The Eastern seduction

NOV 24, 2008 — The global financial crisis, which is hitting hard the economies of the United States and Europe, is changing the paradigm of international relations.
The outcome of the two World Wars determined the global alliances as well as awarded the privilege as Security Council permanent members to five countries — the US, Britain, France, Russia and China — with veto power.
If the outcome of the World Wars had been different, Japan, Germany and even Italy might be where Britain, China and maybe the US are now.
However, that is all hypothetical and is not worth the debate.
In today's era, states with strong defence forces can only get you so far.
That is why Pakistan will almost never be allowed into the Security Council.
Even though it has nuclear warheads and a massive military force, Pakistan will not be able to bulldoze its way into being awarded this privileged position.
Other aspirants on the world stage with nuclear arms like Israel, Iran and North Korea can only dream of becoming a big-time player.
However, today the single most important consideration is how much one country can determine the rest of the world's economy.
India stands a chance of making it into the big boys club if it can sustain an impressive growth rate of 9 per cent (which it has achieved for the past 3 years) whilst maintaining a strong military force.
However, the most important consideration for the world is not a place in the increasingly irrelevant United Nations but how to overcome the problematic financial crisis.
China now seems like the saviour or the messiah to save the rest of the world.
China's US$1.9 trillion in reserves seems like a gold mine and everyone is rushing to get whatever "crumbs" that they can get their hands on.
When China was busily earning extra cash, the US and its allies criticised it and demanded that China spend some of the "savings" that it had been keeping in store for "rainy days ahead".
With the current financial turmoil that the US is in now, the Americans are thanking their lucky stars that China is responding positively to their request to help bail them out.
China has been buying US$500 billion of US bonds and the Americans are hoping that China continues the buying spree.
The US requires this to finance its US$700 billion bailout plan as announced by outgoing President George W. Bush.
Now, there is no more talk about China's huge reserves what more about human rights, Tibet or democracy.
Relations between the US and China now and in the near future will revolve around how to ensure that China keep its economy growing, in the hope that it will trickle down to the rest of the world.
The US is also demanding for a more balanced trade with China.
While China's cheap yuan makes its exports attractive; the US is bent on getting China to spend and buy more US products.
The past few years have seen China building economic allies around the world.
One of the most controversial being its long-term agreement with Australia to purchase uranium to feed its energy-starved industries and factories.
At that time Australia received a mouthful from its partners — the US, Britain and many others — on the "warm" relationship between Australia and China.
However, now everyone wants to be a friend and ally of China.
Many of the troubled developed states are also looking towards the oil-rich Middle East countries.
Even though the price of oil has fallen to a third of the value it was just some six months ago, the Middle East is the other region that is attracting countries who need a helping hand.
The Arab countries and the Gulf states are cash rich, thanks to the spike in the price of oil over the past year or two.
That Saudi Prince Alwaleed bin Talal upped his stake in Citigroup to 5 per cent recently is proof where the other "gold mine" is located.
We also see many overtures by Arab investment companies and individuals buying English football clubs almost at will, with the latest being Manchester City that was bought by the Abu Dhabi United Group.
However, the Middle East countries lack the tactical and political astuteness of the Chinese.
The Middle East also lacks the huge population to provide the cheap labour necessary to expand its manufacturing industry.
The Middle East countries need to build up their services industry especially in finance, tourism and high-tech industry as they seek to elevate their status in global trade.
The West now looks to the East not for spices or opium —the main commodities coming out from the East centuries ago — but for what lies under the pillows — cold hard cash.

- published in The Malaysian Insider : Nov 24, 2008