China, with AIIB, Ups Its Global Economic Sprint
Europe’s major countries this week have said they will join the new Asian Infrastructure Investment Bank (AIIB), an international financial institution proposed by China. The move represents a heavy blow to the United States, which has opposed the AIIB, considering it a rival to the International Monetary Fund (IMF) and World Bank.
The IMF and World Bank, both formed in 1944 at the Bretton Woods Conference during World War II, have worked closely together in providing loans globally. Both located in Washington, D.C., they’ve served primarily to guide the world economy under U.S. leadership.
China, Russia, India and other countries have been looking to counter that U.S. economic control. And China has been leading the way in the new century. The formation of the new AIID — scheduled to become active by the end of 2015 — is just one of the economic weapons in China’s global arsenal.
That arsenal grew this week with the announcement of Europe’s mainstays bucking the U.S. regarding the AIIB. The United Kingdom had jumped first at the Asian bank’s open invitation. Then on Tuesday it became clear that Germany, France and Italy would also link up. U.S. pressure evidently had kept South Korea and Australia from signing; but by Thursday it appeared they, too, would join in.
As its name indicates, the AIIB is designed to finance infrastructure projects in the Asia-Pacific region. China appears to have proposed the bank in 2013. By June 2014, Beijing suggested doubling the bank’s original funding from $50 billion to $100 billion, and invited India to join. By October 2014, 21 primarily Asian countries had signed a formal agreement to create the bank. By Thursday evening, a Chinese attorney interviewed on Chinese America TV said the number of countries had increased to 32.
This week’s actions, particularly by the larger European countries, have weakened U.S. efforts at opposing the bank. Those nations, which all trade with China, as does the U.S., obviously see the move as a boon to aiding their struggling economies and their dependence on the equally suffering Euro currency. As for the U.S., it has mainly ignored a $2.3 trillion need for infrastructure at home, concentrating instead on expanding military conflict abroad in efforts to keep a grip on the Eurasian energy flow.
Dissatisfaction with Washington
The European move appears to come from countries’ dissatisfaction with slowness of IMF reforms. Particularly, the IMF’s demand for austerity in strapped European economies such as Greece, Portugal and Ireland which have increased hardships, benefitting lenders but discouraging employment and even costing lives through drastic healthcare cuts.
China, meanwhile, has seen its own economy grow over the last couple of decades, placing it second behind the U.S. in the world economy, with some predicting it could become the global leader in this century. All this is clear to Europe’s economic and political policymakers.
No doubt, Wall Street’s fraud, which led to the global economic meltdown in 2008, set the stage for Europe, Asia, and South America to seek alternate opportunities to U.S. economic and political dominance, though that’s been tough due to the U.S. dollar’s place as the global reserve currency.
Too, world policymakers have to be concerned, though they’re reluctant to voice it, with America’s self-view of “exceptionalism”, and addiction to aggressive invasion of foreign countries, particularly in the Middle East. Combine that with news breaking in 2014 of U.S. efforts at global surveillance, including tapping phones and emails of allies. Such actions can dissolve already fragile trust.
China’s Global Cooperation
Meanwhile, China in the new century has followed a doctrine of “noninterference” in other countries’ military efforts, but been widely involved in actions of global economic cooperation. Most seen as a detriment to U.S. dominance.
Xi Jinping, China’s president who assumed office in November 2012, has become the highly visible leader of the global economic cooperative effort. He has traveled worldwide to meet with nations’ policymakers and bind trade and security agreements.
Perhaps most significantly, he has melded with Russian President Vladimir Putin on historic energy contracts — both oil and gas — to provide homes with heat and industry with fuel for production. The pact also will help China slowly turn away from coal, which helped the country’s consistent industrial and economic growth, but at great environmental costs, leading to heavy air pollution in the industrialized cities.
That connection has also led China to state publicly it would offer economic aid to Russia if needed due to sanctions on Moscow from the U.S. and European Union over the Ukraine 2014 revolution and current civil war. This is dangerous business, with a number of historians and foreign-affairs analysts seeing the U.S. and North Atlantic Treaty Organization (NATO)’s challenging Russia as a new Cold War, and possible prelude to world war and even nuclear war.
