The Nikkei Asian Review has looked into its crystal ball to predict possible sources of military friction, political tension and economic trouble across the region in 2020. Some scenarios focus on specific countries, while others span borders. Several involve an increasingly dominant China.
Read on for our non-exhaustive list of what may go wrong in Asia.
North Korea fires missiles at U.S. bases
The U.S. and North Korea are unlikely to reach an agreement on denuclearization before Kim Jong Un's end-of-2019 deadline for sanctions relief, and this may prompt the young dictator to revert to a more aggressive posture.
What would happen next is anyone's guess. One particularly dire scenario could play out like this: Pyongyang fires intercontinental ballistic missiles from its Tongchang-ri launch site on its west coast, breaking its promise to demolish one of its key missile facilities. U.S. President Donald Trump issues a stern rebuke, pushing for stronger sanctions, resuming military drills with South Korea and dispatching strategic military assets to the region.
In response, North Korea conducts nuclear tests. Or perhaps it bombards an island off South Korea's west coast, killing civilians and soldiers, just as it did a decade ago.
From there, the crisis could quickly spiral out of control. Trump might order an evacuation of Americans in South Korea, causing Seoul's stock market to plunge. President Moon Jae-in could send a special envoy to meet Kim, only for Pyongyang to take him hostage.
That would set the stage for even grimmer developments. The U.S. could strike the North's Yongbyon nuclear complex. North Korea, meanwhile, may choose to attack American military bases in Japan or South Korea.
-- Kim Jaewon, Nikkei staff writer
North Korean leader Kim Jong Un supervises a military drill in this May 10 photo from the Korean Central News Agency. Should denuclearization talks break down, the situation on the peninsula could rapidly escalate. © Reuters
U.S.-China trade talks break down for good
The signing of a "phase one" deal might be on the horizon, but that does not mean the U.S.-China trade war is over. The stock market's lukewarm reaction to the announcement of the partial agreement suggested investors are skeptical of its substance, especially on structural issues such as state subsidies and intellectual property protection.
These are likely to remain sticking points. And given the dramatic fashion in which the talks collapsed in May, as well as the tariffs and other moves that ensued, the process could break down -- even for good. This would be catastrophic for both sides and the global economy in general.
In this scenario, the U.S. and China could weaponize their financial markets or holdings, slipping into a capital war. Wall Street increasingly sees this as a real -- albeit remote -- possibility.
If Washington takes steps to close off its capital markets to Chinese companies and investment, some analysts fear Beijing would retaliate by dumping U.S. Treasury bonds. This is known as the "nuclear option" and would disrupt all aspects of the American economy.
-- Alex Fang, Nikkei staff writer
U.S. President Donald Trump and China's President Xi Jinping: Without a trade deal, the world's two biggest economies could slip into a capital war, with dire consequences for the global economy. © Reuters
U.S. is pulled into Taiwan Strait crisis
Cross-strait tensions are set to escalate, with Taiwan's independence-leaning President Tsai Ing-wen likely to win a second term in January's election. If China thinks a red line has been crossed, some fear it would take aggressive action toward the island -- potentially drawing the U.S. into a military conflict in the Taiwan Strait.
In a January 2019 speech, Chinese President Xi Jinping reiterated Beijing's right to use force to unite Taiwan with the mainland. Tsai pushed back firmly, then irked Beijing further by visiting the U.S. and repeatedly pointing to the Hong Kong unrest as a failure of Chinese rule.
Taiwan has also increased arms procurement from the friendly Trump administration. China responded with military drills over the strait.
If Beijing does strike Taiwan, Washington could feel compelled to act. There is also the risk of an accidental clash sparking a full-blown conflict.
-- Alex Fang, Nikkei staff writer
U.S. aircraft stand by on the deck of the USS Independence during the Third Taiwan Strait Crisis in 1996. Any aggressive action by China toward Taiwan could draw the U.S. into a military conflict. © AP
China defaults cause economic "chain reaction"
China's escalating debt woes are a potential fault line, as the world's second-largest economy loses growth momentum. Already, in 2019, there were at least 27 defaults by state-linked enterprises, according to data from research company Shanghai DZH.
Baoshang Bank was bailed out in May, and other regional lenders have received emergency cash injections. It is these smaller financial institutions in the "shadow banking" sector that are at greatest risk, as many have not complied with regulations, such as capital adequacy ratios.
Domestic bond defaults are likely to reach a record high in 2020, according to S&P Global Ratings, as liquidity for privately owned enterprises dries up. Market watchers expect bad debts to continue plaguing smaller rural banks and local government financing vehicles as policymakers get tougher to guard against systemic risk.
Should a few of those local government financing vehicles go bust, one People's Bank of China policy board member warned that a "chain reaction could ensue."
-- CK Tan, Nikkei staff writer
A branch of the bailed-out Baoshang Bank in Beijing: Companies carrying off-balance-sheet debt for China's local governments could damage an already cooling economy. © Reuters
Protesters seek to oust Thailand's Prayuth
Thai Prime Minister Prayuth Chan-ocha's political fate will be tested in mid-January, as a no-confidence motion against him and four ministers looms in parliament. It will be a rare grilling for Prayuth, who went unchallenged from 2014 to 2019 as head of the former military junta.
Prayuth's allies reckon his quasi-civilian government will triumph with more votes than the wafer-thin majority it enjoys in the lower house, and are banking on the supposedly independent Constitutional Court to do their bidding. The court is expected to issue a ruling to dissolve the opposition Future Forward Party before the no-confidence debate -- an outcome that would boost Prayuth's chances of completing his four-year term.
