Even a cursory glance at world events leaves no doubt that Asia remains high on the international agenda. Following the signing of the Regional Comprehensive Economic Partnership (RCEP) agreement, the high-level summit of the Quad, and a number of smaller events, China and Iran signed the cooperation agreement
dubbed the Comprehensive Strategic Partnership on March 27 in Tehran.
The document is a 25-year plan outlining the prospects for long-term cooperation in the political, strategic, economic, scientific, technological, cultural and humanitarian spheres with an emphasis on Iran’s effective participation in the One Belt, One Road initiative. The agreement provides to China a guarantee in the event of a serious escalation with the United States in the Persian Gulf. For Iran, this is primarily an attempt to ensure the stability of trade relations in the face of external pressure, to weaken the impact of anti-Iranian sanctions and to nullify its isolation in the international arena.
Prior to the Chinese Foreign Minister's visit to Tehran in March, the CEO of the National Iranian South Oil Company (NISOC) said that Iran is ready to rejoin global oil markets taking into account a 30 percent increase in the company’s oil production in the first half of the previous Iranian calendar year and a projected further increase of 10 percent. Refinitiv Oil Research estimates that about 3.75 million tons of oil, equivalent to 27 million barrels, entered China from Iran in March. This exceeds the previous record of 3.37 million tons supplied in January 2020 despite the US sanctions.
The agreement significantly undermines Washington's efforts to use an economic war strategy against Tehran. Rather than limiting regional ambitions, the sanctions allow China to consistently increase its presence in Iran and in the Middle East. Notably, the following day Biden expressed concern about the growing ties between Tehran and Beijing. Meanwhile the European Union has imposed sanctions on 11 Iranian security officials (including members of the Basij, a militia structure incorporated into the Islamic Revolutionary Guard Corps (IRGC) for the repression of protesters in November 2019.
Among the countries of the European continent, in its confrontation with China, the United States finds strong support from Great Britain. The recently presented foreign policy and defense strategy for the next 30 years Global Britain in a Competitive Age
names China as the main threat and assumes active opposition to the full range of threats from Russia (in the 111-page document, Russia is mentioned 14 times, China – 29). The document, in fact, is London's largest conceptual review of its foreign and security policy fundamentals since the end of the Cold War. The review also highlights the UK’s commitment to deepen ties with regional states such as Japan, South Korea, Indonesia, Vietnam, Malaysia and Singapore. However, oddly enough, the document does not mention the Quad, although this may be a diplomatic nuance. As part of the strategy, the UK has already concluded trade deals with Japan, Australia and started negotiations with the members of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, including the defence dimension.
Meanwhile, an unprecedented confrontation between the United States and China unfolds in the technology sphere. According to the Ministry of Science and Technology of the People’s Republic of China, the expenditure on fundamental studies for the 14th five-year plan (2021-2025) is expected to reach a record-high level
: 8 percent of total R&D spending. In 2019, China's R&D spending reached 133.6 billion yuan (ca US $20.4 billion) accounting for over 6 percent of total R&D expenditure. China will focus on cutting-edge scientific research while promoting the involvement of a larger number of scientists in applied research to address national development and security challenges.
In response, Washington has already invested US $1.9 trillion
in the economy and initiated the discussion of the Infinite Borders Act, according to which US $100 billion will be allocated over five years to finance research in 10 advanced areas: Artificial intelligence, machine learning, quantum computing, information systems, and advanced energy technology. The National Science Foundation, the federal agency responsible for supporting basic research, will establish a technology office to fund studies in these areas. There are plans to increase spending on research efforts at universities, establish specialised research centers and increase funding for cooperation with allies. The main challenge is to provide federal support for basic research that will lay the foundation for key future technologies, as Washington is determined to play the long game of technological rivalry with Beijing.
The China-US standoff is pushing Beijing to create an alternative stock market and international payment system. Chinese authorities are exploring the possibility of creating an exchange allowing for the listing of both China's companies trading in Hong Kong and the United States, as well as local divisions of Apple and Tesla. China's long-standing de-dollarisation efforts are paying off. The Financial Times
reported that the US share of bilateral trade fell from 90 percent in 2015 to 46 percent in Q1 2020, going for the first time ever below the 50 percent mark. Also, talks are underway among BRICS nations (Brazil, Russia, India, China, South Africa) on the use of their own currencies in intra-block transactions. China's six major commercial
banks are stepping up efforts to create digital wallets through their WeChat accounts to give a boost to the digital yuan testing. The People's Bank of China in cooperation with the financial authorities of Hong Kong conducted the first test of its cross-border application. Further expansion of the area of use in international transactions will allow China to discontinue transactions fixed by by Society for Worldwide Interbank Financial Telecommunications (SWIFT) with third countries, which will be an important step in the internationalisation of the Chinese currency, as well as a tool for working with countries sanctioned by the West.
The expansion of the Chinese digital currency will ultimately weaken US control over global payments and, consequently, jeopardise the sanctions policy as well as American hegemony. It may not become the dominant payment standard, but it will be able to create a parallel system to bypass the US regulator. The de-dollarisation of the global economy is an obvious trend, albeit not a fast one. And while the US dollar remains the preferred reserve currency of the major central banks worldwide, last year its share fell to its lowest level in 25 years. According to IMF
, in Q4 2020, its bargaining position in global foreign exchange reserves decreased to 59.02 percent (in Q3 - 60.46 percent).
Yet, nature does abhor a vacuum. The same data also show that in Q4 the total global foreign exchange reserves in yuan increased to US $267.52 billion dollars (in Q3, it was US $245.55 billion). Thus, the share of the yuan rose to 2.25 percent, which is the peak since China's currency gained reserve status on a par with the dollar, euro, pound and yen.
It’s a matter of fact that American business is not thrilled about the China-US geopolitical showdown. Given that China’s financial liberalisation will create huge added value and profits for foreign financial institutions, some of the largest Wall Street banks are preparing to expand access to China’s financial sector, which is already valued at US $47 trillion. For example, Goldman Sachs will increase
the number of employees in mainland China. JP Morgan Chase will expand its asset and capital management business, as well as its investment banking operations. In 2019, Morgan Stanley bought a 2 percent stake from China Fortune Securities. PayPal has become the first foreign company to provide online payment services in China, after acquiring a 70 percent stake in the Chinese GoPay. American Express is the early corporate adopter in China's market of plastic cards. Visa and Mastercard have applied for a network clearing license. S&P Global was the first foreign firm to receive a license for credit rating services in China's domestic bond market. Recently, the senior management of the American Boeing Company voiced concern about the risks of closing the Chinese market to the benefit of competitors, and called for separating trade from disputes over human rights, intellectual property, etc. In 2020, the shares of Boeing Co. fell by 37 percent.
In the context of a new geoeconomics architecture emerging in the Asia, it is the support of the Russian Federation that is crucial for the new regional order. Russia has considerably stepped-up diplomatic efforts in Asia against the background of the above-mentioned events. A quick reference to the tight working schedule and the geography of visits of Russian Foreign Minister Sergey Lavrov (India, Pakistan, Kazakhstan, Iran, China, South Korea) would confirm that view. It seems that the turn of Russia to the East is becoming more stable and irreversible, and the crisis in relations with the collective West only boosts this process and emphasises its geographical scope.
Thus, the New Great Game in Asia is underway and acquiring the shape of a high stakes game. The main question is who will eventually hit the coveted jackpot.
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