China in the west wind

FRFI 162 August / September 2001

Declaring the victory of the Chinese revolution in October 1949 Mao Zedong said China had stood up. Since then China has achieved the quickest and most extensive rise out of poverty of any nation in history. China stood up out of feudalism and colonialism and began the task of constructing socialism. But, despite their terrific achievements the Chinese people’s future is not secure: imperialism dreams of destroying China’s walls, of reconquering China from within and without. TREVOR RAYNE reports.

The US/NATO bombing of the Chinese embassy in Belgrade in May 1999; a US spy plane colliding with a Chinese fighter off the Chinese coast in April 2001; China joining the World Trade Organisation later this year and hosting the 2008 Olympics: China is a capitalist preoccupation. The incoming US Bush administration redefined China from ‘a strategic partner to a strategic competitor’. Whether weak or strong, capitalist or socialist, China is seen as a possible threat to US global dominance over the next 25 years. It is precisely China’s potential to challenge the balance of world forces but also provide a lifeline to a failing international capitalist system that makes the capitalist brain focus – sharply.

President Jiang Zemin predicted that, by the centenary of the revolution, China would have become a ‘prosperous, strong, democratic and culturally advanced socialist country’. China has 1.3 billion people, over one fifth of the world’s population. Its economy, if ranked by purchasing power, is second only to that of the USA, but is the world’s seventh largest when ranked by market prices. Since 1978 China’s economy has quadrupled in size and current growth is 8.1% per year, compared to typical growth rates of between 2-3% in the developed capitalist countries. This performance surpasses that achieved by Japan between 1953 and 1973. China’s share of world trade has also quadrupled since 1978 to 3.6%, accounting for 7.3% of US imports and 14% of Japan’s. On recent performance the Chinese economy will have outgrown that
of the USA by any measure within 25 years.

Two roads
When China began socialist construction, 80% of the population were peasants; today the rural population makes up 70% of the total. Socialism requires a high level of development of the productive forces if people’s needs are to be met. For as long as capitalism is more productive, its cheap commodities are a threat to the development of socialism. They form a material basis for a potential alliance between bourgeois elements in society and imperialism. When the Soviet Union launched its planned economy in 1928, its steel output was 3.3 times that of China in 1952, its oil output 29 times greater. China had four times as many people as the Soviet Union, but produced only twice as much grain. To build socialism under such conditions was an enormous problem. The main advantages China had were the solidarity of the Soviet Union and the political leadership of the Communist Party of China (CPC) supported by the majority of the peasants and workers.

Under Chairman Mao’s leadership the CPC’s path to development depended on collectivised agriculture. This was promoted during the 1957-59 Great Leap Forward and the 1966-76 Cultural Revolution. Collectivised farming would free labour for employment in industry and industry would develop at a pace determined by the modernisation of farming. Accumulation would take place through farming into light industry and through light industry into heavy industry. The mass of the population in the countryside would form the political leadership of the country through the Communist Party and struggle against bourgeois privilege. Politics and class struggle would be in command. Capitalist norms and methods would be restricted.

Opposing Mao’s line from within the CPC were Liu Shaoqi and Deng Xiaoping, whom Mao called ‘the number one and two capitalist roaders’. For Liu and Deng collectivisation was unthinkable before agriculture was mechanised. Decollectivisation would accelerate development while emphasis should be placed on building heavy industry and the use of material incentives. Capitalist methods would be used to catch up with capitalism.

Both the Maoist and the Liu/Deng lines faced the same problem: how can enough surplus be accumulated from agriculture to allow industrial investment, without driving down peasant consumption to the point that it threatens the worker-peasant alliance that sustains the socialist state? The same problem had confronted the Soviet Union in 1928 and similar divisions to those in the CPC occurred between the Bolsheviks. Mao’s programme for development was an extension of his theory of protracted war based on the peasantry. The Liu/Deng model was closer to the Soviet emphasis on the leading role of the cities and the industrial working class.

