The rise of China as an emerging superpower presents unprecedented opportunities and challenges for the world. Given recent tensions between China and the USA and their ongoing trade war, it raises questions about what it means for the future. Is it possible that we are entering a new Cold War?
The short answer, in my opinion is yes, we already have.
It might have started as a trade war, but it is now much more than that. Ultimately, it’s the rising superpower competing with the established one. At the moment there are half a dozen or more different issues of serious disagreement between the countries that could at any time take a turn for the worse and lead to serious escalation.
While there are obvious differences in political and economic ideology between communist China and capitalist USA, and their allies, this isn’t the only complication. Over the years, the trust between the two nations has been lost to the point that it becomes difficult to repair the relationship.
The new reality for the world is that China and the USA are not only competing in economic terms. It’s a battle for power and influence in the global hierarchy for the next century and beyond. So, whether it's in relation to the South China Sea, Taiwan or another issue, we will continue to see posturing and positioning as they test each other out.
Let’s not be naïve either, as the incumbent superpower, strategically, it is very likely that the USA would prefer to have whatever battles they need to have, sooner, while China are not yet as powerful. The US does not want a conflict, or the threat of conflict, when the countries are the same size and certainly not once China is more powerful.
I don’t think this is a dramatic statement, simply an obvious one.
The general assumption by many has been that there may be conflict decades down the track when China is able to challenge the USA as an equal. I think everyone is looking at it wrong. History has shown that, where their strategic interests are at risk, the US will take whatever action they deem necessary to nullify it. As such, it is my view that the threat of potential conflict is actually greater in the near term (this decade).
Obviously, this is an extremely complex issue. It will likely be the most important geopolitical issue of this century. It is not just about global politics, because after decades of globalisation, the impacts of these emerging risks have never been greater, or more widely felt, for all nations and industries. Certainly, businesses in many industries are already having to rethink how they manage their business to mitigate the risks. I also think investors should be taking these risks into greater consideration when making investment decisions.
This information is of a general nature only and may not be relevant to your particular circumstances. The circumstances of each investor are different, and you should seek advice from an investment adviser who can consider if the strategies and products are right for you.