Spiralling Down to Cold War 2

Why a week of tit-for-tat sanctions will be remembered in future

Dear all

Future historians may look back at the last few days as being integral to the start of a new Cold War. This last week has seen a flurry of sanctions from West and East. In a coordinated move, the EU, US, UK, and Canada announced on 22 March a list of sanctions on officials in China over cited human rights abuses against the mostly Muslim Uighur minority group in Xinjiang. 

China immediately hit back. Ten EU individuals, including French, Slovakian, and Belgian parliamentarians, and four entities were sanctioned in reply. One of the entities was Merics, the EU’s largest think tank on China and in important champion of better understanding of the country. 

Aside from these sanctions being the normal tit-for-tat that happens in diplomacy of this kind, the Global Times (a CCP tabloid) spelled out the reasons for Beijing’s actions:

“Instead of contributing to the bilateral relations between China and Europe, these EU parliamentarians and institutions continued to lie and deceive the world by spreading rumors and continually propagating strongly prejudicial agendas and narratives against China”. In particular this related to what Beijing called unfair criticism of their policies in Xinjiang - or what some Western lawmakers have called genocide of the Uighur population there.

Almost the same reasons were given for China’s next move, the sanctioning of a number of British people and entities a few days later. The nine individuals targeted by China include former Conservative leader Sir Iain Duncan Smith, MP Nusrat Ghani, two peers, a lawyer and an academic, as well as the leaders of the Parliamentary China Research Group (CRG), Tom Tugendhat and Neil O’Brien. None of those listed will be able to travel to any Chinese territory (including Hong Kong) and their assets in China, if they have any, will be frozen. The CRG and three other entities were also proscribed. 

Why would China do this? There are a couple of reasons. The first is linked to its new, confident self-perception. Diplomatic moves against it need to be met with fire, and indeed the Chinese media has made much of the fact that Beijing upped the ante with its actions.

The second is to warn foreign nations that it won’t be trifled with anymore. By coming out swinging, China is showing that there is a price to pay for meddling in its internal affairs – and so giving ample warning that there will be a price to pay for any government wanting to join a Western-backed alliance that stands against China. 

The irony is that China’s actions have now increased the chances of such an alliance actually forming. The dust from the sanctions was still in the air when the UK press reported that Prime Minister Boris Johnson and President Joe Biden were planning on leading a coalition against Beijing. 

If this anti-China alliance does materialise, and it is perceived as much by Beijing, then we are for all intents and purposes in a new Cold War. As soon as the two sides (the West and its allies vs China) are in a formalised position against each other then the ante is going to accelerate up and up. Actions and counteractions will spill out from this, forcing countries to have to take sides and leading to more division. Given the totemic significance of Taiwan’s fate for both China and America, it is no exaggeration to say that all this may end in war.  

There are theoretically two main mechanisms that China and the West can use to stop their relationship plunging into open conflict. The first is economic. Economists claim that a new Cold War isn’t likely because of how integrated China is with the global economy; far more than was ever the case with the Soviet Union, China is a vital part of the world’s supply chain for countries and companies alike.

As I wrote in a past newsletter, Beijing has also carefully been courting Wall Street bankers by opening up its financial services to foreign investment. By having BlackRock and other US institutional investors exposed to the tune of billions and trillions inside China, so the theory goes, Washington is less likely to be so aggressive towards Beijing.

However, relying on economic interconnectedness to keep the sides free from conflict is a fool’s errand. Time and time again history has shown us how money is so easily trumped by political necessity: after all, Japan’s leading trade partner on the eve of Pearl Harbor was the United States

The second way of stopping the slide to open hostility is through better dialogue. It is patently clear that there is a gulf of understanding between the two sides which needs to be bridged. This is not going to be helped by China sanctioning two of the only think tanks in the West actually studying the country, Merics and the CRG.

For those of us who want to see harmony between China and the West and its allies, who think there is far more to gain from working together than splitting apart into two opposing sides, who believe that there are lessons to be learnt from China’s recent successes as well as the West’s longer-term accomplishments, and who desperately want to avoid a world defined by division, this has been a dreadful week.

We can and we must hope that this is just a small squall, and that China and the West and its allies will find a way to cooperate to the benefit of all. 

Then I look up from my desk and say, Who am I kidding? Neither side looks remotely like backing down, now or anytime soon.

There are likely to be far stormier seas ahead.