Mini-Scenario I: Integration or growing together in a Sino-centric world
"… economic integration is the path to riches and peace." E Prescott
China uses its massive wealth to invest in other countries generating wealth and peaceful sustainable development in a Sino-centric world. This will be done through the One Belt, One Road initiative that groups two projects, the Silk Road Economic Belt and the 21st Century Maritime Silk Road which aims at integration, on a number of levels, a large number of countries from Asia to Europe. These projects replace the International Socialization initiative of President Hu.
Central Asia will be the first beneficiary of the first project and could easily be integrated as a supplier of energy and food.
Europe has largely welcomed China’s financial presence – it now rates as the fifth biggest investor with 2014 FDIs of $18 billion. China has signed an Agriculture Cooperation Plan with the European Union. China is also interested in the Ukraine as a food supplier. Russia would welcome investments in the Pacific where China could produce food and timber to fill its large requirements.
The Silk Road initiative is backed by a $40 billion fund and the creation of the Asian Infrastructure Investment Bank (AIIB) of which even the UK has become a founding member, soon followed by France, Germany and Italy. This could alleviate the negative perceptions the US has of the bank.
These two initiatives are very wide and encompass financial cooperation, increased people-to-people contacts, infrastructure building, investment facilitation, opening of economic corridors and trade facilitation.
China’s actions go as far as Latin America where investments in Ecuador and Venezuela cover the entire energy production process. Africa has also been a priority zone for Chinese investments with a priority for infrastructure. The possibility of transferring labor intensive industries to the black continent has also been suggested.
Nevertheless, the US remains the first destination of China’s overseas investments. Chinese companies are buying majority shareholdings in US companies cheaply as the American economy has been underperforming significantly. This has also led the US to considerably reduce its defense spending.
For the project to be fully successful, however, China abandons its bullying tactics in the South China Sea, its aggressive stance towards Japan, the expansion of its naval power in the Indian Ocean and its rhetoric about reconquering Taiwan. Territorial disputes with India are settled. Historical issues leading to tensions with Japan and the negotiation of an agreement regarding the disputed islands should also come about.
It changes its historical narrative to reduce anti-Japanese feelings and above all to increase the GDP per capita of its population.
It is also more cooperative with its ethnic minorities to avoid confrontation and gradually slides towards a fully democratic system.
It should reduce its military spending that make it appear as an aggressive regional power looking to become a hegemon and invest time and money to project a friendlier image to the surrounding countries.
A satisfactory model is the relations between China and South Korea. This has been achieved through frequent meetings and discussions at various governmental levels.
China and Japan reach an agreement on the Senkaku Islands, followed by wider agreements covering trade and investments, and Japan becomes one of China’s closest allies. A number of events related to the US personnel on the military bases in Japan, leads to a downgrading of the relationship between Japan and the US and the latter is asked to reduce the number of military personnel in the country. Effectively the US presence in the China Sea becomes irrelevant. Taiwan can no longer be effectively protected and a referendum approves the return of Taiwan in the fold of the People’s Republic of China.
Another important step in increasing China’s contribution to a peaceful development is the rise of the remimbi – which today is the fifth most used currency and the second most used in trade finance - as a global currency. It first needs to become convertible and then become a reserve currency and part of the IMF’s SDR basket.
MiniScenario 2: Chaos ahead: The collapse of the Chinese economy
The ageing population and the impact of decades of the one-child policy led to a major impact on labor availability. The country stops being considered as low labor-cost. The government may open the country to immigration from the neighboring countries, creating social tensions.
The anti-corruption drive amplifies and touches a large number of well-established senior members of the party that decide to band together. The president is overthrown. Revolts start in several rural areas where income inequality with city dwellers is large. Farmers and workers are reluctant to see corruption gain the upper hand. Social stability is threatened.
Large tracts of land are polluted and the rural labor force ages, agricultural production declines steeply leading to food shortages. Imports of foodstuffs lead to increased prices and a disruption of the grain market, exacerbated by a US-imposed reduction on exports to China. China decides it will no longer support North Korea and a flood of refugees arrives in the poor eastern provinces.
Water scarcity, already a problem, grows worse due to the present agricultural plans. A disaster is only a climatic-wrought drought away.
Pollution is affecting agricultural production and creating major health problems. Air pollution is major cities already led to episodes of civil unrest.
