Transfer of Power
Pfäffikon SZ, Switzerland – Next to all the noteworthy and emotional commotion surrounding puny Greece there are ample areas of concern that are quite possibly more pertinent. 57 countries are involved as candidate cofounders of the Asian Infrastructure Investment Bank (AIIB), which is supposed to be the counterbalance to the World Bank. China, India and Russia will become major shareholders in the bank but also Switzerland and the Netherlands are involved. The AIIB is slowly but surely becoming a thorn in the side of the US.
Sanctions
I have pointed out before that sanctions against Russia have adverse side effects. The Russians have opted – justifiably so – for an accelerated alignment with China. Many have labelled it a marriage of convenience but there is ample evidence indicating a deeper relationship. The founding of the AIIB on 24 October 2015 is concrete evidence supporting this case. Russia is rapidly aligning its trade activities with rising star China for which the EU could pay a price at a later stage.
It is worth noting that the US, but Japan as well, are vehemently opposed to the creation of the AIIB. In contrast to the World Bank, China has a firm hold on the reins at the AIIB. The US government has publicly denounced the AIIB as not being transparent enough and not being able to comply with the stringent government norms. I wonder how the US was able to come to that assessment without being involved.
Eagerness
The founding of the AIIB is not a politically neutral effort. China’s eagerness to put forward its surplus foreign assets is worth noting. The AIIB is the ideal tool to exert more influence under the auspices of ‘development’. This, in turn, contributes to the realization of China’s ultimate dream of being included as a currency in the IMF’s basket of SDR (Special Drawing Rights).
China is a rising power bloc in contrast with the US. Oddly enough there seems to be only one American who realizes what’s going on, namely controversial presidential candidate Donald Trump. Trump, in my view and from an American perspective, hits the nail on the head regarding many issues and isn’t afraid to rock the boat. Many have for some time left the American dream behind them. For several reasons it is desirable that the US and China, as power blocs, keep each other in balance.
Restructuring
The founding of the AIIB underlines the shifting of power. The fact that small countries such as the Netherlands and Switzerland supply the AIIB with capital despite pressure from the US, can be seen in a positive light. The Washington controlled IMF is no longer representative for its economical relations and that is cause for worry for the US. Restructuring international power blocs for the future while avoiding disaster is an irreversible and necessary process.
It remains for me to wish you a good weekend.
Jan Dwarshuis is a senior asset manager at Thirteen Asset Management AG, where he is responsible for the Thirteen Diversified Fund. Dwarshuis writes his columns in a personal capacity and is not paid for them. Nor is he paying for his columns to be placed. Professionally, he holds positions in major European, American and Russian stock funds. The information in his columns is not intended as professional investment advice or a recommendation to make certain investments. At the time of writing, he has no position in the above shares and has no intention of doing so in the next 72 hours.
