Peace Progress

Xi initiates Peace Part II, dollar de-throned in cross-border trade, US is literally and figuratively bankrupt, Josep Borrell in deep water, Joseph Biden is not getting any younger

Apr 27, 2023

UPDATE: Chinese President Xi Jinping and Ukrainian President Volodymyr Zelenskyy held a phone call on Wednesday at the invitation of the latter, during which the two leaders exchanged views on China-Ukraine relations and the Ukraine crisis. China will engage more on the diplomatic front to contribute to a political settlement of the Ukraine crisis, and the role that China could play has been sincerely welcomed by both Kiev and Moscow, despite some voices from the West, especially the US, that have tried to distort China's mediation efforts.

China passed another milestone in its bid to reduce reliance on the dollar, as yuan usage in its cross-border transactions jumped ahead of the greenback’s for the first time in March. The local currency’s share of China’s cross-border payments and receipts rose to a record high 48% at the month end from nearly zero in 2010. The dollar’s share declined to 47% from 83% over the same period, the figures showed.

Josep Borrell calls on European navies to patrol the Taiwan Strait to show Europe’s commitment to freedom of navigation in this absolutely crucial area. Taiwan ‘concerns us economically, commercially and technologically,’ Borrell said, echoing recent comments stressing how crucial Taiwan is to Europe.

America’s oldest ever president seeks more time in office amid lacklustre public enthusiasm. US President Joe Biden’s re-election appears daunting. The majority of Americans wish he would not run again, his supporters are anxious, but Biden likes his chances.

President Xi Jinping calls for peace

Chinese President Xi Jinping and Ukrainian President Volodymyr Zelenskyy held a phone call on Wednesday at the invitation of the latter, during which the two leaders exchanged views on China-Ukraine relations and the Ukraine crisis. Chinese analysts said that China will engage more on the diplomatic front to contribute to a political settlement of the Ukraine crisis, and the role that China could play has been sincerely welcomed by both Kiev and Moscow, despite some voices from the West, especially the US, that have tried to distort China's mediation efforts.

Xi said in the phone call that China will send a special representative of the Chinese government on Eurasian affairs to visit Ukraine and other countries to conduct in-depth communication with all parties on the political settlement of the Ukraine crisis, according to the Xinhua News Agency. Xi stressed that China, a permanent member of the UN Security Council and a responsible major country, will not choose to be a bystander to the Ukraine crisis, or "add fuel to the fire," or use the crisis as an opportunity to make profit.

"On the Ukraine crisis, China always stands on the side of peace, and China's core position is to promote peace via talks," Xi noted.

Everything China does is aboveboard. Dialogue and negotiation are the only viable way forward. There is no winner in nuclear wars, the Chinese president said.

The Ukrainian side is committed to the one-China policy, and hopes to advance all-round bilateral cooperation with China, open up a new chapter in Ukraine-China relations, and jointly safeguard world peace and stability. Zelenskyy shared his views on the current state of the Ukraine crisis with the Chinese president. He thanked China for providing humanitarian assistance to Ukraine and welcomed China's important role in restoring peace and seeking diplomatic solution to the crisis. Zelenskyy on Wednesday appointed Pavlo Ryabikin, a former minister of strategic industries, as Ukraine's new ambassador to China, according to a decree posted on the website of the Ukrainian president.

Mutual respect for sovereignty and territorial integrity is the political foundation of China-Ukraine relations, Xi said. "China's readiness to develop relations with Ukraine is consistent and clear-cut. No matter how the international situation evolves, China will work with Ukraine to advance mutually beneficial cooperation," said the Chinese president.

Chinese analysts said the call readout shows that Ukraine holds a different attitude toward China's mediation efforts compared to the US. On March 21, White House National Security Council spokesperson John Kirby told reporters that the US does not see China as capable of being an impartial mediator between Russia and Ukraine.

Experts said this shows that the US has failed to provide hope of a peaceful solution for the relevant parties, including Ukraine, Russia and other European countries, and this is why even Kiev, who received weapons from the US and NATO, is now seeking dialogue and the possibility of political settlement from China.