But circumstances could change. Prayuth's infamous grumpy moods serve as a signal of threats to his rule. He has already lashed out over a 5,000-strong flash mob assembled by Thanathorn Junagroonruangkit, leader of the anti-military FFP. The protest in a Bangkok shopping area was the largest since Prayuth, as army chief, staged a coup in May 2014.
A growing number of young voters, many of whom helped the FFP secure 80 seats in the 2019 election, appear to have had enough of Prayuth. Many of those who protested are planning to join a "Run Against Dictatorship" demonstration on Jan. 12.
"The anger among the people is real," Thanathorn told reporters this month. "We know a storm is coming."
-- Marwaan Macan-Markar, Asia regional correspondent
Thanathorn Juangroongruangkit of Thailand's progressive Future Forward Party attends a rally in Bangkok on Dec. 14. A growing number of young Thais appear to have had enough of the Prayuth Chan-ocha government.
India's economy hit by growing unrest
India's recent abolishment of the special status of the Kashmir region, long disputed with Pakistan, and major protests over a new citizenship law slammed as anti-Muslim are hurting an already struggling economy -- dampening business sentiment and deterring foreign investment.
The global community looks set to apply pressure on New Delhi. The U.S. Commission on International Religious Freedom this month said Washington should consider sanctions against Indian leaders such as Home Minister Amit Shah, who introduced the citizenship bill. This could undermine the U.S. "Indo-Pacific strategy," which seeks to tighten ties among allies including India in order to contain China's regional influence.
The violent, ongoing protests have "certainly dented India's peaceful image at the international level," according to Shamshad Ahmad Khan, a visiting associate fellow at the Institute of Chinese Studies in New Delhi.
The risk now is that the economy sinks further, creating even more discontent over high unemployment.
-- Kiran Sharma, Nikkei staff writer
Demonstrators protest India's new citizenship law in New Delhi on Dec. 24. Groups in the U.S. are calling on Washington to impose sanctions against India over the legislation. © Reuters
Vietnam takes legal action against China
Vietnam's intractable maritime dispute with China in the South China Sea remains a ready source of potential conflict in 2020.
Repeat incursions by Chinese vessels this year prompted Hanoi to openly consider legal action against what it called "serious violations" of its exclusive economic zone. The Philippines went the legal route in 2016 and a similar move by Vietnam would "incense" Beijing, one analyst said.
One key question is whether Vietnam will resume its joint oil exploration project with Russia's Rosneft, which was harassed by Chinese ships, including an armed coast guard vessel, during a monthslong standoff this year. Beijing has long pressured Vietnam to accept joint oil projects with China and stymied its efforts to shore up its diminishing energy reserves through partnerships with foreign oil companies.
If Vietnam is unable to tap new hydrocarbon reserves in the South China Sea, it faces a worsening struggle to meet its energy needs, threatening blackouts and hampering economic development.
-- Shaun Turton, Contributing writer
A worker on the Lan Tay gas platform operated by Rosneft Vietnam in the South China Sea: Chinese ships have harassed the joint Russian-Vietnamese project. © Reuters
Fresh violence erupts in Myanmar ahead of election
A national election, expected in November, is likely to deepen volatility in Myanmar. After a landslide win in 2015, Aung San Suu Kyi's National League for Democracy retains popular support domestically, but is being condemned internationally over the military's brutal crackdown on Rohingya Muslims in the state of Rakhine.
Amid a lack of significant economic progress, Suu Kyi could lean further into nationalist rhetoric, as seen recently during her trip to The Hague to contest allegations of genocide against the Muslim community, said Khin Zaw Win, director of the Tampadipa Institute in Yangon.
Myanmar analyst David Mathieson said the biggest flashpoints would be conflict states like Rakhine and Shan, particularly if instability or violence prompt authorities to cancel voting. "It's only going to get much worse," he said. "All of Rakhine is destined for a 2020 of increased volatility and a very uncertain outcome."
The volatility could further tarnish Suu Kyi's image abroad, and lead to her government stalling on constitutional reform and the repatriation of the more than 700,000 Rohingya driven to refugee camps in Bangladesh.
-- Shaun Turton, Contributing writer
Myanmar's leader Aung San Suu Kyi defends her country's military against allegations of genocide at the International Court of Justice in The Hague in December. Further violence in conflict states like Rakhine and Shan could lead to a canceling of voting in elections scheduled for November. © Reuters
Malaysia's Mahathir (again) delays handover to Anwar
All eyes in Malaysia will be on the much-anticipated transition from Prime Minister Mahathir Mohamad to nemesis-turned-ally Anwar Ibrahim.
Mahathir's government is losing public support over unpopular decisions and unfulfilled campaign promises. Any delay in handing over power to Anwar -- the 94-year-old had been anticipated by many, including Anwar, to do so within two years after his election in May 2018 -- would hurt the ruling coalition's hopes of retaining power in the next election due in 2023.
Nevertheless, the timing remains a guessing game. In a recent interview with Reuters, Mahathir said he intends to stay on as leader until the Asia-Pacific Economic Cooperation leaders summit in Kuala Lumpur in November.
Political pundits are skeptical that Mahathir will keep his promise on the handover despite his repeated assurances. A major reason is rising opposition to Anwar within his own People's Justice Party, driven by his deputy and longtime ally Azmin Ali -- seen as Mahathir's favored successor.
Anwar and Azmin are both embroiled in gay sex scandals. Anwar has been slapped with a sexual assault allegation by a former assistant, which could turn into his third formal sodomy charge. Azmin, meanwhile, is allegedly seen in a sex tape with a young politician from his party. Both men have rejected the claims as nothing more than political vendettas.
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