Mao’s guerrilla strategy and emphasis on the revolutionary role of the peasantry brought him into conflict with Soviet-influenced CPC members before the revolution’s triumph. However, Mao’s leadership of the CPC was established by the success of the Long March of 1934-35 against Kuomintang attempts to exterminate the CPC. In 1945 Stalin and the Soviet Union encouraged Mao and the CPC to ally with the Kuomintang as bourgeois nationalists against imperialism. Mao rejected this advice, eventually driving the Kuomintang from the Chinese mainland to Taiwan. Differences with the Soviet Union resurfaced with severe problems encountered by the 1957-59 Great Leap Forward. This coincided with the Soviet leader Kruschev’s 1956 denunciation of Stalin, which the CPC criticised. Ideological disputes between Soviet communists and the CPC were inter-linked with differences within the CPC about the best path of development. Soviet and Chinese relations deteriorated into an outright split in 1963-64 and border disputes between the two countries followed in 1969. Mao launched the Great Proletarian Cultural Revolution in 1966 against the bourgeoisie in the CPC and state bureaucracy, and to relaunch the agricultural collectivisation programme.

Mao died in 1976 and at the end of 1978 Deng introduced the Four Modernisations (science and technology, agriculture, industry and national defence), which were intended to make China a leading industrial nation by 2000. Agriculture was decollectivised and replaced by household responsibility and private plots. Capitalist management techniques, hierarchies and authority were introduced into industry along with productivity bonus schemes, profit and loss accounting and the removal of ‘surplus labour’ to boost efficiency. Critically, China was to be opened up to foreign investment as a means of rapidly modernising industry. Productivity not politics was to be in command: ‘Black cat, white cat, who cares what colour cat, as long as it catches the mice’, said Deng. ‘Let some people get rich first’, he later added. The USA had begun to seek closer relations with China and diplomatic ties between the two countries were established in 1976. China had lost the prospect of Soviet investment but the USA beckoned. In 1979 China launched a border war with Vietnam, almost as if confirming its good intentions towards the world’s capitalists.

The pursuit of development through capitalist methods inevitably posed dangers to the socialist state. A bourgeois class would be likely to re-emerge both inside and outside the CPC. This bourgeoisie would see its interests advanced by multinational capital. On the other hand, the potential loss of support among rural and industrial workers for the CPC as their economic and political status deteriorated would remove the main defence of the Chinese state. The Tiananmen Square protests culminating in the deaths of 300-700 civilians in June 1989 showed that China’s opening to the West had also opened the door to pro-capitalist ideas among its youth. Significantly, the protestors had mobilised little support from the rural and industrial workers. The Chinese government responded to the Tiananmen events with an even greater push for rapid development and encouragement of multinational corporations to invest in China. Consumerism and commercial culture spread. For as long as the living standards of the mass of the Chinese people continued to improve the leaders of the CPC assumed they would have its support.

After Tiananmen the USA implemented a boycott policy against China. The other major capitalist powers did not follow suite and took advantage of the US boycott to advance their own interests in China. The first western government to send a delegation to Beijing after Tiananmen was Britain, which signed an agreement to build a new airport in Hong Kong under the terms of the hand back of the colony to China in 1997.

For socialists China poses important questions: is it possible to build socialism using capitalist methods? If they are used, when do they present a threat to the socialist character of the state? To what extent can the market and overseas investment be limited and put at the service of socialism or must they invariably clash with socialism and the interests of the working class? What is the role of the communist party in maintaining the dictatorship of the proletariat and peasantry? In China these questions are to be answered concretely in people’s experiences.

‘The last gold mine’
For imperialism China offers abundant cheap, skilled and disciplined labour and the biggest untapped market in the world. With a severe global over-production of capital, China looks like the last chance of making sufficient profits to keep drowning companies afloat. While Marconi, Nortel, Ericsson, Philips, Siemens and Nokia announce profit warnings and job cuts this summer, the boss of Intel’s China operations says China ‘is the last gold mine. Everyone is rushing into it.’ China’s mobile phone market is growing at 65% a year and will soon exceed that of the USA. Telecommunications, manufacturers of automobiles, food, clothing, detergents etc, they are all scrambling to get into China.

