Why those back-stabbing Limey shi.........Britan to join China's new World bank !

[Fiat Currency]

Re: Why those back-stabbing Limey shi.........Britan to join China's new World bank !

Don't forget about Canada becoming the first RMB trading hub in the Americas a couple of months ago.

Obama ... "pissing off allied countries since 2008"

What does an RMB trading hub mean for Canada?

Canada has been designated a trading hub for China's currency. What does it mean in terms of jobs, the economy and international trade?


Canada's main reason for seeking the yuan trading hub deal was to encourage Canadian business to do more trade with China, the world’s fastest growing and second largest economy, while also boosting Canada’s financial sector, which is headquartered in Toronto. AFP/GETTY IMAGES


By: Dana Flavelle Economy, Published on Mon Nov 10 2014
Canada has been designated a trading hub for China’s currency, a move aimed at boosting international business between the two countries while also nudging China’s once cloistered “redback” toward global status.

Among other things, it means for the first time, Canadians can open bank accounts in Canada that contain China’s yuan, also known as the renminbi (RMB).

Canadian institutional investors, such as pension funds, will also be able to buy up to 50 billion yuan worth of Chinese bonds and stocks directly. That’s roughly $9.2 billion.

The deal will “continue to boost the Toronto region’s status as a global financial centre,” Janet Ecker, president and chief executive officer of the Toronto Financial Services Alliance, said in a statement.

But the main reason Canada sought the deal was to encourage Canadian business to trade more with China, the world’s fastest-growing and second-largest economy.

“What this is, hopefully, is a wakeup call to Canadian business to do more trade with China,” said Jason Henderson, head of global banking for HSBC Canada. Instead of being 21st on China’s list of trading partners, he said, Canada should be closer to 10th or 12th based on the relative size of the economy.

Both Harper and central bank governor Stephen Poloz have urged Canadian business to expand their international trade efforts, both to reduce Canada’s dependence on the U.S. economy and also offset sluggish domestic demand. How fast and how much of that actually happens will depend on how good a job the banks do of selling the idea to Canadians.

“Our next step is to get out and explain this to our customers,” Henderson said.

The Canadian Chamber of Commerce has estimated the hub could boost Canada’s exports to China by as much as $32 billion over the next decade. Most of it will happen in commodities, such as wood, oil and minerals. Canada’s current two-way trade with China is $73 billion a year.

The deal could also cut Canadian importers’ costs by as much as $2.75 billion, the chamber also estimated last month, saying those savings could “potentially” be passed onto consumers in the form of lower prices, mainly on consumer goods.

Currently, Canadian companies buying and selling in China have to convert the funds used to finance those deals into an intermediary – usually U.S. dollars – an extra step that adds costs.

More than half of Chinese businesses would offer Canadian importers discounts of up to 5 per cent if Canada’s banks could convert Canadian dollars directly into Chinese yuan, a survey by HSBC bank found.

Some of the details of the RMB trading hub agreement, announced Saturday in Beijing by Prime Minister Stephen Harper and Premier Li Keqiang, have yet to be worked out, such as where the hub will be located.

Toronto and Vancouver had been rivals for the designation, which has previously been assigned to a city, not a country. Other cities, such as London, Frankfurt and Seoul, already have it, while Paris and Luxembourg are in the queue.

For now, the designation is Canada.

A hub is mainly a virtual concept. It doesn’t create a new building or a new organization. Rather, it means China’s central bank — the People’s Bank of China — has authorized a centre to complete RMB transactions.

“The goal here in Canada, from my perspective, is we want a Canadian company anywhere in Canada to be able to walk into their local bank of choice and say, ‘I need this RMB product.’ Whether it’s in Vancouver, Calgary, Toronto, Montréal or Ottawa shouldn’t make a difference,” C.J. Gavsie, global head of foreign exchange products for BMO Capital Markets, said in an interview.

China named ICBC, the Industrial and Commercial Bank of China, in Toronto, as the clearing house for the currency transactions.

