Nancy Pelosi’s much-hyped visit to Taiwan on 2 August, as speaker of the US House of Representatives, was to threaten President Xi Jinping against the policy of reuniting China. This step was but a stage in an already carefully orchestrated process. The aim is to remove the 1972 policy of Nixon-Kissinger, which avoided formal recognition of Taiwan as independent, yet treated the island as if it were. This policy change had already been proposed in the Taiwan Policy Bill 2022 put before the Senate for consideration in June. On 16 September President Biden again provocatively announced that Taiwan would be defended by US forces if attacked. ALVARO MICHAELS reports.
Pelosi’s visit
On becoming president in 2013, Xi made two promises: firstly, peacefully to reunite Taiwan with the mainland by 2049 and, secondly, to raise the per capita income of the Chinese people to $20,000 (currently $10,500). The proposed peaceful Hong Kong-type reunification is strongly rejected by the ruling elite in Taiwan, supported by US imperialism.
Since 1949 Taiwan has been an armed base to keep Chinese nationalist anti-communism alive. In 1979, under President Richard Nixon, the United States recognised the government of the People’s Republic of China in Beijing, but continued to provide Taiwan’s dictatorship with defensive weapons via its Taiwan Relations Act of that year. This policy continued after 2000, when the local ruling class adopted an electoral system.
Pelosi’s visit also sent a message to all the regional ruling classes: US imperialism has no intention of relaxing its influence in the region.1 On 30 August, US ally Japan unveiled plans to develop and mass-produce cruise and ballistic missiles, violating the Japanese constitution. A further critical aim of the visit was to ensure that innovative production technology that the US lacks was transferred to the US.
The economic contest
Since 2013 China has become the world’s biggest trading nation. Its economy has grown to approach that of the US in size. Its influence in Asia, Africa and Latin America has deepened. China has become the world’s second-largest financial power. From 1997 its sovereign wealth funds exported excess capital. Net capital exports in 2022 alone were $1.994 trillion, channelled through Hong Kong and Caribbean tax havens. In contrast, both Britain and the US are net capital importers.
US and European imperialism are alarmed at their comparatively weakening control and influence over global markets and investments – thus President Obama’s shift to the Pacific, and President Trump’s tariff campaign against China. For US imperialism, the only solution is to intensify its exploitation of the world’s working class and natural resources.
Biden’s duplicity
Already last year, former Trump Cabinet members Mark Esper and Mike Pompeo made speeches in Taiwan – Pompeo again this March – calling on the US to abandon its ‘One China’ policy and formally recognize Taiwan’s sovereignty. In October 2021 and May 2022, Biden responded that the US would defend Taiwan directly if it were attacked. A sanctions programme against China is now being prepared. On 1 June, the ‘US-Taiwan Initiative on 21st-Century Trade’ was established. On 13 June, US House Armed Services Committee Member Jim Banks announced the Taiwan Weapons Export Act, to fast-track delivery of ‘critical weapons’ to Taiwan. On 16 June, the US Senate proposed a Taiwan Policy Bill 2022, ‘to support the security of Taiwan and its right of self-determination, and for other purposes’. On 28 July the Taiwan Democracy Defense Lend-Lease Act was introduced to speed military aid to Taiwan. Yet before Pelosi’s visit Biden’s aides insisted that US policy was still Nixon’s. After Pelosi’s visit, the Chinese responded with unprecedented military exercises around the island, with limited sanctions on some Taiwanese imports, withdrawal from military and environmental discussions with the US government, and unspecified sanctions on Pelosi and her family. On 25 August Taiwan’s President Tsai Ing-wen announced that Taiwan would raise its defence budget nearly 14% this year. On 2 September, US imperialism announced a $1.1bn arms package for Taiwan, violating the One China principle and the provisions of the three China-US joint communiqués, especially the 17 August Communiqué of 1982.
The economic imperative
For US imperialism to hold onto its relative share of global profit requires an uncompromising foreign and domestic policy, to strengthen its ‘democratic industrial chain’ (Pompeo). An intensification of its technological capacity is essential to extract more surplus value. Stagnating productivity in the US threatens further to weaken US global dominance. In 2019 the US exported $44.2bn of integrated circuits whilst Taiwan in 2021 exported $446bn of mostly technical products, of which $200.1bn were for the US. The US produces only 10% of world semi-conductor chips.
Mainland China/Hong Kong accounted for 42% of Taiwan’s total exports last year, and like the US it is currently heavily dependent on Taiwan’s high-end chips. Both the US and China are now working to escape this dependence. China and the US are fighting to pioneer 5G technology. At the moment, the US has no 5G global corporate participant. The primary players are Huawei and GTE from China, and the European companies Nokia and Ericsson. The US has nothing like China’s ‘Made in China 2025’ programme to lead worldwide in specific businesses.
A key aim of Pelosi’s visit was then to further relations with Taiwan Semiconductor Manufacturing Company (TSMC), the world’s largest advanced chip manufacturer. TSMC is vital to both Washington and Beijing. In May 2020, TSMC agreed to build a $12-$20bn facility in Arizona. On 9 August, the US CHIPS and Science Act provided $39bn for the private sector to build new US semi-conductor factories, with 25% tax credits, prompting $50bn more private investments.
