China

Yesterday was momentous, but we should not lose sight of the head of the IMF saying that the Chinese renminbi could take steps to becoming a global reserve currency. To be specific: Dominique Strauss-Kahn has in mind adding renminbi to the IMF’s Special Drawing Rights system. In itself, no big deal - but a notable kiss being blown to Beijing. It fits a trend. The Chinese, notoriously, manipulate the value of their currency to keep their goods cheap, so they can’t have their currency treated with reserve status. But power is shifting - and America’s fiscal misbehaviour has unsettled international investors. John Peace, chairman of UK bank Standard Chartered, put it well the other day: “the last decade was characterized by ‘made in China’.

Today's Times splashed on the spat between Britain and EU foreign policy "czar" Catherine Ashton over the embargo barring arms sales to China. The embargo was put in place after the Tianamen Square massacre and has remained in place, largely at US insistence, ever since. But is it the right policy? The policy has not prevented China from becoming a military power — its annual defense budget officially stands at $70 billion, although the Pentagon believes the real figure to be twice as high. China is developing carrier-killing missiles that even NATO does not have, and will soon sell weapons rather than seek to import them. There is, of course, a moral argument: the sanctions were put in place because of China's human rights violations.

As if to illustrate Pete’s post about the rise of China and India, Chinese Vice Premier Li Keqiang has just finished a visit to Spain during which agreements worth 5.7 billion euros were signed. The Chinese delegation is said to have committed itself to buying six billion euros of Spanish debt, which helped calm markets and provided some relief for Spain’s recession-hit economy. Around the time that the Soviet Union collapsed, the Chinese used to say only they could save communism. Twenty years on, it seems only they can save capitalism. The Spanish are certainly in no doubt about the importance of their newfound Chinese friends. The left-leaning Spanish newspaper El País wrote that that Li was received in Madrid as "a new Mr.

China is doing what it can do to scupper the forthcoming Nobel Peace Prize ceremony in Oslo. Their Foreign Ministry has now said that countries who decided to attend event would be showing disrespect to China: "We hope those countries that have received the invitation can tell right from wrong," the ministry's spokeswoman told journalists. Many of the world's human-rights abusers have been only too happy to oblige, including Pakistan, Iran and so on. They want to keep friendly with China and share Beijing's anti-democratic agenda. But, oddly enough, Serbia, a would-be EU member, is said to have chosen to boycott the Norwegian event. Keen to get Chinese financial assistance and help in its Kosovo policy, Belgrade's thinking is clear.

The latest cache of Wikileaks has done America no end of good. The Saudis urged the US to bomb Iran – a sign that the Arab world can make common cause with the States and Israel. It has also emerged that North Korea has sold the Iranians long range rockets – Moscow, Berlin and Istanbul are all within the Ayatollah’s range. But the most important revelation is that China has tired of North Korea’s lunatic machinations, recognising that the rogue state is an impediment to global and regional security. China is also convinced that the country will not survive Kim Jung-il’s death and favours a union of the two Koreas, provided the new state is pro-Chinese (could it be anything but?).

North Korea has again put itself at the centre of international relations. As the US pushed for a start to six-party talks, Pyongyang lifted the veil on a hitherto secret uranium-enrichment facility and launched an artillery barrage on a South Korean island,  injuring four soldiers, and damaging several buildings. The South Korean military scrambled fighter jets and returned fire and the situations remains tense. Conflict with nuclear-armed North Korea has intensified in recent years. North Korea launched nuclear and missile tests last year and sank a South Korean warship in March this year, killing 46 sailors. But the first ground-to-ground assault across the DMZ represents a new escalation in the decades-long, but usually non-violent conflict.

In his recent cover story for The Spectator, the Financial Times' Gideon Rachman talked about how, in the United States, China was beginning to take on the appearance of a new Cold War-style foe. Many Americans accuse China of stealing US jobs, of keeping the its currency undervalued, of exporting deflation by selling its products abroad at unfair prices, and of failing to meet its commitments to the World Trade Organisation. Two months ago, a poll from WSJ/CNBC showed that the majority of Tea Party activists oppose free trade – seeing China as the sole beneficiary of a free trade policy. But it is not only the Tea Party that is goading for a US-Chinese clash.

As the G20 summit begins in Seoul, the emphasis in much of the papers is on the economic hostility between America and China. The FT's Gideon Rachman wrote a cover piece on this matter for The Spectator two weeks ago, which we've reprinted here for the benefit of CoffeeHousers: In a couple of weeks’ time, David Cameron and George Osborne will arrive in China and witness at first hand an economic boom that is shaking the world. The British duo will doubtless receive a polite and outwardly respectful reception. But, as I discovered on a visit to Shanghai last week, Chinese diplomats and academics have noted the deep cuts in British spending — and they are drawing the obvious conclusions about the relative fortunes of the two nations.

For the first time since 1990, Burma went to the polls. Though the final results have not been released, most regard the election as a sham meant to cement military rule, with complex election rules put in place to exclude opposition candidates as well as interference from the junta in the campaign and a ban on foreign reporting.   Senior General Than Shwe and his camouflage-clad cohorts are likely to get away with the electoral theft. Nearly all of Burma’s neighbours -– Thailand, India and China included -– are willing to ignore the regime’s failings to obtain commercial benefits.  As The Telegraph has reported, Chinese investment in Burma stands at over £5 billion; China is particularly interested in Burmese oil and gas.

The world is undergoing a permanent shift of power from West to East, with China being the biggest beneficiary and middling states (like Britain) likely to be the biggest losers. The government may, in the words of William Hague, reject any kind of strategic shrinkage. But if China's economy continues to grow at even half the rate it has developed until now, Britain will end up looking small no matter what policy it pursues. What is the best way to deal with a country like China, which on current projections, will have a larger economy than the United States by 2050? How best to position Britain if the US and China abandon peaceful co-existence, and, as the FT's globe-trotter Gideon Rahman predicts in his new book Zero-Sum World, begin to fight?