The deal is backed by a three-year, $30 billion currency swap agreement with the Bank of Canada, which means the central bank would step in to backstop any deals if credit dried up during a crisis.

For China, creating trading hubs is a controlled way to “liberalize” its currency, which could one day rival the U.S. dollar as the currency of choice for international deals.

Canada is the first place in the Americas to win the designation, giving Canadian companies a competitive edge over their U.S. rivals.

[touchring]

Re: Why those back-stabbing Limey shi.........Britan to join China's new World bank !

Don't forget about Canada becoming the first RMB trading hub in the Americas a couple of months ago.

Obama ... "pissing off allied countries since 2008"

This is call free market. Companies (countries) can choose to do business with whoever they like.

Like it or not, the world is now ruled not by bankers that yield for war and chaos but multinationals that seek profit and stability.

[don]

Re: Why those back-stabbing Limey shi.........Britan to join China's new World bank !

Institutional Discontent

March 22, 2015
By Michael Hudson







Odious Debts

March 23, 2015
By Michael Hudson

[GRG55]

Re: Why those back-stabbing Limey shi.........Britan to join China's new World bank !

Isn't this just more FIRE? With Chinese characteristics.

[touchring]

Re: Why those back-stabbing Limey shi.........Britan to join China's new World bank !

Isn't this just more FIRE? With Chinese characteristics.

Of course it's about the money. But isn't ironic when Chinese migrants are more accepted, and in greater proportions in the America and especially in Canada than as compared to the UK?

[don]

Re: Why those back-stabbing Limey shi.........Britan to join China's new World bank !

Isn't this just more FIRE? With Chinese characteristics.

It's all about historical placement, the wax and the wane. The US was once a progressive power, a bright light shining on European colonialism. Today neoliberalism to many doesn't look so good. If China succeeds, check back in a decade or two and see how its 'mutual benefit' package is holding up. States, like people, change over time and the lesser powers have to navigate those changes as best they can.

[touchring]

Re: Why those back-stabbing Limey shi.........Britan to join China's new World bank !

It's all about historical placement, the wax and the wane. The US was once a progressive power, a bright light shining on European colonialism. Today neoliberalism to many doesn't look so good. If China succeeds, check back in a decade or two and see how its 'mutual benefit' package is holding up. States, like people, change over time and the lesser powers have to navigate those changes as best they can.

At this point, America's every loss is China's gain. China's current rapid rise is dependent on the continuous decline of America.

MSM is a double edged sword. Overall time, one can actually be taken in by one's own propaganda. This is what is happening to the bankers, they got so caught up with their own propaganda that they themselves read all the time, they don't even know they are losing the economic superpower title.

[don]

Re: Why those back-stabbing Limey shi.........Britan to join China's new World bank !

U.S. couldn’t corral AIIB due to soaring Chinese investments in Europe


Author: Asia Unhedged March 23, 2015 0 Comments
Asia Unhedged

Stopping a stampede isn’t easy – as that old cowpoke Uncle Sam is finding as more European nations bolt to join China’s Asian Infrastructure Investment Bank (AIIB).

The weak Euro’s drawing a conga line of Chinese investments to Europe. The money’s being plunked down not only in “typical” Chinese sectors of historic interest like resources or transportation. It’s focusing geographically across the entire European opportunity and capability spectrum.

The uplifting effects of this investment hasn’t been lost on the European countries who are now eager to climb aboard China’s AIIB.
Ever since Europe embarked on their QE, and China has maintained stability in the yuan. As we have noted, this is viewed as pre-condition for the non-convertible yuan to join the IMF’s SDR currency basket later this year. And the yuan has increased in value against the Euro almost 25% in one year – a trend likely to continue through the year with the long-term policies of the respective central banks likely to stay in place for the foreseeable future.

According to the EU Observer: “Even before the crisis, these flows surged, tripling from less than US$1 billion per year in 2004-8 to roughly $3 billion in 2009-10. As the Eurozone crisis kicked in, Chinese investment tripled again to $10 billion in 2011. And last year, Chinese investors doubled their money in Europe to a record $18 billion.”