"China has become an influential mediator that is recognised by Ukraine and Russia as well as France and Germany, meaning China's stance over the crisis is fair and objective and China is a responsible major power seeking no individual interests," (Wang Xiaoquan, Chinese Academy of Social Sciences)

China has successfully mediated tensions between Saudi Arabia and Iran, brokering a deal between the two formerly hostile countries which allowed the resumption of diplomatic ties earlier this year.

In a 12-point position paper called "China's Position on the Political Settlement of the Ukraine Crisis," issued on the one-year anniversary of the Russia-Ukraine military conflict in February, the Chinese Foreign Ministry called for ceasing hostilities and resuming peace talks, stopping unilateral sanctions and abandoning the Cold War mentality.

It also called for respecting the sovereignty of all countries and expressed opposition to the use of nuclear weapons.

"Both Ukraine and Russia have welcomed China's effort to promote a cease-fire and a political solution to the crisis. China didn't fuel the flames, provide weapons to either side or attack them, which is why China has the channel to speak to both Russia and Ukraine," “Beijing is a qualified mediator for the crisis.” (Cui Hongjian, director of the Department of European Studies at the China Institute of International Studies)

Mediation of the Ukraine crisis is more difficult and more complicated than the Iran-Saudi deal, because the two major Middle Eastern powers did not directly fight each other, and Riyadh and Teheran have strategic autonomy and are able to make independent strategic decisions. However, Kiev has been deeply affected by Washington. Therefore, it could be too early to set high expectation for a peaceful solution immediately, and the whole peace process will take time, said experts.

Before the phone call with the Ukrainian president, the Chinese leader has spoken with many leaders of relevant parties, including Russia, Germany, France and the EU, as well as neutral third parties like Brazil, and this made conditions for a dialogue between Xi and Zelenskyy more mature, Li said. "It shows that China is sincerely prepared for mediation efforts.

Now that Ukraine shows a similar attitude to China's mediation with other relevant parties on the continent of Europe, like the EU and France, who really want the conflict to be stopped, Kiev has perhaps started to realize that US and NATO military support cannot effectively protect Ukraine or stop the bloodshed, but will only prolong the conflict. This might bring some hope as Kiev might start to act more independently and make pragmatic decisions based on its own judgments, said experts.

Yuan Eclipses Dollar

China passed another milestone in its bid to reduce reliance on the dollar, as yuan usage in its cross-border transactions jumped ahead of the greenback’s for the first time in March. The local currency’s share of China’s cross-border payments and receipts rose to a record high 48% at the month end from nearly zero in 2010, according to research by Bloomberg Intelligence citing data from the State Administration of Foreign Exchange. The dollar’s share declined to 47% from 83% over the same period, the figures showed.

Cross-border payments and receipts in yuan rose to a record US$549.9 billion in March from US$434.5 billion a month earlier, according to Reuters calculation based on data from the State Administration of Foreign Exchange.

The yuan was used in 48.4% of all cross-border transactions, Reuters calculated, while the dollar's share declined to 46.7% from 48.6% a month ea

The ratio is calculated based on the volume on all types of transactions, which includes securities trading through the links between mainland China and Hong Kong’s capital markets. It doesn’t represent transactions used by the rest of the world — the yuan’s share in global payments was little changed at 2.3% in March, according to SWIFT.

“The rise in yuan usage could be a natural consequence of China opening up its capital account, with rising inflows for China bonds and outflows for Hong Kong stocks,” Stephen Chiu, chief Asia foreign-exchange and rates strategist at BI, wrote in a note.

The rising share allows local firms to reduce the risks of currency mismatch in transactions, a spokeswoman at the State Administration of Foreign Exchange said at a Friday briefing. China will further expand yuan settlement in cross-border transactions, the State Council said in a guideline aimed at boosting foreign trade issued Tuesday.

“Yuan internationalization is speeding up as other countries seek an alternative payment currency to diversify risks and as the credibility of the Federal Reserve is not as good as before,” said Chris Leung, an economist at DBS Bank. “But at the same time we are still talking about a long way from dollar dominance, and the yuan’s share in global payment might be forever small.”

