A ‘Cold War 2.0’ Between the US and China

From the heights of Ladakh in northern India to the Miyako Strait in the south of Japan, multiple military tensions pit a Western bloc led by the US against China. This clash explains, in part, why Australia unfairly broke the agreement to deliver French submarines in order to line up under the more showy banner of an alliance system with the US. Above all, it places at the centre of the game a small island of 24 million inhabitants: Taiwan, which the People’s Republic of China seeks to annex. However, unlike the totalitarian regime of Xi Jinping, Taiwan is a liberal democracy even more advanced than France, and an industrial power with which the US trades more. It is the West Berlin of this new ‘Cold War 2.0’ in everything but name.

This US–China confrontation over Taiwan was one of the predictions made by the author in Babel Minute Zero, a book published 14 years ago. In Israel, where the novel has been read by all who matter including the head of state, it was above all the book’s discussion of the new role of information technologies in the struggle between states that attracted the most attention from decision-makers. This revolution remains an essential key to a Cold War 2.0.

On the Balance of Power

The US’s focus on China is not a recent phenomenon.Although it has only been fully engaged since autumn 2011, the China challenge was identified from the end of the 1990s. It was especially highlighted by some of the future influential members of the Bush Jr administration, who – within the Project for the New American Century think tank – identified a rising China as a future rival capable of exploiting transformational information technologies. These conservatives, many now anti-Trumpists, nonetheless embrace a bipartisan consensus based not on ideology, but on an observation of the balance of power.

China is a technological superpower. It has the largest installed base of internet users in the world, numbering 1 billion in 2021 (three times that of the US). Naturally, this leads to more advanced uses: 40% of Chinese citizens engage in e-commerce through live streaming, for instance. China also outperforms the US in telecommunications equipment (3.5 times more in global sales) and commercial drones (20 times more). In 2020, China had as many industrial robots as the US, Japan, Germany and South Korea combined. This year, China also overtook the US in the number of research articles published and cited in the field of AI.

This technological rivalry is fundamental. In the 19th century, US historian Alfred Thayer Mahan – the first recipient of RUSI’s Chesney Gold Medal – had theorised, following the British example, that becoming a sea power was the key to world supremacy. In the 21st century, such a competition will be played out in cyber space. It is the domain in which the greatest wealth is created: eight of the 10 largest companies across the globe are native to the digital world. With the acceleration of robotisation in the second half of this decade, it is in cyber space that most services will be created and directed – from fleets of autonomous cars to industrial or home automation robots. But the robot is controlled by the code, and – to divert to the words of another geopolitician, Halford Mackinder – ‘who dominates the code will dominate the world’.

What will such a future clash resemble? Perhaps the serious tensions between great European powers before 1914. The British economist Norman Angell wrote in 1910 that economic integration would prevent war, yet the security dilemmas of each state demonstrated the limits of his reflection. A century later, similar dilemmas could be exacerbated by the struggle in cyber space and lead to an even more unstable and dangerous world. This struggle abolishes all borders and encourages, if only for defensive reasons, great military powers to penetrate and hide in the networks of an adversary. If there is a Chinese military strike on Taiwan, it could quickly involve the security of Chinese and US computer networks, both civilian and military, potentially accelerating escalation.

Constant High Tension State

If nuclear confrontation is avoided, as in every major crisis since Berlin in 1948, a state of constant tension will set in. The economic decoupling between the democratic bloc led by the US and the authoritarian bloc centred on China will accelerate: any car, machine or home automation product embedding the code of the opposing camp could be manipulated from a distance by the enemy. Trade disentanglement will only reinforce antagonisms, and the pace of digital transformation will be amplified by politico-military decisions of a nature unknown since the fall of the Soviet Union. The recent $50-billion US investment plan in semiconductors is a harbinger of this, and such a move could be interpreted as another form of arms race escalation by the adversary.

The struggle in cyber space will also be cognitive. The manipulation of Facebook, a platform that has become Russia's ‘useful idiot’ in its campaign against the US, has shown one of the domain’s uses: it amplifies the emotional instability of the user, a precursor to reactions ranging from fear to anger. The recent announcement of a future ‘metaverse’ – namely, a fictitious ‘virtual’ world – coupled with the rise of deepfakes reinforces these risks.

Meanwhile, Western institutions like the EU or, more timidly, the US Congress, want to regulate online media, so that liberal, democratic and humanist values ​​are integrated into the design of services. Yet, this is unacceptable for the authoritarian bloc, which will likely view such efforts as a Western attack on its political control. In essence, a Cold War 2.0 could potentially lead to an ideological life-or-death struggle in cyber space.

Who will win? Without nuclear confrontation, this Cold War 2.0 could end like the first: with one of the combatants throwing in the towel, following a democratic or authoritarian revolution. However, if the confrontation is prolonged, it will be the power capable of extracting the most value from the network economy and cyber space innovation that wins.

This gives an advantage to the most open societies for, to quote the philosopher Karl Popper, they are the most capable of integrating new ideas, talents and capital from elsewhere, while maintaining strong internal competition.

It is precisely at this key moment that Xi has abandoned openness to the world, the very essence of the transformation policy started by Deng Xiaoping. Entailing a halt in regional reform experiments and a brutal takeover of digital capitalism, this recentralisation can only ultimately slow down the innovation machine.The signs are already there: between 2018 and 2020, private investments in AI contracted by 20% in China, while they increased by almost 50% in the US.

The US is not guaranteed victory – it made the same fatal mistake as China. Instead of reinvesting the profits of the new economy of talent and automation into the adaptation of the greatest number to the digital age, many corporate and private financial profits have gone into other portfolios of assets, such as real estate. As a result, Western lower-educated employees face disappearing career opportunities, as the transmutation of digital gains to investment in bricks and mortar generates speculation and exploding housing costs.

These new inequalities threaten the US with serious disorder, and China with uncontrolled speculation. This risks a financial meltdown that would be fatal for the regimes of both countries.Amplified by the anticipated acceleration of robotisation, these revolutionary thrusts render illusory the myth advanced by the Israeli historian Yuval Noah Harari of a stable domination of the knowledgeable over those of the 'useless' class. In reality, the US and China – these two ‘super start-up nations’ – can collapse. And one can lead the other in seeking to rally to the flag in a military adventure.

The Downgrading of Europe

Europe has everything to lose from these collapses. Battered by extremes, eventually overtaken by India and militarily dependent on the US, Europe is also undergoing a brutal downgrading in digital matters, a field still not identified as a vital priority. In what must be recognised as a serious failure of the single market, only two European technology companies are among the world's top 100 companies – five times less than in Asia and 12 times less than in North America. Rather, it is small countries entirely focused on digital exports that could upset future global rankings. Who would have imagined 10 years ago, for example, that Israel would be able to capture 30–40% of global investments in cybersecurity start-ups?

Nevertheless, all these new players will be dependent on the violent upheavals of a Cold War 2.0. We are entering an age of much more perilous tensions than in the past 30 years. The shadow of war is returning, and supremacy in cyber space – the medium for controlling robotic forces and influencing human minds – will be at the heart of this century’s struggle for hegemony.

The views expressed in this Commentary are the author’s, and do not represent those of RUSI or any other institution.

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