Chinese capital’s typically poking around for each European country’s relative market advantages. In the UK as with many foreign investors, the Chinese have focused on prime property, while in Germany they look for advanced technology.

“The UK is the top destination for Chinese investment at $5.1 billion, followed by Italy at $3.5 billion,” the Observer said.

As the capital needs of Southern Europe grow, Chinese capital has focused on privatisations and distressed opportunities, from the Greek ports connecting to their new Silk Road to Europe, to Portugal’s Espirito Santo Bank and Spain’s real estate foreclosures.

And the road is not one way. The weak Euro has opened up significant competitive advantages to European exporters, who now view China, with Russia, Emerging Europe and Latin America faltering, as their clear growth market of priority.

As Bloomberg reports in “China Prevails as Land of Opportunity for European Automakers”, “China’s density per 1,000 people lags far behind more developed nations at 54, compared with 531 in the U.S. and 404 in Germany. A one-person increase in vehicle density in China translates to almost 1.4 million additional autos in the country, amounting to almost 7% of total volume sold in the U.S. in 2014.”

To grasp the size of this opportunity, note that China has 480 cars per 1,000 people less density. The Chinese auto market is expected to grow 10% per annum to 40 million units annually by 2020 or more than twice the current size of the U.S. market.

[don]

Re: Why those back-stabbing Limey shi.........Britan to join China's new World bank !

Nomi Prins

Presidents, Bankers, the Neo-Cold War and the World Bank

Monday, March 23, 2015 at 5:58AM

At first glance, the neo-Cold War between the US and its post WWII European Allies vs. Russia over the Ukraine, and the stonewalling of Greece by the Troika might appear to have little in common. Yet both are manifestations of a political-military-financial power play that began during the first Cold War. Behind the bravado of today’s sanctions and austerity measures lies the decision-making alliance that private bankers enjoy in conjunction with government and multinational entries like NATO and the World Bank.

It is President Obama’s foreign policy to back the Ukraine against Russia; in 1958, it was the Eisenhower Doctrine that protected Lebanon from a Soviet threat. For President Truman, the Marshall Plan arose partly to guard Greece (and other US allies) from Communism, but it also had lasting economic implications. The alignment of political leaders and key bankers was more personal back then, but the implications were similar to the present day. US military might protected its major trading partners, which in turn, did business with US banks. One power reinforced the other. Today, the ECB’s QE program funds swanky Frankfurt headquarters and prioritizes Germany's super-bank, Deutschebank and its bond investors above Greece’s future.

These actions, then and now, have roots in the American ideology of melding military, political and financial power that flourished in the haze of World War II. It’s not fair to pin this triple-power stance on one man, or even one bank; yet one man and one bank signified that power in all of its dimensions, including the use of political enemy creation to achieve financial goals. That man was John McCloy, ‘Chairman of the Establishment’ as his biographer, Kai Bird, characterized him. The relationship between McCloy and Truman cemented a set of public-private practices that strengthened private US banks globally at the expense of weaker, potentially Soviet (now Russian) leaning countries.

John McCloy and the World Bank Twist

In 1947, President Truman selected then-partner at a Rockefeller law firm, John McCloy, to be the second president of the World Bank (or International Bank of Reconstruction and Development) that would provide financial aid to developing nations after WWII. McCloy demanded the ability to unilaterally restructure the nascent World Bank—absent Congressional debate –such that its bonds would be sold through Wall Street banks.

That linkage altered the future of global financial relationships, by transforming the World Bank into a securities vending machine for private banks that would profit from distributing these bonds globally, while augmenting World Bank aid with private loans.

World Bank, IMF and other multinational entity decisions about aid vs. austerity or any other ‘reform’ requirements including opening border to private banks, would be controlled by the capital markets. Big private global banks arrange, underwrite and distribute World Bank bonds. Small banks in Greece did not. Financial assistance terms were established to follow a similar hierarchy.

