World Politics

The U.S. and China could slip into a 'new cold war' that pushes countries to pick sides

Key Points
  • The new "cold war" could last a generation, and may be a "global economic, military and ideological struggle" between the U.S. and China, said Darren Tay of Fitch Solutions.
  • A split between the world's two largest economies would likely force Southeast Asian countries to take sides, he said — even though they would want to be "pragmatic" and remain friendly with both countries for as long as possible.
  • Tay also said it would be difficult for Asian nations to resist "the pull from China's gravity in terms of its size and its influence," but that's not to say they will all side with China.
US President Donald Trump and China's President Xi Jinping attend a business leaders event inside the Great Hall of the People in Beijing on November 9, 2017.
Nicolas Asfouri | AFP | Getty Images

SINGAPORE — The U.S. and China have "diametrically opposed values" and will eventually slip into a "new cold war" in the coming decades, said a China analyst from Fitch Solutions.

"By a new cold war, I mean an all out, perhaps generation long, global economic, military and ideological struggle that could lead to a bifurcation of large parts of the world into a pro-U.S. bloc and a pro-China bloc with significant numbers of countries caught in between," said Darren Tay from the Asia country risk team at the data research firm.

The split between the world's two largest economies would likely force Southeast Asian countries to take sides, he said, even though they would want to be "pragmatic" and remain friendly with both countries for as long as possible.

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"Being in Asia, the pull from China's gravity in terms of its size and its influence would be hard to resist," said Tay during the firm's Asia Macroeconomic Quarterly Update virtual seminar on Monday.

"That's not a knockdown argument to say that they will all side with China in that case," he added. "But there is that risk to consider."

Opposing values

Explaining what he meant by an "ideological stand-off" between the U.S. and China, Tay referred to a Chinese Communist Party memo circulated in 2013 that identified constitutional democracy and freedom of the press as some threats to the party's authority. He pointed out that these are what the West considers universal values.

Tay said the technology sector has already become a battleground for the U.S. and China, and is likely to see the largest divide if relations do not improve.

It's easy to imagine an American consumer not trusting a Chinese tech company to be scrupulous in terms of safeguarding their privacy, and likewise, for a Chinese consumer with regard to U.S. tech companies
Darren Tay
Fitch Solutions

In recent months, Washington has made it more and more difficult for Huawei to purchase semiconductors needed to manufacture its products. The Trump administration has also tried to remove Beijing-based video-sharing app TikTok from U.S. app stores, though a U.S. court eventually blocked that order temporarily. 

Growing mistrust

But aggressive foreign policy moves such as blacklists and bans by both sides will not be the only thing tearing the countries apart — a lack of trust will also play a part, Tay said.

"It's easy to imagine an American consumer not trusting a Chinese tech company to be scrupulous in terms of safeguarding their privacy, and likewise, for a Chinese consumer with regard to U.S. tech companies," Tay said.

That's especially likely if the U.S.-China relationship worsens and there's a lot of mistrust "not just between the government but between the people of these two major world powers," he added.

Consumers from both sides already appear to be boycotting products from each other, as nationalism rose after the coronavirus pandemic broke out. A report by Deutsche Bank Research in May said a survey found that 41% of Americans will not buy "Made in China" products again, while 35% of Chinese will not buy "Made in USA" goods.