America’s empire is bankrupt

Let’s start with the basics. Roughly 5% of the human race currently live in the United States of America. That very small fraction of humanity, until quite recently, enjoyed about a third of the world’s energy resources and manufactured products and about a quarter of its raw materials. This didn’t happen because nobody else wanted these things, or because the US manufactured and sold something so enticing that the rest of the world eagerly handed over its wealth in exchange. It happened because, as the dominant nation, the US imposed unbalanced patterns of exchange on the rest of the world, and these funnelled a disproportionate share of the planet’s wealth to itself.

There’s nothing new about this sort of arrangement. In its day, the British Empire controlled an even larger share of the planet’s wealth, and the Spanish Empire played a comparable role further back. Before then, there were other empires, though limits to transport technologies meant that their reach wasn’t as large. Nor, by the way, was any of this an invention of people with light-coloured skin. Mighty empires flourished in Asia and Africa when the peoples of Europe lived in thatched-roofed mud huts. Empires rise whenever a nation becomes powerful enough to dominate other nations and drain them of wealth. They’ve thrived as far back as records go and they’ll doubtless thrive for as long as human civilisations exist.

America’s empire came into being in the wake of the collapse of the British Empire, during the fratricidal European wars of the early 20th century. Throughout those bitter years, the role of global hegemon was up for grabs, and by 1930 or so it was pretty clear that Germany, the Soviet Union or the US would end up taking the prize. In the usual way, two contenders joined forces to squeeze out the third, and then the victors went at each other, carving out competing spheres of influence until one collapsed. When the Soviet Union imploded in 1991, the US emerged as the last empire standing.

Francis Fukuyama insisted in a 1989 essay that having won the top slot, the US was destined to stay there forever. He was, of course, wrong, but then he was a Hegelian and couldn’t help it. (If a follower of Hegel tells you the sky is blue, go look.) The ascendancy of one empire guarantees that other aspirants for the same status will begin sharpening their knives. They’ll get to use them, too, because empires invariably wreck themselves: over time, the economic and social consequences of empire destroy the conditions that make empire possible. That can happen quickly or slowly, depending on the mechanism that each empire uses to extract wealth from its subject nations.

The mechanism the US used for this latter purpose was ingenious but even more short-term than most. In simple terms, the US imposed a series of arrangements on most other nations that guaranteed the lion’s share of international trade would use US dollars as the medium of exchange, and saw to it that an ever-expanding share of world economic activity required international trade. (That’s what all that gabble about “globalisation” meant in practice.) This allowed the US government to manufacture dollars out of thin air by way of gargantuan budget deficits, so that US interests could use those dollars to buy up vast amounts of the world’s wealth. Since the excess dollars got scooped up by overseas central banks and business firms, which needed them for their own foreign trade, inflation stayed under control while the wealthy classes in the US profited mightily.

The problem with this scheme is the same difficulty faced by all Ponzi schemes, which is that, sooner or later, you run out of suckers to draw in. This happened not long after the turn of the millennium, and along with other factors — notably the peaking of global conventional petroleum production — it led to the financial crisis of 2008-2010. Since 2010 the US has been lurching from one crisis to another. This is not accidental. The wealth pump that kept the US at the top of the global pyramid has been sputtering as a growing number of nations have found ways to keep a larger share of their own wealth by expanding their domestic markets and raising the kind of trade barriers the US used before 1945 to build its own economy. The one question left is how soon the pump will start to fail altogether.

When Russia launched its invasion of Ukraine in February 2022, the US and its allies responded not with military force but with punitive economic sanctions, which were expected to cripple the Russian economy and force Russia to its knees. Apparently, nobody in Washington considered the possibility that other nations with an interest in undercutting the US empire might have something to say about that. Of course, that’s what happened. China, which has the largest economy on Earth in purchasing-power terms, extended a middle finger in the direction of Washington and upped its imports of Russian oil, gas, grain and other products. So did India, currently the third-largest economy on Earth in the same terms; as did more than 100 other countries.

Then there’s Iran, which most Americans are impressively stupid about. Iran is the 17th largest nation in the world, more than twice the size of Texas and even more richly stocked with oil and natural gas. It’s also a booming industrial power. It has a thriving automobile industry, for example, and builds and launches its own orbital satellites. It’s been dealing with severe US sanctions since not long after the Shah fell in 1978, so it’s a safe bet that the Iranian government and industrial sector know every imaginable trick for getting around those sanctions.

