• All governments lie, but disaster lies in wait for countries whose officials smoke the same hashish they give out.

  • I.F. Stone

zaterdag 17 september 2016

Replacing the US Dollar

China's Win-Win with Russia at the G20 Summit of Hangzou

Replacing the US dollar as the main currency in world economy remains Beijing's shared goal with Moscow
9 hours ago | 918 8


The author is an Italian industrialist and honorary member of the Academy of Science of the Institut de France. He is a regular RI contributor

In a letter written in December 2015, Xi Jinping proposed some national and global objectives for the G20 Summit of  September 4-5, 2016. For the CCP Secretary the aim of the G20 system - which he recalls was born at the beginning of the 2008 financial crisis - would be to develop concrete goals leading to a multipolar and shared global economy.
In that letter Xi Jinping said that, if said goals were reached, China would provide its decisive contribution, even partially changing its production system.
The win-win strategy is the declared goal of the Chinese Secretary. Over and above the wording of this concept, this  has a very specific meaning.
As shown by statistics, 77% of all the goals set at the previous G20 Summit held in Antalya have been achieved.
Furthermore, considering that data shows that the G20 countries account for approximately  90% of the world GDP, we can realize that, over and above declarations of principle and set phrases, for China the Hangzou Summit  was the ideal forum to start redesigning its place in the world.
In his opening speech at the G20 Summit in China, Xi Jinping clarified - in modern terms - a concept of the old Maoist tradition, whereby each country must take its own specific path to development.
In other words, there are no models to be imported in an already globalized world, possibly after a long and ruinous war for "democracy".
Each country has its own vocation, its system, its shih, namely its natural form, just to use a term of Taoist philosophy.
While recalling the effort - a true "Great Leap Forward", unlike Mao’s autarkic line of the 1950s - which has led China to be the second largest economy, Xi Jinping  clarified - always between the lines - another important point.
According to the CPC Secretary, China will not slow down the pace of its reforms, which means that today it will still tend to strengthen its internal market and its fight against corruption.
According to the latest data, the Party has sanctioned as many has 300,000 officials this year only.
Xi Jinping’s fight against corruption wants to convey the message that the Party is resuming the central role it has always played in Communist China and intends to open itself to foreign markets in the best possible way.
Hence without foreign entrepreneurs’ actions  manipulated by the corruption of State’s and Party’s cadres, executives and leaders.
In addition, Xi Jinping wants to change the old equation of China's development, with a view to increasing competitiveness on an equal footing with the most technologically advanced Western economies.
In other words, so far China has made social and industrial dumping towards the West's "mature" productions, characterized by low growth rate and average value added.
Thanks to this system, China is overcoming underdevelopment and is "standing up" - to use again  Mao Zedong’s terminology.
Currently the strategy is changing: China will play on equal terms in the global technology and capital market.
In that way, over the years, China had become what some US economists called "the global sweatshop", thus using for the Chinese factories a terminology reminding us of Charles Dickens’ novels.
According to the CPC Secretary, Xi Jinping, now the Chinese capital will be used, on the one hand, to create a supply-side economy within the country and, on the other hand, to enter the new labour-saving technological sectors, which will be the majority in future productive systems.
Hence, with a view to avoiding the huge Chinese population creating problems of internal political stability which could not be solved, even by force, Xi Jinping is enlarging the Chinese domestic market.
This is the reason why, however, he wants the West to keep on contributing to the upgrade of the Chinese economy.
Globalization is still one of China’s primary goals.
Hence the reference made by Xi Jinping to the renewal of the technological drivers of this global production phase is particularly significant.
And this is the reason why China still requires an open and competitive global market.
Instead of absorbing "old" productions, as in the days of the "Four Modernizations", China wants to participate in the creation of the new technologies - not only the digital ones - which will characterize the economy in the coming years.
Initially Deng Xiaoping wanted to compete with Hong Kong in attracting foreign companies.
Now Xi Jinping will participate, on an equal footing with the West, in the definition of the next economic growth cycle.
A cycle in which, incidentally, Italy will participate only marginally.
Its current leadership has not even the faintest idea of ​​the issues raised by Xi Jinping in his speech delivered to the  G20 Summit.
Therefore the Chinese leader’s line is even clearer: in the near future, development will be based on a range of tax, monetary and geopolitical tools, of which Xi Jinping’s China is fully aware.
