US struggling to retain dominant position in world economy as China’s credit rises

[TaiShang]

US struggling to retain dominant position in world economy as China’s credit rises
By Zhou Jimo
Global Times
Published: 2016-5-4 22:48:01


Ever since the fall of the gold standard, there hasn't been a currency that can counter the US dollar's dominance. The global economic system relies heavily on credit ratings, among which currency credit is pivotal. Any national currency is backed by a country's sovereign credit rating, so if the rating is lowered it suggests the credit of the country's currency has fallen as well.

The dollar's global influence has long been dominant, and US credit, backed by its currency, also became unprecedentedly powerful. But following the 2008 global financial crisis, US quantitative easing (QE) has led to increasing frothiness in asset prices and the dollar itself, and has also led to a decline in US credit. On the other hand, with the launch of the Asian Infrastructure Investment Bank (AIIB), the yuan's influence and China's sovereign credit have been enhanced.

A credit comparison between China and the US could be based on the US-led Trans-Pacific Partnership (TPP) and the China-initiated AIIB and "One Belt, One Road" initiative. For the US, It is never difficult to set up an international political alliance, let alone an economic union. But the outcome of the TPP seems to be more rhetorical than real. Only a total of 12 countries have signed up to it, and it remains to be seen when the agreement will become effective. This situation apparently isn't commensurate with the US and the dollar's dominant status, and this can be explained by the sovereign credit decline of the US.

By comparison, the China-initiated AIIB has already had 57 countries join up as founding members. Meanwhile, the "One Belt, One Road" initiative has seen even more rapid development. Unveiled in 2013, the initiative launched direct investment in 49 relevant countries, and established more than 50 economic and trade cooperation zones overseas by the end of 2015. Such swift development has demonstrated China's increased sovereign credit.

In the evolving global landscape, it is a natural move for one side to attempt to reduce the other side's growing advantages and influence. But this is not always appropriate, especially as the Sino-US relationship is inclusive and interdependent nowadays.

The fall in US dominance is tied to the country's deindustrialization, and its re-industrialization strategy is only a tactical contingency plan. Even this tactical adjustment requires a huge capital injection. Sadly, the US has taken QE programs to the extreme since the 2008 financial crisis. Today, among the world's major currencies, the euro is weak and the yen is not as influential as it used to be, which has left the yuan with the capacity to provide support for the US and its re-industrialization.

If this is the case, why would US credit rating agencies lower China's credit rating outlook? US President Barack Obama has said that the US should make regional trade rules, not China. But if the US is truly an advocate of the free market, it shouldn't force rules on other countries. Presently, despite the world's gloomy economic environment, the Chinese economy has been largely stable, and the IMF still holds a positive attitude toward it. In this regard, it's safe to say that bucking the trend to reduce China's credit rating is a way for the US to enforce its rules.

It is undeniable that China's growth is not as fast as it used to be, but this is natural amid the current economic upgrading, and should not be seen as too much of a disadvantage. In this regard, reducing China's credit rating could to a certain degree impact China, but it could affect the US even more.

The author is a research fellow with the National Academy of Innovation Strategy.

 

[BoQ77]

this guy is crazy, when compare TPP to a ADB-like bank.
that similar to compare a loan for buying a phone and a marriage which husband and wife grants the free access to each other's assets.

 

[Providence]

 

[jhungary]

US struggling to retain dominant position in world economy as China’s credit rises
By Zhou Jimo
Global Times
Published: 2016-5-4 22:48:01


Ever since the fall of the gold standard, there hasn't been a currency that can counter the US dollar's dominance. The global economic system relies heavily on credit ratings, among which currency credit is pivotal. Any national currency is backed by a country's sovereign credit rating, so if the rating is lowered it suggests the credit of the country's currency has fallen as well.

The dollar's global influence has long been dominant, and US credit, backed by its currency, also became unprecedentedly powerful. But following the 2008 global financial crisis, US quantitative easing (QE) has led to increasing frothiness in asset prices and the dollar itself, and has also led to a decline in US credit. On the other hand, with the launch of the Asian Infrastructure Investment Bank (AIIB), the yuan's influence and China's sovereign credit have been enhanced.

