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June 22, 2020 Scott B. MacDonald, Ph.D. South Asia’s geopolitics have swung back into sharper focus in June 2020 as Chinese and Indian troops clashed in a remote border region in Kashmir. While prospects for a war between the two nuclear powers are not high, China appears to be warning India not to move too close to the United States in the emerging cold war between Beijing and Washington. China’s more aggressive stance vis-à-vis India should be seen as part of a more assertive foreign policy stance that includes bringing Hong Kong under greater control, threatening Taiwan over any pretenses of becoming an independent country (China regards the island-state as a breakaway province), and seeking to consolidate its hold on the South China Sea. Another calculation in Beijing is that by putting pressure on India, it helps Pakistan, China’s ally. If nothing else, China’s incursion into Indian-held territory reminds India that of the threat of being caught in a two-front war (with both China and Pakistan if tensions ever rose to that level). One last thought is that China’s population is graying; India’s population is still younger. If China doesn’t assert its dominance over its Asian rival, it could lose an opportunity. All in all, Sino-Indian relations are likely to remain a point of concern for global geopolitics.
The Global Economic Doctor June 22, 2020
The New Cold War in Asia
In June 2020 Chinese and Indian
troops clashed in the remote Galwan
Valley, which is part of Kashmir, a
region divided between China, India
and Pakistan. At least 20 Indian
soldiers were killed. The Chinese also
suffered a number of casualties. The
cause of the incident appears to be a
Chinese move to discourage the
development of a road on the Indian
side of the Actual Line of Control,
which has its origins in the 1962 Sino-Indian War. India has been active in building up its
transportation system to counter a longstanding Chinese military build-up across the border.
The Chinese clash is not an isolated development; China is using the COVID-19 crisis as an
opportunity to assert an increasingly more powerful role in the world, especially in pushing to
make gains over its new Cold War rival, the United States. The two countries have ideological
differences, competing visions of what the world should look like in the future, and both
countries are putting pressure on other countries to pick a side. Asia is a primary arena for the
new Cold War. The U.S. and China are competing around the world, but Asia offers up some of
the most likely geopolitical flashpoints.
The new Cold War had its beginnings during the Obama administration with its “Pivot to Asia”
and the Trans-Pacific Partnership (TPP), which was created in part to contain China. China’s
rising economic and military power, its expansion into Africa, the Caribbean and Latin America,
the Belt and Road Initiative (BRI) seeking to link Asia and Europe into an integrated Chinese-
dominated Eurasian market, and ongoing cyberattacks on U.S. civilian and military institutions
indicated to Washington that Beijing was its chief rival. Although the Trump administration
backed out of the TPP, it launched a bruising trade war on China in 2018, pushing a decoupling
of the U.S. and Chinese economies, seeking to weaken China’s global 5G push, and taking a
tougher line on Chinese engagement around in the world, including in Africa, the Caribbean and
Europe.
For its part, China has not shied away from U.S. efforts to contain it. As Political Science
Professor Thitinan Pongsudhirak at Thailand’s Chulalongkorn University noted in May 2020:
“The proposition that ‘you are with us or against us,’ not long ago brandished by Washington, is
coming more now from Beijing.” The COVID-19 pandemic has provided an opportunity for the
Chinese Communist Party government to make a new diplomatic push, portraying China as a
willing partner in making the world a better place. Planting rumors that it was the U.S. military
2
The Global Economic Doctor June 22, 2020
that started the pandemic in Wuhan, China has sent doctors and medical equipment to more
than 100 countries around the world, ranging from Dominica and Grenada in the Caribbean to
Cambodia and Laos in Southeast Asia.
While the world is grappling with the ill-effects of the pandemic, China has taken advantage of
COVID-19 to impose a draconian security law on Hong Kong and other measures to bring the
city under greater control of the mainland Communist Party. Hong Kong’s “one country, two
systems” accord with China, which helped maintain the city since the 1997 handover from the
British as a special administrative region with a well-respected legal system and a place to do
business for foreign and Chinese companies, is now being eclipsed. For the Communist Party
the virus of a more open political system, with which Hong Kong has been “infected”, is too
dangerous and must be snuffed out before it spreads to the mainland.
China has made more bellicose noises in the direction of Taiwan, which it regards as a
breakaway province. Indeed, Chinese government spokespersons have stated that Beijing
would “resolutely smash” any move by Taiwan toward declaring independence. Beijing has
also increased its military activity around the island. Taiwan, which has an elective government
and recently re-elected a pro-independence government, is seen as an ideological threat to the
Communist Party on the mainland. Moreover, as part of China’s sense of historical mission of
righting the wrongs of earlier former imperial actions (this time from Japan), Taiwan needs to
be reunified with the mainland. The wishes of most Taiwanese do not matter in this (and a
sizable block would prefer independence). There is growing concern that Taiwan could be next
on the Chinese menu after Hong Kong.
But China’s more aggressive stance has not been limited to places which it regards as being
Chinese. Beijing’s claims on the South China Sea are becoming more belligerent, leaving
3The Global Economic Doctor June 22, 2020
countries such as Malaysia, Vietnam, the Philippines, and Indonesia more deeply concerned
about Chinese encroachments. China has made a sustained push into the South China Sea,
creating islands, planting military bases, and driving off challengers. At stake are large fish
stocks, potential oil and gas reserves and access to strategic sea lanes.
What’s at stake in the South China Sea?
• $3.37 trillion of total trade passes through the South China Sea yearly.
• 40 percent of global liquefied natural gas transited through the South China Sea in 2017.
• There are an estimated 11 billion barrels of untapped oil and 190 trillion cubic feet of
natural gas under the region’s waters.
• Since 2013, it is estimated that China has created around 3,200 acres of land in the
Spratly Islands since 2013.