During the Cold War, the World Bank provided funds for countries that leaned toward capitalism versus communism. Political allies of the United States got better treatment (and still do). The Nations that private bankers coveted for speculative and lending purposes saw their debt loads increase substantially and their industries privatized. Equally, the bankers decided which bonds they could sell to augment public aid funds, which meant they would have control over which countries the World Bank would support. The World Bank did more to expand US banking globally than any treaty or entity that came before it.

The Marshall Plan and Eisenhower’s Rise

Another pillar of global reconstructive and foreign policy efforts, the Marshall Plan, would provide further a ide to “friendly” countries in the early years of the Cold War. Truman unveiled the Marshall Plan in the spring of 1947. He presented it as a way to counter the threat of Communism, warning that Europe was disintegrating economically, and Truman feared Greece and Turkey would fall victim to Communist control. America’s new enemy was not Germany nor the Nazis but Communism and its associated countries.

Under the Marshall Plan, Congress approved $13 billion to aid Europe’s fight against Communism, and also to bolster prime trading partners for American industries and banks. As a result, more currencies became available for conversion into US dollars. The Marshall Plan wasn’t just about helping allies: but about spreading dollar domination.

Chase (now JPM Chase) Chairman, Winthrop Aldrich enthusiastically supported the Marshall Plan. To big banks, lending to developing nations and fighting Communism amounted to the same thing. Plus, the Marshall Plan effectively gave each major US bank its own European country to play in. From 1948 to 1952, Chase amassed the most deals in Europe, nearly $1 billion, followed by National City Bank (now Citigroup).

Eisenhower, NATO & Bankers

In 1952, General Dwight D. Eisenhower was commander of the North Atlantic Treaty Organization (NATO), the new military alliance established between the United States, Canada, and leading Western European powers to deter Soviet expansion, and promote European political integration. NATO blended military, political, and economic power behind the mantra, “an armed attack against one or more of [the allied countries] shall be considered an attack against them all.”. In practice, what held for military support, held for opening borders to dollar based trade and private banking business, too.

In the spring of 1952 Aldrich traveled to Europe with an entourage of power brokers to persuade Eisenhower to run for president on the Republican ticket. Upon election victory, Ike’s banker sphere of appointees included his secretary of war, Thomas Gates, who would later chair the Morgan Guaranty Bank (now JPM Chase), Aldrich who became Ike’s ambassador to Great Britain, and John McCloy, who would spend the Eisenhower years as chairman of the Chase National Bank (now JPM Chase) assuming Aldrich’s role.

Beside the Marshall Plan, the Truman and Eisenhower doctrines extended US military and economic support to nations that adopted US ideology and that were military allies. Overseas offices of major US banks subsequently swelled to accommodate all the private loan demand that accompanied government support.

In 1956, W. Randolph Burgess, former National City Bank Vice President, left his Treasury Department post to become the US ambassador to NATO. By that time, the luster of NATO was fading. By 1963, Burgess noted that “the shine of postwar NATO was getting a little dull.” Stronger European countries felt less threatened by Soviet aggression and this made them less pliable to US policies. In addition, their European banks began spreading their wings globally again. The financial end of the cold war was preceding the diplomatic end by decades.

The International Bank Race

US bankers sought to compete with strengthening European banks by opening more offices overseas and by fighting to eliminate New Deal regulatory restrictions so they could grow domestically and use their size as a broader lending springboard.

Fast forward sixty years later to today , and those seeds of political-military-financial partnerships against the threat of the Soviet Union (now Russia) have sprouted to support US banks and dollar, and US monetary and fiscal policy supremacy the world over.

Much has happened in between; mass deregulation of international banking, technological advancements in trading, and the use of the World Bank (and the IMF and various central banks) to subsidize bank led speculation by submitting weak countries to austerity measures or ‘bailouts’, thereby prioritizing payments to bondholder clients of mega-banks over economic stability. The Big Six banks in the US, a subset of the 30 G-SIBs (global systemically important banks) enjoy a magnitude of government, central bank and multinational entity support that would have been unimaginable back then.

