Where does Bangladesh stand in all of this?
Every day, there are more nasty snarls and coercive actions taken by China against the US and by the US against China. This is like a playground, students taunting each other, but there is no teacher to calm things down. Accusations fly from both sides.
American think-tanks are largely taking the position that the Chinese are the aggressors, while Chinese scholars argue the reverse of this. The national leaders talk without restraint. We should all be worried that this could turn into war.
After reviewing the potential conflicts and the implications for the world political and economic systems, we look specifically at the challenges this sets for Bangladesh. China has pushed its interests and military challenges in three different areas: First in Hong Kong, second on the Indian border in the northeast corner in the vicinity of Kashmir, and finally in the South China sea.
In Hong Kong, there has been no attempt to slow the pace of snarling and it appears that Hong Kong’s economy will change nature. With the cancellation of the special trade relationship with the US and potential restrictions on financial flows, Western companies and residents will be increasingly uncomfortable and there will be a steady exodus. Chinese mainland businesses will step in to try to replace the disappearing British and American interests.
This will take some years to play out, but the future is clear. This great city symbol of the benefits of a competitive market economy will shrink, becoming another large Chinese city. It is a disaster for HSBC and Standard Chartered, both of which are critically dependent on their Hong Kong-based operations.
These two banks will try to walk the line between China and the West, but will not be successful. Cathay Pacific has no real future, as the US will begin to treat it as a Chines airline with all kinds of implications for its flights to the US. A large number of British, Japanese, and American companies that are based in Hong Kong will lose much of their value and not be able to shift their base of operations without grave loss.
The Indian border with China has two tense points: One in the northeast near Kashmir, and the second in the Siliguri corridor. The Chinese believe that they can take limited actions here without drawing American intervention. With an election in America in November, US military intervention in a border war seems unlikely, although the US would certainly assist India with equipment, internal logistics, and intelligence information.
India is locked into concentration of its forces along the border, but must maintain the larger part of its army along the border with Pakistan. Any sizeable Chinese actions would end up with another bloody nose for India as in 1962. The Siliguri Corridor could be closed, cutting off the Northeast states.
Indian nationalism would increase, demanding counteraction that Modi cannot deliver. The South China Sea is the most dangerous, as Chinese and American soldiers may actually shoot at each other. Both sides are posturing about their rights. Let us hope that they keep shouting and do not raise the level of violence.
The US is aggrieved with China about the conflicts over trade; the human rights violations of the Uighur, the aggressive actions against India, the actions violating the Hong Kong agreement between the UK and China, the belief that the Chinese concealed important information about Covid-19, causing harm to the US. The Chinese, according to the Americans, are illegally extending their sovereignty in the South China Sea.
The Chinese response is that it is the US that is the aggressor: The US disrupted the trade relations by placing high tariffs on Chinese exports to the US. The Uighur are Chinese citizens and the US should not interfere. In addition, John Bolton tells us that Trump told Xi the re- education camps were OK with him.
As for Covid-19, the Chinese say: “Nonsense, we shared information as fast as we developed it.” The Chinese say they have their rights in the South China Sea. Further, the Chinese are furious at the American attempts to destroy Huawei. The US has also increased its arms sales to Taiwan; this goes against an informal but important understanding according to the Chinese. Back and forth it goes.
A final consideration is how this plays out in the coming American election. Is Trump willing to push back against the Chinese, advertising himself as the tough man? Does he think this will help him win the election? Bangladesh faces serious challenges if there are real military conflicts on the Sino-Indian border.
If the Siliguri corridor is closed then India will certainly expect to use transit through Bangladesh both for general cargo and for military supplies. Such demands pose terrible dilemmas. Being caught between conflicting demands of the two Asian giants, Bangladesh would seek some compromise. It will be a challenge.
The trade regimes in South Asia may be disrupted, leading to a sharp drop of imports. Chinese naval operations in the Bay of Bengal would raise insurance rates and disrupt shipping. Essential inputs to the garment sector would be slow for delivery. There will certainly be some disruption to Bangladesh exports.
Container trade between India and Bangladesh is beginning to open with obvious implications for the movement of goods to Northeast India. India is pushing rapidly to get in place this alternate supply route.
The Chinese are involved in several large and important development projects in Bangladesh; continuing trouble on the Sino-Indian border may cause additional implementation difficulties in addition to those currently being experienced from Covid-19.
Indians believe that the Bangladesh government has swung too far towards China, with growing trade and investment along with increasing military co-operation in the navy, the air force, and the army. The Indian government believes that they have a special relationship with Bangladesh based on their role in Bangladesh gaining freedom from Pakistan.
Many believe that Pakistan and Bangladesh are really part of a greater India. The risks emerging in the next six months are immense. The new high commissioner from India comes with instructions to improve the real situation and reduce the growing importance of the Chinese. Fortunately, Bangladesh’s strong prime minister can be counted on to guide the nation through the minefield before the nation.
Forrest Cookson is an economist who has served as the first president of AmCham and has been a consultant for the Bangladesh Bureau of Statistics.