The Beijing skyline is littered with logos of Coca-Cola, McDonald’s and General Electric, Olympic corporate sponsors. Visitors to Shanghai, with five times the population of Singapore, come away breathless at the staggering scale of construction underway. Sechuan, China’s most populous province, has 110 million people – about as many as Japan; other provinces have populations exceeding those of Britain, France and Mexico. Foreign Direct Investment (FDI) in China rose from $3 billion in 1987, to $10 billion in 1992, and to over $40 billion in 1999. India receives less than $2 billion FDI a year, central and eastern Europe and Russia together about $25 billion. Accumulated FDI stock in China will grow from $100 billion in 1994 to $400 billion in 2002, far exceeding that of Brazil, Argentina and Mexico combined. The biggest investors in China are Hong Kong (part of China since 1997), Japan and the USA. Britain is Europe’s biggest investor with $16 billion spread over 2,500 projects.

The Anglo-Dutch Unilever, already the leading consumer goods firm in India, returned to Shanghai in 1986 after being evicted in 1953. Its annual report states, ‘China, this awakening giant dragon, is viewed by many multinational corporations as the last frontier for significant growth.’ Philips employs more workers in China than in the Netherlands. Kodak has invested $1.2 billion making China the second biggest market after the USA for consumer film and paper. Even as the US government wrangled with the Chinese authorities for the return of its spy plane, General Motors was negotiating a $1.5 billion deal to buy a 34% stake in a company with a quarter of China’s mini-van market.

In 1999 approximately 20 million Chinese or 10% of urban workers were employed in foreign-funded enterprises. Foreign invested business accounts for over a fifth of industrial output, about half of overseas trade and 16% of China’s total industrial and commercial taxes. Its productivity is significantly above that of entirely Chinese state owned assets.

Multinational corporations’ investments are normally made in partnership with Chinese companies that themselves have state-owned parent companies. The government usually retains a majority of the ownership or the largest share. Consequently, for example, sitting together on the board of China Netcom Corporation are Rupert Murdoch and President Jiang Zemin’s son. Communist Party officials form part of these enterprises’ administrations. In so far as they are paid in return for the enterprises’ productivity and earnings, they are in privileged positions. Millions of young Chinese, now occupying management positions in industry and the state, have been educated in the USA and Europe. This is an extension of that privilege.

In 1997 the 15th National Congress of the CPC approved the privatisation of state-owned assets. Small and medium-sized state-owned enterprises could be turned into companies with mixed public and private sector ownership. Much as in the former Soviet Union, party officials started transferring state assets into their own private property. In the face of protests from workers the CPC leadership grew wary of this process and slowed it down. Nevertheless, state investments in state-owned enterprises were redefined as loans, thereby encumbering these organisations with both taxes and interest payments. Consequently, much of the state sector is now heavily in debt. This summer the British Ernst and Young accountants held a ‘roadshow’ in London and New York where $2 billion of ‘non-performing’ state-owned assets were offered for sale. This is part of a debt for equity trade that has been used to transfer state-owned resources into the
market economy.

The numbers employed in entirely privately-owned enterprises (outside of agriculture) have grown from 1.8 million in 1991 to over 30 million today – over 16% of the urban workforce.

China’s stock market is valued at $650 billion, second in Asia only to Japan. With 1,100 companies and 60 million shareholders it is a far bigger market than are those of South Korea, Brazil, Mexico and India. As yet only one third of the shares are tradeable, the majority being controlled by the government.