Right after the start of the Ukraine war, Russia and Iran suddenly started inking trade deals to Iran’s great benefit. Clearly, one part of the quid pro quo was that the Iranians passed on their hard-earned knowledge about how to dodge sanctions to an attentive audience of Russian officials. With a little help from China, India and most of the rest of humanity, the total failure of the sanctions followed in short order. Today, the sanctions are hurting the US and Europe, not Russia, but the US leadership has wedged itself into a position from which it can’t back down. This may go a long way towards explaining why the Russian campaign in Ukraine has been so leisurely. The Russians have no reason to hurry. They know that time is not on the side of the US.

For many decades now, the threat of being cut out of international trade by US sanctions was the big stick Washington used to threaten unruly nations that weren’t small enough for a US invasion or fragile enough for a CIA-backed regime-change operation. Over the last year, that big stick turned out to be made of balsa wood and snapped off in Joe Biden’s hand. As a result, all over the world, nations that thought they had no choice but to use dollars in their foreign trade are switching over to their own currencies, or to the currencies of rising powers. The US dollar’s day as the global medium of exchange is thus ending.

One of the interesting consequences of the shift now under way is a reversion to the mean of global wealth distribution. Until the era of European global empire, the economic heart of the world was in east and south Asia. India and China were the richest countries on the planet, and a glittering necklace of other wealthy states from Iran to Japan filled in the picture. To this day, most of the human population is found in the same part of the world. The great age of European conquest temporarily diverted much of that wealth to Europe, impoverishing Asia in the process. That condition began to break down with the collapse of European colonial empires in the decade following the Second World War, but some of the same arrangements were propped up by the US thereafter. Now those are coming apart, and Asia is rising. By next year, four of the five largest economies on the planet in terms of purchasing power parity will be Asian. The fifth is the US, and it may not be in that list for much longer.

In short, America is bankrupt. Our governments from the federal level down, our big corporations and a very large number of our well-off citizens have run up gargantuan debts, which can only be serviced given direct or indirect access to the flows of unearned wealth the US extracted from the rest of the planet. Those debts cannot be paid off, and many of them can’t even be serviced for much longer. The only options are defaulting on them or inflating them out of existence, and in either case, arrangements based on familiar levels of expenditure will no longer be possible. Since the arrangements in question include most of what counts as an ordinary lifestyle in today’s US, the impact of their dissolution will be severe.

In effect, the 5% of us in this country are going to have to go back to living the way we did before 1945. If we still had the factories, the trained workforce, the abundant natural resources and the thrifty habits we had back then, that would have been a wrenching transition but not a debacle. The difficulty, of course, is that we don’t have those things anymore. The factories were shut down in the offshoring craze of the Seventies and Eighties, when the imperial economy slammed into overdrive, and the trained workforce was handed over to malign neglect.

We’ve still got some of the natural resources, but nothing like what we once had. The thrifty habits? Those went whistling down the wind a long time ago. In the late stages of an empire, exploiting flows of unearned wealth from abroad is far more profitable than trying to produce wealth at home, and most people direct their efforts accordingly. That’s how you end up with the typical late-imperial economy, with a governing class that flaunts fantastic levels of paper wealth, a parasite class of hangers-on that thrive by catering to the very rich or staffing the baroque bureaucratic systems that permeate public and private life, and the vast majority of the population impoverished, sullen, and unwilling to lift a finger to save their soi-disant betters from the consequences of their own actions.

Read full article here.

Borrell’s Gunboat Diplomacy

‘I call on European navies to patrol the Taiwan Strait to show Europe’s commitment to freedom of navigation in this absolutely crucial area,’ Borrell said Taiwan ‘concerns us economically, commercially and technologically,’ Borrell said, echoing recent comments stressing how crucial Taiwan is to Europe.

EU foreign policy chief Josep Borrell called on European navies to patrol the disputed Taiwan Strait, in an opinion piece in a French weekly published on Sunday. Borrell’s comments in the newspaper Journal Du Dimanche, echo comments he made last week when he stressed how crucial Taiwan is to Europe.

Taiwan “concerns us economically, commercially and technologically,” Borrell said.

