The latest twist is that “de-coupling” from China is now being termed “de-risking.”
This is an oxymoron, because ripping up decades-old supply chains for geo-political reasons is almost impossible and painful, as William Pesak explains in the Asia Times. There is no other China out there, in terms of size of economy and manufacturing prowess. On top of this, and critical to grasp, is that China is no longer merely a producer, it is the largest consumer market too.
Wall Street and giant MNCs are very reluctant to disengage from China. With India continuing to disappoint, with a less sophisticated and smaller consumer economy, the bonanza cannot be ignored.
Indeed, China is opening up its bond markets. Its stock market can only grow over the coming decade as the public will be encouraged to plough savings into financial services and away from the vulnerable and unsustainable property market. Wall Street would love to charge fat fees as intermediaries, selling their "financial expertise."
Goliath looks groggy
Contrast this with the embarrassment of the Debt Ceiling Drama in the United States. Chinese media have been laughing their heads off at Biden's cancellation of meetings with the Quad. The US is seen as an increasingly hollow hegemon. Asia (mainly China and Japan) holds 3,500 billion dollars' worth of US Treasury bonds. Even though Beijing has been reducing its holdings to under 900 billion dollars, it cannot afford to see a depreciation of that asset.
The compact of China exporting deflation (selling products at low prices) to the West, earning dollars and then parking them in the custody of the US Treasury is now being shredded.
Most commentators expect a last-ditch messy compromise in the dysfunctional US political morass. Yet, if one links all this with ex-President Trump's attempted "coup" in January 2021, after those decidedly un-presidential "debates," it is obvious that the stock of US prestige has declined significantly.
Seasoned observers continue to respect and fear the might of the Pentagon. No one is writing off the dollar in the short term. Yet the graph is now trending down and no longer even plateauing. We are now arguing about the timeline of decline and the angle of descent, not the direction of travel.
In short, will the dominance continue until we end up in the grave and thus something for the next generation to deal with? Or will we watch in "shock and awe" at the collapse of Leviathan, as our grandfathers or great-grandfathers witnessed the collapse of European empires in Asia?
Islands in the sun
An uber-wealthy prime minister based in London, of sub-continental heritage, came early to sign a military pact (and promises on investment) with his counterpart in Tokyo. The relative freefall in the power configurations of both states is evident if anyone wished to delve back a century or so.
The Anglo-Japanese Alliance ran from 1902 to 1922. It marked the return of Britain from "splendid self-isolation." The purpose was to halt Russian expansion towards Manchuria and the Pacific coast. The underlying objective was to get Japan to do all the fighting and allow the Royal Navy to confront the rising German naval threat on the North Sea, in Europe.
A mighty, industrialized Japan wrought death and destruction in China. It humiliated the Qing Chinese armies in 1894 and took Taiwan as its prize, keeping it for fifty years until 1945. Japan then pillaged China on and off till the end of World War Two. It smashed the Russian armies and navies in 1904.
The British Empire reached its apogee in 1920 (in terms of territorial expanse), even though it was essentially bankrupt by the end of World War One in 1918. It clung on to glory for another two decades. The death blow was struck by Japan when the Imperial forces overran "impregnable" Singapore in 1942. Britain never recovered. Indeed, the Japanese supported the independence armies in Burma (under Aung San) and towards Bengal and Nagaland (under Subhas Chandra Bose). Both rebellions by indigenous forces made British relinquishment of empire inevitable.
Alliances are convenient until they aren't.
Unfortunately, its new defence pact with Britain in 2023 is accompanied by a steep rise in military spending. Japan has been on a QE money-printing drip, on life-support, for two decades.
One island has cut off links with its European mainland neighbours and is already falling behind economically. Yet it finds time to join another island off the Asian mainland, both seeking adversaries far larger than them. Now, just as Britain did with the Japanese a century ago, the US superpower is manipulating both Britain and Japan to man the barricades.
The two former island empires are relatively diminished powers. Both could re-join hands with their respective mainland neighbours and climb upwards on the latest technologies to maintain an enviable level of prosperity.
Instead, Britain is in delirious "un-splendid isolation." It does not have to be like this.
Japan remains in RCEP, for now. It possesses world-beating manufacturing and tech giants. It needs to ditch the legacy of Shinzo Abe and his grandfather. The latter served as a minister in the war (criminal) government of World War Two. Grandson Abe led with the Quad in 2007 to confront China once more. Kishida is thus ploughing familiar furrows.
The G7 is no longer the big kahuna any longer. The BRICS grouping is now bigger than the G7 in terms of GDP and economic clout. Brazil, Russia, India, China and South Africa: together they are unwieldy and not a fully cohesive group. Pressure is being put on the flanks, on Brazil and South Africa. Nevertheless, the figures offer a symbolic expression of just how rapidly the balance of economic gravity is shifting.
The former heavyweight champions of the world are yesterday's winners. If only they could be graceful and agree to share the planet equitably with the champions of a world preceding them, before 1750.
If only more sensible, wise, and knowledgeable leaders could emerge to guide us to a saner world.