In the preceding two discussion articles we described the profound contradiction that China presents: a government that is now publicly, if nominally, committed to socialism, retains the title Communist, yet ‘manages’ an economy that for over 40 years has expanded capitalistically, bringing with it both material gain, yet immense polarisation of wealth, and the periodical sharp crises inherent to capital accumulation. We then argued that China’s level of development and leadership have not yet led it to shift to becoming an imperialist state, a latent potential arising from the large-scale accumulation of capital in this period, with its aggressive adoption of state-promoted monopolies aiming to destroy its competitors.
Sections of the petit bourgeois left in the west have simply declared China imperialist without proper reflection on the facts. The political challenge for the Communist Party of China (CPC) is how to avoid being swallowed up by such a transformation. Its defensive steps against the open threats made by US and European imperialism cannot be confused with imperialism.
The objective problem
The needs of the Chinese people, and their government’s international economic policies, face obstruction from China’s contradictory domestic social relations of production. Profit is the dominant purpose of economic activity. Social needs are subordinated to the accumulation process. In China, social development will remain inadequate as long it is subject to the proportionality of profit to employed capital. Domestically, it will remain subject to the ever-recurring systemic clash between maximising money income and meeting social needs, resulting in crises, in addition to the effect of economic crises arising outside its borders.
Foreign investment in China
For some 45 years Chinese development has rested principally upon North American and European Foreign Direct Investment (FDI), exploiting both Chinese labour and natural resources. The diplomatic opening provided by US imperialism to Deng Xiaoping, China’s leader from 1978 to 1989, succeeded in putting China’s vast labour reserves at the disposal of foreign capital. By 2020 US investors alone owned nearly 10% of the 100 largest Chinese companies. The percentage of FDI in Chinese investments in the period before the 2008 global financial crisis was 20-45% in a range of key industries. In 2018, 53% of foreign investment in China was direct, 21% foreign portfolio investment, and 26% ‘other investment’. In 2021, US investments in China were $118.19bn.
China has thus provided huge amounts of surplus value to western imperialism, contained in its exports of a mass of cheap goods, which have further allowed the extraction of greater relative surplus value from waged labourers (by cheapening their necessities) elsewhere in the world, whilst providing more cash to bribe sections of the imperialist states’ own working classes.
The 2008 crash, and the growing hostility of US imperialism to China’s purchase of global raw materials, brought about changes within the CPC. A Chinese $590bn stimulus package was organised in 2009. This pushed the world back into some growth. In 2008 China had modest debts, but by 2020 this debt was about half the world’s total and much of the world’s interest payments.
The character of China’s investments
With growing masses of surplus value retained through foreign trade, from 2004 to 2018 China’s total foreign assets exploded from $929bn to $7.32 trillion while foreign holdings in China rose from $693bn to $5.19 trillion. By 2020, China had a net investment position of $3.93 trillion. So, China has become a large net creditor in the global capital market, denying imperialist states investment space. China’s total investment income received in 2018 was $215bn or 1.6% of China’s gross domestic product (Minqi Li, Monthly Review, 1 July 2021). However, China’s net investment income in 2018 was negative, -$61bn, as its estimated rate of return is about 3%, compared to 5-6% paid out to foreign investors. China is not a net recipient of surplus value from the rest of the world.
Chinese foreign assets have a different, more liquid, character to imperialism’s assets in China. Over 40% consists of reserves, about a quarter is direct investment abroad, a further quarter in loans and trade credits, and around 7% in portfolio investment. Nearly 80% of Chinese FDI sits in Hong Kong, Singapore, Macao or tax havens in the Caribbean, so the final use of this capital remains unclear. In 2022 Chinese FDI was $1.37 trillion compared to the US’s $2.7 trillion in 2019, and Britain’s $2.43 trillion in 2021. Investment in Asia represents some 63% of Chinese FDI, with 21% in Latin America and the Caribbean, where it is focused on infrastructure and the primary sector. Only $100m was provided to Africa in 2018, though even then surpassing the US. China’s FDI in Europe, at 6%, and North America, at 5%, is aligned more with secondary and tertiary sectors.
China’s holdings of US Treasury Securities were $859.4bn in January 2023, subsidising US imperialism. The recent fall in the market value of these bonds, as the Federal Reserve raised its interest rates, inhibits their sale by the Chinese government and traps it as a creditor to the US.
Chinese loan policy
China promoted the $50bn Asian Infrastructure Investment Bank in 2014, which then opened in 2016 with 53 country and region members. There are now 103. It was boycotted by Australia (which later joined), Indonesia and South Korea. Accusations abounded of deliberate Chinese over-lending to borrowers, placing them in a position where they had to surrender valuable assets or facilities. In March 2023, General Richardson, head of US Southern Command, claimed ‘China continues to expand its influence’ in Latin America and ‘manipulates’ its governments through ‘predatory investment practices’.
The most contentious case has been Sri Lanka’s over-borrowing, which in 2017 led China to renegotiate a $1.34bn debt for building Hambantota Port in 2010, in exchange for a 70% stake, and it then paid for a 99-year lease. Money paid for the stake allowed Sri Lanka to pay other debts. Sri Lanka remains heavily indebted to China, the fault being the then-Rajapaksa government’s ambition. Yet there were no direct asset seizures, nor penal interest rates charged, nor arbitration cases imposed on this or any other debtor.
The average interest due on
Chinese debt has been 2.7% compared to 5% on other states’ or international institutions’ loans (Debt Justice Report). China took part in the G20’s Covid-19 debt suspension scheme in 2020. Private western lenders did not. It forgave interest-free loans to 15 African countries due to mature at the end of 2020. It promised similar help for the 2021 period. Bilateral and discrete arrangements are made in all its dealings. Chinese loan policies are not the predatory contracts that the western press describes.
Alvaro Michaels
FIGHT RACISM! FIGHT IMPERIALISM! 293 April/May 2023
