The Chinese government seems to be very keen on developing the New Silk Road Economic Belt as fast as possible; an initiative, said to be designed by President Xi Jinping himself, that will increase economic cooperation in the wide Eurasian region. At a stunning speed China and Russia take the lead in strengthening ties in the area. For the wind down of the US dollar hegemony the Silk Road economic project is an important tool. As part of this project two clubs are rapidly developing as we speak, the Asian Infrastructure Investment Bank (AIIB) and the Eurasian Economic Union (EEU). Additionally, China is incorporating gold into the Silk Road project.
The Asian Infrastructure Investment Bank
The AIIB is an international financial institution proposed by China in 2013 to finance infrastructure projects in Asia. The Chinese government has been frustrated with the slow pace of reforms in established institutions like the IMF and World Bank, which are dominated by the US. China’s rapid economic growth in recent years has made them pursuing a greater input in these institutions, but the US has neglected to honor these requests appropriately, forcing China to launch its own institutions.
Despite the US has been pressuring its allies from signing up as AIIB prospective founding members only Japan obeyed, signaling a demise of US power and failing US foreign policy. In a milestone event many western countries have submitted in March and April 2015 for membership, amongst others the UK, Switzerland, Sweden, Spain, Portugal, Norway, the Netherlands, Italy, Germany, France, Finland, Denmark, Australia and Israel. The AIIB articles of agreement are expected to be completed by the end of 2015.
China is now playing multiple games at the same time by developing the AIIB and concurrently pressuring the IMF to reform. One of China’s goals is for the renminbi to be included into the IMF’s Special Drawing Right (SDR). On April 30, 2015, the IMF’s Director Of The Communications Department, Gerry Rice, stated in a press briefing about the SDR review “Yes, the work has begun” (see this video at 28:15). The first IMF board meeting on the SDR review originally scheduled in May 2015, has been “deferred, because the work is underway” (see the same video at 31:30).
The Eurasian Economic Union
The President of Kazakhstan, Nursultan Nazarbayev, first suggested the idea of creating a regional (Eurasian) trading bloc during a speech at Moscow State University In 1994. Afterwards Belarus, Russia and Kazakhstan formed a free trade zone, which turned into a customs union, followed by a single economic space, finally reaching an economic union (the EEU) on May 29, 2014, when an agreement was signed by the Supreme Eurasian Economic Council in Astana, Kazakhstan.
Worth noting is that according to Pravda.ru Nazarbayev is of the opinion the US dollar is an illegal and non-competitive means of payment, “the world currency was not de jure legitimate because it was never adopted by any communities or organizations. There is no such international law,… the world currency market is not a civilized market, as the system of world currency issuance is not being controlled”. Nazarbayev believes the world is heading towards a new monetary system, from “defective capitalism” to “the new capitalism that would be based on a non-defective currency.” Chinese President Xi Jinping visited Kazakhstan in September 2013 where he raised the initiative of the Silk Road Economic Belt at the Nazarbayev University. In March this year China and Kazakhstan signed 33 deals on industrial capacity cooperation
The EEU is aggressively expanding; its latest official members are Armenia and Kyrgyzstan. By looking at the EEU flag, that displays the whole of Asia, it doesn’t take a lot of imagination to expect they’ll continue expanding. Turkey has mentioned it likes to join and there are talks with Vietnam to form a free trade area.
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