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American Resistance To Empire

US Stocks Plummet 1000 Points After China Drop—Today Another 1000 Point Drop Expected

[Yesterday, the precious Dow dropped 1000 points when it opened, after the Chinese market dropped by 7%.  Look for a similar drop when it opens again this morning, after China falls another 7 (SEE: Dow drops 1000 points, US stocks plummet at open ).]

China Stocks Plummet Another 7 Percent Amid ‘Mood of Panic’ 

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The CSI300 index of the largest listed companies in Shanghai and Shenzhen dropped 7.1 percent, while the Shanghai Composite Index collapsed 7.6 percent to close below the psychologically significant 3,000-point level.

Underscoring the panic gripping the retail investors who dominate China’s stock markets, all index futures contracts fell by the maximum 10 percent daily limit, pointing to expectations of even deeper losses.

After the turmoil in China rocked world equity and commodity markets on Monday, policymakers elsewhere in Asia sought to soothe fears about the broader impact on the global economy.

“I think it’s important that people don’t hyperventilate about these type of things,” said Australian Prime Minister Tony Abbott, whose country is heavily exposed to China, the biggest consumer of its commodity exports. “It is not unusual to see stock market corrections. It is not unusual to see bubbles burst in particular markets and for there to be some flow-on effect in other stock markets, but the fundamentals are sound.”

Japanese Finance Minister Taro Aso also said Chinese stocks, which had more than doubled in the six months to May, had been a bubble that was now bursting.

“There’s also suspicion on whether China’s official GDP figures reflect the real state of the economy,” he told a news conference after a cabinet meeting in Tokyo.

After a year of heady gains, Chinese markets have been buffeted by increasing signs that economic growth is faltering.

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“Pushing Back” the Boat People In Asia and In Europe, Symptom of Universal Insanity

By Amy Sawitta Lefevre and Fransiska Nangoy

BANGKOK/JAKARTA (Reuters) – Thailand, Malaysia and Indonesia gave no response on Wednesday to a United Nations appeal for them to rescue thousands of migrants, many of them hungry and sick, adrift in boats in Southeast Asian seas.

There were conflicting statements on whether regional governments would continue to push back migrant boats in the face of the UN warning that they risked a “massive humanitarian crisis”.

“Indonesia, Malaysia and Thailand have decided not to receive boat people, as far as I am aware,” Major General Werachon Sukhondhapatipak, spokesman for Thailand’s ruling junta, told Reuters.

He declined to comment on the UN refugee agency UNHCR’s appeal on Tuesday for an international search and rescue operation for the many stranded on the seas between Thailand, Malaysia and Indonesia.

The UN has said several thousand migrants were abandoned at sea by smugglers following a Thai government crackdown on human trafficking.

Malaysia’s Home Ministry also declined to comment on the U.N. rescue appeal.

The issue would be discussed at a meeting of 15 countries, to be held in Bangkok on May 29, Thai junta spokesman Werachon said.

But the Royal Thai Navy said on Wednesday that its policy was not to send the boats back to sea.

“If they come to Thai waters we must help them and provide food and water,” Rear Admiral Kan Deeubol told Reuters. “For human rights reasons, we will not send them back to sea.”

Earlier this week, a junta spokesman said that a surge in migrants to Indonesia and Malaysia from Bangladesh and Myanmar had been caused by the crackdown and by Thai authorities blocking boats from landing.

Thailand ordered a clean-up of suspected traffickers’ camps last week after 33 bodies, believed to be of migrants from Myanmar and Bangladesh, were found in shallow graves near the Malaysian border.

That has made traffickers wary of landing in Thailand, the preferred destination for the region’s people smuggling networks, leading to many migrants being left out at sea.

‘IT’S A POLICY MATTER’

A senior Malaysian maritime official said on Tuesday, after more than 1,000 people arrived on the Malaysian island of Langkawi at the weekend, that any more boats trying to land would be turned back

“We don’t allow them in,” said First Admiral Tan Kok Kwee, northern region head of the Malaysian Maritime Enforcement Agency. “It’s a policy matter.”

Indonesia provided food, water and medical supplies to around 500 passengers on a boat off the coast of the northwestern province of Aceh on Monday, before sending the vessel towards Malaysia.

