Relations between the US and China have moved on to a new footing. They have taken the step for the worse amid territorial disputes concerning the area covered by the South China Sea.
Starting of high-profile mutual recriminations by officers of Foreign Ministries presenting both parties was only a matter of time thereat. In other words, if the territorial dispute had not begun, Washington would have found another cause for its demands.
More than a club
A unipolar world transforms to a multipolar one and the USA tries to resort to different threats increasingly frequently to restrain this process. Such policy results in strengthening of economic ties followed by strategic cooperation between other growing centres of force. For example, that goes within the scope of the ‘political club’ BRICS.
Due to various reasons, China reaches some leading positions within this structure. As for instance, due to adverse economic environment (including the pressure of Western governments that is sponsored by Washington), Russia is obliged to concentrate its strength on solution of internal problems.
China suffers slowdown in GDP growth rate now. “China is under pressure of three simultaneous processes, namely, degradation of the situation with labour forces, need for correction of investment disbalance in growth and not too favorable market conditions as for manufacturing export, – clarified the Head of the World Economy Research Group at the Centre for Macroeconomic Analysis and Short-Term Forecasting Alexander Apokin during the FINAM conference. – That is why a deceleration in growth is unavoidable, the growth does not exceed 5.5% without the investment component even now”. So, more attention is paid by Beijing to outward investments as a source of future incomes. It should come as no surprise that the priority investment pattern is the BRICS area. Taking into account the results of the preceding year, Beijing has ranked third in the world concerning the volume of investments made in foreign projects.
Chinese money is going to be involved in the construction of a railway in Brazil that will connect Brazilian and Peruvian Atlantic and the Pacific coasts. “A new way to Asia” will cost 30 billion dollars. Brazil and China signed an agreement on foundation of a mutual fund amounting to the sum exceeding 50 billion dollars in May. Investments, on top of everything else, will be forwarded to the electrical power engineering, mineral industry and aircraft industry, related to defence industry. As a general principle, China plans to invest about 250 billion dollars in the region in the course of the next ten years.
An agreement on economic cooperation in the amount of over 22 billion dollars was signed between Beijing and Deli in May as well. The agreement provides bilateral cooperation in the power industry, industrial parks creation, steelmaking industry and financial logistics, i.e. these are the spheres that are related to defence issues.
We might add that cooperation with India is of a great interest for BRICS participants, and especially for Russia. India enjoys wide popularity among investors because the rate of its economic growth for some next years provide evidence for its increase in comparison with the growth rate in regard to Chinese economy. “Indian economy actively achieves the status of the most dynamically developing one in the whole world,” – says Alexander Abramov, the professor of the Open and Investment Market Department of the Higher School of Economics. Even some assessments provide evidence that India will economically reach China within 10–15 years.
Relations with China will be smooth as silk
Quite possible, that Russia will obtain an equal partner represented by China eventually in the key economic project covering the Eurasian area for the next decades and called ‘the new Silk Road”.
It is to be recalled that dozens of agreements related to power, gold mining, shipbuilding, high-tech and transportation industries were signed following the results of the May meeting between Chinese and Russian delegations in Moscow. Clearly enough, that a part of these branches are not directly related to the military-industrial complex, but are considered as allied fields.
But, as expected by experts, from the point of view of the President of the People’s Republic of China Xi Jinping, the most important document accepted during the May visit was the joint statement made by the Russian Federation and the People’s Republic of China concerning joining efforts that aimed at creation of the Eurasian Economic Union (EEU) and the Silk Road Economic Belt.
A transit corridor called the Silk Road-2 as it is today is proposed to be arranged in the territory of EEU countries. It will pass through Kazakhstan and Russia, with Belorussia as a probable member. “Conception of the new Silk Road presents some viewpoints of the long-run foreign policy of China and its cooperation with countries in such regions as Asia, Europe, and Africa, – states Egor Susin, Chief Expert, Centre for Economic Forecasting at Gazprombank. – It expects a large movement of capitals and goods, improvement of infrastructure, development of the financial infrastructure”.
