IRSHAD SALIM — There’s a much bigger news than oil prices falling on Wednesday after U.S. President Donald Trump said he was working on a strong response to China’s proposed security law in Hong Kong.
That Secretary of State Mike Pompeo said he certified to Congress Wednesday that Hong Kong no longer enjoys a high degree of autonomy from China is a bigger and ominous one — “a decision that could result in the loss of Hong Kong’s special trading status with the US and threaten its standing as an international financial hub”, wrote Reuters.
This could lead to a potential deterioration in relations between the world’s two biggest economies and ratchet up the pressure on global businesses — so oil demand highs and lows already weakened by the coronavirus pandemic could become a collateral.
Already, analysts say the global economy post-pandemic will shift to the south, meaning China could lead and be the largest beneficiary. Those camping out with Beijing, for example Pakistan, would see quite a bit of reduction in its trade deficit with the “iron brother”.
A Pakistani analyst says Coronavirus or no Coronavirus, this time a Sino-US cold war is inevitable. Earlier it was the US-Soviet, with the Soviets and China sharing aisle seats.
Incidentally, the pandemic and the earlier Cold War started from the 38th parallel band in East Asia. If the analyst’s view is considered, the 38th parallel would add another repute to its already two: 1. Around the 38th Parallel, the sun is visible for 14 hours, 48 minutes during the summer solstice and 9 hours, 32 minutes during the winter solstice. 2. the first Cold War between the Soviets and the US started there.
A Pakistani diplomat based in the EU tends to agree that if US-Sino tensions continue to escalate, the dispute could morph into a damaging conflict that weakens the world’s recovery from Covid-19, and risk slowing the technological revolution.
There’s already a significant race between the two global economic powerhouses to ride the tech crest.
The analyst says growth of Chinese economy will be contingent upon its remaining ahead on the innovation curve. “I personally believe they are ahead on that account. Hence all in all, China appears to have an upper hand, and the US will fight to the last to preserve the existing global order”, he says.
Post-pandemic, Washington is pressing for a decoupling from China, says the Foreign Policy. “But the last big economic split brought on two world wars and a depression”, it points out.
This scenario may seem far-fetched, but the Foreign Affairs recently highlighted it:
“U.S. economic sanctions on Iran remain in place, but Iran has shifted much of its international commerce to a new yuan-based system—a Chinese digital currency that allows Tehran to avoid dollar transactions and thus evade U.S. financial institutions (by not using the SWIFT). As a result, Iran’s oil sales to China, India, and Europe are up, providing the Iranian regime with critical revenue streams that U.S. authorities cannot monitor. And when Iran decides to move quickly toward the development of nuclear weapons and new medium-range missiles to deliver them, the United States can no longer turn to sanctions as one of its primary means of responding to the threat”.
China recently launched its Digital Currency — it could unseat the Dollar, some observers think.
According to FA, “given the long-standing dominance of the dollar, if that happens, American economic and geopolitical power is at stake”.
Digital currency will gain as a currency as the Chinese economic clout and influence grows, says the analyst. “As the Chinese economic clout grows, which is a real possibility, so will the Digital Currency”.
South of the Tropic of Cancer, several countries close to China may opt to join its cryptocurrency bandwagon. Pakistan is one of them. Some of these nations have already said yes to Beijing’s multi-billion dollars Belt and Road Initiative (BRI), which the US calls is “non-transparent” and wrapped with geopolitics. It wants to compete with it with its OPIC (Overseas Private Investment Corporation) and the Indo-Pacific strategy.
The wider region is therefore a geopolitical laboratory for the new world order. And “since the wars have changed the form, so will the battlefields. To sum it up, interesting times ahead”, says the analyst.
The writer is Islamabad-based. A business consultant and analyst, he’s also the Editor/Publisher of despardes.com and pkonweb.com