The Indonesian Navy said the passengers of the boat they sent onwards wanted to go to Malaysia, not Indonesia.

A day earlier and also in Aceh, Indonesia rescued nearly 600 migrants from overcrowded wooden boats. Those migrants were brought ashore and remain on Aceh.

The Indonesian policy was to offer food and shelter to refugees and coordinate with international migrant and refugee bodies, Foreign Ministry spokesman Armanatha Nasir told reporters on Wednesday. This it had done with the nearly 600 migrants it rescued on Sunday, he added.

“What we do not do is load them on to the ship and push it to the ocean,” he said.

But advocacy group ASEAN Parliamentarians for Human Rights criticised the Indonesian government for sending the boat back to sea on Monday.

“Towing migrants out to sea and declaring that they aren’t your problem any more is not a solution to the wider regional crisis,” ABHR Chairperson and Malaysian lawmaker Charles Santiago said in a statement.

Many of the arrivals are Rohingya, a stateless Muslim minority from Myanmar described by the United Nations as one of the most persecuted minorities in the world.

‘BLOOD ON THEIR HANDS’

An estimated 25,000 Bangladeshis and Rohingya boarded rickety smugglers’ boats in the first three months of this year, twice as many in the same period of 2014, the UNHCR has said.

“When countries such as Thailand implement a push back policy, we find Rohingya bodies washing ashore,” said Sunai Phasuk at Human Rights Watch in Thailand.

“If these three countries move forward with push backs, blood will be on their hands.”

Malaysia’s police chief said that joint work with the Thai police force had helped Malaysian police smash seven syndicates involved in smuggling and trafficking in March and April.

The syndicates operated in northern Malaysia and southern Thailand, Khalid Abu Bakar told reporters on the Thai island of Phuket, where members of the two police forces met this week for annual talks on international crime.

Among 38 people arrested were two Malaysian policemen, he said.

As well as trafficking, Malaysian police believe the syndicates were involved in forging UNHCR documents, he said.

(Additional reporting by Fransiska Nangoy in JAKARTA and Apichai Thornoi in PHUKET, Thailand; Writing by Simon Webb; Editing by Nick Macfie and Alex Richardson)

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TSIPRAS TO FIRE BANK OF GREECE BOSS FOR ‘UNDERMINING SYRIZA POSITION’

GREECE EXCLUSIVE: TSIPRAS TO FIRE BANK OF GREECE BOSS FOR ‘UNDERMINING SYRIZA POSITION’

the slog

gunptnet

Syriza aims smoking gun at Central Bank Governor

Former Nia Demokrita Finance Minister Yannis Stournaras asked to leave BoG

Sources within Athens media and finance told The Slog last night that Bank of Greece Governor Yannis Stournaras will be quitting his post today (Sunday). Alexis Tsipras will ask for his resignation in the light of documentary proof that the former New Democracy Finance Minister personally gave specific briefs to a top journalist about “putting the most negative spin possible on the news” about Greek finances.

Influential Greeks have long suspected that Troika sympathisers in the banking system were working in close-knit coordination with the creditors to destabilise the Syriza government led by Alexis Tsipras and Yanis Varoufakis. But the smoking gun apparently emerged last week in the shape of briefing documents from the central bank’s Governor to “a leading influential Greek journalist”.

The Slog has posted before about coordinated withdrawals from Athenian banks, and high net worth customers being encouraged to withdraw funds soon after the Syriza election victory. This case, however, is infinitely more insidious because it potentially opens up a trail of deliberate destabilisation and dirty tricks all the way back to Brussels, Berlin….and Washington.

1. YannisStournaris was the Greek Minister of Finance from 5 July 2012 until he moved to the BoG last year. It is unlikely bordering on unthinkable that senior New Democracy colleagues didn’t have any idea this briefing was going on.

2. As a senior consultant to the BoG, he was personally involved in the entry of Greece into the euro. This is now widely known to have involved corruption on a grand scale. So Stournaras has every motive for urgently destabilising the government now investigating all aspects of EMU and Greek debt.

3. Stouranaras is a senior Governor who sits on the Board of the IMF. This gives him a serious conflict of interest….but also ready access to Christine Lagarde should he need it.