Transition from socialism to capitalism?
The private sector’s share of industrial output grew from 2% in 1985 to 24% in 1995 to 33% today. If agricultural companies are included in the private sector then the World Bank estimates this sector at 51% of the economy. State-owned enterprises have had their role in social provision reduced. From 1998 work units were no longer allowed to allocate subsidised housing to employees and allowances for education and medical care were reduced. Workers were encouraged to buy their own homes or rent at commercial rates. Bank lending switched from the state sector to private firms and to a booming property market.

This expansion of the market in China is having profound social consequences that suggest critical events for the state are imminent. There is growing inequality between the rural and urban populations and between the coastal regions (recipients of 88% of FDI) and the interior. Agriculture constituted over 30% of the economy in 1980 but just 18% in 1999. Agricultural employment was 68% of total employment in 1980 but is 50% today. The ratio of urban to rural per capita incomes was 2:1 in 1980 and 3:1 in 1997. China is said to have a surplus population of 200 million living in the countryside. Some 100-160 million rural workers migrate between villages and towns for subsistence wages in part-time work. There are an estimated 18 million urban unemployed, about 9% of the urban workforce. Any further reduction in the state sector industries and agricultural employment must increase unemployment unless there is a compensatory growth in foreign investment and private business.

China’s income inequality is now similar to that of the USA and is greater than that of India. The richest 20% of urban households receive 42% of total urban income while the poorest 20% receive 6.5%. Shanghai’s average income is twenty times that of the average rural income; Hong Kong’s is over one hundred times. In this context President Jiang defined the CPC as standing for the ‘Three Representatives’: ‘advanced productive forces, advanced Chinese culture and the fundamental interests of the majority’. An increasing percentage of the urban and rural proletariat may well feel they are excluded from this ‘majority’. They see a growing part of the population which benefit, like the pre-revolutionary comprador bourgeoisie did, from a relation of service to international capital.

The breakneck pace of development has also been costly in environmental terms: while the population has grown 30% in 20 years, grain production has doubled and meat output risen five-fold. Soil erosion and depletion of natural resources have been severe. Water levels are falling and deserts are spreading across northern China to the extent that towns may become uninhabitable.

Just as the Tiananmen Square protests produced divisions within the leadership of the CPC so the current crossroads for the future have produced an opposition both in the working class and inside the CPC.

In February, in Yangjiazhangzi in northeastern China, 20,000 miners defied armed police for several days in protest at being made redundant. A recent CPC-sponsored report, ‘Research into Contradictions among the People under new Conditions’, warns of growing unrest and protests. It particularly warns of dissent following ethnic divisions and focusing on agriculture.

What is described as a ‘new left’ has emerged in the CPC which opposes the pace of opening to multinational corporations and their effects on China. There are 64.5 million CPC members, 5% of the population. Women account for 17.4% of CPC membership. Party members make up 38.8% of government officials and managerial and technical personnel in state-owned enterprises and institutions. Of the seven members of the ruling CPC politburo Standing Committee, six are trained engineers, one studied architecture; all are men. A similar pattern is repeated through the ministries, State Council and cabinet. The rival demands of international finance and the rural and urban poor will be reflected within the CPC, where regardless of the terminology of ruling in the ‘fundamental interests of the majority’, class struggle continues.

Six months after the US bombed China’s embassy in Belgrade, the USA and China signed an agreement on China’s entry into the World Trade Organisation (WTO); this will probably be confirmed in November. WTO membership will mean even more opening up of China to investments, financial services, imports of food and other goods and reduced subsidies to farmers. It is likely to further exacerbate the divisions and tensions between the rural areas and the urban and the coastal regions and the interior.

‘Let China sleep’ – Napoleon

As China grows, so it is making itself felt where once the imperialists held domain. China became a net importer of oil in 1993. It is currently 25% dependent on oil imports but this is expected to rise 50% by 2010. Petro China, 90% owned by the state, is the world’s fourth biggest oil company if measured by output and reserves. Chinese oil firms have outbid US, British, European and Russian rivals for stakes in fields from Venezuela to Kazakhstan, from Peru to Sudan. Once UN sanctions are dropped China has a $1.2 billion deal to develop Iraqi oil fields. Half of China’s oil comes from the Middle East, across the Indian Ocean and through the Malacca Strait between Malaysia, Singapore and Indonesia. China has staked claims that seas around the north of Indonesia are Chinese territory. Prior to World War Two, Japan attempted to secure regional supplies of resources and strategic routes. The USA and Britain blockaded Japan – the response was Pearl Harbor.

