Who said armies fight and win wars. In today’s world the final outcome– the fight to finish the lethal knock-out is decided in the banks vaults and corporate boardrooms. Accordingly gone are the days when gun-powder or bullets were required to cripple or kill a few hundred or thousand enemy soldiers, in today’s economic battlefield an entire country can be wiped out and its economy can be made to literally bleed endlessly without even firing a single bullet. In other words& though the rules of the game may have changed, the ultimate moral of the story is that a far more devastating and lasting blow can be dealt by shattering a country’s economic strength and fighting capability.

In a move which is nothing short of economic dadagiri or financial arm-twisting, trust the Chinese to come up with new and innovative ways to impose their will and dictate terms to bring the once mighty and powerful super-power America on its knees.

While it may still be too early to say if this would lead to a traditional World War III or not but in all possibility the outcome of this new and infectious economic war would have far reaching consequences on the whole world and once again prove it beyond doubt that might is always right military, economic or otherwise.

Practically speaking, though China with all its population or muscle power is still not in a position to stand up against the US military supremacy, the close to US $ 99.5bn (£70 bn) Chinese investments in the US stock markets more than twenty five times its $ 4 billion investments in the US equities over the last two years — are proving to more than just a equalizer and the thrust engine behind the decisive lethal punch in favor of the Chinese. Enough to make the militarily weaker though economically stronger pygmy China stare in the eyes and make funny faces at the financially stumbling giant USA.

Though China has been advocating greater say for the developing countries in the IMF, World Bank and other finance bodies for quite some time now, emboldened by its hold over the US economy, Beijing is now building world opinion in favor replacing the US dollar with the Chinese Yuan as the new currency for trade, investment, pricing commodities and corporate bookkeeping. If this move actually comes through, who knows Yuan might become the world’s main reserve currency and we might be soon witnessing a new reformist global exchange regime under the International Monetary Fund.

This is nothing short of blasphemy in a world where almost the entire financial system is dominated by the U.S. dollar as the Special Drawing Right (SDR), a quasi-currency created by the IMF in 1969 but a belligerent Beijing does not seem to be in a compromising mood.

To build up its case Governor of People’s Bank of China Gov. Zhou Xiaochuan has gone on record stating the dangers of relying on one nation’s currency for international payments. The Chinese viewpoint simply is that the new currency would let governments manage their economies more efficiently because its value would not be influenced by any one nation’s need to regulate its own finance and trade. Surprisingly even Russia is supporting the cause and is expected to support the move at the London summit.

According to international analysts Beijing is gunning for far reaching changes in the manner in which SDRs are currently fixed using four currencies dollar, euro, yen and British pound as the yardstick. As Zhou has suggested The basket of currencies forming the basis for SDR valuation should be expanded to include currencies of all major economies. The allocation of the SDR can be shifted from a purely calculation-based system to one backed by real assets, such as a reserve pool, to further boost market confidence in its value.

This may seem a simple solution but it is not as some 185 member nations hold shares in the International Monetary Fund as special drawing rights or SDRs. The Washington-based IMF in turn advises governments on economic policy and lends money to help with balance-of-payments problems. At the very least it requires endorsement of nations that have long been maintaining huge stockpiles of the U.S. currency. Even the 16 European nations using Euro have still not been able to reconcile all their fiscal differences even though their economies are similar.

Experts in international trade say that they could see this coming as Beijing has long since been feeling uneasy about relying on the dollar for bulk of its trade and foreign reserves.

Had it been some other country the US reaction might have been different but with an estimated $ 1 trillion holdings in the U.S.Treasury and other government debts, the US today is simply not in a position to respond to the Chinese whisper.

To say that the Chinese have acquired all this clout overnight would be an understatement as the Chinese government has been consistently topping its investments in the US stock market over the past several years. According to figures released by the US Treasury department, Beijing was holding $ 99.5bn of shares in June 2008. This is quite a big leap considering the $ 29bn Chinese investments in 2007 and $ 4bn in US equities, some two years back.

According to sources, the State Administration of Foreign Exchange (SAFE) a branch of the Chinese central bank headed by Hu Xiaolian– one of the few top ranking Chinese women government officials, has only recently acquired close to £9 bn shares in London based companies to emerge as one of the largest sovereign wealth funds in the world.

This apart the $ 200bn China Investment Corporation (CIC), the official Chinese sovereign wealth fund too has been heavily picking up loss-making stakes in Blackstone and Morgan Stanley.

Although both the agencies might have incurred heavy losses in the process due to the falling share prices in volatile markets due to uncertainties in the meltdown economy it is still a very small price to pay as compared to an all out traditional war of supremacy.

Maybe its time we should be saying —all is fair in love and business.