China is in the late stages of constructing its thirteenth five-year
plan, a process that commenced over a year ago and will result in a first
draft in October. While the bulk of the plan will concern regional and
domestic development, it is the international aspects that will concern the
rest of the world. The plan, which will produce specific goals for 2016-20,
is already having an effect on China's foreign and trade policy.
At its centre will be a shift of emphasis away from trade with the
advanced nations, whose prospects are bound to subside towards their level of
economic growth. Instead, to maintain the long-term objective of 7% growth in
GDP China will turn her attention to improving Asia's infrastructure, a
policy for which the building-blocks are now in place. The Silk Road Project
is advancing from the drawing board, and the Chinese-led Asian Infrastructure
Investment Bank (AIIB), which will arrange finance for projects totalling as
much as $20 trillion over the next thirty years, was formally established
this year.
Working in partnership with China through the Shanghai Cooperation
Organisation (SCO) will be Russia, whose resources are central to Asia's
modernisation. The SCO will eventually cover a territory from the Bering
Strait to the Persian Gulf. To obtain extra resources, China has already
established a dominant presence on the ground in Sub-Saharan Africa, secured
the undivided attention of the Middle East by being its largest customer, and
through its own diaspora can count on the cooperation of the South-East Asian
nations currently in the West's sphere of influence. At the end of the
thirteenth plan a substantial majority of the world's population will have
become involved one way another.
The implications for the West are becoming apparent. We have already seen
how Europe and Japan have clamoured to join the AIIB, despite their alliances
with America. Unfortunately, America has been a Goliath to China's David: her
mistake has been not to recognise the passing of her own era and embrace a future
based on Asia.
Instead the US has sought to be obstructive. China now knows that America
will always be fundamentally uncooperative and that she must plan
accordingly. This is why, with Russia's support, she is ditching the dollar.
She has been discouraged by America's attitude into establishing a parallel
financial and monetary system. In doing so, she needs to offer something
better than the US dollar as a currency medium, because for her Pan-Asian
development plans she will need to attract long-term funds from Western
capital markets.
This is where the new BRICS bank comes in. Its priority will be to de-risk
Asian currencies which are less credible in international markets than the
dollar, yen, euro or sterling (the constituents of the IMF's SDR). The
obvious way to do this would be to incorporate something all Asians
understand as money, and that is gold, which could be why most SCO member
countries have been adding to their reserves. This would solve all
cross-border currency issues within the SCO. While the West may not be
initially impressed by such a development, a move by the BRICS bank to
include gold in its own version of the SDR will in time highlight the
relative weaknesses of a dollar-reserve system, particularly when Asia dumps
its dollar reserves in favour of a BRICS super-currency.
This could mark the end of the era of pure fiat currencies, which started
with the Nixon shock in 1971 when the Bretton Woods agreement died.
Competition from gold-backed currencies from Asia would be the most serious
threat yet faced by American hegemony.
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