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26 Mar, 2013 18:48

BRICS in the Great Wall

BRICS in the Great Wall

The Durban summit marks the point when BRICS becomes a real, rather than a paper tiger, and a defining moment for the relations between the bloc’s member states, as each of the five countries pursues its own national agenda.

Probably, the most thought-provoking question is why BRICS is of so much interest to China, which traditionally abstained from making unions or joining alliances that could have limited its activities in the world arena. It seems that Beijing’s commitment to BRICS can be seen through the prism of US-Chinese global rivalry. From the Chinese perspective, the main role BRICS has yet to play is to help China force out the US dollar as the main and single world currency and challenge American dominance in the existing world economic order. 

Paradoxically enough, the “Chinese economic miracle” was largely created by the Americans themselves with the help of the US dollar. At the time of the cold war, after a long period of trade and economic blockade against “Red China” the two countries established diplomatic relations in 1972 and resumed bilateral trade. Four years after that the “dollarization” of China became a real possibility.

At one point, the Chinese appeared to be so articulate in playing the game by American rules that they started outdoing the Americans. Relatively inexpensive Chinese goods of fair quality flooded shops from the East to the West coast. The U.S. trade deficit with China in 2011 exceeded $300 billion, with the trade turnover hovering slightly over $500 billion. 

Beijing also bought heavily into US debt, holding bonds worth some $1.2 trillion, which is unlikely to ever be exchanged for real money or goods. Nevertheless, the U.S. authorities are working hard to reverse the Chinese trade offensive, mainly by demanding that Beijing raise the exchange rate of its currency, the yuan, to the US dollar, thus encouraging American exports and making Chinese goods less competitive.

China has raised the value of its currency slowly. But Washington has demanded that Beijing take “a big leap” and raise the yuan by 20-50%. The Chinese leadership will not do that of course.  

Being unable to force Beijing to change the rules of trade, the United States resorted to “heavy weapons”. In response to China’s stubbornness, America came up with the Pivot to Asia strategy proclaimed by US Secretary of State Hillary Clinton in November 2011.The strategy calls for greater concentration in the Asia Pacific Region and containment of China. As part of the Pivot to Asia, the United States is creating an increasingly tangible threat along the routes used for trade and transportation of raw materials from Africa and the Middle East to China.

In August of last year, Hillary Clinton toured Africa, during which she criticised growing trade between China and African countries ($166 billion in 2011) and proposed to offer Africans loans and military assistance as an alternative. In addition to that, growing Western pressure on Iran has already resulted in reduced supplies of oil so badly needed by China. The notable warming of relations between the United States and India in recent years is largely attributed to Washington’s desire to sour the rapidly growing Indian-Chinese commercial ties ($70 billion in 2011) and New Delhi’s political contacts with Moscow and Beijing within BRICS.

Under such circumstance Beijing understands that while full-fledged war with America is practically impossible, a new type of confrontation is almost inevitable. The future strategic competition between China and America can be defined as a “cloud war” as its form can change and its boundaries are hard to determine.  

Chinese analysts believe that world finances are one of the forms of a limitless “cloud war”. On the one hand, the dominance of the US dollar gives tremendous advantages to the United States and allows Washington to meet the cost of global dominance with the help of military and economic levers and support the “American way of life”. On the other hand, the US dollar is passing through hard times. One bad vote in US Congress would be enough to cause a collapse of the US currency that serves as the foundation for the global financial system.

However, a blow may come from the outside. If the world’s leading emerging economies abandon the dollar this could undermine Pax Americana. Chinese strategists are mulling over the use of such “cloud weapons” if America resorts to military and economic measures as part of the Pivot to Asia.

The Chinese also think it would be too dangerous for them to stand up to the United States alone. Beijing believes risks can be shared by engaging other rapidly growing economies, which are wary of the United States, in the global anti-dollar drive. These are China’s BRICS partners: Russia, India, Brazil, and South Africa. The great distances between them are not a hindrance to joint action on the world financial front.

Spelling out its new concept of “peaceful rise”, which will make China a truly independent global centre of development, Beijing regards its BRICS partners as reliable allies in the struggle against the dominance of the US dollar as this serves the interests of all its members. 

This is how BRICS will provide the bricks for the China’s new Great Wall.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.