David Prosser: China's push for power is irresistible - Business Comment - Business - The Independent

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
News
John Travolta is a qualified airline captain and employed the pilot with his company, Alto
people'That was the lowest I’d ever felt'
Life and Style
healthIt isn’t greasy. It doesn’t smell. And moreover, it costs nothing
News
peopleThe report and photo dedicated to the actress’s decolletage has, unsurprisingly, provoked anger
Property
Home body: Badger stays safe indoors
property
PROMOTED VIDEO
News
The programme sees four specialists creating what they believe are three perfect couples, based on scientific matchmaking. The couples will not meet until they walk down the aisle together
tvUK wedding show jilted
Arts and Entertainment
US pop diva Jennifer Lopez sang “Happy Birthday” to Gurbanguly Berdimuhamedow, president of Turkmenistan
musicCorporate gigs become key source of musicians' income
Arts and Entertainment
You've been framed: Henri Matisse's colourful cut-outs at Tate Modern
artWhat makes a smash-hit art show
News
ebooksAn unforgettable anthology of contemporary reportage
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig believed to be donning skis as 007 for first time
Sport
Mikel Arteta pictured during Borussia Dortmund vs Arsenal
champions league
Voices
Yes supporters gather outside the Usher Hall, which is hosting a Night for Scotland in Edinburgh
voicesBen Judah: Is there a third option for England and Scotland that keeps everyone happy?
Arts and Entertainment
Pulp-fiction lover: Jarvis Cocker
booksJarvis Cocker on Richard Brautigan
Arts and Entertainment
Robin Thicke and Pharell Williams in the video of the song, which has been accused of justifying rape
music...and he had 'almost no part' in writing it
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Sales Executive

£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

Payroll & Accounts Assistant

£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

£280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

Senior BA - Insurance **URGENT**

£400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week