A credit comparison between China and the US could be based on the US-led Trans-Pacific Partnership (TPP) and the China-initiated AIIB and "One Belt, One Road" initiative. For the US, It is never difficult to set up an international political alliance, let alone an economic union. But the outcome of the TPP seems to be more rhetorical than real. Only a total of 12 countries have signed up to it, and it remains to be seen when the agreement will become effective. This situation apparently isn't commensurate with the US and the dollar's dominant status, and this can be explained by the sovereign credit decline of the US.

By comparison, the China-initiated AIIB has already had 57 countries join up as founding members. Meanwhile, the "One Belt, One Road" initiative has seen even more rapid development. Unveiled in 2013, the initiative launched direct investment in 49 relevant countries, and established more than 50 economic and trade cooperation zones overseas by the end of 2015. Such swift development has demonstrated China's increased sovereign credit.

In the evolving global landscape, it is a natural move for one side to attempt to reduce the other side's growing advantages and influence. But this is not always appropriate, especially as the Sino-US relationship is inclusive and interdependent nowadays.

The fall in US dominance is tied to the country's deindustrialization, and its re-industrialization strategy is only a tactical contingency plan. Even this tactical adjustment requires a huge capital injection. Sadly, the US has taken QE programs to the extreme since the 2008 financial crisis. Today, among the world's major currencies, the euro is weak and the yen is not as influential as it used to be, which has left the yuan with the capacity to provide support for the US and its re-industrialization.

If this is the case, why would US credit rating agencies lower China's credit rating outlook? US President Barack Obama has said that the US should make regional trade rules, not China. But if the US is truly an advocate of the free market, it shouldn't force rules on other countries. Presently, despite the world's gloomy economic environment, the Chinese economy has been largely stable, and the IMF still holds a positive attitude toward it. In this regard, it's safe to say that bucking the trend to reduce China's credit rating is a way for the US to enforce its rules.

It is undeniable that China's growth is not as fast as it used to be, but this is natural amid the current economic upgrading, and should not be seen as too much of a disadvantage. In this regard, reducing China's credit rating could to a certain degree impact China, but it could affect the US even more.

The author is a research fellow with the National Academy of Innovation Strategy.

lol...............Someone compare Trans Pacific Partnership (TPP) to AIIB.........Did the author realize it is two different thing? AIIB is a Chinese backed banking institution, TPP is a government level trade treaty. It's like comparing World bank to a formation of NATO...........

Also, he failed to realize since AIIB settle with USD, any boost with AIIB will only boost USD, and not the other way around ......

But hey, this is global time.

 

[BoQ77]

AIIB and Silk Road Fund made a total of about 140 billion, and basically a way to export equipment and service of China to Asia.

TPP is forming an economic community of 30 trillion dollars based on two way basis.
Small example, Vietnam revised granting 1 year visa to US citizens ( instead of 90 days as before ), as Vietnamese received 1 year visa from US. Or US employees could be free to apply for a job in Vietnam and Vietnamese employees could do the same, apply for a job in US as a part of agreement.

As you may know, TPP set conditions for membership, while AIIB doesn't.

Like, you could sign up for free newsletter as many as you can, but to pay high for real time service and analysis, you must think twice.

 

[TaiShang]

As a truly Eurasian project, OBOR is bound to prevail over US atlanticism and pacific-ism.

**

TPP and TTIP Are Both Doomed From the Outset

Thu, May 5, 2016





Originally appeared at ArtNet News

The President of the United States (POTUS) is desperate. Exhibit A: His Op-Ed defending the Asian face - the Trans-Pacific Partnership (TPP) - of a wide-ranging, twin-headed NATO-on-trade “pivoting”.
The European face is of course the Transatlantic Trade and Investment Partnership (TTIP).

POTUS frames TPP – as well as TTIP - in terms of a benign expansion of US exports, and private (US) firms having “a fair shot at competing against state-owned enterprises.” “Fair”? Not really. Let’s see how the mechanism works, focusing on TPP’s European twin.