4. His media ‘order-taker’ (who is known to the Athenian cognoscenti) regularly passes these briefings on to a number of neoliberal global publications…notably Reuters.

Meanwhile, the forensic investigation into debt overstatement in 2010 and how much Greek debt can be objectively defined as ‘odious’ continues.

Hat-tip to Archie X for giving me the lead on this exclusive.

The Slog would like to thank all senior members of the Eurobnoxious tendency in the British Labour Party for its unstinting support of the Greeks, and virile attacks on the bullying control freaks of Brussels-am-Berlin. It will stand forever as a beacon of apathy among progressives in the UK, and got the reward it so richly deserved in last Thursday’s British General Election.

Shell Oil Bows-Down Before the Gods of Predatory Capitalism, Then Buys BG

(SEE:  Obama Pushing the World To Embrace American Failure ;  Sermon from the Corporate Church)

ImageOfTheEnemy

Shell’s carpe diem a lesson for all

AFRI COM

Royal Dutch Shell’s $90 billion pitch at step-change growth is expected to trigger a tornado of consolidation across a wide landscape of global petroleum, with the Deepwater Horizon-blighted BP rated the next-most-likely landing point of acquisitive interest.

Indeed, while Shell’s interest in the British-based Mini Me that is BG Group has long been anticipated, there are some surprised by this acutely timed fulfilment, only because it was felt BP might be a more attractive target for the world’s second-biggest oil company.

The word is that Shell certainly took more than a sideways glance at the other British-born super major. But, in the end it plumped for BG, because it introduced more momentum in Shell’s transitional embrace of global gas markets as a core growth engine, would arrive in the original dual-listed giant carrying less uncertainty and reputational risk and was a deal more likely to be consummated reasonable quickly.

But there is some conviction that the mighty ExxonMobil might not feel as constrained by risk and that BP would deliver the world’s biggest listed petroleum house with massive reserve growth, at a serious discount to the cost of finding replacement barrels and with the potential of serious synergies, given the considerable geographic overlap of their resource bases.

The fact that the addition of BP would retain for any foreseeable future Exxon’s place as petroleum’s biggest listed operator might not hurt either. Given Shell is successful with the BG pitch, that title is likely to be a matter of some contention by about 2018, when the new combination’s production will outstrip that of the Exxon we see today.

Needless to say, the existing Exxon is the product of the same sort of targeted and ambitious opportunism that would be required to take on BP. It was at the depths of a slump in oil prices in 1998 that Exxon opened a campaign that ended with it paying $75 billion in paper to merge with Mobil. History says that deal was done at a discount to long-term value and generated far more in synergies than originally anticipated.

Whether Shell will extract more from BG than the $US2.5 billion ($3.25 billion) of annual savings targeted for 2018, time will tell. What is more certain though is that Shell is getting BG at a 50 per cent discount to its five-year average valuation and that more that justifies the similarly sized premium it has offered for ownership.

Well timed

Add to that the fact that Shell is using its own paper to cover 70 per cent of price and what you have is a deal as well timed as it is structured.

Interestingly enough, the man who led BG to this deal was chairman Andrew Gould. We know the former Schlumberger boss better as the lead independent director of Rio Tinto through a period that included the resistance of BHP Billiton’s attempt at mega-major consolidation in 2008.

To some degree, Gould’s readiness to accept a deal at BG highlights the polar opposite tacks being taken by mega petroleum and big mining during these days of cyclical retreat in their respective markets.

The oilmen are seizing their moment to drive tectonic change that delivers geographic diversification, with new reserves being acquired at a discount to their long-term value. Meanwhile the miners, with the notable exception of Glencore’s bellicose Ivan Glasenberg, seem content to live within the security of their known knowns.

Australia’s pair of dual-listed resource houses, for example, have been strident in their rejection of opportunistic, inorganic growth through this period of cyclical weakness across their suite of commodities. Instead both, publicly at least, are sticking resolutely to strategic rhetoric that focuses on driving growth through targeted brownfields expansions, cost management and productivity enhancement.

This focus on the known has been particularly laser-like at the world’s biggest diversified resources business, BHP Billiton. The only concession chief executive Andrew Mackenzie has made to counter-cyclical opportunism is in deep-water petroleum, where he has raised the potential of acquisitions as the most economically attractive way of filling an emerging medium-term production gap.

