President Trump and the US government blame China for the pandemic. They not only seek to deflect attention away from their own reckless response to the disease but to mobilise US people and foreign allies against China. The US ruling class intends to halt China’s challenge to US global hegemony. US imperialists understand that a turning point against them may have been reached – and that time is running out for them to act. It is not just Covid-19 that threatens the economy and life; the US ruling class is especially dangerous. TREVOR RAYNE reports.
At the time of writing China, with over four times the population of the US, has one-twentieth of the number of Covid-19 cases and deaths from the disease. The International Monetary Fund (IMF) forecasts that the US economy will shrink in 2020 while China’s will grow. Before the pandemic, China’s manufacturing output was almost equal to those of the US, Japan and Germany combined. China has the four biggest banks in the world, when measured by assets. China’s exports of goods far exceed those of the US (see China: on top of the world FRFI 266 Oct/Nov 2018).
Those charged with trying to manage capitalism’s global financial system have questioned the leading role of the US dollar. Addressing central bankers in August 2019, Mark Carney, former governor of the Bank of England, said the US accounts for only 10% of global trade and 15% of global GDP, but US dollars are used to finance half the world’s invoices and two-thirds of security issuance. This creates distortions in the global monetary system, undermining policy making. Carney warned, ‘The deficiencies of the international monetary and financial system have become increasingly potent … even a passing acquaintance with monetary history suggests this centre won’t hold.’
‘Built on a lie’
By the end of 2019, the world financial system was heading for a crisis resulting from ballooning debt. ‘Up to 40% of the $19 trillion of debt owed by companies is now at risk of default if there is a global economic downturn, according to the IMF’s analysis’ (Financial Times 21 October 2019). The World Bank estimated that underdeveloped countries were burdened with a ‘towering’ $55 trillion of debt by the end of 2018. China’s debt to GDP ratio had risen from 182% in 2010 to 255%. To these debt mountains is added the cost of bailouts during the pandemic. At the outbreak of the pandemic there were over $16 trillion worth of negative-yielding bonds, that is a quarter of all government and corporate debt, up from $6 trillion in October 2018. Investors in these bonds will get back less than they paid; creditors pay to hold debts. As financial assets lose their prospective profitability, so their liquidity decreases. Nevertheless, investors demand returns. Carney warned that investment funds that hold illiquid assets but offer investors daily redemptions (payments) were ‘built on a lie’.
The US Federal Reserve states that in the US, corporate debt rose from $3.3 trillion before the 2008 financial crisis to $6.5 trillion in 2019. Now, with shopping malls, offices, factories and supply chains shut, corporate America is facing ‘unpaid bills carnage’. Chains of defaults, bankruptcies and closures will follow. In the US, the average US hourly wage has the same purchasing power as it did in 1978. Labour’s share of value-added in production has dropped 8% in five decades. With stagnant and falling living standards for the majority and a rotting infrastructure, decay and decline are symptomatic of US capitalism.
In 2019, the accountants Ernst and Young (EY) produced a report showing that the number of Fortune Global 500 companies headquartered in the US fell from 179 in 2000 to 121, while the number headquartered in China grew from 10 to 119. Under the headline ‘Covid-19 and the threat to US primacy’ the Financial Times surveyed the prospects, ‘The world’s most powerful military machine is not much use against a virus. But a lack of universal healthcare coverage is suddenly a threat not just to the poor but to the whole of US society … Combine the relative stabilisation of China, with the threat of a new Great Depression and a deep political crisis in America and it is clearly possible that Covid-19 will trigger a big shift in power from the US to China. It could even mark the end of American primacy’ (14 April 2020). The writing is on the wall for the US ruling class.
Blaming China
On 24 January President Trump tweeted ‘China has been working very hard to contain the coronavirus … The United States greatly appreciates their efforts and transparency.’ By 6 May the message was: ‘We went through the worst attack we’ve ever had on our country … This is worse than Pearl Harbour, this is worse than the World Trade Centre attack.’ Trump and his Secretary of State Pompeo accused China of developing the virus in a Wuhan laboratory and targeting the US – in effect, of waging biological warfare. Peter Navarro is Assistant to the President and Director of US Trade and Manufacturing Policy. He was put in charge of Defence Production Act policy to fight the pandemic. The Act, dating from 1950 during the Korean War, mobilised private industry for the war effort. During an interview, Navarro said, ‘I did write a book in 2006 called The Coming China Wars. On page 150, I predicted that the Chinese Communist Party would create a viral pandemic that would kill millions of people worldwide, it is now beyond my wildest nightmare what China has inflicted on the world.’
Trump, Pompeo and Navarro mobilised Rupert Murdoch’s media empire to repeat the message that China is to blame. The story about the Wuhan laboratory was aired by Fox News on 15 April. A wave of anti-China propaganda followed. On 25 April, The Times in London carried an article, ‘Time is running out for the West to stop China’s global takeover’. On 5 May, Murdoch’s Australian Saturday Telegraph cited research confirming that ‘China deliberately suppressed or destroyed evidence of the coronavirus outbreak in an “assault on international transparency” that cost tens of thousands of lives.’ Despite being ordered to investigate China’s Wuhan laboratories as a possible source of Covid-19, US intelligence agencies would not confirm that the coronavirus was manmade or genetically modified. Murdoch is no friend of China; he bought Star TV in 1993 to broadcast to over 30 countries in Asia, but the Chinese government prevented it from reaching most of China.