With impeccable timing, almost simultaneously to Obama’s Op-Ed, Greenpeace Netherlands leaked 248 pages of classified TTIP documents that were to be re-discussed last week by negotiators in New York. There have been no less than 13 rounds of TTIP negotiations so far, over nearly three years.

The documents – negotiated in total secrecy since 2013 - represent roughly two-thirds of the latest negotiating text. An array of detailed studies, like this one, had been warning about the state of play. The veil of secrecy ended up being the ultimate giveaway to TTIP’s toxicity. Before the Greenpeace Netherlands leak, EU elected representatives could only examine these documents under a police watch, in a secure room, without access to experts, and on top of it they could not discuss the content with anyone else.

I will crush you with my GMOs

Everything civil society across Europe – for at least three years – has been debating, and fearing, is confirmed; this is a sophisticated, toxic US-led corporate racket, a concerted assault across the spectrum, from the environment and animal welfare to labor rights and internet privacy. In a nutshell; it’s all about the US corporate galaxy pushing the EU to lower – or abase – a range of consumer protections.

Hardball, predictably, is the name of the game. Washington no less than threatened to block EU car exports to force the EU to buy genetically engineered fruits and vegetables. In my travels in France, Italy and Spain over the past two years, I confirmed this to be the ultimate nightmare expressed by practitioners of top-end artisanal agriculture.

Predictably, the lobbyist-infested European Commission (EC) fiercely defends TTIP, stressing it could benefit the EU’s economy by $150 billion a year, and raise car exports by 149 percent. Obviously don’t expect the EC to connect these “car exports” to a US-led GMO invasion of Europe.

At least some nations have finally woken up from their (corporate lobbyist-induced) slumber. The French Minister for Foreign Trade, Matthias Fekl, said negotiations over a “bad deal” should stop. He went straight to the point, blaming Washington’s intransigence; “There cannot be an agreement without France and much less against France.”

Perennially ineffectual President Francois Hollande, for his part, has threatened to block the deal altogether. Three years ago Paris had already secured an exemption for the French film industry not to be gobbled up by Hollywood. Now it’s also about the crucial agriculture front. Hollande said he would never accept “the undermining of the essential principles of our agriculture, our culture, of mutual access to public markets.”

And what is the EC – leading the negotiations on behalf of the EU - doing? Pulling its predictable Trojan horse act; these are all “alarmist headlines” and “a storm in a teacup”. Puzzled EU citizens, en masse, may question if this is really the way for the EC – a bureaucratic Brussels behemoth - to supposedly defend the rights of EU consumers. Yet, infiltrated as it is by corporate lobbyism, the EC simply can’t protect the EU’s environmental and health standards, much more sophisticated than the US’s, from a corporate America bent on meddling with the content of EU laws all along the regulatory line.

I got an offer you can’t refuse

POTUS was heavily campaigning for TTIP last month in Germany. POTUS still hopes he may have a deal in the bag before he leaves office in January 2017. White House spokesman Josh Earnest has tried to put on a brave face, saying the leaks will not have a "material impact" on the negotiations. Wrong; they will – as they are mobilizing public opinion all across the EU.

David Cameron, in the UK, is also in a bind. He’s fiercely pro-TTIP. But Obama has already warned; this means Brexit is a no-no. Club Med nations, for their part, are leaning against. All 28 EU member nations – plus the European Parliament – would have to ratify TTIP if a deal is eventually reached.

TPP, for its part, has been negotiated. But it has not been approved by the US Congress (nor by Pacific nations). The approval process has gone nowhere. In fact it will be up to either Hillary Clinton or Donald Trump. Trump arguably is oblivious to TPP’s details; but considering the deal is being heavily championed by Obama, Trump may go against it.

A case can be made that both TPP and TTIP vow to distort markets, in Europe and Asia; prop up (US) monopolies; transfer jobs to slave labor markets (in the case of parts of Asia); trample on intellectual property rights (in the case of the EU); facilitate tax evasion; and ultimately transfer more wealth from the many to the 0.00001 percent.

