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As the global ‘Clash of civilizations’ intensifies, what is the end game?

Recently, the British PM hopeful Rishi Sunak joined the chorus of leaders blaming China for every evil in the world. He spoke about shutting all the Confucius Institutes in the UK, building an international alliance to tackle Chinese cyber threats, expanding the power of MI5 to counter industrial espionage and protecting British assets. A similar narrative has been doing rounds in the West, especially since the Russian invasion of Ukraine – every African and Asian nation in danger of default is linked to the Chinese loans and influence through the Belt and Road Initiative.

I am not an apologist for China, far from it. The Chinese trade and investment practices have been very objectionable. They have closed their domestic markets while having free access to those in Europe, the US and elsewhere and have conducted industrial espionage on a grand scale. China has unfavourable loan terms leading to the problem of debt overhang in countries that have invested in the BRI. In the last few years, the Chinese political system has become more authoritarian, foreign policy more belligerent, and its ambitions – more global. The Chinese actions in their ‘near abroad,’ i.e., Asia and the Indo-Pacific – maritime aggression, the border dispute with India, or the constant threat to Taiwan – signify the Chinese willingness to assert their geo-political muscle.

But none of the above is the primary or even a secondary reason for the political implosion in western democracies (and democratic political systems elsewhere). China was not even a consideration in Brexit and the subsequent toppling of PMs in the UK. They have only a part to play in strengthening the right wing in Europe, though autocracies like Hungary and Poland have been able to use the China card to get concessions from the European Union. The fragility in the German coalition building only owes partly to the Chinese economic influx in the country, perhaps more than any other EU country. The recent fall of the Italian government has more to do with the massive polarization and the discord between its existing political parties. Russia would probably be a much more significant factor in European politics at this stage than the Chinese.

In the US, the China card is the most important and indeed played the most. However, suppose China was to reform tomorrow. The massive gap between the Democrats and the Republicans, the rise of white supremacist trends and a rollback of democratic rights in the US will not disappear. Nor will the deadlock on key foreign policy issues that is leading to knee jerk reactions geared towards domestic political compulsions, rather than any meaningful long term global strategy. The list of other countries in a similar boat can continue. Even in countries where the Chinese debt has been a critical factor in economic problems, like Sri Lanka, the misgovernance of the ruling elite in the political-economy crisis cannot be overlooked.

The reasons for the political implosion in these countries are internal and need to be examined internally. Looking for an external enemy when politics is unstable, energy prices are rising, and inflation is going through the roof – is a dangerous trend. Not only is it obstructing meaningful analysis and internal reforms, but also decimating the space for trust and dialogue between powers on either side. As big democracies dog whistle, the Chinese and Russians (and allies) will match it with their belligerence or vice versa since everyone needs to blame someone for their economic and political problems. And the impact on business, society and global geopolitics will be damning.

We are already in a phase of hyper ‘weaponization of trade and finance’ and ‘tit for tat’ sanctions. If the West weaponizes the international financial system they control, Russia uses ‘energy weaponization’ and China lawfare and counter-sanctions in its markets. The rules of the game are fundamentally changing and there are several examples of businesses being caught in the middle. The western sanctions on Myanmar’s military junta post the February 2021 coup forced some Japanese companies to exit operations in the country. The US restrictions on sourcing cotton from Xinjiang due to Chinese human rights violations have increased multi-level compliance costs for companies. Global operations have also been caught in the US-China economic war, especially in the ‘nationally sensitive’ domains – tech, semiconductors, clean energy and rare earth minerals. The recent sanctions on Russia have upped the ante. They have created a state of utter confusion on what is allowed and for which ‘nationality’ company. It is a state where businesses are doomed if they do and doomed if they don’t.

The societal repercussion can also be significant with increasing anti-China and anti-Asian hate crimes in some western democracies. There are also signs of an anti-Russia sentiment, with some European political heavyweights calling for a blanket ban on Russian tourists to the EU.

However, at the global geo-political level, this gauntlet being thrown by either side will make the end game more dangerous. As western democracies become more dog whistling and the ‘other side’ more belligerent and reactive – the world is likely to get caught in a loop of conflict, increased tensions and economic warfare. Any cooperation on vital global problems – climate change, energy reconfiguration and supply chain stabilization – will become much more difficult. The run-up to the Russia-Ukraine conflict was symbolic of the breakdown of this global trust, however fragile.

A new power game will lead to collateral damage affecting the fragile nations – as seen in the increasing risk of default for several countries post the Russia-Ukraine conflict. Technology nationalism will likely increase and global supply chains will be further tested. The inadequacy of the leaders to address these problems will lead to further political and societal polarization and the rise of populist and short-sighted governments.

Unless a leader/leaders can reach out to both sides and bridge the divide  – we are heading for a roller coaster ride. A ride where critical aspects of the global order taken for granted since the end of the Second World War and especially post the Cold War and the rise of China –– are in danger of a reversal. These include an open and cooperative world economic system, technological collaboration, freedom of navigation and a geo-political system that at least in theory seeks to deter unilateral aggression.

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