As we keep noting, Mackenzie’s management thesis stands unique in the resources business, because he expresses so little interest in the reserve replacement that sits central to big oil’s routine of consolidation through period of price retreat.

Eating itself

Despite throwing $35 billion annually at growth, Shell has recently been unable to find new resources at a rate fast enough to cover its production. Reserve replacement has been running at less than 80 per cent and that means Shell is eating itself.

Exxon, on the other hand, is under considerably less pressure to acquire reserves, given it has been replacing them at 101 per cent over the past three years. In other words, it has more reserves now than it did in 2012.

For all that, though, chief executive Rex Tillerson told the market in March that Exxon stood ready for a big transaction. Whether coincidence or not, there was a consensus formed that Tillerson had ambitions for BG and speculation abounds that Exxon might yet invited itself to Shell’s party.

Back at BHP, Mackenzie insists the Global Australian has its foot on all that it needs to sustain a compound production growth of 6 per cent and will, in turn, support the company’s progressive dividend strategy. Instead, the BHP strategy is aimed at maximising returns on every key measure, from operating margins to shareholder returns. Mackenzie insists, too, that being the biggest is not the point and has underlined that point by moving to release a fleet of sub-scale assets to shareholders in the form of South32.

But, given BHP’s pretty fine history of engineering growth through structural transition has enabled it to anticipate long-term shifts in commodities demand, this certainty in the sustainability of the existing BHP asset base sits just that little bit uncomfortably for some.

As one senior mining executive observed on Thursday: “To a degree, Shell is calling an end to the oil era and the transition to the gas era. But while Shell is moving to the future, to gas, the likes of BHP are committed to the past, to steel-related products and thermal coal.”

Now, while this is a pretty high-level view and one that does not account fully for intricacies of either the attributes of the Shell deal or to BHP’s portfolio investment strategy, it does effectively capture the divergence of approach to generating growth.

For a start, of course, Shell is buying a good deal more in BG than expanded exposure to export gas markets, the gas resources that sustains them and the massively expensive LNG chillers that facilitates them.

Oil prosects

BG will arrive with Brazilian oil prosects that are expected to be producing at 550,000 barrels a day by 2018 – equivalent to about 15 per cent of Shell’s current daily oil output – and that remains highly prospective exploration territory. It introduces upside too in the North Sea, Kazakhstan and Tanzania.

But the view that Shell’s BG play is an evolutionary investment holds. This is a deal driven by short-term expediency and long-term strategy and one that illuminates Shell’s view of the potential of gas as the transitional fuel for both advanced and emerging economies as they manufacture a reduction in the carbon intensity of their energy infrastructure.

The phrase “straw hats in winter” is embedded in BHP history. It was uttered in 1984 by BHP’s then chairman Sir James MacNeill to explain why he would countenance spending $US2.4 billion on a coal company during a price slump. That deal delivered two of the four pillars that support Mackenzie’s strategy – coal in the Bowen Basin coal and copper at Escondida.

And Shell’s shape-shifting approach on BG arguably offers a timely reminder that a bit of counter-cyclical carpe diem can go an awfully long way.

Guaranteed Financial Security Is A Fantasy

Guaranteed Financial Security Is A Fantasy

investing

Charles Hugh Smith Charles Hugh Smith

Guarantees based on extracting higher taxes, borrowing trillions of dollars and creating trillions more out of thin air only guarantee eventual systemic implosion.

It is difficult for those living through tectonic social and economic shifts to recognize the passing of one era and the emergence of a new era. We are clearly in such a tectonic shift, yet it is slow enough and uneven enough that those who hope the old era will somehow endure despite the erosion of its foundations can find evidence to support their beliefs.

One such cherished belief is the faith that financial security can be guaranteed. This faith has two components:

1. The faith that risk can be identified and managed to the point it cannot disrupt the payment of promised pensions, benefits, yields, etc.

2. The faith that the system can pay what has been promised by one means or another.

If tax revenues are inadequate, taxes can always be raised. If tax revenues fail to rise, then the money needed to pay the promised pensions, benefits, etc. can be borrowed. If the money cannot be borrowed, then it can simply be created out of thin air by central banks or printed by government treasuries.