And this leads us to how Hillary Clinton – the Wall Street/US establishment candidate – views both TPP and TTIP. Well, she supported both NAFTA and CAFTA, approved under Bill Clinton in the 1990s. As Secretary of State, she lobbied for the Panama trade deal. And, crucially, she has always treated the TPP as the “gold standard”. No wonder; this is the trade arm of the “pivoting to Asia” she’s been so fond of - a Pacific trade deal that excludes China, which happens to be the top trade partner of most Asian nations.

Moreover, those by now famous Goldman Sachs speeches are increasingly being seen as payments for services rendered (and promised) by Hillary Clinton to the 0,0001 percent, who are, of course, in favor of global corporate America expansion.

Yet it ain’t over till the November ballot sings. Hillary now faces serious scrutiny by working class voters in the US. So no wonder, in another flip-flopping masterpiece, she’s now leaning towards describing herself as opposing both TPP and TTIP.

Still, TPP at least may be approved during the post-election ‘lame-duck’ session of the US Congress. As for TTIP, it’s now mired in Walking Dead zone. Talk about what it takes for the Obama administration to imprint its trade “legacy” in the history books; to keep blackmailing Europeans and Asians alike as if it was just a lowly Mob extortion racket.


Media corruption is no joke, everyone needs to help if we are to have any hope of real change. This free article was served to you by donations and volunteers, please do your part with a contribution to our Spring crowdfund NOW LIVE on Indiegogo.

 

[Cossack25A1]

this guy is crazy, when compare TPP to a ADB-like bank.
that similar to compare a loan for buying a phone and a marriage which husband and wife grants the free access to each other's assets.

Funny thing is that in another thread, TaiShang "liked" a comment of Beidou2020 saying that the said thread (about Japan and ASEAN) being a troll thread just because the news article in that thread is not in China's favor, even calling a mod to shut that thread down.

Yet no American members here (that are still here) labeled this thread as "troll thread" or called a mod to shut this thread down.

 

[seven7seven]

TPP was always doomed because it is meant to be an economic pact but everyone knows it's really a thinly veiled military alliance against China. Unless you are USA, who calls the shots, deals signed under TPP are heavily in USA's favour and everybody has to compromise, except the USA. Only weak and desperate nations are foolish enough to sign up to TPP. The smart nations steer clear of TPP and keep its flexibility to deal with whomever they choose to. Of course, China is at the top of most country's list to do business with as they have the industrial capacity, skilled labour, supply chain, logistics infrastructure, plenty of capital for investment, and most importantly of all, China's burgeoning consumer market has the biggest potential of any on the planet. This ultimately means that TPP's goal of trying to isolate China is destined to fail because any economic scheme, without China involved, is not worth looking at, in the eyes of most sane nations.

 

[BoQ77]

TPP was always doomed because it is meant to be an economic pact but everyone knows it's really a thinly veiled military alliance against China. Unless you are USA, who calls the shots, deals signed under TPP are heavily in USA's favour and everybody has to compromise, except the USA. Only weak and desperate nations are foolish enough to sign up to TPP. The smart nations steer clear of TPP and keep its flexibility to deal with whomever they choose to. Of course, China is at the top of most country's list to do business with as they have the industrial capacity, skilled labour, supply chain, logistics infrastructure, plenty of capital for investment, and most importantly of all, China's burgeoning consumer market has the biggest potential of any on the planet. This ultimately means that TPP's goal of trying to isolate China is destined to fail because any economic scheme, without China involved, is not worth looking at, in the eyes of most sane nations.

If you know for recent 3 years, US has deficit over 1 trillion dollars in trade with China. When TPP come into effect, the deficit with China would reduce, due to their change to import from other participants of TPP.
https://www.census.gov/foreign-trade/balance/c5700.html

 

[Kiss_of_the_Dragon]

If you know for recent 3 years, US has deficit over 1 trillion dollars in trade with China. When TPP come into effect, the deficit with China would reduce, due to their change to import from other participants of TPP.
https://www.census.gov/foreign-trade/balance/c5700.html

If US is diversified itself to import from other participants, you think China will sit idle? China can as well import from other nations except US, American will feel great pain if China chose to import Airbus instead of Boeing, or Volkswagen instead of Ford, and import Samsung instead of Apple...no matter what US will do, China will readjust itself as consequence.

