First off, let's hose down the TL with liquid handwavium and say that, somehow, the Nationalist armies manage to hold the Yangtze River line in 1949 instead of being driven all the way to Taiwan. An unofficial truce is established (mutual exhaustion, we'll say) and eventually a formal cease-fire. North China is under Soviet protection, South China under US protection.
Thus, the Republic of China (aka South China, capital Nanking) and the People's Republic of China (aka North China, capital Beijing) are born.
Now what? The ripple effects are going to be massive, to say the least. The Korean War is likely to still happen, but it's sure to play out differently. The Red Army can't deploy huge numbers of troops to Korea and still defend the very very long border with South China (South China has the same problem, of course). Will the USSR take a more active role, or give up North Korea as a lost cause rather than risk a general conflict?
What about Communist expansion in general? The Indochinese countries are a lot less likely to go Communist - then again, any South Chinese intervention is going to provoke a nationalist backlash the Communist movements might be able to exploit. Will the area of conflict move to South and Central Asia (Pakistan, Afghanistan, Iran)?
And then the big one - South China as an Asian Tiger... what happens if/when South China becomes an industrial power with a per capita GNP on par with OTL's South Korea? An economic powerhouse with 500 or so million people and a very large military (because of the continued tension with North China) is going to have enormous effects on the global stage. But what will they be?
Thoughts? Ideas? Comments?