Before the advent of high finance, lowering risk could only be achieved by spreading the risk over a large populace. To lower the risk to individuals that their house would burn down in an accidental fire, insurance was sold to 1,000 homes. If one or two of the 1,000 homes burned down each year, the insurance could pay the claims and still build up reserves for future claims.

But if a conflagration burns down all 1,000 homes, the insurance is overwhelmed; the guaranteed coverage is rendered worthless.

The creation of a volunteer (or tax-supported) fire brigade will also lower the risk that an accidental fire could spread. But once again, such a brigade can only mitigate very limited fires; a second fire or a windstorm would exceed the capacity of the brigade to extinguish multiple fires.

The faith in guaranteed security is actually a faith that there will be no consequences from borrowing or printing enormous sums of money, and no possible risk to the system that cannot be anticipated and mitigated with some fancy financial footwork.

Is this faith reality-based? We know that borrowing immense sums of money does have consequences: interest must be paid out of future income, reducing the income that can be consumed or invested, and dependence on borrowed money creates moral hazard: rather than make difficult trade-offs, the borrower just borrows more money.

Creating money out of thin air is also not consequence-free. Fancy financial footwork can mask the consequences of creating money to pay promised pensions, benefits, etc., but eventually the reality that creating money does not create wealth intrudes on the fantasy that if tax revenues are insufficient, and borrowing has limits, then we can guarantee incomes, pensions, benefits, etc. by creating money out of thin air.

Those dependent on the promises made in the previous era will support any policy that “extends and pretends” the illusion that financial security can be guaranteed, regardless of seismic shifts in the natural and financial economies.

The irony of “extend and pretend” is these policies only push the system to extremes that guarantee systemic collapse. The more we avoid facing the intrinsic insecurities generated by tectonic shifts, the more we hasten the sudden implosion of old systems pushed beyond their limits.

Real security arises from the constant volatility, friction and insecurity of experimentation, adaptation and dissent. Guarantees based on extracting higher taxes, borrowing trillions of dollars and creating trillions more out of thin air only guarantee eventual systemic implosion.

Put another way: spreading the risk of a house fire amongst the 1,000 homeowners does not actually lessen the risk of a conflagration burning down the entire town.

Homeland Security Stockpiling Lots of “Less Lethal Specialty Munitions”

Are They Arming for Riots Across America? Homeland Stockpiling “Less Lethal Specialty Munitions”

SHTFplan-logo-350

Mac Slavo

tear-gas-riot-crowds

One of the biggest stories for years in the alternative media was the mysterious and foreboding purchase by Homeland Security of more than 1.6 billion rounds of ammunition.

Thanks to coverage on prominent sites like DrudgeReport, the story reached into mainstream media, prompting official spin and downplaying of the purchase.

Now, a new Homeland Security purchase order listed on FedBizOpps  also raises an eyebrow or two, given the heated and divided political and social climate at hand. Just look at what happened in Ferguson…

A request for “less lethal specialty munitions” for use by Homeland Security dated March 23, 2015 reads:

U.S. Customs and Border Protection (CBP) intends to solicit responses to Request for Information (RFI) 20082225-JTC for Less Lethal Specialty Munitions (LLSM) for use by the Department of Homeland Security (DHS). CBP is interested in incorporating commercial and industry practices that support this type of procurement. To accomplish this, CBP intends to make industry a partner in all facets of the acquisition process, specifically by considering existing market capabilities, strengths and weaknesses for the acquisition of this commodity.

FedBizOpps-Homeland-Less-Lethal4.14-PM

Over the course of 9 pages (PDF), the technical requirements call for an arsenal of specialized weaponry for training and deployment against crowds.

On top of a wide range of gas and chemical grenades, rubber bullets and other riot rounds, the purchase calls for “controlled noise and light distraction devices,” including flash bangs which set off a 175 dB sound with 6 – 8 million candelas light bursts in 10 milliseconds.

So why are the Feds prepping to take on crowds?

Officially, the request is put through Customs and Border Patrol, a subset of the Department of Homeland Security, but it is unlikely that the equipment will be used to protect the border and keep out illegal aliens. But the riot gear and crowd control devices have many potential uses.

Perhaps, the equipment for use in instances like last year, when protesters in Murrieta confronted Customs and Border Patrol agents and blocked buses carrying a wave of illegal immigrants from Central America?

