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China-US ‘de-coupling’ will shake Asia too

TOP NEWS-ENG-29-08-2020

While this remains to be seen whether the US would actually ‘de-couple’ from China or not, a decision involving ‘de-coupling’ of the world’s two largest economies will inevitably have serious consequences for the whole world. This is particularly true of Asia, the continent where China is located and the US has allies; still has military presence in Afghanistan (close to China) and is keen to revamp its ties with the Central Asian states to deepen its presence and allow for avenues of competition with both Russia and China. 

For countries like Pakistan, which have a history of strong economic and military ties with both the US and China, a sharp ‘de-coupling’ will mean a difficult diplomatic path to traverse, faced with a choice between regionalizing foreign policy (allying even greatly with China), or becoming a part of what Mike Pompeo has called a ‘global coalition’ of countries to roll-back Chinese influence.

For Pakistan, the latter option might be unthinkable given China’s already deep presence in Pakistan and how CPEC has already regained pace. At the same time, Pakistan’s role in the Afghan end-game puts in a close diplomatic proximity with the US as far as the latter’s bid to finally withdraw from Afghanistan and end the war is concerned. This is apart from the fact that Pakistan, despite CPEC investments, continues to rely on IMF (US sponsored) bailout package to survive economically.

For countries like Pakistan, therefore, a sharp ‘de-coupling’ will inevitably mean reliving the geo-political anxieties of cold-war days. The challenge would be to walk a fine balancing act, a performance that is always hard in a sharply divided world. 

Also Read: Tied to US’ apron strings, India has had to give way to China in Iran  

While the US may ideally want Pakistan and other countries to use “more creative and assertive ways” to deal with China/Chinese projects in Pakistan and elsewhere in Asia-Sri Lanka, Malaysia, Indonesia-a de-coupling will, first and foremost, invoke the question of co-hosting both the US and Chinese investments, and with this will come the question of strategic foreign policy choices on a range of global and regional issues.

As it stands, while for most countries in Asia, China has already eclipsed the US, an actual move towards de-coupling will still shake all of these countries. Whereas, for instance, a number of US companies have their production units in China, a ‘de-coupling’ will raise the question of relocation of these units elsewhere in Asia and thus maintain an identical supply chain. 

These countries-Vietnam, Thailand, the Philippines etc.,-some of which have historically enjoyed economic and military relations with the US and have received both US investment and aid, might see in a move towards relocation a potential opportunity to fast-track their economic development, especially in the wake of economic disruption caused by the pandemic. 

While a complete transition and re-location would take decades and may never fully occur, the fact that such a move will bring more investment would still make at least some of them review their ties with China and even the US. 

That such a de-coupling is already happening and causing tension is evident from the otherwise ‘sensitive’ case of Taiwan. 

Taiwan Semiconductor Manufacturing Company (TSMC) announced that it was investing US$12 billion in a chip plant in Arizona. In July 2020 TSCM became the world’s leading semiconductor company, surpassing Samsung and Intel. Though the Taiwanese firm may attract US investment, the dilemma is-which is relevant to a number of other Asian countries such as Pakistan-this will inevitably create tensions and geo-political tussle, leaving these countries directly standing in the line of fire.

Also Read: Indifference of other countries blocks US bid to create an anti-China cold war

For some Asian countries, such as India, however, a US-China ‘de-coupling’ will, however, throw into sharp relief their ambitions to counter the rising China. 

For India, for instance, increasing US-China tensions will allow it to project itself as a natural and the biggest US ally in Asia, including being a potential re-location site for American companies as well. 

Already in India, movements, such as the Swadeshi Jagran Manch (SJM), for boycotting China and Chinese products have been raging. A US-China divide will allow these movements a leeway to press even more forcefully an India-China divorce as well, taking instead the path to becoming an alternative global supply chain destination. 

But such a ‘de-coupling’ will not simply erode China as a US competitor. Instead, the competition will increase manifold, creating almost a bi-polar global economy. 

While China’s own competitors will see in this division an opportunity, countries seeking to balance ties with both China and the US will particularly be hard pressed to carve out their ways to both Beijing and Washington.