Contradictions Unbound

 New Cold War on China, Monthly Review, Vol. 73, No. 3

This is a very useful, contradictory compilation of articles on China, part of an annual review.  It will give pause to both China cheerleaders and China haters, as China is not an issue for rote thinkers.  Of most interest are the introduction on the new Cold War against China, written by the editor, J.B. Foster; discussions of Chinese political economy and the Belt & Road initiative; an analysis of China’s international economic role by Minqi Li; another on tech competition between the U.S. and China by J. Zhao and lastly, one on the contradictions between Chinese environmentalism and neo-liberal growth. 

I will highlight the significant points.

NEW COLD WAR

Foster defines China as “neither capitalist nor socialist,” but a ‘post-revolutionary’ state pursuing a ‘sovereign project.’  MR’s history regarding China has vacillated as it deals with the varying periods of “China’s complex reality.”  Here Foster quotes Xi Jinping profusely.  Foster describes the recent bi-partisan hostile moves by the U.S. and its allies against China – Trump’s trade war, which has been continued by Biden; an encirclement military strategy; sanctions, especially on technology companies like Huawei; pressure on China’s exposed points as a method to split up the country – Hong Kong, Taiwan, the Uighurs and Tibet; and the final goal of bringing down the CCP. 

He calls this the New Cold War, which has certainly been going on since Obama.  Most of the writers discount the possibility of actual widespread military conflict, but a new cold war does not necessarily involve that.  The point of this war is to keep China as a ‘low value’ labor provider to imperial capital.  Key here is that the U.S. and its allies do not see the U.N. and national sovereignty as relevant, though China does.  They advocate ‘a rules-based order’ run by the U.S. instead.

BELT AND ROAD

A group of professors from France and Beijing argue that the Chinese policy is of ‘co-development’ for countries in the periphery and semi-periphery.  In their definition this includes some European countries like Greece, Italy and Portugal… so the ‘peripheries’ are getting wider and wider.  Co-development involves financing and investment, and building infrastructure for the New Silk Road’s land and sea routes, with financing far less odious than the IMF. They describe it as a ‘win-win’ program. However some countries have taken on too much debt, like Sri Lanka; some projects have defaulted; while these routes provide raw materials for China and export/import lanes.  China has constructed a free trade agreement in Asia, including Japan, South Korea, Australia and New Zealand, but not dominated in dollars.  The authors describe China’s ‘market socialism’ as similar to the USSR’s NEP during the Civil War.  The NEP ended in 1928 during the primacy of the Stalin faction.  You could make a claim that this 'NEP' has been going on since 1978 and the victory of the Deng faction in the CCP - 44 years.  It is a permanent NEP.

FINANCIALIZATION

Three Chinese professors from Hong Kong and Beijing discuss a sort of ‘definancialization’ in China.  At present China has allowed over 100 foreign banking and insurance entities to set up shop in China, including Blackrock, Allianz and Credit Agricole.  But foreign capital is not yet dominant in China, as the top 4 Chinese state-owned banks are among the top 10 worldwide.  State bank profits are plowed back into ‘the real sector’ according to them – infrastructure, jobs, social utilities and regional development.  They describe these banks as social enterprises.  

Foreign direct investment in China – FDI – was $212.5B in 2020.  China’s currency has been anchored to the U.S. dollar since the 1990s. China does have capital controls and the authors advocate these be extended.  Internally land has become financialized, used as collateral or ‘leased.’  They describe large financial bubbles in China – in real estate, debt and investment – which the central government has been unable to quell.

Their main focus is on the growth of the private Ant Group, whose IPO was shut-down in November 2020 by the central government.  Ant is the biggest loan, credit card and microfinance group in China, partly because they privatized a public money fund.  According to stats, 86.6% of Chinese young people use credit cards and only 42% pay off their debt each month.  Many of these are cards from Ant or other lenders. 

State financial institutions have invested heavily in Ant, which also runs the Alibaba© e-Commerce platform – China’s Amazon©.  Alibaba is actually headquartered in the Cayman Islands.  Ant’s shareholders include many Chinese public entities, along with foreign firms. On the other hand, the central government, like regulators in the EU and even in the U.S., are trying to strengthen ‘anti-monopoly’ measures and so have come after Ant, fining Alibaba and stopping the IPO.  Given state support for Ant, this involves a real ‘contradiction.’  The authors conclude that financial containment ended when China followed neo-liberal globalism in the 1990s and this will continue if financialization is allowed to continue or expand.

I Phone, U Phone, We All Work for Their Phone

IMPERIALISM or SEMI-PERIPHERY?   

Minqi Li looks at the issue of whether China is an imperialist in the classical sense, and if China can still be said to be in the periphery.  Li says no to both.  He contends that China exploits other countries in the extraction of raw materials and labor time, but China still exports more labor hours and material to the core imperialist countries than the reverse.  He concludes that China has moved from a peripheral to a semi-peripheral status.  Given the vast size of the Chinese economy, 2nd in the world, this is quite an odd ‘semi-periphery!’