“That’s why I call on European navies to patrol the Taiwan Strait to show Europe’s commitment to freedom of navigation in this absolutely crucial area.”

Two weeks ago, mainland China launched three days of military exercises around Taiwan – simulating targeted strikes and a blockade of the island – in response to a meeting between Taiwan’s President Tsai Ing-wen and US House Speaker Kevin McCarthy.

On Tuesday, in a speech opening a debate on China at the European Parliament, he said: “Taiwan is clearly part of our geostrategic perimeter to guarantee peace.

“It is not only for a moral reason that an action against Taiwan must necessarily be rejected. It is also because it would be, in economic terms, extremely serious for us, because Taiwan has a strategic role in the production of the most advanced semiconductors,” he said.

Borrell’s comments come after French President Emmanuel Macron earlier this month argued that Europe should not be a “follower” of the United States in the event of conflict with China over Taiwan.

Macron’s comments, coming after a visit to China, sparked criticism from some politicians in both the United States and inside the European Union.

Old Joe seeks Trump rematch

America’s first octogenarian president has finally announced he is going to seek more time in office amid lacklustre public enthusiasm. At first glance, the challenges facing US President Joe Biden’s re-election appear daunting. Following Donald Trump’s failed campaign in 2020, this will be the second time in four years that a sitting US president whom the majority of Americans wished would not run again has announced his re-election. Yet, while many of his supporters are anxious, Biden has it made clear he likes his chances.

As the oldest-ever sitting US president, Biden’s age and ability to be in touch with younger generations remain a central criticism of his viability as a candidate for a second term. Concerns about the 80-year-old Biden’s physical fitness only highlight the fact that the energy and exorbitant demands required to run a presidential campaign have overwhelmed far younger presidential candidates.

Furthermore, after running much of his 2020 presidential campaign from homedue to the pandemic, Biden will now have to spend a considerable amount of time over the next 18 months travelling and fundraising around the country, in addition to maintaining his day job as president.

Biden has repeatedly acknowledged and rebutted such concerns with statements like, “The only thing I can say is, ‘watch me’”. But, in an effort to avoid giving a microphone to the gaffe-prone president, the Biden administration has severely limited the public’s ability to do that by granting the smallest number of media interviews for a sitting president since the Reagan administration.

Beyond Biden’s age and ability to relate to the approximately 96% of Americans who are younger than him, there is also the challenge of not knowing how the US economy will be faring on election day in November 2024.

When Trump announced his re-election campaign on June 19, 2019, the US economy faced few headwinds and had record-low rates of unemployment, both nationally and across several major demographics. Yet, on election day 16 months later, the country was still emerging from a pandemic-fuelled economic downturn that saw the highest unemployment rate since 1941 and 5.4 million Americans lose their health insurance.

American presidents are generally favoured to win re-election. But in each of the four re-election losses that have occurred in the last century — Herbert Hoover in 1932, Jimmy Carter in 1980, George H.W. Bush in 1992 and Trump in 2020 — the US economy was either recently recessionary, fully recessionary or in a depression.

Once again, time and conventional wisdom may not be in Biden’s favour.

Politicians often perceive decisive election victories with significant margins to be mandates from voters for their policy agenda. Biden won by a slim margin in the “swing states” that determined the presidency in 2020 – by no means giving him a clear mandate.

Two and a half years later, Biden’s approval ratings do not appear to have markedly improved. Due to a combination of factors – the chaotic exit of the US military from Afghanistan, record levels of migrant border crossings, high levels of public concern about crime, and persistent economic anxiety related to inflation – Biden currently has just a 43% national approval rating. It should come as no surprise that two-thirds of Americans think the country is on the wrong track.

Although three-quarters of Democrats approve of the job Biden is doing, the majority still do not want him to run for re-election. Ultimately, only three presidents in the last half century — Carter, Ronald Reagan and Trump — have announced their re-election campaign with similarly negative approval ratings. Only Reagan ended up winning a second term.

Instead of seeing his age and subdued public support as weaknesses to be overcome, the Biden team is hoping his relative stability arising from half a century of experience in Washington will remain a welcome relief for many Americans following such an exhausting period in American politics.

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