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The Rupp Report

The Rupp Report: 2014 - The Dawn Of A New Age?

Jürg Rupp, Executive Editor

For some hundreds of years, the 14th year of a century has generated a fundamental change for the rest of the century. Some of these events still have an influence on the development of global history.
 
In 1714, George I, Duke of Brunswick-Lüneburg and Elector of Hanover in what is today Germany, was crowned King of Great Britain and Ireland. With HRM Queen Elizabeth II, the family is still in charge.
 
The year 1814 was a memorable year for Europe: The battle of Paris in that year was one of the last battles of the Napoleonic Wars and provoked finally the first abdication of Napoleon and the start of a virtually new setup for Europe, which is still valid today.
 
The year 1914 saw the assassination of the heir apparent of the Austro-Hungarian Empire, which led to World War I. The outcomes of this tragedy and World War II are still palpable today.
 
2014
And this year could be the dawn of a new age: fortunately, not through a military war as in the previous two centuries, but through other rules of the game, and probably another type of war: a commercial war. As Europe is still debating how to create a unified European Union and the future of its common currency, another country is gaining power in every sense of the word: the Middle Kingdom, or the People’s Republic of China.
 

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Some years ago, China started a race to the top of almost everything: power, influence and market strength. As the Rupp Report has mentioned before, there is currently no crisis at all in China in view of a 0.5-percent lower growth rate, as the government has a very long-term strategy. This strategy sets China on a long trail — again — but this time, not with a fight, but with brain, people and perseverance. The achievements in the last 25 years are just staggering. Nobody can deny that these days, no political or economic decision can made without incorporating China. The reason for this absolute will to power is probably concealed deep in the past of the country:
 
Dark Past
Over the last few centuries, empires and kingdoms in Asia — India, Japan and China, for example — lost their power. The British Empire crushed the Indian subcontinent by sheer power and a lot of money given to the maharajas. China, on the other hand, was squeezed among international interests from different countries. The Boxer Rebellion is just one example, when the British Empire flooded China with opium and nearly the whole country was addicted to the drug. The rest is history. No one should forget that only more than a hundred years ago, a conference among European countries took place to consider one single question: how to divide China among them. It was the same procedure that had already happened in Africa. And after World War I, the winning Allies gave the ex-German territories in China to the Japanese, without asking the Chinese people. The outcome of this horrifying time is also well-known. All if this history still lingers in the heads of the Chinese population, and the country is still thinking back to its history, which explains quite a lot of the behavior of modern Chinese politicians.
 
Bright Present
China started to calm down politically after the Cultural Revolution and the death of Mao Zedong. It was Deng Xiao Ping who opened the country a little for the first time in the late 1970s. In parallel with this opening, the education of Chinese people soared. Many Western people would be amazed at how much the Chinese know about European history. How much do Westerners know about China, with the exception of Mao? Probably not that much. It would be good and valuable for the Western Hemisphere if they knew more about China and its past in order to understand its journey to the top. And this journey seems to be unstoppable. Some years ago, the global networks were talking about things that happened mostly in the Western world. Today, China is in the news every day, whatever the reason may be — political, social and economic issues.
 
In the endeavor to replace the U.S. dollar as the leading and most important currency, China plays the major role. The internationalization and free convertibility of the renminbi is growing. The agreement of the BRIC states — Brazil, Russia, India and China — in 2012 regarding trade in local currencies underlines these activities.
 
For a few weeks now, it has been possible to execute clearings of renminbi in London. Experts estimate that already 17 percent of China’s external trade is executed in renminbi, which was unthinkable a few years ago. To further break the dominance of the U.S. dollar as the leading currency in the oil business, China is planning to establish future contracts in renminbi.
 
Strong Overall Power
Decades ago, it was said: “If the US gets a cold, the rest of the world has pneumonia.” Today, it is different: if China starts to chase any kind of resource or raw material, whether it be power, steel or cotton, the prices and the global system are shaken. Everybody remembers the cotton turmoil a few years ago, when raw cotton prices tripled due to the purchasing efforts of the Chinese government. At ITMA 2011 in Barcelona, Spain, one big cotton merchant said to the Rupp Report: “if I keep my cotton contracts, I lose US$20 million. If I break the contracts I can make US$80 million-plus.” Not an easy decision to take.
 
Almost every day, there is some nagging with China somewhere: and it is more than astonishing to see that the Western world still thinks that China is in the weaker position. No way! Europe, for example, is losing very much time and is still busy fighting internal struggles, while China as a unified nation thinks in very long terms. The ultimate goal is to become again a global power. The list of examples is very long.
 
Some people say China is still dependent on the United States because China is holding billions and billions in U.S. treasury bonds. The main reason is definitely not monetary policy, but the policy to have political power over the global financial system. And they got it. The current problems with the negotiations about the WTO are another example that China is holding all the aces of the game.
 
In his famous book “The Art of War,” written around 500 BCE, the ancient Chinese writer Sun Zi (Sun Tzu), a military general, strategist and philosopher, stated that one should only start a war from a position of strength and never from an inferior position. Through history, China has always been one nation with a strong will to hegemony and not a conglomerate of equal nations like Europe.
 
The global textile industry was the first sector to be tackled by China. Step by step, the Chinese have taken over all sectors of the industry, and China is the undisputed number-one player in all sectors of the entire textile chain. Most of the textile production chain has moved in the last 20 years to China. And — still having the ancient European behavior in their minds — the Chinese make no concession on their way to the top, either on the political or financial floor.
 
No Concession
ITMA Asia gives another example of Chinese behavior: After two successful shows in Singapore in 2001 and 2005, alternating with ITMA Europe, the Chinese took over ITMA Asia in a deal with CEMATEX, the European Textile Machinery Manufacturers Association and owner of the ITMA label. The goal and understanding of the European Textile Machinery people was to stop some other local exhibitions and to have one single important textile machinery show in Asia. The result: there is an ITMA Asia + CITME every two years, the Chinese are making the rules, and none of the local shows have been cancelled. Off the record, many people complain about these facts. Will something change?
 
The Challenge
The year 2014 will be very interesting: China is continuing with its power play politically and the outcome is fragile. It seems the Western world should start to get ready for the dawn of a new age, probably a Chinese age. And don’t forget: there will be another ITMA Asia + CITME in June 2014.
 
On Jan. 31, 2014, the year of the horse starts in the Chinese zodiac. The horse is said to be restless, always in search of new adventures. The year 2014 promises to be full of excitement and adventure. New projects should be executed now. However, the year of the horse can also hectic and be full of stress. Happy New Year!
 
January 7, 2014