Russia isn’t currenly listed as connected with China and AIIB. But the two giants are bound together through BRICS, the Shanghai Cooperation Organization (SCO), and the Asia-Pacific Economic Cooperation (APEC).
BRICS is the international association consisting of Brazil, Russia, India, China and South Africa. China has led the way in BRICS last year forming its own development bank, also to challenge the IMF and World Bank.
The SCO is a Eurasian political, economic and military organisation which was founded in 2001 in Shanghai by the leaders of China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan, and Uzbekistan. The organization is considering “designing a new banking system which is independent from international banking systems”.
APEC is a forum of 21 Pacific Rim economies promoting free trade in the area. At a November 2014 meeting of the group, Xi said it should fulfill an “Asia-Pacific dream” of becoming a world economic leader.
China and Russia have also made a consistent effort to chip away at the U.S. dollar in new trade pacts with countries, getting the partners to agree at trading in Chinese yuan or Russian rubles rather than U.S. dollars. Investment strategist Jim Rickards, in his book Currency Wars, has cited this effort as a mainstay in what has become a global currency conflict.
Xi also has called for building the “Silk Road Economic Belt” and the “21st Century Maritime Silk Road”, an update of the ancient Silk Road trade routes, suggesting it range from Asia into both Europe and Africa.
Too, Xi has traveled tirelessly to South America and Africa to offer China’s cooperation in trade and infrastructure projects. During his trips he has emphasized China’s policy of “noninterference” militarily and cooperation economically. He has also slyly contrasted that policy to American military efforts and attempts at foreign control. For example, when in Brazil last year for the BRICS conference which set up its development bank, he also spoke to a contingent of South American political leaders. His speech included general references to “hegemony,” and while he did not mention a specific country, it was clear he meant the U.S.
Xi’s Internal Reform Efforts
Xi’s administration is also introducing massive economic, legal, political and social reform programs at home which he is calling “the four comprehensives”. He has dubbed the economic program “The New Normal,” what he considers a realistic response to a dragging global economy. A major focus will be moving away from exporting goods — and thus having to depend less on the U.S. dollar — to producing goods for consumption by his own country’s over 1.35 billion citizens.
China in recent decades saw 100 million citizens migrate from rural to urban areas to fill jobs in the country’s growing industrial effort. Now, Xi and cohorts are pushing for comfortable lives for its mass of urban and rural workers. That will require decent incomes, housing, health care, and education for their young. It will also require concentrated efforts to fix horrible air and water pollution problems, and providing adequate water supply for large areas lacking it.
Xi has also led a major push for stamping out corruption in China’s regions as well as in the national government. This, along with new policies for making the court system more transparent and open to citizens and foreign corporations, and a push for human rights (Amnesty International reports “an estimated 500,000 people are currently enduring punitive detention without charge or trial”) add to the major challenges Xi has set for his regime. He seems to want to do this with a firm hand, looking to assure control over the Internet, thus seeking transparency in the courts and government agencies, but censoring public dissent through social media.
All this will make for dramatic viewing as the world looks to see if Xi can pull off the internal reforms and work through foreign relations to stifle American aggression while also cooperate with Washington on trade and even security. He and President Obama have made surface inroads on those cooperative efforts in recent months.
Xi will travel to Washington in September for face-to-face follow through on those efforts. But huge obstacles remain: China’s growing economic cooperation with Russia, which will probably lead Xi to challenge Obama on his efforts to crush the Russian economy and rid Putin of power. And also U.S. efforts to manipulate the global economy through the proposed Trans-Pacific Partnership treaty, a mainly secret trade effort involving multinational corporations, the U.S., Canada, Mexico as well as a handful of countries from South America and the Pacific region. Washington has made a point through the Bush and Obama administrations to keep China out of the treaty process. And Xi surely must be unhappy about that.
Their September meeting will occur in a world where the growing U.S. dollar is damaging other currencies, where troubling global economic numbers ranging from derivative investment to private debt are reaching portions similar to those leading to the 2008 global economic meltdown, and where military conflict between East and West is in danger of escalating from Cold War to Fiery War.