The requested equipment includes:

Hand Delivered Pyrotechnic Canisters, including

  • Smoke Canister for Training (Reduced Toxicity)
  • Continuous Discharge Large Smoke Canister (Operations)
  • Continuous Discharge CS Canister
  • Orange Colored Smoke Canister
  • Green Colored Smoke Canister
  • Pocket Tactical Smoke Canister
  • Pocket Tactical CS Canister
  • Three Part Sub-Munitions CS Canister
  • Non-Burning Internal Canister OC Grenade

Non-Pyrotechnic Indoor/Outdoor Use

  • Flameless Expulsion Grenade (OC)
  • Flameless Expulsion Grenade (CS)
  • Flameless Expulsion Grenade (Inert)

Hand Delivered Rubber Ball Grenades

  • Rubber Ball Grenade
  • Rubber Ball Grenade (CS)

40mm Launched Specialty Impact Munitions

  • 40mm Direct Impact Sponge Cartridge
    40mm Direct Impact Sponge Cartridge (OC)
  • 40mm Direct Impact Sponge Cartridge (Marking)
  • 40mm Direct Impact Sponge Cartridge (Inert)
  • 40mm Sponge Training Rounds

Crowd Management Projectile Cartridges

  • 40mm Smokeless Powder Blast (OC)
  • 40mm Smokeless Powder Blast (CS)
  • 40mm Long Range Canister (CS)
  • 40mm Long Range Canister (Smoke)
  • 40mm Cartridge Four Part Sub-Munitions (CS)
  • 40mm Cartridge Four Part Sub-Munitions (Smoke)
  • 40mm Aerial Warning Munitions (100 Meters)
  • 40mm Aerial Warning Munitions (200 Meters)
  • 40mm Aerial Warning Munitions (300 Meters)
  • 40mm Aerial Warning Munitions OC (100 Meters)
  • 40mm Aerial Warning Munitions OC (200 Meters)
  • 40mm Aerial Warning Munitions OC (300 Meters)

Controlled Noise And Light Distraction Devices

  • Distraction Device Compact
  • Distraction Device
  • Distraction Device Reloadable Steel Body
  • Distraction Device Reload
  • Command Initiated Distraction Device Reload
  • Distraction Device Training Fuse
  • Distraction Device Training Body
  • Multiple Detonation Distraction Device
  • Low Profile Distraction Device
  • Command Initiator

Ferret Rounds

  • 40mm Ferret Round (OC Powder)
  • 40mm Ferret Round (OC Liquid)
  • 40mm Ferret Round (CS Powder)
  • 40mm Ferret Round (CS Liquid)
  • 40mm Ferret Round (Inert Powder)

The ferret rounds are designed to penetrate barriers and deliver debilitating or disrupting chemicals:

“The projectile shall be designed to penetrate barriers of glass, particle board, and interior walls. Upon impact of the barrier, the nose cone will rupture and instantaneously deliver the OC liquid on the other side of the barrier. “

The collection of equipment provides a diverse range of toys with which authorities could push back crowds and potentially intimidate free speech as well.

Are there more riots coming? Is widespread civil unrest only a matter of time? Is it related to martial law exercises like Jade Helm 15?

What do the Feds know that we don’t?

They are getting ready… are you?

 

Related Reading:

The Prepper’s Blueprint: Prepare For Any Disaster

If Martial Law Comes to America “Dissidents and Subversives Would Be Rounded Up”

The 17 Elements of Martial Law

New world bank order

[It is a good thing that China is there to present an alternative to US financial hegemony. AIIB will provide the pressure relief valve to US/international banker plans to dominate the world through universal enforcement of World Bank austerity standards and financial wars against potential rivals to the West. I pinned the “hope of the world” medal upon China back in 2009, for just those reasons. (SEE: China is the Key to the America’s problems).]

New world bank order

the indian express

Even Taiwan has applied for membership. And the US, under intense criticism for staying out, is now pledging cooperation.