Whether it’s a $17 billion bailout package for the Ukraine. or a $270 billion one for Greece, or Obama doing a 180 on Cuba to keep Russia out, the costs of power alignments are greater than ever for the smaller, weaker countries. Their economic coffers have been pried open by the Western super-powers still calling the political, military and financial shots and again using threats of Russian ‘aggression’ to camouflage expansionary intents.

Under Obama, the US is resurrecting the Cold War and invigorating NATO by promoting the threat notion, just as Truman and Eisenhower did. Financial supremacy and currency dominance remain central to this strategy. But this time, there’s a more dangerous difference – a level of financial opposition that could become military opposition if sufficiently provoked. The counter-movement from a currency and financial perspective is comparatively small. But it’s growing. The global position of super-powers and super-banks remains at play in this newly sanctioned financial Cold War.

For more on historical foundations for present decisions, read: All the Presidents’ Bankers: The Hidden Alliances that Drive American Power (out now in paperback). Also, please watch my interview with Max Keiser.

(Go to 12:52)

[touchring]

Re: Why those back-stabbing Limey shi.........Britan to join China's new World bank !

Does Communism as an ideology still exist?

This appears to me more like baiting, to divert the attention from Middle East which is understandable given that some American politicians like fights, so you create another new arena (in Ukraine).

Unfortunately, as we have seen in Iraq, it backfired as the insurgents outwitted the Americans - they knew the game played in Ukraine and timed to grab Mosul at the same time.

Nomi Prins

Presidents, Bankers, the Neo-Cold War and the World Bank

[srivatsan]

Re: Why those back-stabbing Limey shi.........Britan to join China's new World bank !

U.S. couldn’t corral AIIB due to soaring Chinese investments in Europe

....

More discussions in Asia Times: http://atimes.com/2015/03/chinas-inf...bretton-woods/

[don]

Re: Why those back-stabbing Limey shi.........Britan to join China's new World bank !

Russia to join China-led Asian bank; Beijing opens door to Taiwan membership

Beijing opens door to Taiwanese involvement in US$100-billion Asian Infrastructure Investment Bank, as string of countries say they will apply

Russia, Australia and Holland yesterday said they would apply to join the China-led Asian Infrastructure Investment Bank, while Beijing also appeared to open the door to Taiwanese membership, days before Tuesday's deadline for founding members.

The news followed an announcement by the finance ministry that Britain and Switzerland had been formally accepted as founding members of the new fund, which has a capital target of US$100 billion.

Some 30 countries had now been formally accepted as founding members with even more under consideration and applications still coming in, the finance ministry said.

Moscow had been conspicuously quiet over whether it would join up, even after eight European countries, led by Britain, made clear their intentions to join, prompting speculation over the indecision of Beijing's global strategic partner. Whether Taiwan, which Beijing perceives as a renegade province, could join and in what capacity, has also been the subject of speculation.

Russian First Deputy Prime Minister Igor Shuvalov expressed Moscow's intent to join the AIIB when he addressed the China-sponsored Boao Forum for Asia in Hainan, reported the Russian TV network RT.

The announcement leaves South Africa as the only country from the Brics developing economies yet to express an interest in joining the bank.
Brazil, one of China's top trading partners, declared an interest in joining on Friday; India was accepted as a founding member months ago.

Nations will still be able to join the AIIB following the deadline, but only as common members, the ministry said.

In a meeting with mainland President Xi Jinping before the opening of the Boao conference, Taiwan's former vice president Vincent Siew told Xi the island hoped to join the bank.

A press release by the Taipei-based Cross-Strait Common Market Foundation, of which Siew is the honorary chairman, said the meeting lasted for about half an hour, but did not mention Xi's response.

Zhang Zhijun , director of the State Council's Taiwan Affairs Office, was quoted by Taipei's Central News Agency as saying that Beijing was willing to listen to Taiwan's views on whether it could join the bank and in what capacity.

