Until recently China was seen as the main economic lifeline for world capitalism.
Massive foreign investment, ruthlessly exploiting a stream of cheap labour – the minimum wage in Guangdong, for instance, is £12.50 a week (25p an hour) – pours out an endless supply of cheap consumer goods gobbled up in the main by US consumers.
Western consumers in turn have been able to buy these Chinese goods because they are flush with cheap loans, which are in turn propped up by an unstable housing bubble that threatens to collapse at any moment. This has not prevented Bill Gates – head of Microsoft and the richest capitalist on the globe – praising China’s leaders, enthusing: "It’s a brand new form of capitalism and as a consumer it’s the best thing that ever happened."
Gates is therefore lending his company’s support to the Beijing regime to suppress a growing mass revolt in China. Dangerous words and phrases like ’freedom’ and ’democracy’ are to be removed from the internet in China, with a software package that prevents bloggers from using these and other politically sensitive words on their websites.
The word ’demonstration’ is taboo, but ’anarchy’ and ’revolution’ are acceptable. Bloggers can denounce Tony Blair but not Chinese leaders and ’Tiananmen’ is completely out.
China has undoubtedly been vital in extending the growth cycle of capitalism in the past period – without it, a massive financial and economic implosion would already have taken place in the US. The Economist commented: "The entry into the world economy of China, India and the former Soviet Union has, in effect, doubled the global labour force (China accounts for more than half of this increase)." [30 July 2005.]
Capitalism, with the same capital stock, has many more workers to exploit worldwide. The result is a huge boost in big business’ profitability and a drop in the share that the working class takes from the wealth they produce relatively. Profits in the US, for instance, as a proportion of gross domestic product (GDP) are the highest they have been for 75 years.
Are the US capitalists grateful to China for this? Not at all! It has suddenly dawned on a section of the propertied classes of the US that, rather than being a benign and subordinate ’partner’, China is emerging as a ’strategic competitor’.
Martin Wolf commented in the Financial Times: "The spectre of a rising China has returned to haunt Washington. This is the principal lesson I have drawn from a week just spent in the US." It is this that explains the latest outburst of ’Sinophobia’ in the US Congress, the threat of increased trade sanctions, unless China comes to heel.
Clashes with US
The clash between China on one side and Europe and the US on the other, firstly over textiles, then over shoes, is minor compared to what could happen in the future. China already produces 40% of the world’s shoes – while it has 20% of the world’s feet – but has the capacity to supply the whole world.
This is mirrored in other industries. China today has some of the features of Germany in the pre-World War Two period with the colossal productive potential to supply the whole world in some industries. German goods were shut out of markets controlled by Britain and France, unemployment resulted and the conditions prepared for Hitler to come to power, which led to the Second World War.
Some sections of the US ruling class are making similar threats to China. Given the nuclear balance of terror, a ’hot war’, a shooting war, may be unlikely but a savage trade war is possible, especially if world capitalism goes into a tailspin of economic decline in the next period.
It is not just in low-skilled, labour intensive manufacturing jobs that China is screaming ahead. It is the world’s biggest producer and exporter of consumer electronics and it is only a matter of time before it becomes a major player in vehicle exports.
Shipbuilding is now dominated by China and aircraft manufacturing will follow. According to one report, the US Navy is now dependent on Asia to build its new ships and, eventually, the economics of trade will force the US Air Force to procure planes made in Asia and assembled in China.
Overall, China is still economically way behind the US, which had a GDP of $11.75 trillion in 2004 compared to $1.6 trillion for China, roughly the same size as Britain. The US economy is 7.4 times the size of China’s, and per capita GDP in China is only $1,411 while that of the US is $42,000, almost 30 times as large.
But it is rapidly catching up. One business magazine warned that the US was becoming a 97lb weakling compared to China.
Jealously guarding its position as the dominant power in the world – now the only hyperpower – the US has always sought to constrain rivals and potential rivals by using its economic muscle and its overwhelming military might.
When confronted with a rising Japan in the 1980s, a campaign was launched in the US similar to that now unleashed against China, resulting in the Plaza Accord of 1985, which led to a revaluation of the Japanese currency (the yen) and a devaluation of the dollar.
The US Congress has made similar demands against China: "Revalue, increase the value of your currency, the Yuan, by 10% to 25% or face trade sanctions from the US." For largely diplomatic, not economic, reasons, China responded with a meagre 2% increase in the Yuan.
However, even if a 25% increase had been introduced – which China will not do – this would not significantly help the US economically. China is an assembly point for imports, mostly from the rest of Asia, with a very small ’added value’, because of the low wages paid to Chinese workers.
Trade war?
While this conflict is unresolved, the shadow of a trade war looms. Some commentators, like Henry C.K. Liu in the Asian Times, go further and warn that "trade wars can lead to shooting wars". China is not the Japan of the 21st century. Japan in the 1980s relied on the US military and particularly its nuclear umbrella against China, and was therefore subject to the pressure and blackmail of the US ruling class.
The fear of the US, and the capitalists of the ’first world’ as a whole, is that China may in time ’out-compete’ the advanced nations for hi-tech jobs while holding on to the stranglehold it now seems to have in labour-intensive industries. As the OECD commented recently: "In the five-year period to 2003, the number of students joining higher education courses has risen by three and a half times, with a strong emphasis on technical subjects."
The numbers of patents and engineers produced by China has also significantly grown. At the same time, an increasingly capitalist China – most wealth is now produced in the private sector but the majority of the urban labour force is still in state industries – and the urgency for greater energy resources in particular to maintain its spectacular growth rate has brought it into collision on a world scale with other imperialist powers, particularly the US.
