US & China: move and countermove

On 18 February 2021, the US landed its Perseverance rover on Mars. Three months later, China’s Zhurong rover touched down on the same planet. The succession of landings symbolises China’s pursuit of the US to be the world’s foremost economy and for technological advantage. When Donald Trump won the US presidential election in 2016 China’s gross domestic product was about 60% that of the US’s. By the time Joe Biden was elected in 2020 it was over 70%. Addressing reporters at the White House on 25 March President Biden said, ‘China has an overall goal … to become the leading country in the world. That’s not going to happen on my watch because the United States is going to continue to grow.’ US efforts to maintain global hegemony and to curb China’s growth continue under Biden as they did under Trump. TREVOR RAYNE reports.

International capitalism is in crisis. According to the United Nations the number of displaced persons in the world exceeded a record 80 million in mid-2020; these are people driven from their homes by wars, climate change and poverty. About one third of humanity suffers from malnutrition. At the same time, there is an overaccumulation of capital relative to that which can be invested for adequate profit. 2,000 non-financial corporations had cash piles of $6.6 trillion in 2010. By 2020 these piles had risen to $14.2 trillion. China beckons to them as a potentially profitable outlet. Wealth is being concentrated into fewer hands amidst increasing inequality and immiseration. Governments in the developed capitalist countries are imposing repressive legislation and curtailing already limited democratic rights in readiness for revolt. The legitimacy of the imperialist system is being called into question. Over the past 42 years China has achieved an average economic growth rate of 9.2% per annum and has lifted an extraordinary 853 million people out of poverty – this is three in every four people who have been relieved of poverty worldwide. In this context, China is presented as an economic and an ideological counter to US and Western capitalism.

Writing in the Financial Times Martin Wolf states that ‘China is wrong to think the US faces decline’ (28 April 2021). He instances that 14 of the top 20 companies in the world measured by market capitalisation are headquartered in the US, and the US has 12 of the world’s top 20 technology companies. Wolf proceeds to say that the biggest threat to the US’s leading position is itself, not China, and leaders like Trump who reject ‘democracy, ethnic diversity, global alliances, science and reason’. On the contrary, Trump and the reactionary beliefs he represents are a manifestation and consequence of the growing crisis of US capitalism, not its cause. On the matter of company size and weight in the world, if we measure companies by revenue then of the five biggest companies three are Chinese and two are US. All four of the world’s biggest banks when measured by assets are Chinese and state-owned. In 2020 China overtook the US as the main destination for foreign direct investment. Unlike the Soviet Union, China is integrated into world capitalist relations. The emergence of China as a rival to the US is not an illusion – it is a defining factor in the world today and it is unprecedented.

Under President Biden the US government’s strategy for dealing with China has been to step up a propaganda campaign and secure alliances against the country, while continuing to maintain tariffs on about $360bn of Chinese imports into the US. At the same time, the US is adding to its enormous military power. The media has been mobilised: China is variously accused of stealing intellectual property, of developing and spreading the Covid-19 virus, mass state surveillance and the use of slave labour and concentration camps. Without reliable evidence China is accused of genocide against its Uyghur population and condemned for attacking democratic rights in Hong Kong. The US has had success with this campaign: the US, British, Canadian and Dutch governments have all described the situation in Xinjiang, home of the Uyghurs, as ‘genocide’. At the May 2021 G7 meeting of foreign ministers in London, a statement was issued criticising China for its human rights record and behaviour in Tibet and Xinjiang. The US coordinated with Britain, the European Union and Canada to impose sanctions on Chinese officials who allegedly mistreated Uyghurs. The Uyghurs and Hong Kong are being used by the US, with Britain, to try and build a coalition against China.

A Pacific alliance?

Before his election as president, Biden said he wanted ‘a united front of US allies and partners to confront China’s abusive behaviour’. China will act to prevent such a front from forming. This March, the then Commander of US Forces in the Pacific, Admiral Philip Davidson, told US senators that the threat of a Chinese attack on Taiwan ‘is manifest during this decade, in fact in the next six years.’ US Secretary of State Antony Blinken was accompanied by the US defence secretary on a visit to Japan and South Korea. In April, Japanese Prime Minister Yoshihide Suga became the first foreign leader to visit President Biden. He said that ‘the deterrence and response capabilities of our alliance must be strengthened’ and Japan must ‘bolster [its] own national defence capabilities’. Notably, Suga made the first Japanese formal mention of Taiwan in a summit statement since 1969. Previously, Japan has been careful not to antagonise China over Taiwan. China’s response was to send a record number of military flights into Taiwanese airspace. China’s President Xi Jinping said, ‘The rules set by one or several countries should not be imposed on others, and the unilateralism of individual countries should not give the whole world a rhythm’, adding ‘bossing others around and interfering in other country’s internal affairs will not be well received.’

While the Biden administration may want to cement an alliance with Japan, South Korea and Taiwan against China, the main trading partner of all three countries is China and they will be reluctant to offend China’s government in ways that could result in retaliation that harms their companies. Sweden’s H&M and the US’s Nike have been subjected to damaging state-organised consumer boycotts in China for their refusal to use cotton produced in Xinjiang.

