One World Two Systems

In the coming decades, a form of geo-economics standoff between the old west and the new east is likely to emerge. Here is an assessment on how it may play out.

China, with its expansion of government-sponsored businesses across the world, already draws much influence in the Asia Pacific and Africa regions. The ASEAN countries and the Indian sub-continent are racing to invite China’s money into the region. From manufacturing to mining and infrastructure, many of these countries are allowing Chinese companies to set up shop with very few terms and conditions. China also has a stronghold on the economies of African countries and the Indian subcontinent through financial aids which eventually may lead into controlling stakes on their main infrastructure like their international ports.

Because of this unprecedented freedom to play, Chinese businesses will not only be able to tap onto the Asian and African markets; they will also increasingly be very influential in the economic policies of those countries. As long as China’s money continue to “lubricate” its entry into these markets, there will be very little resistance that can hinder or slow down their influence. In the next decade or two, barring any unforeseen internal collapse in China’s government, it is very likely that China will increase its influence on the economic agenda of Asian and African governments.

Standing on the other end is the old western economy that has defined the world’s way of life for most of the 20th century. The western economic influence, led by the United States, is strong and deeply rooted because it is built on top of two pillars of power: military and cultural influence. The western military alliance has interfered with many governments for many centuries to ensure that they serve the western interest. Through the twists and turns of the world war II, the US established an unmatched worldwide military presence around the world, a presence that is detested by some, but welcomed by the others who feel the need for some extra protection against large powers like China. 

A balancing act to the US military power is the soft power of its entertainment and media industry. Most people who lived through the 20th century are influenced by the power of Hollywood movies and western television programs. This domination of the airwaves worked wonders in creating an image of the USA as a strong and judicious leader of the world. The youth of the time believed that the English language is the key to a successful career, and those that could afford it went to study in the west and tried to experience the “land of opportunity”. Through the airwaves the United States told the world what is cool and uncool, and what is right and wrong.

As we enter the third decade of the 21st century, the competition for influence between China and the US is escalating. China has the upper hand on the business momentum, with its strength of the domestic market, its increasingly wealthy and skilled population, their business-minded government, and their established “seeds of investments” in many countries around the world. China now has reached a position where it can determine the economic health of virtually every country in the world. More recently, China began to exert this influence by punishing other countries who have spoken loudly against them and their policies. Australia was recently punished with an increased import tariff for their wines and barley, after questioning China’s role in causing the COVID-19 epidemic. Canada has also gone to their bad book for helping the US arrest Huawei’s top executive. 

Despite its economic influence is at the moment, China has not reached the multi-dimensional influence that the US has been able to establish through its military presence and its dominance of the information airwaves. There is no question that the USA is facing life-altering domestic troubles, and this will certainly weaken its international standing. However, their pillars of power are still there to help them maintain their influence. Many countries in the world, from Japan, South Korea, Taiwan, Singapore to the Western European nations depend greatly on the health of the USA. They will be happy to embrace them back the moment they can, even if the USA has become a weaker version of itself. The transparency of the US troubles in the social media provides the world clear information about who they are as a country. There will be a time when the USA finds its new equilibrium and the world's familiarity to the USA will turn to work in its favor.

On the other hand, China has been taking a closed book approach to the world, in which nobody could know what is happening inside the country. This approach may work fine during its fast growth spurt in the last few decades, but it will likely be an increasing challenge as it tries to wield more strategic influence in the world. A closed-book approach does not create positive sentiment and trust, the subtle qualities that are important to create sustainable leadership in the world. There has been signs that China is trying to open up, inviting more people to work in China, creating cultural and educational ambassadors around the world in the like of the Confucius Institute. However, it is still in its early stages of its soft power development and much remain to be seen.

The dynamics of the present time, with the economic might of China and the domestic troubles in the US point to a creation of some form of new polarization. However, unlike the cold-war of the 1960s, this polarization is not driven by philosophical ideas of capitalism or communism. Although the debates and narrative on capitalism and communism are still very loud throughout the media and social media, they are mostly academic with no real consequences in the world. After all, China is both a capitalist and a communist.

The polarization is going to emerge in a form of dual economic order, one being the western economic order influenced by the USA and the other as the eastern counterpart, influenced by China.
 

Here are some of the areas to watch for

1)   Dual global currencies

The world is due for a complete re-invention of the financial system. The concept of the USD as the world reserve currency seem to be as outdated as the analog system in the digital age.

A digital-currency that is accepted around the world as a medium for trade will create a great alternative to the USD. The Chinese-government with its extensive investments around the world is well positioned to influence its creation. It is quite likely that in the coming years there will be real alternative to the current USD dominance.