Hence it will maintain a flexible fiscal policy and it will support some tax cuts. It will also increase government spending, in contrast to the private capital crisis, while it will maintain and increase the yuan-denominated funds  deposited abroad.
This project is reminiscent of the Eurasian project to be undertaken jointly with Russia.
The project consists in replacing the US dollar, or at least being side by side with it, as world exchange currency.
Again between the lines Xi Jinping conveys the message that globalization is perfect because it helps us to manage the still substantial Chinese overproduction.
In addition, China needs to cut production costs - and here the Western advanced management counts – as well as   change its costly and unproductive real estate market.
Finally, China must improve the distribution network efficiency and avoid financial asymmetric shocks.
All this can be read between the lines in the speech delivered by Xi Jinping.
And it is also worth recalling the attention paid by the  Chinese CPC Secretary to the "green" economy because it improves the whole economic performance and avoids the parallel health and infrastructure costs and even the cost of adapting the Chinese production to the world market.
According to Xi Jinping, who is still a serious expert of Marxism, it is the new climate of global collaboration which generates the new economic growth drivers, not vice versa.
Without a political decision on the new production formula there will be no transformation of the global economy.
Hence the issue lies in enhancing international cooperation and involving also the marginal countries we must rescue from the jihad or from the long fratricidal wars, as well as particularly ensuring a level playing field in the international system.
China has not appreciated the US policies of vast "ocean" alliance for trade globalization - the TTIP for the European Union and the TTP for Asia, namely the strategies put in place by President Obama.
Types of trade policies that - while speaking of the British economic growth - Carl Schmitt called "thalassocratic".
In fact, China is both land and ocean.
It has not accepted the North American TTP because it  suspects there is a US desire of leadership in global trade.
China wants to take advantage of the void of the US global policy - which has been blocked by the EU for the TTIP  and has seen only 13 countries advocating the Asian TTP, clearly targeted against China  - and fit in it, also to avoid becoming a regular purchaser of US goods and distorting its monetary policy, which is designed to promote the yuan internationalization.
Furthermore, so far neither Hillary Clinton nor Donald Trump have fully clarified their projects towards China.
Using again Taoist concepts, the "emptiness" of US policy must be replaced by the "fullness" of the new Chinese geoeconomy.
Moreover, the current European leaders attended the Huangzou G20 Summit having in mind the next EU Summit of  Bratislava, which shall deal with the Brexit issue.
Currently no EU Head of State or Government has the ability, the culture and the strength to evaluate operations longer than six months. Conversely the British Prime Minister, Theresa May, has already had confidential contacts with Xi Jinping and has spoken of a "golden age" in bilateral relations between Great Britain and China.
At the G20 Summit, Prime Minister May also met five other European countries to negotiate the new trade system after the Brexit.
The British Prime Minister wants to ward off the danger of a new US approach vis-à-vis Great Britain and is opening to China with a view to becoming a global hub, not only at financial but also at productive level.
China is expected to invest approximately 40 billion pounds in Great Britain, not to mention the building of the nuclear power plant Hinkley Point C and later of Sizewell in Sussex.
Great Britain wants to use China with a view to positively stepping up Brexit, thus decreasing its economic risks. Great Britain will replace the tired old Europe, with the  rich, powerful and vibrant China.
This means applying to the European economy - that Great  Britain is leaving - the "Four Is", the four key priorities which provided the slogan of the Huangzou G20 Summit, in the most genuine and authentic Chinese tradition.
The future economy shall be "Innovative, Invigorated, Interconnected and Inclusive".
In other words, China does no longer intend to support  global growth only with financial means, as happened during the US-led globalization.
In fact, China founded the Asian Infrastructure Investment Bank (AIIB) in December 2015 and aims at including the nations marginalized from the first wave of globalization. The AIIB has already 57 members.
Indeed China aims at a global economy which will implement new value creation mechanisms, especially  manufacturing and non-financial ones.
And here the link between the Russian Federation and China will be strengthened permanently.
The starting point will be the joint initiative for the Russian Far East and the Chinese North-East.
The G20 spoke about the new Russian-Chinese Eurasia and the Chinese leaders said to the leaders gathered for the Summit that this would lead to "big surprises."
The systems and organizations on the basis of which the Chinese and Russian project will be implemented are the Shanghai Cooperation Organization and ASEAN, through the Eastern Economic Forum.
Hence, in this regard, we can say that, for Xi Jinping, the G20 held in China was a great success.

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