The US government is seeking to block exports of semiconductors to China. Semiconductors are crucial to the manufacture of many technological products, but they use rare earths in their manufacture and China controls about 80% of their supply. A single US F-35 fighter jet uses 417kg of rare earths in its production. China is considering blocking US access to its rare earths. Consequently, the Pentagon has signed contracts with US and Australian mining firms to boost rare earths’ refining capacity and reduce reliance on China.

In November 2020 China led 15 Asia-Pacific nations, including Japan, South Korea, Australia and New Zealand, in signing a Regional Comprehensive Economic Partnership intending to create the world’s largest free-trade zone with 30% of the world’s population and nearly a third of the global economy. New Zealand’s foreign minister, Nanaia Mahuta, says that her country was uncomfortable with the ‘Five Eyes’ (US, Britain, Canada, Australia and New Zealand) intelligence-sharing network’s efforts to pressure China, and that her country wanted to pursue its own relationship with the country.

An Atlantic alliance?

In April three NGOs and a Uyghur woman filed a lawsuit in Paris against four European and US clothing manufacturers, accusing them of crimes against humanity for buying cotton that used forced labour in Xinjiang. The EU-China Comprehensive Agreement on Investment, which would give European banks easier access to China, has been suspended and not ratified because of EU sanctions against four Chinese officials involved in China’s policy towards Xinjiang. China retaliated with sanctions on EU officials, parliamentarians and academics. At the G7 meeting in London in May, Blinken said, ‘We’re not asking countries to choose [between the US and China].’ But that is exactly what the US administration is doing. German Chancellor Angela Merkel stated that it was ‘absolutely clear’ that, when it comes to China, the interests of the EU and the US were ‘not identical’.

China’s Belt and Road Initiative, launched in 2013, has been endorsed by over half the EU’s 27 nations. China is now the EU’s biggest trading partner for goods, worth about €600bn. Two-way trade between the EU and China has risen 67% in the past decade, compared to an overall growth of 19% for the EU with all countries. German exports to China were up by 26% in the year to February 2021, compared with a 1.2% drop for all German exports in the same period. Volkswagen has a factory in Xinjiang and China is the firm’s biggest market. The company denies that any of its employees in China ‘work under duress’.

US attempts to build alliances against China are confronted by capitalism’s desperate need to invest, sell, and make profits, for which China is essential: ‘Companies like Volks­wagen, Apple, Starbucks, Nike, Intel, Qualcomm, General Motors and H&M are all reliant on the huge and growing Chinese market’ (Financial Times 6 May 2021). US banks and finance institutions are particularly keen to take advantage as China opens its financial markets. This can give the Chinese state leverage over sections of the US ruling class. China’s wealth market, savings built up over years, is estimated at potentially $18.9 trillion, growing 10% in the past year. This is irresistible to US and European financiers. BlackRock, the world’s biggest asset manager, has been given approval to launch a wealth management business in China, with 51% ownership of a joint venture with a Chinese bank. JPMorgan Chase, the US’s biggest bank, announced that it will fully own its Chinese fund management business. Flows of foreign capital into Chinese bonds and equities have tripled in three years. China has become crucial to multinational corporations’ strategies and profits.

A reliable partner

We said that eventually the British ruling class would have to choose between Europe and the US and for now that choice has been made.* In the past year, the British government has banned the Chinese firm Huawei from the 5G network, offered UK passports to British National Overseas citizens in Hong Kong, issued sanctions against officials said to be involved in persecuting Uyghurs in Xinjiang and this May passed the National Security and Investment Act to prevent companies said to be linked to the Chinese state from buying sensitive British assets.

On 22 May 2021, the new Royal Navy aircraft carrier HMS Queen Elizabeth set sail on a voyage that will take it from Portsmouth, through the Mediterranean, on to the Gulf of Aden and then the Philippine Sea. The centrepiece of the voyage will be a freedom of navigation exercise in the South China Sea, intended to send a military signal to China. Alongside the 1,350 Royal Navy crew will be 250 members of the US Marine Corps. The carrier’s battlegroup will include a Dutch frigate and a US destroyer, as well as 10 US F35-B jets and eight British F35-B jets. This partnership is intended as a show of strength. Former Tory leader Sir Iain Duncan Smith would like the British government to ‘let the Chinese know that they disapprove of their very aggressive actions against their [Taiwanese] neighbours’ by plotting to sail through the Taiwan Strait. Echoing Palmerston and Victorian gunboat diplomacy this provocation would be laughable if it were not backed by the US military which has encircled China with over 300 bases, including with nuclear weapons. The world’s top five weapons producers are all US companies, followed by Britain’s BAE Systems. Any imperialist military confrontation with China would implode the world economy and wipe out prospects for profits – surely reason enough for the capitalists to pause for thought?

See David Yaffe ‘Britain: parasitic and decaying capitalism’ FRFI 194 December 2006/January 2007