Date
15 December 2018
At an APEC gathering over the weekend, US Vice-President Mike Pence warned nations against accepting debts that would compromise their sovereignty, in remarks seen as a broadside against China. Photo: Reuters
At an APEC gathering over the weekend, US Vice-President Mike Pence warned nations against accepting debts that would compromise their sovereignty, in remarks seen as a broadside against China. Photo: Reuters

US, China may be heading toward a new cold war

Twenty-one leaders attended the Asia Pacific Economic Cooperation (APEC) leaders’ summit in Papua New Guinea, but the attention was focused almost entirely on US Vice-President Mike Pence and Chinese President Xi Jinping.

It is because, as the Sino-US trade war rages on, the international community is deeply concerned about whether Washington and Beijing can resolve their differences through dialogue at the summit.

As it turned out, Pence and Xi traded sharp barbs with each other in their speeches during the summit and were apparently showing no sign of relenting whatsoever.

Xi insisted that the Belt and Road initiative isn’t a highly exclusive members-only club that would only bring about debt traps, and referred to Washington’s protectionist and unilateral approach to global trade as being “short-sighted” and “doomed to failure”.

Pence, meanwhile, hit back by telling his foreign counterparts that the United States can offer “a better option” to the nations of the Indo-Pacific when it comes to foreign investment because, as he put it, “we don’t drown our partners in a sea of debt, we don’t coerce, or compromise your independence.”

Nor does the US offer “a constricting belt or a one-way road”, Pence added.

The US vice-president warned leaders of the Indo-Pacific nations against accepting debts that would compromise their sovereignty.

The warning of “debt traps” isn’t totally unfounded. For example, last year Sri Lanka had no choice but to lease the port of Hambantota to China for 99 years because it was unable to repay Beijing’s US$1.4 billion loans, a decision that has provoked quite a backlash among the Sri Lankans.

Another example is Maldives, where China accounts for 80 percent of its foreign loans.

The island nation’s new president, Ibrahim Mohamed Solih, said during his inauguration ceremony over the weekend that he is determined to look to India, the US and Saudi Arabia for foreign financial aid instead, because his government is heading towards bankruptcy as a result of its participation in the Belt and Road plan.

The move is tantamount to ditching the pro-Beijing diplomatic policy embraced by his predecessor Abdulla Yameen.

Returning to the APEC summit, apart from trade and economic issues, Pence also talked tough over Beijing’s territorial claims in the South China Sea, stressing that the sea “doesn’t belong to any one nation,” and that the US “will continue to sail and fly wherever international law allows and its national interests demand.”

And Pence did mean what he said: last week, on his way from Tokyo to Singapore to attend the Association of Southeast Asian Nations (ASEAN) summit, the vice-president carried out his own freedom of navigation operation by ordering his plane to fly over a disputed area in the South China Sea.

Judging from the posturing of Xi and Pence, it has become increasingly apparent that Washington and Beijing may now be reaching a point where imposing tariffs on each other’s imports is very likely to be just a prelude to another round of new cold war between the two powers.

Pence told political analyst Josh Rogin earlier during an interview that US President Donald Trump “is leaving the door open for a deal with Xi in Argentina, but only if Beijing is willing to make massive changes that the United States is demanding in its economic, military and political activities.”

Pence also said in the interview that “this is China’s best (if not last) chance to avoid a cold-war scenario with the United States.”

Obviously, the prerequisite to preventing the outbreak of a new cold war is for China to back down first. But the question is, would Xi be willing to do that?

As a matter of fact, the failure of the leaders at the APEC summit in Papua New Guinea to agree on a communique, the first time in its history, is an unmistakable sign of the deep divisions between China and the US.

Given that, the prospect of Xi and Trump being able to resolve their fundamental conflicts at the Group of 20 summit in Buenos Aires scheduled for Nov. 30 is anything but promising.

After all, Trump’s policy of “America First” literally means “the rest of the world comes second”.

As the US appears all set for a new cold war, China is now facing its most severe test ever on its path toward global prominence.

This article appeared in the Hong Kong Economic Journal on Nov 19

Translation by Alan Lee with additional reporting

[Chinese version 中文版]

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JC/RC

Hong Kong Economic Journal

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