However there is a vested interest in almost everyone to minimize its volatility of USD or at least allow it to release its status as a reserve currency in a manageable pace. A volatile USD will wreak havoc not only in the USA, but in almost every country.

For the coming decade or more we maybe experiencing a parallel system of the old and the new.

2)   Dual trade arrangements

One of President Barack Obama’s strategy to compete with China is to push the creation of TPP (Trans-Pacific Partnership), a deal that was spearheaded by the USA and participated by most other Asian countries. The US participation in the Trans Pacific Partnership was later on canceled by Donald Trump, just as China proceeded to solidify its presence in the pacific through the RCEP agreement. This agreement, along with the many direct investments into Africa and Asian countries, will likely to accelerate China’s influence in the Pacific.

In the meantime, the USA will need to find its way to create a trade agreements that work in its favor. Other than trying to re-enter the TPP framework, the USA will likely look east towards the Atlantic for partnership with their old allies in Europe, as well as working on a more country-by-country basis with their allies in the pacific. The western European countries will try to build a close relationship with both the USA and China. However, China still has a long way to go before it can earn the trust and support of the Western nations.

3)   Dual socio-political alliances
Unlike China, the USA did not expand its influence in the 20th century through business deal-making. Its economic strength emerged as an outcome of the expansion of the two pillars of power around the world that has been discussed earlier.

With the backing of those power pillars, the American brands from McDonald, PepsiCo, Starbucks and Facebook easily gained reception in many countries in the world. However, this influence has waned significantly lately and is likely to continue. The USA also has taken a serious hit to its reputation in the world as it battles its domestic demons of racism, political instability, and social injustices. Its influence will never be the same anymore, but it will still be the center of the western economic interest.  

USA's struggles is China's opportunity. Just like the English language was the language of the 20th century, the Chinese language is seen as the language to learn in the 21st century. As mandarin begins to be understood by more people around the world, there will be higher understanding and emotional affiliation towards China as a culture, not a country.  This provides China the invaluable opportunity to expand its influence to other dimensions of other people's life.
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How this standoff will take place will be for all of us to experience in the coming years. Both China and the USA are imperfect giants with their own demons to overcome.

Can China transform from being the biggest boy in the playground who everyone fears to become the wisest person in the field who earns the respect of others? Without genuine respect from the rest of the world, China's influence will always be fragile. China of the present can take lessons from the 14th century China, who was successful in creating lasting influence in the world through their trade.

The USA’s deep troubles are well laid out in the media. Their domestic social and political crises are at the early phase and much will still be coming out in the years to come. Its standing in the world is going to be weakened, perhaps quite significantly. But a weak giant is still a giant, and its action will continue to set the tone in the world we live in.

The rest of the world will have to get ready to live in a one-world-two-systems environment. How will it be like? 

The Precious Year 2020

 The year 2020 is a year that has been portrayed by the media, as well as by the world leaders, as a year of hardship, pain and suffering. The virus that is spreading is believed to be the main cause of increased death worldwide. It is also blamed as the cause of the economic trouble as the world took austere measures to defend against the virus.

It is easy to forget that before the word COVID entered our vocabulary, the world was already on a fast track towards a crash or a clash. At the end of 2019, the global economy was already showing dangerous symptom of overheating at a scale that we have never seen before. There was rampant speculation in the stock market and rapidly growing income inequalities everywhere in the world.  While the world's economy was a runaway train wreck, the geopolitical environment also deteriorated.

Prior to COVID 19 crisis, China was struggling to keep its economic growth and seemed to have a growing tendency to exert itself to other countries like the biggest boy in the playground. The USA was already long in its self-destruct mode with its polarized politics, toxic media, health care crises and other deep-rooted social issues. Europe was already in economic distress due to its dysfunctional union and was already in a divorce court with Britain. The middle-eastern countries continued their struggle to recover from many years of violent interventions by the west. In the meantime, we are reminded about the climate crisis with unprecedented magnitude of forest fires in Australia and California and severe flooding in several Asian countries in the early part of 2020.

The corona virus may have taken so much of the world’s headlines and attention in 2020, but it is certainly not the cause of the world’s biggest problems. Some pundits have called the virus the great accelerator. Some others have called it the great equalizer. It deserves those titles and more. What the virus has done certainly, is to disrupt the rhythm of the world all at the same time. This disruption may not be a bad thing at all. It offered an opportunity for the world to work together on a common cause, to reach out with goodwill and create peace. The disruption should let us find new ways to doing things that is not destroying our environment or creating additional burdens for the next generation. 

 
As we enter 2021 with the prospect of vaccine and the hope to go back to “normal” – does that mean that we are getting back on-board the runaway train wreck?