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US on backfoot

 

Editorial. Rajiv Sharma. XIII. VIII. XV 


 

DRAGON GETS COMBATIVE 



Rajiv Sharma By Rajiv Sharma



Xi Jingping and Barack
Obama-fnbworld

 

Dragon sails fast-fnbworld

 

The eventful relationship between the US and China has seen many ups and downs in the past. In recent years, they have been neither friends nor foes. The compulsions of globalization and economic growth forced them time and again to co-operate and co-ordinate. Nonetheless, they had to contend with many bones of contention as they moved along. For example, the issues like US arms sales to Taiwan, the US interference in China’s territorial and maritime disputes in East China and South China seas, blatant human right violations in China, trade imbalance, intellectual property rights, China’s clandestine role in proliferation of nuclear technology and climate change have been among many niggling irritants between both of them.

 

But, now altogether a new dimension is being added to US-China rivalry, which has the potential to turn the whole gamut of their relationship virtually on its head. China has elevated itself to a position where it can alter the world economic order permanently, transform the planet’s geo-political paradigm upside down and attempt to isolate the US. There are many pointers which indicate that sooner than later, the world is going to see a new world leader in China. This could happen much earlier than most accept.


      World Bank-fnbworldThe AIIB-fnbworld

 

For the first time, the world economic order that was hitherto regulated by the US controlled International Monetary Fund (IMF), World Bank (WB) and Asian Development Bank (ADB) established under Bretton Woods system is facing serious threat. In April 2015, 57 countries across the globe came together under the leadership of China to establish a rival ‘Asian Infrastructure Investment Bank’ (AIIB) in order to foster new economic and strategic relationship among the countries spread over Asia, Europe, Africa and Australia. A vision document prepared jointly by Chinese Ministry of Commerce, foreign affairs and its ‘National Development and Reform Commission’ which conceived and prepared this mega initiative stated that the AIIB would directly impact about 5 billion people spread across the globe.  


Initially, the US desperately tried to dissuade other countries from joining the AIIB. But to its utter dismay, even many of its trusted allies including The UK, France, Netherlands, Germany, Italy, Sweden, Switzerland, Norway, Portugal, Israel, South Korea, New Zealand, South Africa and Australia accepted the lead role of China in the AIIB. Even Russia has acknowledged the Chinese dominance. The snub must have hit very hard. Chung min lee, a professor of international relations at graduate school of International studies in University of Seoul sums up aptly. “The new normal is that all the US allies have to co-exist with China as well as the Americans. For this time around, China is very different type of adversary to the US because the Americans also benefit from China’s economy and any of the US allies in the world plays more with China then the US”. It seems the US is now forced to acknowledge the growing clout of China. In a major victory for China, Barack Obama in a recent statement supported the establishment of AIIB. The clock has indeed turned a full circle. The US who, only a few months ago opposed giving just a few more rights to China in its capacity as a member of the World Bank, is now compelled to accept Chinese leadership role in a rival bank. 


Now it is widely accepted that the AIIB is likely to establish China as undisputed world leader. It will help China to finance its ambitious plan to integrate the economies of a large number of countries spread across the globe. It will also help it to realize its yet another, a very formidable, game changing initiative ‘One Belt One Road’ that will shift the world’s economic levers to Asia and Europe. The Chinese President Xi Jinping is confident that due to these initiatives a business of more than $ 2.5 trillion shall be generated in Silk Road economies in next ten years. 


‘One Belt One Road’ initiative consists of two components. First, the Silk Road Economic Belt (SREB), to be established along Eurasian Land corridor from the Pacific Coast to Baltic Sea and second, the 21st century Maritime Silk Road (MSR). The SREB will bring together China, Central Asia, Russia, Europe which plans to link China with Persian Gulf and Mediterranean Sea through central Asia and West Asia. This will also connect China with South East Asia, South Asia and Indian Ocean. The other component of MSR shall proceed from China’s coast to Europe through South China Sea and Indian Ocean on one hand and from China coast to South Pacific on the other hand. Other major projects include building of new China-Mongolia-Russia and China-Central Asia-West Asia and China-Pakistan economic corridors. Pakistan and Russia remain the core partners of China in its endeavour to implement the formidable global initiative.


In April 2015, China and Pakistan entered into a new strategic tie up wherein China will invest $ 46 billion to build a 3000 kilometer economic corridor that passes through Kashmir. China plans to extend this route to enter Afghanistan and Middle East and further to Africa. The tripartite talks between China- Pakistan-Afghanistan have already been going on since February 2015. 


Analysts say that another core partner, Russia shall help china to establish a transportation corridor starting from Xian in China that will pass through Russia to reach almost all states of Europe. The ‘Belt and Road’ document proposes to jointly build a new Eurasian land bridge and gateways to connect China with other European countries through Russia. The plan also envisages a Eurasian high speed transport corridor linking Beijing with Moscow. 


Last but not the least, the economic stranglehold of China over America has been slowly tightening. At the moment more than 20% of all American exports come from China. Further, China is also the biggest money lender to America. The irony of current US-China trade is manifest by the per capita income of an average Chinese today that is about one tenth of an average American. The poor workers of China produce material goods for use in a rich America. But surprisingly, China does not bring back its export earnings from the US. It actually invests a major part of its export earnings from there in American treasury bonds at a very nominal interest. This has proved to be a smart strategy. It stopped appreciation of Chinese currency ‘Yuan’, thereby making the Chinese exports to the US highly competitive. More importantly, it has made the current super power the world’s biggest debtor of China. At present, the Chinese deposits in the US treasury stand at a whopping $ 1328 billion. This would impact heavily on American economy if China decides to take this money out. 


Therefore, it is only natural that now International Monetary Fund is seriously mulling the idea of declaring Chinese currency ‘Yuan’ as reserve currency. When this materializes, the monopoly of American dollar shall stand shattered for all times to come. If everything goes as the Chinese have planned, this may happen in just a few months. 


The aforementioned developments make it amply clear that American fiefdom in the world is steadily crumbling. Further, it is highly likely that China is just about to adorn the throne of world’s next super power. But many international political analysts still feel that the US would, in all probability, continue to have its own sphere of influence even in the face of rise of the Dragon. After all, the world has been long used to living in a bipolar polity. That China took just over two decades to occupy the space left vacant by Soviet bloc could be a welcome development. In last 25 years, a unipolar world has miserably failed to solve the global problems. The conflict areas in the world have actually multiplied during this period. Not only this, the intensity of these conflicts also rose alarmingly. Furthermore, many observers blame the US led bipolar world for steep rise in terrorism after the demise of Soviet bloc. One can only hope that a new world order may bring about a welcome change. Therefore, those who feel that a world divided into two or three blocs could be a better bet, may not be entirely wrong. However, the rise of China opens up new challenges for many countries including India that now needs to reframe its strategies very carefully. 

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