"We are delighted to hear any opinions and suggestions from Taiwan about this, but so far we have yet to officially receive any application from Taiwan," he was quoted as saying.

Zhang, who was in the meeting with Xi and Siew, said there was a chance for Taiwan to join, but did not elaborate.

As the AIIB requires statehood to join, it has so far been unclear how either Taiwan or Hong Kong could join, even though both have expressed a wish to.

Hong Kong Chief Executive Leung Chun-ying attended a group meeting with Xi yesterday, but said it was only a courtesy greeting. Hong Kong said earlier it would lobby to join the bank.

Meanwhile, Toshihiro Nikai, a senior member of Japan's Liberal Democratic Party, met Xi for a photo session at the Boao forum, amid a slight easing of tensions between the two sides, Kyoto reported.

Nikai was the first Japanese political figure to have met Xi since Japanese Prime Minister Shinzo Abe held his first talks with Xi in November.
Japan, an ally of the US, has yet to say whether it wants to join the AIIB, which some see as a competitor to the US-dominated World Bank and Asian Development Bank.

Washington had previously asked its European allies not to join the AIIB.

This article appeared in the South China Morning Post



Under the so-called "One Belt, One Road" initiative, China aims to create a modern Silk Road Economic Belt and a 21st Century Maritime Silk Road to boost trade and extend its global influence. Commerce Minister Gao Hucheng said previously that more than 50 countries had shown interest in the initiative.Projects under the plan include a network of railways, highways, oil and gas pipelines, power grids, Internet networks, maritime and other infrastructure links across Central, West and South Asia to as far as Greece, Russia and Oman, increasing China's connections to Europe and Africa.

Speaking at the sidelines of a high-level event in the southern city of Boao on Sunday, Xi said the scheme would stimulate trade and investment between China and countries along the route, according to a statement on the foreign ministry's website.

"We hope that the annual trade volume between China and these countries surpasses $2.5 trillion in a decade or so," Xi told 40 company representatives from China and overseas.

By way of comparison, China's trade with the European Union in 2013 amounted to 428.1 billion euros ($466.1 billion).
Chinese industries expected to benefit from the plan include agriculture and mining as the route encourages exploration for minerals.

In addition to trade efforts, China is seeking to boost its global influence by signing up countries to its Asian Infrastructure Investment Bank.

Xi, meanwhile, sought to address concerns from foreign businesses, which have complained of an increasingly tough business climate in the world's second-largest economy.

"China will be more open. China's policies that encourage the use of foreign investment will not change, and the protection of legitimate rights and interests of foreign-invested businesses will not change," Xi said.

The United States is concerned about China's restrictions on the use of foreign information technology equipment by the banking sector, according to a filing published by the World Trade Organization on Thursday.

New cyber-security regulations would force technology vendors to Chinese banks to hand over secret source code and adopt Chinese encryption algorithms.

U.S. companies have also cried foul over China's oversight of monopoly and pricing issues and antitrust enforcement.

(Reuters)

[don]

Re: Why those back-stabbing Limey shi.........Britan to join China's new World bank !

How should America compete with China?


Author: David P. Goldman March 29, 2015

Never in the history of American foreign policy has so much egg adhered to so little face as in the matter of Asia Infrastructure Investment Bank. All of America’s allies, including Britain and Australia, have elected to join the Chinese-led institution. That is a grand validation of China’s One Belt/One Road vision for infrastructure upgrades across the whole Eurasian landmass. China’s President Xi Jinping envisions $2.5 trillion of trade between his country and the “Silk Road” nations over the next decade. Rather than fret about the impact of a slowing (or shrinking) world economy on China’s export-driven prosperity, China is seeking to shape the economic environment around it.

It is not only the Obama administration that has been wrong-footed by the world’s embrace of China’s economic ambitions, but almost the whole of America’s foreign-policy elite. With almost no exceptions, American analysts have misunderstood China. One school argues that China inevitably will collapse of its own weight, because authoritarian governments supposedly are incapable of efficient allocation of resources; another warns of a Chinese plan for world domination.