In a new worldwide version of the ’Great Game’ – the clash for control of central Asia’s resources in the nineteenth century – the US and China have increasingly come up against and buffeted one another. Up to now, the US has held sway worldwide, due to its economic dominance, buttressed by a colossal war machine, accounting for 47% of total world arms spending. But Iraq has dramatically shown the limits of this: "A country that cannot control Iraq can hardly remake the globe, on its own." [Financial Times.]
But no privileged group disappears from the scene of history without a struggle. Donald Rumsfeld, US defense secretary, has stated: "Since no nation threatens China, one must wonder: why this growing (arms) investment? Why these continuing large and expanding arms purchases?"
China could ask the same question of the US. In order to maintain its position the US keeps six nuclear battle fleets permanently at sea, supported by an unparalleled network of bases. As Will Hutton in The Observer has commented, this is not because of "irrational chauvinism or the needs of the military-industrial complex, but because of the pressure they place on upstart countries like China."
In turn, the Chinese elite has responded in kind. For instance, in the continuing clash over Taiwan, a major-general in the People’s Liberation Army baldly stated that if China was attacked "by Washington during a confrontation over Taiwan… I think we would have to respond with nuclear weapons".
He added: "We Chinese will prepare ourselves for the destruction of all of the cities east of Xian. Of course, the Americans would have to be prepared that hundreds… of cities would be destroyed by the Chinese." This bellicose nuclear arms rattling shows the contempt of the so-called ’great powers’ for the ordinary working class and peasant peoples of China and the people of the US when their interests are at stake.
’Great power’ambitions
China could emerge within a decade as the major world exporter, overtaking the US. It is emerging as the main pole of attraction for Asian capitalism and is even drawing in Australia, whose iron ore, beef and dairy products are now destined for China, not Britain.
But how will these great power ambitions of the Chinese elite further the interests either of the Chinese people or those of the world? In its wake, 400 million Chinese have been dragged out of extreme poverty by the Chinese economic fireworks of the last 20 years.
However, China today still has more poor in absolute figures than exist in the whole of Africa. There are 150 to 200 million unemployed or underemployed in the rural areas. This is not the ’model’ which workers and peasants should follow in the neo-colonial world, as is argued by some like the Communist Party of India theoreticians.
The present regime in China is increasingly capitalist with a peculiar amalgam of a growing capitalist economy (particularly in the export sector) together with the remnants of the Maoist-Stalinist state machine, which is also seeking to move in the direction of capitalism.
However the ex-Stalinist elite, in opening up to the market, has been haunted above all by a repetition of a social collapse along the lines of the former USSR which accompanied the introduction of wild capitalism.
And Chinese capitalism is not at all ’modern’ in terms of the wages and conditions of those who produce the wealth, the working class. They suffer unprecedented injuries and slaughter in the killing fields of Chinese industry, reminiscent of what was described by Marx in the hellholes of nineteenth century British capitalism.
Fear of a mass revolt of the working class was reflected by Henry C.K. Liu: "Given the absence of a sound social security system in the country’s move towards a socialist market economy [?], the rich-poor gap amongst the Chinese urbanites may become threatening to social stability. Popular resentment towards the rich is approaching seismic dimensions, unlike in the US where the rich enjoy the enviable status of adored celebrities." [Asian Times.]
This class polarisation is ultimately far more decisive for the future of the world than confrontation between greedy imperialist powers – which now includes China – for a new struggle and re-division of the world’s resources and markets.
There has been a huge increase in China of ’mass incidents’, including strikes, which have risen from about 10,000 a year about a decade ago to 58,000 in 2003 and 74,000 in 2004, involving 3.6 million people.
Notwithstanding all the Chinese elite efforts – with the help of the likes of Bill Gates – the conditions are being prepared for a mass uprising to throw off the shackles of an autocratic regime, the shameful conditions and low wages in the factories, and for democracy.
The present political outlook of the population and particularly the working class is very mixed. The regime’s main support is that layer of the urban middle class who have prospered from the introduction of the market. There are also illusions in Western ’democracy’.
On the other side, the consciousness of the masses partially reflects the past, of collective property. This has led to big opposition to the rush towards the market; for instance, the sale of common land to greedy developers comes up sharply against the opposition of the masses. The conditions in the factories also lead to the idea of independent workers’ organisations and trade unions.
Powerful working class
A widespread confrontation between the regime and the masses has not taken place in the major urban areas until now. When it does, because there are no means of ventilating popular discontent through democratic channels, this could be the spark for a revolution.
The Chinese working class is now a potentially powerful force. In all probability, a mass movement will not be along the lines of the October Revolution in Russia in 1917, because of the limited experience and outlook of the masses. On the other hand, it could be similar to the 1905 revolution, a ’dress rehearsal’, or even of the 1896 strikes in St Petersburg, which were preparations for the later revolutions in Russia.
The present regime in China has nothing in common with genuine socialism or ’communism’, as some of its misguided defenders argue. Democratic socialism would only be possible through a revolution to overthrow the present elite.
The regime that would come from this would establish workers’ and poor farmers’ democracy. It would also renationalise privatised industries under workers’ control and management, introduce democratic workers’ control and management in the state sector and unify industry through a democratic socialist plan.
National and linguistic rights would be granted to all national minorities, including the right of self-determination to the Taiwanese, the Uighur and Tibetan peoples, and extend the hand of friendship to the working people of Asia and the world.
The China that will emerge in the next decade will not be the one that capitalist commentators and experts expect. Rather than a new ’great power’ arising, it could be a workers and peasants’ China which can emerge and really transform the world in a socialist direction.
This article is due to appear in the next issue of the Socialist, weekly newspaper of the Socialist Party in England and Wales
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