A bank collapse is a clear possibility as the amount of outstanding bad loans is considerable. This could lead the central bank to sell massive amounts of dollars, putting enormous pressure on the American currency.
The Uigur minority revolts in an attempt to secure independence.
Maoists entice the population to revolt and lead them into a civil war. This grinds globalization to a halt and creates a surge in inflation.
MiniScenario 3: The collapse of North Korea
North Korea’s dictator, Kim Jong-un is assassinated and rival army factions launch a civil war. Chaos ensues and large numbers cross into China. The Chinese army tries to secure the border, but facing total lack of success, invades North Korea. The South Korean army also receives marching orders to secure part of the North Korean territories and in particular the Weapons of Mass Destruction. The two armies clash. US ground forces and air support back the South Korean army.
Certain army units that had remained loyal to the Kim clan, led by Kim Jong-Un’s sister, detonate in front of Pohang, South Korea, a nuclear engine loaded on a ship. There follows a large number of deaths. Simultaneously a similar deflagration is carried out in a Japanese port with catastrophic mortality. The average Japanese is reminded of Hiroshima and Nagasaki. North Korean artillery bombs Seoul, including with chemical weapons. Sleeping North Korean operatives in South Korea proceed with assassinations of key figures.
South Korea, having previously obtained nuclear weapons, reciprocates with the use of these weapons destroying major North Korean infrastructure.
Japans’ Primer Minister orders Japanese troops to land on the western beaches of North Korea.
The NATO allies of the US are expecting to be requested to provide support but no such request is forthcoming. The US wants to avoid having China drawn into the conflict. However, as the US, South Korean and Japanese troops make deep inroads into North Korea and the troops of that country put a stiff resistance, China calls urgent meetings of the Security Council which is simply emitting toothless resolutions. The Chinese military overtake North Korea and explode a nuclear bomb over Seoul.
MiniScenario 4: Reviving old enmities
China lands a group of group of marines on the Senkaku islands. Japan may not back down on its own claim on the islands and answers to the Chinese provocation by an important landing of Japanese troops and what starts as small skirmishes rapidly escalate as both sides provide air cover to their troops. With obvious Chinese superiority due to proximity and numbers, Japan asks for military assistance from the US.
China disables a several important US satellites, causing disarray in communications among US troops. Chinese ballistic missiles rain on the US bases in Japan as a preemptive move and North Korea bombs Seoul with classic artillery and missiles.
Russian troops seize the opportunity of occupying several northern islands and Hokkaido.
Essentially, the Japanese economy is destroyed and the country suffers millions of dead civilians.
MiniScenario 5: Gas as mediator
For the US, Russia can be a potential player in the containment for China. Russia, while refusing this role, is reluctant to let China’s influence increase even more or to join China in limiting US’ role in Asia.
While tensions rise between China and Japan over the Senkaku islands, and several incidents take place with planes colliding, Russia’s increased penetration in the Ukraine have led to severe sanctions by the European Union and the US. An ever larger part of Russian gas is exported to China, Japan and Korea. A conflict would seriously impair Russia’s exports. Russia therefore successfully acts as a mediator and President Putin’s prestige is enhanced both domestically and internationally.
MiniScenario 6: China choking … or is it?
Several vessels carrying oil for China are hijacked by pirates in the Malacca Straits. In spite of denials by the US and Indian governments, China claims this is a plot against it. A vessel also destined to China explodes a few hundred miles outside the Hormuz Straits and claims are made by an as-yet-unknown Uighur liberation movement. A US frigate was sailing very close to the vessel at the time of the explosion. An oil tanker bound for China is intercepted by a US vessel, thoroughly searched and then allowed to proceed to its destination.
Central Asian and Russian supplies are able to replace the Middle East shortfall in exchange for further Chinese investments and an even greater economic integration.
MiniScenario 7: Restless islands
The US closely monitors the synthetic islands built by China in the South China Sea and which are claimed to be Chinese territory. Small incidents degenerate and lead to China attempting to close air and naval space to the US military. The US sinks a Chinese naval unit and China reciprocates. Escalation leads to a major conflict. Escalation includes cyber warfare, space warfare and China is able to keep the US outside the South China Sea. Both powers refrain from using nuclear weapons and China is free to continue its regional domination.