Responding to the New Cold War
MNCs have two options for dealing with rapidly rising tensions between China and the United States.
TENSIONS between China and the United States have escalated rapidly in recent weeks. Yet while the pace of events may have picked up, the deepening of conflict per se between the two countries does not come as a surprise. Drawing on the leading theories of international politics, realism and liberalism, I concluded in January 2017 that "the relationship between the two countries will be conflictual. All-out war seems unlikely but is possible, while a renewed Cold War scenario may well materialise".
Some two years later, in October 2018, US Vice-President Mike Pence declared cold war on China.
Meanwhile, the factors leading to my earlier conclusion, and Mr Pence's declaration, remain firmly in place and have gathered strength. China has continued to gain economic and military strength relative to the US, a development that would lead adherents of realism to expect conflict or even war. Viewed through this lens of relative power, the current trade war with China makes perfect sense: the US may incur economic losses because of it, but as long as China loses relatively more, the US comes out ahead.
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