Introduction to China Commission at CWI Summer School 2017
There are a number of questions we need to discuss. How serious is the economic crisis in China? Is Xi Jinping really the strongest leader since Mao, as many claim? Where is the dictatorship’s foreign policy leading, such as its signature ‘Belt and Road’ economic plan? Is this set to gain even more strength or face setbacks?
State repression is getting worse and worse. Is our perspective that this would continue or will this change in the next period? Finally, what about the development of the workers’ movement and the tasks of a Marxist organisation in China?
Upturn in strikes
In 2016, there were 2,663 strikes in China, according to the Hong Kong-based NGO China Labour Bulletin, which compiles these figures based on social media reports. For the first time, the combined numbers of strikes in transport, services and the retail sector is more than in manufacturing industry.
Service sector jobs are even lower paid and with lower job security than manufacturing jobs, usually without contracts, so it is growth based on the informal sector.
Strikes in the transport and service sectors can get more attention compared to action by manufacturing workers because they more directly affect other workers’ daily life. For example, 5,000 bus drivers in Guangdong (southern province) went on strike in June and got a 40 percent wage increase.
Also, companies in the service sector more and more use smartphones as a platform. These workers have no contracts or their contracts only exist on a phone app and can be changed at any time. But this technology is also increasingly a platform used to link-up strikes.
Extreme wealth gap
In manufacturing industry, unpaid wages and social insurance are the main cause of workers’ protests. In 2015, the total amount of unpaid wages was 27.2 billion yuan (US$4bn). Migrants are the majority of the labour force in construction and manufacturing.
China has the most dollar billionaires in the world - 594. In China’s fake parliament, the National People’s Congress (NPC), there are 100 billionaires. It’s the world’s richest parliament.
At the same time, workers’ average monthly salary is US$475. Around 280 million migrant workers have left their home town and go to other cities in China to work. However, as factories have closed down due to the economic crisis, unemployment rates have increased and real wages stagnated. Especially the coastal cities are very expensive places to live, so many migrants can no longer afford to work there.
Migrant numbers are falling and this trend can make workers’ struggles more confident as workers can get greater support in their own home town.
The Institute of International Finance, a global banking body, puts China’s debt in 2017 at 304 percent of GDP. This is an extremely high level and the increase in the past decade, since the global capitalist crisis began, has been very rapid.
In 2008, China launched a huge stimulus package to inject cheap credit into the economy. Many local governments and state-owned companies borrowed huge amounts of cheap loans to expand investment. But this led to the accumulation of the debt that exists today.
The Chinese regime can order the state-owned banks to implement its policies. This is a bit like Japan’s economic crisis in the 1990s. (A slump was avoided by using the banks to prop up failing companies). This reality has allowed China to accumulate a much higher level of debt without a financial collapse. But this doesn’t mean that this situation can continue forever.
Xi Jinping wants to launch economic reforms to channel more private capital into the state-owned companies. His economic agenda is to allow more market competition, hoping to let some indebted small and medium-sized state-owned companies default. This is to reduce overcapacity and increase the efficiency of capital (reducing wasteful investments) and to clear the debt which is unsustainable. But, if implemented, this programme means a further slowdown of economic growth. This explains why Xi has in practice rolled back on economic reform, by injecting even more credit into the economy.
It also means that if the Chinese government uses the same stimulus measures to deal with the next economic crisis, the effect will be much less. So the government finds it harder and harder to soften the effects of crises.
Housing is absolutely unaffordable. In 1st tier cities like Beijing and Shanghai, for instance, the price for one square metre of property at average housing prices costs one year of average income. In cities like New York and Tokyo it would cost buyers a month of income.
Speculators are increasingly investing in the housing sector because there are no other profitable sectors and the stock market is seen as too risky. This means that if China’s housing bubble bursts it will have a bigger effect on the banking system even than in Japan in the 1990s.
With China’s low household consumption rate (because of low wages, poor welfare, high savings and high housing prices), huge debts and deflation, in a long-term perspective the future for China is likely to follow the Japanese model of low growth or stagnation. If this happens in China it will cause a bigger political crisis because of the much bigger wealth gap and poorer social protection system compared to Japan.
Xi’s foreign policy
The Chinese regime’s foreign policy is linked to the internal situation and potential for political and economic crises. Xi needs to present himself as a ‘strongman’ using nationalism to channel popular discontent away from his own policies.
But the Chinese economy has also outgrown its national market, a problem that becomes more acute given the international situation, with globalisation in reverse and the rise of protectionism. These processes are reflected in many contradictory ways in relations between the Xi and Trump governments, geopolitics, and China’s push for the ‘Belt and Road’ economic plan.
China at this moment has gained the upper hand over the US in the South China Sea conflict. Privately, US strategists accept they cannot reverse China’s militarisation of the ‘islands’ it has built to secure its dominance in the disputed waters – that can only be achieved by war. More and more countries have in the past few years turned from the US bloc to China for trade and investment, including Malaysia, Philippines and Australia. This process has accelerated under Trump.
Trump faces a big crisis and pressure in the US and from Wall Street not to engage in a big confrontation with China. But this may only be temporary, because of the many tensions that now exist between the two powers.
The Belt and Road initiative (also known as ‘OBOR’ – One Belt One Road) is Xi’s plan to link 65 countries, which make-up 55 percent of global GDP, 70 percent of the world’s population and 75 percent of global energy supplies, into a China-led economic sphere.
