The Beatles have had numerous hit songs. One of them was "Can't Buy Me Love." A Hong Kong youth listened to it, but did not quite agree and said, "Give me the money and I’ll show you what I can buy!"
He did not understand romantic feelings in the song; he was too pragmatic. The same can be said about countries. Countries do not talk about feelings. The closest distance between them is when they use money to build a bridge. The Beijing authorities are quite aware of this. However, it seems that rather than dealing with each country by using money, they might as well have a clean sweep. So, since the beginning of the meeting of Brazil, Russia, India, China, and South Africa (BRICS) held in Brazil in July this year (2014), they began to build friendship with money. Let me make a rough calculation of the money the Beijing authorities were willing to spend: the BRICS Bank, $100 billion; the Asia Infrastructure Investment Bank (AIIB), $50 billion; the Silk Road Fund, $40 billion; the East Asia Special Drawing Facilities, $10 billion; the ASEAN Development Bank, $5 billion; all in USD. Altogether, China was ready to provide more than $200 billion in seed money for these financial institutions. The actual amount and when to implement each are to be verified later. For now, at the successive international conferences of BRICS, APEC, G20, etc., Xi Jinping’s generosity seems to have tempered Obama and Abe’s swagger.
In addition, during the Asia-Pacific Economic Cooperation (APEC) meeting Xi advocated to establish an open Free Trade Area of the Asia-Pacific (FTAAP), which is neither the Trans-Pacific Partnership (TPP, in which China was not invited to join) promoted by the United States nor the China driven Regional Comprehensive Economic Partnership (RCEP) Agreement (the United States was not invited to join). The FTAAP motion received unanimous support. Although it may take many years to further develop and implement, it has decreased the economic momentum of US returning to Asia. In addition, China also reached an agreement with South Korea and Australia to establish a free trade zone, which can probably work to divide and conquer the TTP of the United States.
Deng Xiaoping said, "Development is of overriding importance". He was absolutely correct. But there is another truth behind this overriding importance, and that is: money is the solid foundation. China has 3.9 trillion US dollars in foreign exchange reserves; therefore, it has the capability to provide substantial funding for these organizations. The US, the EU and Japan now have no money (Japan had two consecutive quarters of GDP decline; it has fallen into recession), so they do not have the clout to confront China. This is the current reality.
Every Sunday, CNN cable television has a very good program known as Global Public Square (GPS), whose host is an American Indian scholar named Fareed Zakaria. He has a first-class brain and once served as the editor of America's premier bimonthly Foreign Affairs magazine. He recently has clearly appeared uncomfortable. In the program, he said that China is trying to reinvent the wheel, or set another center, or create another system outside the economic order (including the World Bank and the International Monetary Fund [IMF]) established by the United States after World War II. He very much disagreed with China in this regard, although he also mildly criticized Europe, the United States and other countries for their refusal to give emerging countries, particularly China, a little more say.
The US disapproves what China is doing. But if we view this objectively, isn’t it the consequence of China being pressured by the international realities? China either continues to stay poor and backward, or to work hard. A small country, no matter how hard it works, still has to attach itself to a particular big system and arrange the people’s way of life in accordance with the behavioral norms within the big system. But a big country would not necessarily have to do so. In the 1980s, when Japan threatened the US number one economic status in the world, although it was a US ally, the US still had to suppress Japan. At that time there was the Group of Five (G5, the United States, France, the United Kingdom, West Germany and Japan), namely they were the five strongest economies. The US allied the other three European countries to suppress Japan. (To be fair, Japan should not have devalued the Japanese currency down to 350 yen to one US dollar to snatch the market for US products; so Japan deserved to be punished by the US.) Of course, Japan did not have the capacity to build another big system.
It seems that China possesses this ability. It can be said that to establish another independent financial system for the world is the only way to achieve a genuine multilateral international system. China is a large country and has four times the population of the US. If China had followed the rules laid down by the US, for example at the beginning of the implementation of reform and open policy, by drawing up a constitution and allowing freely organized political parties like the former Soviet Union did, and accepted a shock therapy as proposed by Columbia economics professor Jeffrey Sachs and other Western experts, then China would have not only disintegrated, but its ethnic minorities and Hong Kong and Taiwan would also become independent. It would really be hard to imagine the extent of sufferings that outcome would have produced. Therefore, China needs to walk its own way; there is no doubt about this. Today, China has reached an almost equal status with the US. Now, a question comes up: in the end, should China help the US to maintain the US-led and established financial system? Or, should it try to step out of the US-established system?
It is undeniable that the US system has made great contributions to the world economic development. And this period of time is likely to be the fastest period of progress in human history in all respects. However, what most people do not know is that the IMF is an authoritarian organization where the US owns the majority of quota and votes, so it has the control. The IMF power shows up when developing countries experience financial trouble. When these countries face bankruptcy, they can only borrow money from the IMF, but the IMF will compel these governments to make draconian budget cuts, force bankruptcy reorganization and open the markets to allow the influx of foreign capital. In 1998, during the Asian financial turmoil, enterprises of Indonesia, South Korea and other Asian countries were bought cheaply in bulk by the Western multinationals, tantamount to looting. Therefore there was a coup in Indonesia while South Korea decided to set a day as the National Humiliation Day in memory of this event. In Latin America, there are numerous examples of this kind. This is because the largest part of the current world economy is the so-called virtual economy or finance-dominated economy. Whoever controls the global financial operations controls or at least can influence the economic lifeline of the world. Therefore, establishing an alternative financial system has the purpose of avoiding being controlled by others. As the second largest economy in the world, it is necessary for China to do so. And China has just begun to have the ability to do it.