A March 20 Wall Street Journal editorial proclaimed, “China Trounces U.S. ‘Smart Power,’ but expresses sour grapes over the outcome:

The AIIB is likely to enhance China’s influence far more than it will help its supposed beneficiaries. Poor regimes willing to stay on Beijing’s good side will earn cheap loans on lax terms, but the bank will promote a version of China’s state capitalism, not transparent markets.
Gresham’s Law applies to economic development: Bad money drives out good. Ports, bridges and other public works funded by artificially cheap capital, with poor or corrupt oversight, become boondoggles that burden states with debt, raise default risks and often stifle productive private investment. The trillions of dollars Asia needs for public works will never materialize unless private investors see reliable, non-corrupt opportunities for returns. Easy public loans that perpetuate cronyism don’t help.

One would like to ask the Journal editors where in the world they observe an efficient model of private infrastructure investment. American infrastructure is miserable compared to Asia’s newly built roads, trains and bridges, as any traveler who has the misfortune to land at JFK or O’Hare will attest. There is a reason for this: A journeyman bricklayer working on any federally-supported building project in Essex Country, New Jersey is expected to earn $67.26 an hour under the Davis-Bacon Act. That’s $134,520 a year without overtime. American public works projects cost the moon and take forever because they are run for the benefit of the construction unions. American politicians are as terrified to touch this torpedo as their French and Italian counterparts are terrified to amend protective labor laws in their countries. New York City expects to complete its Second Avenue subway line by 2029 at a cost of $17 billion, or 22 years after ground was broken. China builds whole subway systems for cities the size of New York in a year.

Infrastructure is one of China’s great achievements. As the New York Times observed in a Sept. 13, 2013 report, China’s high-speed rail system already serves more passengers than the 54 million Americans who board domestic flights every day, and has transformed China’s economy. With 600 million Chinese migrating from the low-productivity countryside to higher-productivity employment in urban areas, the high-speed rail network has made business ventures possible that were not conceivable before.

A generation of American China-watchers is growing old waiting for China’s economy to crash. There is a parallel thesis, propounded most recently by Brookings Institution scholar David Shambaugh, that China faces a “coming crack-up” for political reasons. It is true that President Xi’s anti-corruption campaign has upset a large part of China’s political elite, but that is not necessarily a sign of political weakness. On the contrary: it is hard for any constituency to oppose Xi on grounds that he has impinged on its parochial interests. Many of China’s economic reforms, moreover, force transparency upon precisely those sectors of the economy that most lent themselves to corruption. The trillion-yuan swap of provincial debt for the obligations of Local Government Financing Vehicles, for example, begins the slow process of shifting provincial infrastructure financing from locally-arranged land sales to tax-financed bonds on the Western model.

A minority of American analysts hold that China will succeed, and that its objective is world domination. That is the nub of Michael Pillsbury’s new book The Hundred-Year Marathon: China’s Secret Strategy to Replace America as the Global Superpower. This I characterized as the “Fu Manchu” theory of Chinese intentions, The leading Chinese news site sina.com had a great deal of fun with this idea, and translated my notice with copies of the covers of the old Fu Manchu novels. Dr. Pillsbury, in fairness, is a serious scholar, and the sensational title of his book doubtless is due to a mercenary publisher Jonesing for impulse purchases. Nonetheless, as I wrote in Asia Times, “China is not planning to take over the world. It doesn’t want the world. It doesn’t like the world – that is, the world outside of China. Unlike Greeks, Romans, Muslims, and European imperialists, it does not want to plant its flag outside its borders, send its young men to conquer and defend new territories, or subject other peoples to colonial rule. Nonetheless, it may inherit the world, reluctantly and by default.”

What should America do in response to a rising China? It is futile and ultimately humiliating to attempt to contain China, as the Obama administration discovered in the case of the AIIB. America should do what it does best, or rather, what it used to do best: Widen the technology gap between America and the rest of the world. That gap is now closing rapidly as a new generation of Chinese entrepreneurs and scientists comes of age. It is closing in part because America’s commitment to basic R&D has faltered.

