David Prosser: China's push for power is irresistible

Outlook Quite a day then for asset prices. By the close of play last night, the gold price had hit an all-time high, oil was up sharply too, the dollar had

suffered a corresponding fall, and the FTSE 100 index had risen 2 per cent despite some decidedly patchy domestic economic news.

Underlying all of those asset price movements was a common thread: a report in The Independent yesterday by my colleague Robert Fisk which revealed secret negotiations between China and the Middle East, as well as several other interested nations, to reprice oil using a basket of currencies rather than the dollar.

That report damaged the value of the US currency, which has the effect of boosting the dollar-denominated oil price. Gold was up because it is likely to be part of the basket to which oil prices will eventually switch – dollar weakness helped its case too – while the Footsie rose thanks primarily to miners and energy companies which benefit from that inflation.

What all this tells you is that the world's markets simply do not believe the denials of the story that have been issued by several countries. Saying so may not suit those countries which have strong political relationships with the US to worry about, but it would be remarkable if talks about repricing oil had not taken place. Indeed, China, the prime mover in these talks, has already openly floated the idea of ending the dollar's reserve currency status, and has never made a secret of its views on the matter.

Nor would it be reasonable to expect China to keep mum. Economists at HSBC – an institution that has already recognised the way the wind is blowing by announcing a move of its head office from London to Hong Kong – put it bluntly in their latest briefing paper. "We have reached a tipping point in global economic affairs," they say.

The bank's forecast is that the emerging economic nations of the world will produce average growth of 6 per cent next year – for China the projection is 9.5 per cent – while the developed economies will manage just 1.8 per cent (rising to 2.8 per cent in the US).

This won't be a one-off because the gap reflects the strengths of the emerging economies rather than the weakness of the West, as HSBC points out. China's improving political relationships with the Western nations has made investing there much easier while information technology has transformed the practical considerations. China's low per capita income gives it plenty of headroom to chase the West and its banking system has come through the credit crisis in good shape.

On conservative estimates, China's economy will be larger than that of the US by 2030 – IMF figures suggest 2018, the date by which these oil price talks are expected to come to fruition is even possible – and could be double its size by 2050.

Moreover, that growth will be commodity intensive, with basic infrastructure sucking up natural resources. China has already begun an enormous push to secure these assets, using the credit crisis and the global slowdown as an opportunity for massive investment overseas – the latest mooted deal, for instance, would see it buy up much of the Nigerian oil industry. It has already signed such agreements in Asia, Africa and South America.

In the context of China's economic power eclipsing that of the US and its insatiable demand for commodities, in what world would its demands for an end to a dollar oil price – should it make them – not be taken seriously?

Moreover, for many of the key players in this debate, striking a blow against the dominance of US economic power will offer a chance for some political payback, as well as reflecting the new world order. Remember how the US scuppered the Middle East takeover of American port facilities for political reasons, for example. Remember how only last month, the Obama administration unilaterally introduced new import duties on certain goods from China.

The scene is set. China – and others – have wanted to wrest power from the US. Soon they'll have the economic clout to achieve their goal. The markets know it: they do not believe the conspirators' protestations of innocence – or, for that matter, US insistence that the status quo can continue indefinitely.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + competitive: SThree: Are you passionate about sale...

Ashdown Group: Graduate Developer (Trainee) - City, London

£25000 per annum + benefits: Ashdown Group: A large financial services company...

Ashdown Group: Marketing Assistant - Financial Services Sector - London

£20400 per annum: Ashdown Group: An established and highly reputable organisat...

Recruitment Genius: Financial Services Graduate Training Scheme

£20000 - £100000 per annum: Recruitment Genius: We are a successful and establ...

Day In a Page

War with Isis: Is Turkey's buffer zone in Syria a matter of self-defence – or just anti-Kurd?

Turkey's buffer zone in Syria: self-defence – or just anti-Kurd?

Ankara accused of exacerbating racial division by allowing Turkmen minority to cross the border
Doris Lessing: Acclaimed novelist was kept under MI5 observation for 18 years, newly released papers show

'A subversive brothel keeper and Communist'

Acclaimed novelist Doris Lessing was kept under MI5 observation for 18 years, newly released papers show
Big Blue Live: BBC's Springwatch offshoot swaps back gardens for California's Monterey Bay

BBC heads to the Californian coast

The Big Blue Live crew is preparing for the first of three episodes on Sunday night, filming from boats, planes and an aquarium studio
Austin Bidwell: The Victorian fraudster who shook the Bank of England with the most daring forgery the world had known

Victorian fraudster who shook the Bank of England

Conman Austin Bidwell. was a heartless cad who carried out the most daring forgery the world had known
Car hacking scandal: Security designed to stop thieves hot-wiring almost every modern motor has been cracked

Car hacking scandal

Security designed to stop thieves hot-wiring almost every modern motor has been cracked
10 best placemats

Take your seat: 10 best placemats

Protect your table and dine in style with a bold new accessory
Ashes 2015: Alastair Cook not the only one to be caught in The Oval mindwarp

Cook not the only one to be caught in The Oval mindwarp

Aussie skipper Michael Clarke was lured into believing that what we witnessed at Edgbaston and Trent Bridge would continue in London, says Kevin Garside
Can Rafael Benitez get the best out of Gareth Bale at Real Madrid?

Can Benitez get the best out of Bale?

Back at the club he watched as a boy, the pressure is on Benitez to find a winning blend from Real's multiple talents. As La Liga begins, Pete Jenson asks if it will be enough to stop Barcelona
Athletics World Championships 2015: Beijing witnesses new stage in the Jessica Ennis-Hill and Katarina Johnson-Thompson heptathlon rivalry

Beijing witnesses new stage in the Jess and Kat rivalry

The last time the two British heptathletes competed, Ennis-Hill was on the way to Olympic gold and Johnson-Thompson was just a promising teenager. But a lot has happened in the following three years
Jeremy Corbyn: Joining a shrewd operator desperate for power as he visits the North East

Jeremy Corbyn interview: A shrewd operator desperate for power

His radical anti-austerity agenda has caught the imagination of the left and politically disaffected and set a staid Labour leadership election alight
Isis executes Palmyra antiquities chief: Defender of ancient city's past was killed for protecting its future

Isis executes Palmyra antiquities chief

Robert Fisk on the defender of the ancient city's past who was killed for protecting its future
Berlusconi's world of sleaze: The astonishing lifestyle once enjoyed by Italy's former PM

Berlusconi's world of sleaze

The astonishing lifestyle once enjoyed by Italy's former PM
Disney plans galactic domination with endless Star Wars spin-offs

Disney plans galactic domination with endless Star Wars spin-offs

Films and theme parks are just the beginning. Disney believes its control of the now decades-old franchise can bring in merchandise and marketing millions for years to come
Could the golden age of the gaming arcade ever be revived in the era of the Xbox?

Could gaming arcades be revived?

The days when coin-ops were the only way to play the latest video games are gone. But a small band of enthusiasts are keeping the button-pushing dream alive
Edinburgh Fringe 2015: The 'tampon tax' has inspired a new wave of female comedians to reclaim period jokes

Heard the one about menstruation?

Yes, if you have been at the Fringe, where period pieces are taking centre stage