By Thanong Khanthong
The visits to Thailand by US President Barack Obama and Chinese Premier Wen Jiabao marked a big test for Thailand.
Unfortunately for Thailand, PM Yingluck Shinawatra failed to walk the delicate balance required. The US and China are fighting fiercely for geopolitical gains. The US is now embarking on a grand policy of containing China. The confrontation stretches from the oil-rich Middle East to Southeast Asia and North Asia. As host to the two leaders, Yingluck appeared to be tilting Thailand towards Obama’s security and military policy at the expense of China’s.
Basic diplomacy dictates a need for Thailand to strike a balance
between the two superpowers in this critical period. But Yingluck flirted outlandishly, with her female touch, with Obama during their meeting at Government House. On the other hand, Yingluck’s welcome to Premier Wen lacked sincerity. His Majesty the King’s equal treatment of Obama and Wen helped restore balance to Thai diplomacy.
The US “empire” is in decline, financially and economically. Soon its fiscal fragility will take a toll on US military might, which is financed 100 per cent by borrowing. The debt-ridden US, kept afloat by the Federal Reserve’s money printing, is not sustainable. The US dollar is losing its charm. Oil transactions, in some cases, are now denominated in gold. Bilateral trade transactions in other parts of the world have also circumvented the use of the dollar. Central banks around the world are reducing their dollar reserves, although the dollar now accounts for 60 per cent of the world’s foreign reserves. But demand is down for the dollar going forward, making it even less attractive for individuals, companies, funds, institutions and central banks.
China, on the other hand, is on the rise. According to the OECD, by 2030 the size of the Chinese and Indian economies combined will dwarf that of the US, EU and Japan combined. The centre of growth is shifting to Asia. Europe is muddling through a huge debt crisis. The US has lost economic steam. Without government intervention in both Europe and the US, their economies and banks would have sunk to their knees.
China is getting prepared to internationalise its yuan. Once the cuurency is floated, it will become another international reserve currency of choice. Its exports are slowing down. Therefore, China’s policy will focus more on domestic demand. The ability to print the yuan for international transactions will add to its regional and global clout. China will be better off printing the yuan to buy foreign assets rather than sweating it out for earnings from exports.
Dollar printing from thin air has been the success formula of the US over the past few decades. But this financial game, abused at a galactic magnitude, is soon to be over.
The US will never tolerate the internationalisation of the yuan or the rivalry of another currency, hence a shift of its policy toward containing China. A strong yuan, or high demand for the yuan, will make the US dollar weak and less attractive. This will undermine the US’s ability to maintain its military empire, now literally financed at almost zero cost.
The US has been Thailand’s military ally, or military paymaster, since 1950. China has enjoyed close relations with Thailand since ancient times. King Taksin the Great borrowed money from a Chinese emperor in his quest to unite the Siamese kingdom after the fall of Ayutthaya. A chunk of the Thai population is of Chinese descent.
In the 19th century, King Chulalongkorn pursued a middle-path policy in dealing with the colonial powers – chiefly the British and French. The British colonised India, Burma and Malaya, while the French took over Indochina. By ceding territories and adopting a prudent policy, Siam was able to maintain its independence. It became a buffer state between the British and French.
Now history is about to repeat itself. The US wants the rest of Asia as its military camp against the Chinese. The Asian nations are being pitted against each other for US interests. China has yet to make any counter-attack, at least overtly. It is not only Thailand, but the whole of Asean, which faces this dilemma.
Prudence calls for Thailand and Asia to refrain from any zealous effort to please any superpower. This region has been relatively peaceful for quite some time. If the superpowers want to fight, let them fight. But peace and stability must be won at all cost for Thailand and other Asian nations without a need for confrontation or siding with any superpower. Yingluck does not seem to understand this international development. The danger is clear and present.