OBOR is at least eight times bigger in financial terms than the post-1945 ‘Marshall Plan’ of US imperialism. This is “imperialism with Chinese characteristics” – it copies the state capitalist investment model from China to build infrastructure in the OBOR countries, also locking these governments into debt-dependency on China. China will issue loans to these countries through its new Asian Infrastructure and Investment Bank (AIIB) and other financial agencies it has set up, and enable it to export the debt burden from China to other countries.
OBOR embodies Chinese economic and political domination. It will mean new winners and losers among the countries, social classes and national minorities covered by OBOR. OBOR countries include many that face military and security crises, terrorism and civil wars – countries like Pakistan, Afghanistan, Burma, and the Central Asian states. That’s why the Chinese regime is considering deploying or employing military forces in these countries to protect its assets.
There are already rumblings of mass resistance over land grabs, pollution, corruption and national oppression in several of these countries, which can also be reflected in heightened anti-China and anti-Chinese nationalist moods. This points to political upheavals in the future between pro- and anti-China wings of local ruling elites. Taken together with the economic risks, this can lead to ‘imperial overstretch’ which, instead of saving the Chinese regime, can trigger economic and political crises in China.
The Chinese regime needs to launch OBOR because of crippling levels of overcapacity at home – too much steel, cement, glass, etc. China has the world’s biggest construction and engineering companies and they need overseas contracts.
Sri Lanka is the first country to join OBOR. The island faces a debt crisis. China built an unwanted international airport – just five flights take off every week – and a sea port which is also a hardly-used white elephant. This port and the surrounding land area is now fully controlled by China for the next 99 years.
In Laos, China is building a high-speed railway at a cost of US$6bn in a country with GDP of US$12bn. Laos is just a transit link on China’s plan to build a high-speed railway from western China to Singapore. 100,000 Chinese workers are building the railway, all the materials are from China, and the technology is owned by China.
One sign of a political crackdown in China is the death of Liu Xiaobo, a right-wing liberal who was arrested in 2009 for writing a limited reform programme, trying to persuade the Chinese dictatorship to undertake political reforms. He was in prison from then on and died of cancer this July. The regime refused to let him go abroad in his last days for medical treatment. Xi’s regime doesn’t mind a negative public image but wants to be seen as hardline and immovable.
More people are now being charged with the crime of ‘subversion’ of the regime. This includes NGO staff and human rights lawyers who have been arrested in recent crackdowns.
The liberals in China do not stand for the overthrow of the authoritarian regime. They do not put radical proposals like free elections, but only very modest prescriptions like fewer media and internet restrictions.
The power struggle
The regime’s 19th (“Communist Party”) Congress later this year will see a five-yearly change of leadership. Behind the scenes a sharp power struggle is being fought among the ruling elite.
Xi has centralised power towards himself. Xi is due to stay in power for five more years but also wants to expand his power, promote his supporters and weaken all other factions.
The factional struggle within the regime is not at all about political ideas or programme. It is about protecting the interests of different factions, with their power based on their regions and sectors of the economy. Although Xi has the upper hand in this internal power struggle, it doesn’t mean his position is fully consolidated or is as powerful as many commentators say. There are signs that Xi is facing different levels of resistance from rival factions. A recent crackdown on the finance sector is partly because some private capitalists have gained too much power and become too independent of the regime and need to be brought back under control.
Xi has used the anti-corruption campaign for five years as a tool in the power struggle to remove some opponents and warn rival factions not to oppose him. The anti-corruption campaign was never really about corruption because all the factions are corrupt.
New features of repression
Facing an increase in workers’ strikes and mass protests, state repression is the most serious since the 1989 Tiananmen Square movement. For example, on media controls, all newspapers (around 2,000) must now follow the orders of the central government propaganda departments on reporting political news. The wording must be exactly the same. The regime has even cracked down on cultural and entertainment news, to block reporting of gossip about celebrities.
State repression is also extending overseas. More and more Southeast Asian countries are supporting China’s attacks on democratic rights in Hong Kong and Taiwan. After the kidnapping of booksellers in Hong Kong in 2016, this year a Taiwanese labour activist was arrested in China and charged with subversion. The regime wants to show its power to increase its control over Hong Kong and Taiwan and block ideas of independence.
In Hong Kong, a new government has been appointed by Beijing, through the fake election process. The new leader (Chief Executive) in Hong Kong, Carrie Lam Cheng Yuet-ngor is continuing the former’s attacks on democratic rights. For example, four legislators, including the radical left legislator ‘Long Hair’ are now disqualified by the court. This is a parliamentary coup - the most serious attack on democratic rights since China took over in 1997. This means the bourgeois semi-democratic institutions in Hong Kong are now almost completely controlled by the Chinese dictatorship.
Xi Jinping is forced to try to centralise power within the Chinese state because of its weakening grip over regional governments and their increasing unwillingness to follow Beijing’s orders on economic policy. The liberal bourgeois layer in China is extremely weak as the vast majority of the bourgeois class is connected to the regime. The liberals’ programme is extremely limited and far from democratic.
Unless facing mass revolutionary upheavals, Xi’s regime is unlikely to make significant democratic concessions, not even like the pseudo-parliamentary democracy introduced in Burma.
But the main feature today is the Chinese regime’s fear that any small reforms will trigger mass revolutionary waves and hasten its overthrow. They fear the territorial break-up of China under these conditions and that is not completely unrealistic.
The ideas of permanent revolution are more applicable in China today in the struggle to transform what is a unique form of state capitalist dictatorship because the bourgeois class is extremely dependent on the current state; the remaining bourgeois democratic tasks (democratic elections, resolution of national question) must be carried out by working class people. The working class will not stop at bourgeois democratic change but carry out a socialist revolution.