The ascent of Xi Jinping to what 'maybe' perpetual power culminated at the 19th National Congress of the Communist Party in late October. His winning mantra 'Xi Jinping Thought' or expanded upon, 'Socialism with Chinese Characteristics in a New Era' has now been embodied in the Chinese Constitution.
China ushered in the 'New Era' that is beyond the vision of Mao and Deng. While Mao Ze Dong forwarded a unified China under a one-party system with Marxist-Leninist leanings, Deng Xiaoping modernised communist China with economic and political strategies that embraced a capitalist direction, [thanks some say to the influence of LKY in Singapore] while complementing its ideology - Xi Jinping takes China dramatically to centre stage with a pivotal role in a new world order.
The recently concluded party congress showed for the 1st time in a very long while, no indication of immediate leadership succession. It is beginning to look that China will be led by Xi Jinping for the next five years and beyond. His name and ideals are now written into the constitution. A Xi Jinping leadership is potentially exciting and alarming – as this also solidifies China’s current position with India, border security, neighbourhood relations, and global ambitions.
For some time now, and under Xi’s stewardship - China’s foremost ambitions included altering the terms of trade with Saudi Arabia and other oil producing countries to favour the yuan, and to ditch the US Dollar. Part of China’s strategy is to squeeze the Saudis to accept the yuan should Saudi want to fill China’s growing appetite for crude oil. China’s current top 3 oil suppliers are Russia, Saudi and Angola. Only recently have Russian imports become greatly favoured after it acknowledged the Chinese currency – whereby China now pays for Russian oil in yuan. Russia, in turn, uses yuan to buy goods from China. Consequently, Russian oil exports to China rose from 5% to 15% - shifting oil purchases away from Saudi Arabia. Meanwhile, Saudi’s share of oil exports to China has dropped from over 25% in 2008 to less than 15% to date.
In addition, Japan and Iran have also agreed to trade with China by means of the yuan. And as of late 2015, Qatar has opened the first and only financial centre in the Middle East that can trade and clear oil, gas and everything else in yuan. This development has consequently tripled Qatar’s trade with China.
The apparent rise of the PetroYuan is of course on a direct collision course to the authority and control of the petrodollar in the international financial system. A systemic and institutionalised shift from the dollar to yuan will syphon demand for the US currency and dollar denominated debt will shrink. A yuan for oil arrangement will redefine global monetary dynamics, and any attempt to displace to US Dollar in favour of the yuan will have reverberating effects not just within the US financial system but on America’s position as a superpower too. The future of the greenback as a currency reserve will be persistently worrisome, leaving much of its fate to Saudi Arabia should it still stick to the US dollar, as it has done since 1974.
Challenging the US Dollar in the past was met with very dire violent and catastrophic consequences. The US government will never allow its currency to be toppled without a fight. When Saddam Hussein announced that he was considering trading oil in Euros, America came in with a global media campaign (yes thanks to CNN and BBC) that he was a threat to global peace with his Weapons of Mass Destruction (WMD). The same fate happened to Colonel Qadaffi, who wanted to empower Africa with a new African Union that would introduce the “Gold Dinar” as backing for African currencies so they could be free from the dollar denominated western monetary system. A few weeks after Qatar established a financial centre that trades yuan for oil, the US [with its Middle East allies] declared Qatar as a sponsor of terrorism and supplied Saudi Arabia with US$100 Billion worth of arms. Saudi and the Emirates then escalated tensions with Qatar with unprecedented diplomatic sanctions that are continuing without resolution.
China’s global ambition is not without economic cost and political risk, and it may even include the likelihood of an armed conflict. If Xi Jinping’s leadership survives American retaliation and aggression – specifically that the PetroYuan is seen a clear and present danger to US interests – it can do more by preparing China to defend itself on all fronts, including the appalling possibility of war.
We have read the writing on the wall and we understand now a 'seeming pattern' of US passive aggression in defence of its economic superpower status. Be wary of the signs. Apart from the already described dangerously fluid situation in the Middle East, it could be something that might be ignited in the West Philippine Sea or the Sea of Japan. Or it can be escalated through a nuclear struggle with North Korea – that would spill over into South Korea, Japan and beyond, or even, though less likely now, NATO escalation of the Ukrainian impasse.