As Singapore’s Ambassador to the United States for 16 years and now its Ambassador-at-Large, Chan Heng Chee has been actively involved in mitigating the impact of escalating tensions between the U.S. and China on both her home country and the Association of Southeast Asian Nations (ASEAN). From the stage at Swell, she offered her take on the state of that relationship today as well as how it could evolve in the future and what it means for innovations like blockchain.

A Policy of Technology Containment

At its most basic, she says it’s difficult for one large superpower to understand another. Fundamental cultural differences can lead to misunderstandings and misperceptions of each country’s ambitions and intentions, fueling a repeating cycle of opposition with enormous implications for the world around them.

Recently, those cycles have continued to accelerate, launching a policy of what she termed Technology Containment. The most visible implementation of this policy has been the blacklisting of Huawei by the U.S. and its pressure on partner nations to do the same. That approach threatens to ensnare many other Chinese and Asian companies, potentially excluding them from U.S. partners and capital markets.

It is also one factor in China’s experimentation with blockchain as a possible way to bypass the U.S. dollar as a reserve currency. This would not be a true decentralized currency because China would want to maintain some degree of control and avoid anonymity, but it would be functional in that it could enable direct settlement between countries for purposes of trade or transactions without having to rely on the dollar.

Fortunately, the Ambassador said that the U.S. Treasury has worked behind the scenes to clarify the situation and relieve some pressure to avoid completely undermining the U.S. industry and the stock market. There has also been significant pushback by the semiconductor industry, universities, and others.

Without this tempering or effective guardrails, she worries that an extended containment policy could undo decades worth of technical cooperation and supply chain optimization. To make her point, she paraphrased MIT president L. Rafael Reif: “If our response to China’s ambitions is to double lock the doors, we would have locked ourselves into mediocrity.”

Avoiding a New Cold War

If safeguards prove unsuccessful or relations begin to deteriorate again, she said it could lead to a worst-case scenario where the U.S. and China actually enter a new Cold War. But the Ambassador was quick to point out that this is an extreme scenario and highly unlikely; at least not a Cold War like we have seen in the past with other communist nations.

She believes a true Cold War is improbable because global realities make it difficult to line up the factions required for this type of standoff. She also wonders if the Trump administration has the discipline required for a Cold War strategy, which would be undermined by recent peace overtures made towards North Korea and Russia.

Competitive Coexistence On the Global Stage

Instead, she is hopeful that the U.S. and China relationship will evolve into a third, more ideal scenario of Competitive Coexistence that would allow the two giant systems to live with one another despite their inherent differences. In this scenario, they could actively compete against one another, but not seek to wholly defeat or eliminate the other.

The Ambassador says this idyll is desired by most ASEAN countries because even though some like Vietnam and Cambodia are now benefiting from the trade war because of the diversion of the supply chain, the long-term implications of a deteriorating U.S.-China relationship would cast a pall over the entire region.

For many ASEAN countries, Ambassador Chan says the mantra has become “don’t make us choose.” She has heard even strong American allies like Australia be vocal about rejecting the binary narrative of having to choose a preferred partner.

These countries are more concerned with their own welfare and that of the AESEAN region, actively shifting trading or political preferences depending on circumstances and benefits. For example, some continue to work with Huawei while others are looking at using Nokia or Ericsson at the core with Huawei moved to the periphery. Others are making one-off decisions about joining trade pacts like Trans-Pacific Partnership or initiatives like Belt and Road.

Regardless of whether individual nations agree on short-term decisions, the Ambassador believes they are all aligned in creating long-term prosperity for the entire region and would actively embrace a scenario of Competitive Coexistence.

We’ll continue to update Insights with more recaps from Swell. Don’t miss a single Swell session, watch full sessions from the on-stage discussions today.