Opinion | A new world dawns, with the East and West as equal partners
Cary Huang says the establishment of new institutions powered by developing nations, led by China, is shaking up the current global order
The start of the Age of Discovery in the early 15th century also ushered in the rise of the superpower. Before the United States became the world's dominant economic power a century ago, the baton of pre-eminence was held variously by major European nations like Britain, France and Germany, and, to a much lesser extent, Spain, Portugal and the Netherlands.
But a string of events in the past year not only marked a further phase in the waning of America's global economic hegemony since the end of the second world war, but also the end of the long history of the Western-dominated global order.
These include the recent successful launch of the China-initiated Asian Infrastructure Investment Bank; the International Monetary Fund's review this year of whether to include the renminbi as a global reserve currency alongside the dollar, yen, euro and sterling; and the launch of the New Development Bank by the world's five largest emerging economies - the BRICS grouping of China, India, Russia, Brazil and South Africa. Both the infrastructure and development banks are seen as rivals to the Bretton Woods institutions, the World Bank and IMF, and regional institutions such as the Asian Development Bank.
An IMF decision to include the renminbi in its special drawing rights basket would be a milestone for the Chinese currency's internationalisation. The currency would become more widely used in trade and investment, and renminbi-denominated assets held by central banks and other financial institutions would become a major store of value.
That, in turn, should lower the transaction costs, currency exchange risks and borrowing costs for China and its companies. With China's growing economic clout, the renminbi will no doubt challenge the dollar's dominance in the global monetary system. The global currency market will usher in an era of competition between the "redback" and the greenback.
These developments reflect the significant tilting of gravity in the global economy from the developed economies towards the developing ones. Last year, the five BRICS nations had a combined nominal gross domestic product of some US$16 trillion, about 20 per cent of the global output, compared with about US$3 trillion and just over 8 per cent of the global output a decade ago.