As Dr. Henry Kressel, former head of RCA Labs, and I wrote in 2013 in American Interest:

One critical but often underrated factor in productivity growth is the impact of basic R&D stemming from aerospace research and development. Between 1952 and 1964, as the Eisenhower and Kennedy Administrations responded to Russian development of nuclear weapons and space flight, R&D spending rose by more than an order of magnitude. During the Johnson, Nixon, Ford and Carter Administrations, though, Federal R&D spending grew very little. When America shifted budget priorities toward increasing Federal entitlements and funding the Vietnam War, Federal R&D spending declined. It rose, although not as fast as during the 1950s and 1960s, during the Reagan Administration under the impetus of the Strategic Defense Initiative and the rearmament program.
America’s response to Sputnik set in motion the eventual productivity recovery of the 1980s, with the fastest rate of increase of federally funded R&D in the nation’s history. It is difficult to identify the fundamental research component in overall R&D spending, to be sure, but a rough proxy is the percentage of Federal R&D spending. The Defense Department, NASA and the Department of Energy have provided a disproportionate share of funding for research with long-range objectives in basic science as opposed to incremental improvements on existing technologies. Federal R&D spending has fallen from nearly 2 percent of GDP in 1963, at the height of the Cold War and space program, to less than 1 percent during the past two decades. That may not sound like much, but as with falling infrastructure investment, 1 percent compounded over a decade or two is a very significant number.

America should be reliving the Sputnik moment of 1957, when Russia’s first space flight prompted a big shift in resources towards science education and basic R&D. America also should make it easier for foreign students (who comprise a disproportionate share of our scientific and engineering student body) to settle in the U.S. and obtain funding for new ventures. China and the United States never will be allies, and probably won’t be friends, but the world’s two largest economies can compete peacefully for the high ground of technological innovation. That’s what America once did best. If America can’t sustain its commitment to innovation, its complaints about China’s ascendance will be futile.

[Chris Coles]

Re: Why those back-stabbing Limey shi.........Britan to join China's new World bank !

Personally, my reaction is to say that present US policies have left me in a deep quandry. As a British citizen I had made the decision, due to my utter repulsion against the idea of Extraordinary Rendition and Torture; that I no longer wish to be associated with the US as a potential location for any future research or development of my own IP.

Then, more recently, from becoming aware of the Defense Trade Co-operation Treaty between the US and the UK; which effectively removes any possibility of the UK being permitted to develop, (as a British nation, for the long term benefit of the British nation), any future defense technology; without having at some point to hand every aspect of such to the US; ......... now means that I am unable to approach my own government; without the VERY real possibility that my own IP will be handed to the US; free and for gratis.

So now where do I locate myself?

As I see it; absolute greed has shot the US in their own foot. They did it to themselves by destroying their credability as a free nation.

Who in their right mind would now want to go to the US and be ripped off; when almost any other nation has become the place to go if you wish to better yourself?

Money is never the reason to so move; it is being welcomed into a nation which appreciates what you have to offer; balanced against respect for the nation you are considering moving to.

In my case; I have lost respect for the US; Totally!

Again, for what it is worth; I love my nation of birth, Great Britain; the people; the underlying ethos; the way of life. Caught between a rock and a hard place, I am likely to stay here and find a way forward without any involvement with either the US, or the UK governments.

Governments that place their citizens into such a dillema show complete disregard for their duties to their nations; one clearly determined to destroy their credability, seemingly at total war with the rest of the planet; the other prepared to sell their nation to the highest bidder, just to keep their extravagent lifestyle intact.

[don]

Re: Why those back-stabbing Limey shi.........Britan to join China's new World bank !

Putting your principles first is admirable, Chris. Inconceivable to many, if not most. Fortunately my wife and i are both working in less compromising circumstances. On the plight of the US, as I've stated elsewhere, the 4-decade-old descent of the world's once-most dominant hegemon isn't pretty.