US strategy is to encircle and contain China while binding it down like Gulliver, but with a thousand financial threads. Russia and China understand that the US definition of Iraq and North Korea as ‘rogue states’ to be neutered by a National Missile Defence (NMD) programme is really targeted at them. Together in July they denounced the NMD, but the US government is not unduly worried. The US military budget is about $350 billion a year; it spends in five days the equivalent of Russia’s annual defence budget. Over the next three years Russia is scheduled to devote a quarter, rising to a third of its budget on debt repayments. The US calculates that Russia is incapable of responding to a US attempt to achieve a nuclear weapons monopoly with an arms build up of its own and that Russia’s financial predicament will make it suitably pliable to US blandishments. China increased its defence spending by nearly a fifth in March to $20 billion. The People’s Liberation Army with 2.5 million soldiers is the biggest in the world, but as yet its equipment cannot rival that of the US forces.

However, China’s geographical and demographic size, its revolutionary history and traditions and its own requirements make it more prepared to stand up to the USA and imperialism. This defiance among the Chinese people quickly asserted itself after the Belgrade embassy bombing and the collision with the US spy plane.

In April President Bush delivered to Taiwan ‘the most impressive arms package’ in a decade and re-pledged US forces to defend the island. US capitalists know that if they are seen to waver over Taiwan then China’s prestige and influence in Asia will quickly grow at their own expense. The US state wants Japanese armed forces to play a supporting role similar to those of Britain for their US counter-parts, as in the Gulf and Balkans. The new Japanese Prime Minister Koizumi has said he will revise the Constitution to allow Japan to deploy a conventional army. Tension between Japan and China has recently increased as the Japanese government imposed tariffs on Chinese agricultural exports and called on China to revalue its currency. China has criticised Japanese school history textbooks for their representation of events when Japan occupied part of China before and during World War Two. Meanwhile, with the collapse of the Soviet Union, the US government is fostering closer ties with India as a nuclear and strategic bulwark against China. India’s government named China as a threat before its 1998 nuclear tests. It now says it supports the US NMD.

Imperialism would like to see China disintegrate, as did the Soviet Union. China’s uneven development gives secessionists in Tibet and in China’s west, grounds to grow on and the impacts of the WTO on farming could make these more fertile. The Chinese government’s response will probably be to re-direct foreign investment away from the coast to the interior – where wages are even lower. However, a combination of commercialism and foreign investment with Communist Party dominance of state power and the use of repression is not sufficient to prevent the destructive forces of capitalism being unleashed. In the Soviet Union the bourgeoisie had entered and taken command of the party. Membership of the party had become a means of securing privilege. These people used their positions to work with imperialism to destroy the state and prostrate the people to crooks and robbers. Whether the Chinese working class and peasantry can still wield the CPC and Chinese state we will soon see, for imperialism is predatory and must attack China’s workers if profits are to be secured; they will not see the CPC or the state as neutral arbiters.

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‘Hobson gives the following economic appraisal of the prospect of the partitioning of China: “The greater part of Western Europe might then assume the appearance and character already exhibited by tracts of country in the South of England, in the Riviera, and in the tourist-ridden or residential parts of Italy and Switzerland, little clusters of wealthy aristocrats drawing dividends and pensions from the Far East, with a somewhat larger group of professional retainers and tradesmen and a larger body of personal servants and workers in the transport trade and in the final stages of production of the more perishable goods; all the main arterial industries would have disappeared, the staple foods and manufactures flowing in
as tribute from Asia and Africa…’’’ Lenin, Imperialism, the highest stage
of capitalism.


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