On 14 August a delegation, led by Senator Ed Markey, chair of the US Senate Foreign Relations East Asia, Pacific, and International Cybersecurity Subcommittee, met TSMC. On 26 August, Marsha Blackburn of the US Senate Commerce and Armed Services committees visited Taiwan. Two more delegations, led by Eric Holcomb of Indiana and Arizona Governor Ducey followed, both to hold meetings with chip companies. The sixth US political delegation to visit in five weeks followed, led by Stephanie Murphy, vice chair of House Armed Services Committee Subcommittee on Intelligence and Special Operations, to promote trade. At the same time US tech firms receiving government funding were banned from building advanced technology facilities in China for ten years.
Socialism with Chinese characteristics
From 1978 China has capitalised its economy, using the indeterminate notion of ‘market socialism’. In the process, the Chinese Communist Party has faced profound difficulties. While the massive influx of foreign capital expanded the economy, the burgeoning of private property relations inevitably created a myriad of private interests which found expression in actions that undermined the political aims of the party, which are economic equality, a balanced economic and social development, mass participation and public wellbeing. Turning to capitalism promoted extensive corruption, uneven investment, uncontrolled pollution, and a weakening of central government authority. This provoked protests, strikes and demonstrations against these ill effects.
Nevertheless, during this ‘reform’ period an estimated 850 million peasants were lifted out of poverty. China sustained an average annual gross domestic product growth rate of more than 11%. For the 20 years before 2008, China was the leading engine of growth for the world economy, including Taiwan. China accounts for more than 40% of Taiwan’s exports, hundreds of thousands of Taiwanese live on the mainland and Taiwanese business own and run many businesses in China. Globally China has invested massively in US tech start-ups such as Lyft, Magic Leap, Tesla and many others. Meanwhile, the US was financing Chinese start-ups. This creates a deeply contradictory relationship, an entanglement between US and Chinese capital. In the end, the intense struggle for markets between monopolies in our age increasingly turns into protective responses between states, and from these inter-state frictions more easily shift to violent conflict. The basis for open military conflict lies here.
Xi’s centennial address
As president since 2013, Xi Jinping has fought against corruption, lack of coordination, the disastrous results of pollution and other challenges. He has worked to re-establish the control of the Communist Party over the economic system, stressing national unity through a ‘United Front’. On 1 July 2021, the 100th anniversary of the Chinese Communist Party (CCP), Xi underlined its essential role in the rejuvenation of the country ‘based on Marxist Leninism and Deng Xiaoping theory’. This promotes the modernisation of the economy, experimenting with ‘reform’ methods. It seeks ideological unity between the 96 million members of the CCP, to ensure that ‘any attempt to divide the People and the Party will fail’. Xi clearly stated that ‘only socialism can save China’. Western imperialism aims to destroy the capacity of this mixed economy, tries to manipulate China for its own ends, and actively promotes political disunity within China.
The fundamental political challenge
The question for the CCP is: how to promote private accumulation to expand the market, badged as ‘market socialism’, yet prevent the expression of its antagonistic material interests from completely undermining the Party’s socialist aims?
High technical compositions of capital with low wages have provided export success, attracting more foreign investment. Commodities are sold to the world at or below their prices of production, but above their own sectors’ value. With massive outputs, huge profits are gained, despite competitive prices. High productivity has meant that Chinese inflation has averaged only 2.3% over the past 20 years. Beijing’s relaxed state monetary policy after the 2008 US financial crisis promoted massive speculative provision of housing in China. From 1995 to 2021, the urbanisation rate increased from 29% to 65%. Construction was creating at least 25% of the GDP by 2019. It has now reached the point of over-investment against its rate of profit. From mid-2020, the government tried to pre-empt a speculative crash, by restricting over-lending. Covid lockdowns halted sales. The turnover of capital slumped – only 45% per annum in housing construction – seriously checking further accumulation, with builders defaulting and suppliers collapsing. Speculative home building needs sales before construction, and now mortgagee protests against some 50m incomplete homes are spreading. Payments are withheld against the undelivered homes for which millions have already paid. Indeed, only 60% of homes pre-sold from 2013-2020 have been delivered. The state has set up a support fund for the industry, the biggest ‘asset sector’ in the world. Local governments have stepped in. Homes represent 60% of personal wealth (2019), and now prices have fallen – 29% in the year from July 2021 – as the economy slows, further hitting the new middle class. Without effective socialist planning in the interests of the people, such crises will continue. Even so, the mixed economy’s growth this year is expected to be 3% even by a pessimistic IMF. In August a huge spending package was announced, including £37bn in new infrastructure spending and an extension of borrowing by local governments worth £62bn. Chinese state support is not dependent on foreign loans, Chinese public debt is only 20% of GDP, almost entirely denominated in local currency and owned by domestic institutions. However, the problem is where to put this money profitably.
US imperialism threatens world peace
The compulsive demand for more profit seeds the growing role of open reaction in the US, creating a political offensive by the state against the mass of ordinary workers everywhere, in order to heighten productivity and strengthen the currency. It is impossible to separate the profound and bitter contradictions of capitalist accumulation on the domestic scene from the foreign policy of any state. In order to press accumulation forward, and so deepen the exploitation of both labour and nature, US imperialism must take an aggressive stance in both domestic and ‘foreign’ affairs.
For two years the Biden administration has worked to build closer political ties with its partners and allies in the Indo-Pacific, Latin America and elsewhere. The AUKUS agreement aligns Australian, British and US military interests to intimidate China in the Pacific, but the arms build-up and military maneouvres clearly threaten world peace in the interests of US imperialism.m
See FRFI ‘US and China: danger ahead’. https://tinyurl.com/4tm3588f
Fight Racism! Fight Imperialism! No 290, October/November 2022