Source: Council on Foreign Relations. https://www.cfr.org/global-conflict-tracker/conflict/territorial-disputes-
south-china-sea.
In late April, Vietnam lodged a formal complaint following China’s announcement that it has
created two administrative units on islands in the South China Sea. This followed an incident
earlier in the month in which a Chinese Coast Guard ship rammed and sank a Vietnamese
fishing boat near the Paracel Islands.
China’s more aggressive stance on the South China Sea has also caused an unexpected change
of direction in the Philippines, where the government of President Rodrigo Duterte reversed its
decision earlier in the year to scrap the 1998 visiting forces agreement with the United States.
The Philippine policy shift to maintain this arrangement was “in light of political and other
developments in the region.” This was clearly a reference to the incident with the Vietnamese
fishing boat as well as another incident involving a Chinese ship engaged in a standoff with a
Malaysian oil exploration vessel.
India and Australia have also been on the receiving end of a more aggressive Chinese stance in
the world. According to Indian security analysts, when the Indian military cancelled its annual
Himalayan border exercises in April due to COVID-19, Chinese troops used the opportunity to
establish positions in territory claimed by India, including strategic peaks of the Galwan Valley,
overlooking a newly constructed Indian road. Although there were intensive talks between
military commanders, tensions rose, leading a major brawl involving up to 900 men, using
improvised weapons, including batons wrapped in barbed wire. It was during this fight that 20
Indian soldiers were killed.
4The Global Economic Doctor June 22, 2020
Chinese media organizations used the occasion to warn India not to get too close to the United
States in the emerging cold war. In an article in the Global Times, the official mouthpiece of the
Chinese Communist Party, it was stated: “If in a new cold war, India leans towards the U.S. or
becomes a U.S. pawn attacking China, the economic trade ties between the two Asian
neighbors will suffer a devastating blow. And it will be too much for the Indian economy to take
such a hit at the current stage.” Consequently, Chinese motivation appears to be twofold: keep
India on the defensive along the border and intimidate India into not developing a closer
relationship with the U.S.
India’s reaction to the Chinese pressure could reverse the government of Prime Minister
Narendra Modi’s efforts to develop a closer economic relationship with China in the hope of
reducing geopolitical tensions. According to senior Indian government officials, India is now
more likely to develop a closer relationship with the U.S. As one official told the Financial Times
“In terms of geopolitical choices, economic choices, India will look elsewhere. We tried to offer
them an economic stake in our country hoping that a more robust business relationship could
create mutual familiarity and understanding. But obviously beyond a point, it hasn’t worked.”
Since the incident, protests have taken place outside of China’s embassy in New Delhi and there
are calls to boycott Chinese goods.
5The Global Economic Doctor June 22, 2020
China Trade (including Hong Kong) with Selected Countries (2019)
Country Exports to China Imports from China Balance (US$ bn)
(US$ bn) (US$ bn)
Australia 109.5 58.4 +51.1
India 29.6 68.6 -39.0
Japan 168.3 169.2 -0.9
Vietnam 26.4 50.1 -23.7
Source: IMF, Direction of Trade Statistics. https://data.imf.org/?sk=9D6028D4-F14A-464C-A2F2-
59B2CD424B85&sId=1514498277103.
China’s pressure on Australia came after Canberra’s push for an independent inquiry into the
2020 coronavirus outbreak. Australian goods suddenly faced mysterious regulatory hurdles
from its largest trade partner. Beijing then warned that there could be a consumer boycott
against Australia; Chinese tourists were warned that they could face racist attacks if they visited
down under; and Chinese students were also warned about the same risk. According to the
Australian government, Chinese students and tourists collectively brought in more than $18
billion to Australia in 2019. Despite Australia’s heavy reliance on China as a trade partner, the
country’s trade minister’s response to the threat of a Chinese boycott was to call such an action
as an “inappropriate indication of attempted economic coercion.”
While some countries, such as Cambodia and Laos, have aligned themselves to China, concerns
about Beijing’s willingness to bully other countries to follow its lead has resulted in the
formation of a block of countries who are increasingly working together. Australia and India
signed an agreement in May to strengthen their cooperation in the India-Pacific region by
mutual logistics support through reciprocal access to each other’s military bases, while Japan
(itself with a set of issues with China) has moved closer to both countries in terms of military
cooperation. Vietnam has also sought to develop better ties with the U.S. The concern about
China also extends to Indonesia, which in January 2020 dispatched warships and jet fighters to
drive away Chinese ships around the Natuna Islands, claimed by Jakarta.
The shift into a new Cold War in Asia is occurring and political risk is on the rise. Countries are
being pushed to take a side. While the U.S. finds allies in Australia, Japan, India, Taiwan and
Vietnam, these countries have questions over the depth of the Trump administration’s
commitment. This stems largely from President Trump’s unpredictability, his willingness to
start trade conflicts with allies and reliance on Twitter to broadcast policy without consultation.
Yet the alternative is to let China freely dominate Asia’s destiny, something that does not go
down well in the corridors of power in Canberra, Tokyo, Hanoi, or New Delhi. And the Trump
administration has been highly focused on containing China’s rising influence. His
administration has lectured African and Latin American leaders on the dangers of Chinese
imperialism, put pressure on European governments not to use Chinese 5G, and most recently
6The Global Economic Doctor June 22, 2020
sent three U.S. Navy aircraft carriers to the Pacific Ocean for the first since 2017. The challenge
is to find a new equilibrium of power in Asia. No one is entirely prepared to give up all the
benefits of globalization and a less confrontational era – at least not yet. The problem is that
many of things that were mutually beneficial in economic terms are fading and political
considerations are assuming greater importance.
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