But you shouldn't be surprise that beside TPP, US still have a secret channel to accommodate China under the Sino-American strategic economic to ensure that China will not do anything to affect American's economy interest as well, it's a secret win-win deal. Japan once was so eager to know what exactly this China-US economy dialogue is about, they don't want to see that US ask Japan to be China's enemy while US itself is secretly cozy with China at the expense of Japan's interest.

 

[dray]

The world economy is very much controlled by the west with USA directing the course, other countries may become rich or poor, but won't get the control of it.

 

[BoQ77]

If US is diversified itself to import from other participants, you think China will sit idle? China can as well import from other nations except US, American will feel great pain if China chose to import Airbus instead of Boeing, or Volkswagen instead of Ford, and import Samsung instead of Apple...no matter what US will do, China will readjust itself as consequence.

But you shouldn't be surprise that beside TPP, US still have a secret channel to accommodate China under the Sino-American strategic economic to ensure that China will not do anything to affect American's economy interest as well, it's a secret win-win deal. Japan once was so eager to know what exactly this China-US economy dialogue is about, they don't want to see that US ask Japan to be China's enemy while US itself is secretly cozy with China at the expense of Japan's interest.

Actually, the divert controlled by price. would you buy within TPP at cheaper price, or buy from China at higher price? Have in mind that TPP is basically a FTA. This doesnt lead by willing but profit in refering to tariff matter.
This considered as market-oriented

TPP work this way, TPP attracts manufacturers, investors to move their factories to TPP participants, using TPP-origin materials, using TPP workforce. To conform with TPP conditions and take advantage of Free duty.

What you talked about China can as well import from other nations except US seems to be the government decision.
And whether China import from Airbus or Boeing, it wouldn't change the situation.
If people prefer Apple, could you push them to buy Samsung by apply the higher import tax rate to Apple only? And why you don't open your market to a Made in China Apple, but import Made in Vietnam Samsung ? to me, I believe that Apple would move some orders to Vietnam too, while keeping some in China for China market.

This is the matter of others would open their market to you if you accept to open your market to them, if you aren't ready to open yours, you are out of the ring.

 

[Kiss_of_the_Dragon]

Actually, the divert controlled by price. would you buy within TPP at cheaper price, or buy from China at higher price? Have in mind that TPP is basically a FTA. This doesnt lead by willing but profit in refering to tariff matter.
This considered as market-oriented

TPP work this way, TPP attracts manufacturers, investors to move their factories to TPP participants, using TPP-origin materials, using TPP workforce. To conform with TPP conditions and take advantage of Free duty.

What you talked about China can as well import from other nations except US seems to be the government decision.
And whether China import from Airbus or Boeing, it wouldn't change the situation.
If people prefer Apple, could you push them to buy Samsung by apply the higher import tax rate to Apple only? And why you don't open your market to a Made in China Apple, but import Made in Vietnam Samsung ? to me, I believe that Apple would move some orders to Vietnam too, while keeping some in China for China market.

This is the matter of others would open their market to you if you accept to open your market to them, if you aren't ready to open yours, you are out of the ring.

And what make you think that TPP will hold a competitive edge over China? any TPP's made product will have a high tarrif when entiering China, they will forever more expensive that made in China.

 

[BoQ77]

TPP created for promoting trade-in goods and services.
to Vietnamese customers, it means now they could enjoy US, Japanese brands at cheaper prices.
Instead of import China clothes, shoes and pay high import duty , they would import those stuffs from Vietnam and enjoy the Free duty.

The act to enhance China competitiveness is joining TPP

 

[hirobo2]

And what make you think that TPP will hold a competitive edge over China? any TPP's made product will have a high tarrif when entiering China, they will forever more expensive that made in China.

Most ppl on this board still don't realize the TPP will be to the countries that sign on what the Plaza Accord was to Japan. USA only knows to destroy. This is reflected when they wage wars with foreign countries or deal politics and "economic ties" with them. It's actually quite an honor to be publicly acknowledged as the "enemy" of the USA (ie. US's Pivot to Asia stance to contain China)...