Alasdair Macleod: The Great Game Accelerates…

• The great game accelerates…! 
  by Alasdair Macleod – 09 December 2013
  In the jigsaw that is the Great Game of Asia pieces which heretofore made little sense on their own are beginning to slot in to give us an idea of the final picture. These disparate pieces are as varied as China’s claim of territorial rights over Japan’s Senkaku Islands, NATO’s backing off from Syria, America’s détente with Iran and the surprising move by Iran to improve relations with the other Gulf States. The Chinese yuan is now second only to the US dollar in trade finance, displacing the euro.  George Osborne, UK Chancellor at very short notice recently flew over to China, when there was already a British delegation there. And this week, again at little notice David Cameron flies to China for top level meetings with the new president and the premier, promoted by the British media as a trade mission.
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  There are also a few gold-coloured pieces in want of a slot in the puzzle. The Arabs are recasting some of their gold into one-kilo bars ahead of the introduction of a spot gold contract on the Dubai Gold and Commodity Exchange in a deliberate move away from LBMA standards. Chinese gold imports are far, far greater than Western analysts acknowledge. Despite accelerating physical demand from the Far East, Western capital markets insist on suppressing the gold price, forcing physical metal to rapidly disappear from Western vaults into the anonymity of Asia.
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  If we stand back to get an overall impression of how this jigsaw fits together, the guiding hand of China can be imagined throughout. While one can read too much into any big-picture action, things do seem to be working for China. The Senkaku dispute, with its provocative Air Defence Identification Zone looks like a kung-fu feint, designed to throw America off-balance and into defending her alliances with Japan and other long-standing allies. America has ended up wrong-footed over regional policy, hampered by a newly-appointed and inexperienced ambassador in Japan and by the imminent retirement of her ambassador in Beijing. All this detracts America from addressing China’s more important interests. Washington is now belatedly sending high-level envoys to the region, but this will be to no avail.
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  We must conclude that China’s future interest is no longer with America, which has been her largest trading partner. Her new ambitions are predominantly towards Asia through the Shanghai Cooperation Organisation (SCO), which is an economic bloc she jointly runs with Russia and has ambitions for the whole continent, excluding for the moment only South-East Asia and Japan. The spread of current member states, observers and associates covers more than half the world’s population. This she sees as her home turf with lots to develop. And the most important outstanding strategic objective for China is to do away with the US dollar for Asian cross-border trade, and also eventually with all other trade wherever possible.
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