China Bank, China AIIB, AIIB China Bank, BRICS Bank, China world bank, China Asia Bank, Indian Express column, Ie column, Ajay Chhibber column
Written by Ajay Chhibber

The Year of the Ram could be witnessing the first tremors of a tectonic shift in global power structures. Despite US objections, some of its closest allies — Australia, the UK, Germany, France, Italy and South Korea — have signed on to the new Chinese-backed Asian Infrastructure Investment Bank (AIIB). Some 45 countries, including Brazil and Russia, have signed up and more may join soon. Even Taiwan has applied for membership. Japan is still holding back and the US, under intense criticism for staying out, is now pledging cooperation.

The BRICS Bank was the first shot across the bow to the established order. Now, the AIIB is an even bigger signal that global economic power is shifting — a majority of the G-20 is backing the bank. As China prepares to take over the presidency of the G-20, there is clear evidence of its global ascendancy.

But these new financial institutions are just the set pieces in a bigger “New Silk Road” strategy, which China is crystallising into the “One Belt One Road” policy. This policy, first announced by President Xi Jinping in 2013 in Kazakhstan, was initially meant for greater cooperation between Central Asia and China’s western provinces. But as Xi laid out at the 2015 Boao Forum, since then, it has evolved into a broader plan for China’s engagement with the world. The belt links China to Europe and to trade and transport corridors across Central Asia and Russia. The road includes maritime links through the Straits of Malacca to the Indian Ocean, Middle East and eastern Africa.

China is signalling that while it has imported technology and capital for over 30 years, since the Deng Xiaoping reforms, it is now ready to turn around and export know-how and capital. China’s “One Belt One Road” project focuses on trade, infrastructure and telecommunications. But it also talks about people-to-people connectivity, cultural exchanges as well as learning from other countries’ development experiences. It emphasises peaceful development and cooperation with existing organisations, such as the Saarc, Organisation of Islamic Cooperation and EU, to assuage fears that China is emerging as a global hegemon.

The idea is not just to build infrastructure. Trade facilitation is an important part of the “One Belt One Road” project. Local currency trading will be encouraged and currency swap arrangements will be put in place. China UnionPay cards are already issued and accepted in many countries — the latest is Turkey.

In addition to the $100 billion BRICS Bank and the $100 bn AIIB, the Shanghai Cooperation Organisation Development Bank and Silk Road Fund ($40 bn) are also being set up. These new institutions are partly a response to the slow pace of reform at the international financial institutions and partly a channel for China to utilise its vast forex reserves. This is in contrast to the oil-rich countries, which mostly rely on existing Western institutions to recycle their vast surpluses.

Badly needed reform of the US- and Europe-dominated IMF to give a greater say to emerging economies is stuck in the US Congress. Ironically, the US does not lose as much because of the proposed reform of the Bretton Woods institutions as European countries, which have bolted to back the AIIB.

Given Asia’s vast infrastructure needs, new financial institutions are badly required. The existing Bretton Woods system no longer has the financial capacity or even up-to-date engineering know-how. Moreover, if Europe can have a European Bank for Reconstruction and Development and a European Investment Bank, why can’t Asia have an Asian Development Bank and an AIIB working in tandem to meet its financing needs?

How China’s plans unfold will be determined by its dealings with individual countries. In Myanmar, environmental concerns as well as worries about China’s overweening presence led to the cancellation of the Myitsone dam project. In Sri Lanka, political change has put the brakes on several Chinese-backed projects, including the Hambantota port. India will judge China’s intentions based on how it solves the border dispute. The Asean countries will judge China’s peaceful intentions by how it plays its hand in the South China Sea. China has had some success but also several problems with its Africa strategy, including significant anti-Chinese feelings in some countries. Russia may be willing to cede influence to China in Central Asia — but only up to a point. The direction China intends to go is becoming clearer as the scope of its ambitious strategy is unveiled.

India missed its opportunity at the end of the World War to get a bigger stake in the UN Security Council and the Bretton Woods system. Today, with its rising economic clout, India must decide whether it wishes to participate intelligently and constructively inside this new tent or risk being left out and regret it later. The Narendra Modi government moved quickly and correctly to enter the BRICS Bank as a founding member but this game just got much bigger. India must increase its engagement or get left out once again. Waiting for reforms at the Bretton Woods institutions would be like waiting for Godot.

The writer is visiting scholar, Institute for International Economic Policy, Elliott School of International Affairs, George Washington University, Washington DC
editpage@expressindia.com

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