Next three years will see turning points in East Asia

Outlook

Scenarios for the near future range from uneasy cooperation to a rapid downward spiral. The most optimistic outcome would likely be a US-China trade deal and a new US president who emphasises economic engagement, Pyongyang resuming nuclear dialogue or at least ignoring its end-2019 deadline, and Beijing taking a tolerant position towards its opponents in Hong Kong and Taiwan.

The downward spiral might involve election campaigns emphasising nationalism, the victory of hard-line candidates, Pyongyang’s resumption of nuclear and missile tests and US military escalation, US-China economic decoupling and President Xi Jinping being forced to yield leadership to a weak successor.

Impacts

• Major international sporting and commemoration events offer opportunities for leaders to show favour to or snub their counterparts.
• New economic policies in Japan and China could have major impacts on the business environment, including unintended ones.
• Elections across the region and in Washington will see provocative campaign rhetoric and potentially sharp changes of direction afterwards.