“Taking into consideration a strong interest shown in Europe in expansion of economic relations, the results may be very interesting. But it must be understandable that it is a very long-term perspective”, – summarizes Egor Susin.
In accordance with the clarification made by Alexander Apokin, the perspective of this project is viewed at least up to the year 2035.
“It was believed several years ago, that the route would pass through some countries of Central Asia without participation of Russia. The implementation of this project is connected with huge geopolitical risks and its outlines may become unrecognizable”, – he adds.
And, in any case, creation of such corridor will strengthen collaborative engagement within the main triangle inside BRICS – “Russia– China – India” at any time.
Aleksey Maslov, the Director of the Centre for Chinese Strategic Studies of the Peoples’ Friendship University of Russia, reminds that the idea about the triangle relationship was advanced by Yevgeny Primakov in the late 1990s. It was thought back then that Russia would play a key role in the triumvirate.
Then again, having the leadership relinquished, our country loses nothing in such situation; it even has the best of the bargain. Let us define more precisely, that one of the cases resulting in association of countries forming BRICS was unwillingness of world financial institutions to implement reforms in the context of growing multipolarity.
Conversations about reforms have been carried on for years, but even a very modest reallocation of quotas in the World Bank (WB) has not been ratified in favor of developing countries because of the opposition on the part of the US Congress. As a result, movement of the IMF and the WB resources is defined by political priorities of advanced economies, and the remaining members are forced to establish their own regional institutes of financial solvency.
“This topic is being discussed for several years, – says Mikhail Aristakesyan, the Head of International Markets Information and Analysis Department at FINAM Investment Company. – No reforms have been implemented, that is why China and BRICS countries began to establish alternative institutions”.
In other words, the level of partnership achieved within the “club” bounds allowed them to proceed in relations.
For example, the Asian Infrastructure Investment Bank was open in October in the preceding year. Its own Bank within the BRICS frame is being established in parallel. And in early May the President of the Russian Federation Vladimir Putin ratified the pooling contract for foreign exchange reserves of BRICS countries to be equal to the amount 100 billion dollars. China will contribute 41 billion, Russia, Brazil and India – 18 billion each. The contribution of the Republic of South Africa will amount to 5 billion.
As it is clarified, “the document provides establishment of a self-regulatory Contingent Reserve Arrangement to react against possible pressure on balances of payment for BRICS countries and rendering of mutual support”.
As a reminder, the ruble was subjected to exactly such pressure late December in the preceding year. Simply said, formation of an alternative for reserve currencies used at the world financial market has been started. Many western financiers have become panic-stricken by this news.
Be prepared for world de-dollarization
As can be seen from the above, this step prompted publications in Russian mass media about the near fall of the dollar age. The most tendentious publications could be united under the head “A dollar remains commercially viable only as long as a stage III cancer patient can live.”
However, an overoptimism is akin to self-deception. Experts working directly with the currency market do not hurry to support an unsubstantiated enthusiasm.
“Ratification of such contract with foreign partners under the conditions of western sanctions is politically motivated for Russia and not profitable with regard to scope and procedure of assistance taken from the pool”, explains Yury Kravchenko, “Veles Capital” investment company senior analyst.
As for the point of view expressed by an analyst of the investment holding FINAM Anton Soroko, this process seems to be more optimistic. “Business competition with the IMF is a long-term but highly probable goal, which will be pursued by this bank step-by-step, because it is profitable for its founders, – argues the expert. – It is quite possible that we’ll see the foundation of a multipolar supranational space for financial structures, which are responsible for global economic growth process. But it is surely the problem, which is to be solved for some dozens of years, because the system is bent to the site of dominance of the US economic model and interests.”
It means that the world, and BRICS countries in particular, have reached the first de-dollarization boundary. All active participants of this process will face different obstacles that do not provide opportunities to receive an expected reward in advance. However, starting of this process will result in further rapprochement of participants of the BRICS’ political club and, we would add with regard to the particular nature of our publication, in integration of defence industry military thinking and manufacturing resources of our countries.