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
Sport
Alexis Sanchez has completed a £35m move to Arsenal, the club have confirmed
sportGunners complete £35m signing of Barcelona forward
Voices
Poor teachers should be fearful of not getting pay rises or losing their job if they fail to perform, Steve Fairclough, headteacher of Abbotsholme School, suggested
voicesChris Sloggett explains why it has become an impossible career path
Sport
world cup 2014
Sport
Popes current and former won't be watching the football together
PROMOTED VIDEO
Sport
News
Wayne’s estate faces a claim for alleged copyright breaches
newsJohn Wayne's heirs duke it out with university over use of the late film star's nickname
Arts and Entertainment
Celebrated children’s author Allan Ahlberg, best known for Each Peach Pear Plum
books
News
peopleIndian actress known as the 'Grand Old Lady of Bollywood' was 102
News
business
News
Mick Jagger performing at Glastonbury
people
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Sport
Germany's Andre Greipel crosses the finish line to win the sixth stage of the Tour de France cycling race over 194 kilometers (120.5 miles) with start in Arras and finish in Reims, France
tour de franceGerman champion achieves sixth Tour stage win in Reims
Extras
indybest
Life and Style
beautyBelgian fan lands L'Oreal campaign after being spotted at World Cup
News
people
Arts and Entertainment
Chocolat author Joanne Harris has spoken about the financial struggles most authors face
books
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

Business Analyst Consultant (Financial Services)

£60000 - £75000 per annum: Harrington Starr: Business Analyst Consultant (Fina...

Systems Administrator - Linux / Unix / Windows / TCP/IP / SAN

£60000 per annum: Harrington Starr: A leading provider in investment managemen...

AVS, JVS Openlink Endur Developer

£600 - £700 per day: Harrington Starr: AVS, JVS Openlink Endur Developer JVS, ...

Technical Support Analyst (C++, Windows, Linux, Perl, Graduate)

£30000 per annum: Harrington Starr: A global leader in trading platforms and e...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice
Hollywood targets Asian audiences as US films enjoy record-breaking run at Chinese box office

Hollywood targets Asian audiences

The world's second biggest movie market is fast becoming the Hollywood studios' most crucial
Grindr founder Joel Simkhai: 'I've found love on my dating app - and my mum keeps trying to hook me up!'

Grindr founder Joel Simkhai: 'I've found love on my dating app'

Five years on from its launch and Grindr is the world's most popular dating app for gay men. Its founder Joel Simkhai answers his critics, describes his isolation as a child
Autocorrect has its uses but it can go rogue with embarrassing results - so is it time to ditch it?

Is it time to ditch autocorrect?

Matthew J X Malady persuaded friends to message manually instead, but failed to factor in fat fingers and drunk texting
10 best girls' summer dresses

Frock chick: 10 best girls' summer dresses

Get them ready for the holidays with these cool and pretty options 
Westminster’s dark secret: Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together

Westminster’s dark secret

Adultery, homosexuality, sadomasochism and abuse of children were all seemingly lumped together
A History of the First World War in 100 Moments: Dulce et decorum est - a life cut short for a poet whose work achieved immortality

A History of the First World War in 100 Moments

Dulce et decorum est: a life cut short for a poet whose work achieved immortality
Google tells popular music website to censor album cover art in 'sexually explicit content' ban

Naked censorship?

The strange case of Google, the music website and the nudity take-down requests