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Jack Rasmus Correspondent
Two events occurred last week that mark a further phase in the waning of US global economic hegemony: China introduced its own economic development bank, the “Asian Infrastructure Investment Bank” (AIIB); the IMF simultaneously announced it will decide in May to include the Chinese currency as a global reserve-trading currency alongside the dollar, pound, and euro – an almost certainly “done deal” as well.

The dual moves caught the US off guard, especially as the USA’s erstwhile main economic ally, Britain, was the first to announce it would join China’s AIIB as a founding member. That announcement set off a quick succession of further announcements by major Western economies that they too were now joining the AIIB – Germany, France, Italy, Luxembourg, and Switzerland – as major European capitalist economies scurried to ensure a piece of the Asian economic action and to tap China’s huge foreign currency reserves for investment in their own economies. Singapore and Australia followed within days. South Korea and Canada are now reconsidering joining, as are other once solid USA economic allies.

The initial USA response to Britain was to accuse it of “constant accommodation” of China. US Treasury Secretary Jack Lew even made telephone calls to British Finance Minister George Osborne, requesting that he “hold off” after Britain’s initial announcement, according to reports in the international business Press. That effort was apparently to no avail, however, as British politicians, including Prime Minister David Cameron, facing re-election within weeks, chose to leverage the decision for political purposes as well as economic. Reportedly, the US also attempted to strong-arm Singapore into not joining, but failed there as well.

The entire affair caught USA political bureaucrats by surprise. The matter of joining the AIIB was thought to have been raised in European centres at low levels, but not at senior financial minister or ambassador levels. No decisions appeared imminent. Events in recent weeks show the Europeans successfully kept USA out of the loop concerning their real intentions, as Britain last week “jumped the gun”, as they say, with British government officials giving the reason for their decision to join the AIIB as: “We want to be a Chinese partner of choice in international finance”(read: We want a slice of the economic pie before someone else gets to eat it).

In making their announcement, British officials vowed that they want the UK to become the main destination for Chinese investments.

In 2013-14, when the British and Euro economies were in particularly bad shape, major trade delegations from China repeatedly visited both Britain and Germany on numerous occasions.

Much of Britain’s tentative economic recovery in the past two years has been driven by infrastructure and property deals that have been heavily financed by massive Chinese private capital inflows into London real estate, infrastructure projects, and south England investments. Deals to revitalise investment in Britain’s nuclear power sector are also being financed by Chinese investment. Without China investments in the UK in recent years, and other capital inflows from emerging markets, British economic “recovery” would have remained British “stagnation” at best.

USA vs China policies toward British banks offer another example of a growing divergence of interests between the USA and Britain with regard to China.

The origins of the AIIB announcement trace back at least to 2010 when the USA quietly agreed to allow China to increase its influence in the USA-dominated international economic institution, the International Monetary Fund (IMF).

Since then, however, the USA has reneged on that agreement, in order to ensure that China’s influence in the IMF would remain minimal. So China went off last October 2014 and formed its own AIIB, in what amounts in effect to a fundamental challenge to the IMF’s parallel USA-dominated institution, the World Bank.

With 27 nations having already signed on, including Britain and other Europeans, Australia, Singapore, and others, the AIIB represents a major challenge to the USA-dominated development banks, the World Bank, as well as to the Asian Development Bank (USA and Japan dominated ADB) located in Manila, Philippines. Initially the AIIB is to be funded with $50 billion to invest in Asian infrastructure.

That compares with $160 billion in the Asian Development Bank (ADB). However, the near term AIIB target is to provide $100 billion in funding. And by 2020, potentially up to $730 billion. That’s a lot of projects and potential profits for European and British businesses.

The “Old Order” of US Economic Hegemony

The USA’s dominance of the IMF and World Bank since 1945 has provided Washington with great leverage in influencing both political events and economic directions in emerging market economies (EMEs). Often multibillion- dollar lending projects are dangled before an EME, or threatened with suspension, if the EME in question fails to do the bidding of Washington involving a political decision Washington wants, or an investment concession Washington wants from the EME for a US bank or company.

A good example of the kind of “economic arm-twisting” by the USA still going on today is the pressure exerted by the US government and courts to force Argentina to agree to terms demanded by USA shadow banksters with regard to the repayment of loans; or the moves underway by USA government and banksters to drain Venezuela’s currency reserves to effect a collapse of its currency, the Bolivar, to set off import inflation to set the stage for another coup and political intervention.

Those are extreme, but not untypical, examples; countless “lesser” forms of pressure on EMEs occur frequently by the USA through its control of decisions by the IMF and World Bank. Ukraine is another, perhaps more traditional example, where the USA has influenced the IMF to install US citizen, shadow bankers, like private equity CEO Natalia Jaresko, to run the Ukraine’s economy as finance minister as a condition for the Ukraine receiving IMF loans.

But by providing an alternative source of infrastructure project funding, the China AIIB reduces potential USA economic and political influence over EMEs.

From 1944 to 1973 the US maintained more or less total economic hegemony in the global economy. The US dollar was the prime currency for trading and reserve purposes.

This dominance was challenged in the post-1973 period briefly, however, as the US economy experienced a crisis at that time. The institutional arrangements by which the US retained dominance from 1944 to 1973 were restructured and rearranged.

But the restructuring of the global economy in the 1980s, led by the United States (and a junior partner the UK) has now run its course for a second time.

Once the unchallenged global currency, the US dollar is once again facing challenge as the dominant global currency.

Today it’s the AIIB. Tomorrow the yuan as an officially accepted trading currency.

Thereafter the yuan as the dominant trading and reserve currency, and an even deeper European dependence on China money capital flows.

China thus represents by far a much greater challenge to US economic hegemony in Europe, and indeed globally as well. -Counterpunch.

US dominated global institutions like the World Bank and IMF are being challenged by alternative institutions, like the AIIB. The focal point of that challenge, today and in the years ahead, is China.

The yuan will not overturn or replace the US dollar tomorrow, or even in the near term. The World Bank and Asian Development Bank won’t be displaced by the AIIB. But in the longer term it is inevitable, should China continue to grow at its recent rates and the USA continue to lag with its recent below historic average growth rates.

As China continues to successfully target Europe for economic integration, the USA has been clumsily targeting Russia for European de-integration.

What’s ironic is that the USA today is directing its most aggressive efforts against Russia in an attempt to prevent Europe from deepening its economic relationships with that country and to roll back those relationships by means of economic sanctions. Since at least 2010, Europe’s growing resource and trade integration with Russia has made the USA increasingly nervous.

Today it’s the AIIB. Tomorrow the Yuan as an officially accepted trading currency. Thereafter the Yuan as the dominant trading and reserve currency, and an even deeper European dependence on China money capital flows.

China thus represents by far a much greater challenge to US economic hegemony in Europe, and indeed globally as well. – Counterpunch