Observing the Shift in China's Economic Dominance and Hong Kong's Strategic Role

Observing the Shift in China's Economic Dominance

A lecture at Renmin University on China-U.S. relations by Martin Jacques, author of When China Rules the World, was recently published by Guancha. Jacques, one of the few Western scholars with direct experience and understanding of the Chinese psyche and lifestyle, provides valuable insights. A key part of the lecture focuses on research by Danny Quah, the dean of the respected Lee Kuan Yew Institute in Singapore. Quah's findings highlight a significant shift in the global economic landscape: “Between 1980 and 2020, Europe’s share of global GDP fell from 26% to 15%. In other words, it fell by 11 percentage points, a very large drop. Although the decline in the United States was smaller, it fell from 21% in the 1980s to less than 16% in 2020. From another perspective, Asia and East Asia are constantly rising. The share in 1980 was 11.5%, and it has risen to 25% in 2020. Among this 25%, China has made the largest contribution, accounting for 18% of the world.”

The Shift in Economic Power

This data clearly illustrates the significant shift in the world’s economic center. In 1980, the economic center was predominantly Atlanticist. However, Quah predicts that the economic center will reach the Sino-Indian border only by 2050. If we consider China along with the 10 members of ASEAN, excluding South Asia, it's reasonable to argue that the economic center will already be in the East by 2030, and will be Sino-Indian before 2040. Jacques suggests that by then, the ‘Asian Age’ will replace the ‘Western Age’, marking the end of a period that has been in effect since 1750. Having lived and worked in Asia for most of the past three decades, the current century could be termed as “The Eurasian Century”. This shift is causing considerable anxiety among Western elites. The era of exploiting the wealth of the Global South is coming to an end.

Hong Kong's Role in China's Economic Strategy

China has already planned its development strategy up to 2035 and in many aspects up to 2049. The current period is particularly challenging. The People’s Bank of China is taking serious steps to adjust the economy. Recently, the PBoC announced cuts to the outstanding mortgage rate and the reserve requirement ratio, which is the amount of cash commercial banks need to hold as reserves. The PBoC also cut the benchmark policy rate and boosted capital markets. On the domestic front, the Politburo, led by President Xi Jinping, pledged to protect China’s private enterprises, stabilize the property sector, and adopt necessary fiscal expenditures. On the external front, China is making steady progress. The top priority is the gradual internationalization of the yuan. Here, Hong Kong plays a crucial role, as detailed in a report by Renmin University. China is rapidly reducing its reliance on the U.S. dollar. The U.S. dollar’s share of bilateral trade has already fallen from 80% to less than 50%. China is now trading with the world mostly in yuan – and the petroyuan is not even in full force. Since the start of the SMO by Russia in Ukraine in February 2022, the yuan is the de facto Asian reserve currency for Russia. Concurrently, Beijing is accelerating currency swaps all across the spectrum and designating more clearing banks around the world. Hong Kong, with its state-of-the-art financial institutions, is an inevitable connection for global investors. All sorts of deals are open in China via Hong Kong, with the added advantage of avoiding sanctions. From now on, Hong Kong will be even more critical for all sorts of yuan-denominated transactions. Hong Kong is already the world’s top market for the offshore yuan – processing nearly 80% of all settlements. Three months ago, according to the Hong Kong Monetary Authority (HKMA), the Special Administrative Region had $151.7 billion in offshore deposits.

The Future of Global Economic Order

Chinese politico-economic elites are comfortable with the fact that for the first time in history, the rise of a great power is not being conditioned by imperialism, war, slavery, looting, but under the concept of “peaceful development.” This is reflected in several concepts such as win-win; mutual prosperity; equality; “community of shared future for mankind”; and the Belt and Road Initiative (BRI), a geoeconomic project involving interlocking connectivity corridors. While China invests in infrastructure development around the world, the West imposes sanctions, engages in bombing, supports wars, finances and weaponizes color revolutions. A daring proposition is emerging that Russia and China – the actual BRICS leaders – should announce at the summit in Kazan next month that they are backing a yuan/ruble/gold alliance: as in if the world needs to choose between Western hegemony or a BRICS alternative, better start with sound (real) money.

Bottom Line

Like a river undisturbed while traversing a rocky wilderness, China silently flows away on its path to peaceful primacy. The shift in global economic power from the West to the East marks a significant turning point in world history. It's a development that will have far-reaching implications for all nations. What are your thoughts on this shift? Do you agree with the analysis? Share this article with your friends and let us know your thoughts. Don't forget to sign up for the Daily Briefing, which is every day at 6pm.