China uses very large amounts of raw materials – in 2016-2017 over 50% of the world’s cement, nickel, coal, copper, steel and high quantities of pork, rice and cotton – and is the world’s largest importer of oil, natural gas and coal. Li focuses on Lenin’s description of imperialism needing super profits, not merely the export of capital.  In the latter, while China has $7.32T in overseas investments, they are mostly in reserves (for instance, U.S. govt. bonds), loans, trade credits, portfolios.  26% is in FDI – which is a marker of financial power over labor. The U.S. can buy Chinese goods by issuing dollars, while China has to export labor time.  Li calls this the U.S.’s “seigniorage privilege.”

Li looks at the concept of unequal exchange – specifically labor time or “labor terms of trade.”  His conclusion is that “in the neo-liberal era, Chinese capitalism has functioned as a crucial pillar for the global capitalist economy by transferring surplus value produced by tens of millions of workers to the imperialist countries.”  Li’s figures show that China has now established exploitative relations with 45% of the world population.  1 unit of Chinese labor can be exchanged for 2 units of labor from sub-Saharan Africa or 4 units of labor from South Asia.  1 unit of Chinese labor is roughly equal to low/middle-income countries in Latin America, Eastern Europe, Central Asia and the Middle East. This contrasts with its labor relation with the U.S. or other core countries.

As part of this, Li points out that Xi Jinping’s family has real estate in Hong Kong worth £35M, while his brother had 2 shell companies in the British Virgin Islands.  This off-shoring behavior is similar to billionaires the world over and funds the international financial system.  The claim that China reduced poverty is true - 'absolute poverty.'  However, China still has plenty of relative poverty.  The terms are not equal.

Li finishes by looking at the environmental cost of bringing China even with the U.S. in every production and commodity metric, starting with cars – a world-crushing impossibility. Another article in the collection highlights various useful environmental mitigation plans in China – the Green Wall for one – as well as failures.  Those authors also conclude that complete ‘modernization’ would be impossible and fatal to the world environment.

TECHNOLOGY WAR

Junfo Zhao discusses the political economy of the key integrated circuit industry (IC), which is dominated by the U.S. Integrated circuits are the heart of the computer industry.  He puts it in the context of “intercapitalist and interstate competition.” China has run a trade deficit in ICs – as imports in 2020 were $350.9B while exports were $117.1B.  The U.S. uses export controls, intellectual property rules and opposition to technology transfers to blunt progress by China.  However other capitalists still want access to China’s large market and cheap, quality labor, so there is no solid consensus, though the politicians have reached one on high-tech.  China leads in low-value production and packaging of ICs, but the U.S. leads in engineering design – a high value-added labor input. The U.S. wants China to stay that way, at a disadvantage in the international labor exchange.  Yet as David Harvey noted in "The Anti-Capitalist Chronicles" (reviewed below) China is catching up in technology across the board.

Zhao concludes that comparisons with U.S. and Chinese GDP and PPP indicate a U.S.-China 'hegemony contest' is flawed concept, as China is still behind.  Zhao indicates that Chinese profit rates have declined since 2010, from 20% to 12.4%.  Zhao also uses a version of Li’s labor time analysis to evaluate unequal relations.  Many Chinese workers work 6 days a week, 12 hours a day, in order to produce goods – a situation described by Zhao in which the U.S. and “China’s ruling elites” in the “coastal provincial governments, export manufacturers and their lobbyists” want to continue.  

The MR articles are all over the map, as China’s hybrid political and economic system obscures a clear view of the class character of the Chinese state.  I don’t think it is fully capitalist nor socialist, but closest to a ‘deformed workers’ state,’ led by a bureaucratic Communist Party which still partially represents the interests of Chinese workers but has also made a pact with capital. In a way it is a version of a bureaucratic Social Democracy.

P.S. - The bankruptcy of Evergrande in China has revealed that the Chinese property sector went from being a practical housing project to a property casino.  Michael Roberts reports that 4 other major private property firms are near bankruptcy, but he thinks the government will be able to forestall a general meltdown due to its control of the financial sector.

Prior blog reviews on this subject, use blog search box, upper left, to investigate our 14 year archive:  “The Musings of the Professors,” “China 2020,” “The Cultural Apparatus of Monopoly Capital,” “The Fall of Bo Xilai,” (all 4 Monthly Review articles); “Two Sea Changes in World Political Economy,” “Is the East Still Red?” “China – the Bubble That Never Pops,” “From Commune to Capitalism,” “The End of the Revolution,” “Jasic Factory Struggle,” “China’s New Red Guards,” “The Rise of China…” (Li); “Hard Like Water,” “Striking to Survive,” “China on Strike,” “Maoism and the Chinese Revolution.”

And I bought it at May Day Books!

Red Frog

August 24, 2021