Responding to the US furore against China, Russia’s President Putin said that since the outbreak of the pandemic, Russia and China have ‘stood in unity and extended mutual support, which is testament to the strategic nature and high quality of their relationship’. Russia condemned the US for establishing laboratories in former Soviet states, including Ukraine.
Blaming the World Health Organisation (WHO)
Under President Trump, the US has withdrawn from the Paris climate agreement, the Iran nuclear deal, the Trans-Pacific Partnership, a nuclear missile deal, is threatening the World Trade Organisation and has questioned the usefulness of NATO. After launching a trade war with China, the US government threatens Europe and Japan with more tariffs. This reactionary US nationalism unnerves the US’s traditional European and Asian ruling class allies. Now Trump has stopped funding the WHO, calling it a ‘Chinese puppet’. Trump claimed WHO negligence increased the world’s Covid-19 death rate ‘twenty-fold’.
The WHO was established as a UN agency in 1948. It has been restricted by the powers that dominate the UN. However, the WHO incurred the wrath of corporate interests by recognising that the ‘the major cause of all ill health was poverty. Generally, the better-off a community was in financial terms, the better its health indices were … health is certainly as much a political issue as a biomedical/clinical one.’ Consequently, Structural Adjustment Policies imposed by the IMF could be regarded as illegal under international law (Theodore MacDonald, Preserving the United Nations 2010).
The WHO supports vaccination programmes in poorer countries, notably in Africa and the Middle East. China detected Covid-19 symptoms on 27 December 2019. On 31 December Chinese authorities alerted the WHO about the new outbreak. The US Centres for Disease Control and Prevention was briefed by its Chinese counterparts. On 17 January, a German institute, using genetic data relayed from China, produced a test kit to identify the virus, which the WHO adopted and made available to all countries. WHO chief-of-staff Bernhard Schwartlander, said of the US government’s action, ‘You don’t turn off the hose in the middle of the fire, even if you dislike the firemen.’ Richard Horton, editor-in-chief of The Lancet medical magazine was angry, ‘President Trump’s decision to defund the WHO is simply this – a crime against humanity. Every scientist, every health worker, every citizen must resist and rebel against this appalling betrayal of global solidarity.’
Addressing the WHO annual meeting on 18 May, China’s President Xi Jinping pledged $2bn to the global battle against coronavirus. Responding to claims that China had covered up the outbreak, Xi said China would support ‘a comprehensive review of the global response’ to the pandemic. He said that any vaccine developed in China would be made a ‘global public good’, adding, ‘This will be China’s contribution to ensuring vaccine accessibility and affordability in developing countries.’ This directly counters US nationalism.
Not to be outmanoeuvred before November’s presidential election, Democrat senators Joe Biden and Bernie Sanders lambasted China as responsible for the spread of the pandemic. The customarily Democrat-supporting Washington Post and New York Times joined in the China bashing.
Trade war to financial war
On 12 May, Trump ordered the US government’s main pension fund to stop investing in Chinese equities. US government officials warned that Chinese firms could be sanctioned because of Chinese government culpability in spreading the coronavirus. Three days later, the US announced rules to stop supplies of semi-conductors and other technology made in third countries (Taiwan and South Korea) reaching the Chinese telecommunications firm Huawei. China holds $1.1 trillion of US government debt. There was talk in the US of ceasing interest payments on this debt. This would be disastrous for the US dollar, at a time when the US Treasury intends to borrow $3 trillion to deal with economic effects of the pandemic.
China removed caps on foreign companies taking full control of local asset management operations on 1 April 2020. China is the third-largest asset management market in the world, after the US and Britain. The market provides the biggest growth opportunity for fund managers in the next decade; a market expected to exceed $9 trillion by 2023. JP Morgan, the US’s biggest bank, has just completed a 100% takeover of its Chinese partner. Trump’s anti-China moves will be considered excessive among some powerful US corporations.
David Cameron announced a ‘golden era’ in Sino-British relations when deals worth over £30bn were agreed during President Xi’s 2015 state visit. In July 2019, Boris Johnson said his sgovernment would be very ‘pro-China’ and promised to keep Britain ‘the most open economy in Europe’ for Chinese investments. However, this February, Trump reportedly vented ‘apoplectic’ fury at Johnson over the British government’s decision allowing Huawei a role in Britain’s 5G mobile phone network. British-US trade negotiations began in May. There are divisions in the ruling class, the Conservative Party and the government over whether Britain should roll over and submit to US government pressure to join it in isolating China.
Meanwhile, the US has deployed a nuclear attack warship and bombers to the Western Pacific and South China Sea, through which passes 80% of China’s trade, including oil. China cannot replace the US as the global hegemon, nor does it wish to, but it will not bow down to US imperialism. Yang Chengjun, Chinese nuclear strategist, warns, ‘Although we have fewer warheads than the US, once we detect any nuclear attack from the US, our warheads are enough to destroy the US in counterattack. This is effective nuclear deterrence.’
FIGHT RACISM! FIGHT IMPERIALISM! 276 June/July 2020
