China and the fall-out from Covid-19

Trump and Xi Jinping in happier times at the G20 Buenos Aires Summit, 2018 (Photo: Wikimedia Commons)

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Covid-19 recognises no borders. It has killed hundreds of thousands, ravaged economies across the world and is not finished yet. All governments have been put to the test and poured billions into protecting their economies, barely recovered from the 2007-8 crisis. Now, as they face what can turn out to be the worst recession in history, national barriers are going up and a new round of protectionism has set in.

In periods of expansion, capitalist powers can extend the division of labour on an international scale and make agreements on trade, banking and investment. Since the beginning of this century, the two biggest global economic powers – the US and China – have been engaged in what has been called a symbiotic (mutually advantageous) relationship in all three of these spheres.

Trade between them massively increased, and bank loans and investments in both directions reached unprecedented levels. However, over the past two years, the process went into reverse. In the first quarter of this year, newly announced Chinese direct investment into the US fell to $200m – down from an average of $2bn per quarter in 2019 and the lowest level for ten years. It had been as high as $8bn a quarter in the boom years of 2016 and 2017.

War of words

A ‘truce’ in the trade war was signed in January of this year, but then US president, Donald Trump, switched again to present China as a foe rather than a friend. Polls showed a majority of Americans disapproving of his handling of the crisis and, with the presidential election in November approaching, he needed a scapegoat.

Trump’s wild accusations against China over the origins of the virus, including that it was deliberately developed and released as a weapon of war by a Chinese laboratory, were blatantly aimed at diverting blame from himself or his administration for the worst figures worldwide. By blaming the killer disease on what he called the “China virus”, he fanned the flames of racism against Chinese citizens in the US and elsewhere. This was reciprocated with expressions of anti-US and anti-African sentiment in China.

The US president decided to cut off vitally needed US funding for the World Health Organisation, ‘punishing’ it for defending China’s cover-up in the early days. He condemned the quality of PPE and testing equipment made in China (and being delivered worldwide). He dismissed the idea of China’s highly skilled scientists making any contribution to the development of a vaccine against Covid-19.

Xi’s response

President Xi Jinping of China retaliated in a war of words with Trump and his aides. For the ‘paramount’ leader, it also came as a welcome diversion from criticism at home. He let loose “wolf warriors” based in Chinese embassies around the world to attack Trump and the US.

No-one, apart from a few rogue Chinese ‘spokespeople’, denies that the coronavirus originated in China – whether in a wet market in Wuhan or elsewhere. But it is also widely known that the Chinese regime, on orders from Xi, suppressed news of the existence of this new virus when it was first detected. Those who reported it were instructed to deny it and those who criticised Xi Jinping were silenced.

The delay in announcing the discovery cost lives. A study published in the English press, on 2 May, estimated that if action had been taken to contain the virus three weeks earlier, with testing and a cordon sanitaire in Hubei province, cases of Covid-19 in China could have been 95% lower. At least 5 million people left Wuhan before the city was locked down on January 23, many flying overseas. Even Xi Jinping was forced to apologise for the fatal suppression of the truth.

Once the Chinese government did move into action to contain the virus, it moved with a speed that other governments around the world were incapable of. The massive state machine mobilised its vast resources and transported military and medical personnel and equipment from across the country. Not subject to control from below, its methods were often crude and brutal. At certain moments bodies were literally piling up unattended. But hospitals were built in days and the virus was largely contained.

Opposition

The Chinese state brooks no public criticism or challenges to its authority, in words or action. The regime tops fear their rule has limited legitimacy in the eyes of the population and that movements will challenge their privileges and rule.

But even in the most repressive of regimes, the truth will out. Reports of arrests and disappearances of critics reached internet platforms within the country and journals and newspapers beyond. In March there were reports of protests in the wider area of Hubei Province against profiteering by officials and local businesses. (Last year saw a substantial protest movement against the building of a waste incinerator in Yangluo, also in Hubei province.)

The on-line ‘China Labour News’ comments that local official representatives of the All-China Federation of Trade Unions, which is “run as an arm of the state to serve the party and government tops”, were often blind and indifferent to the very real struggles of workers when they are battling with mass layoffs, wage arrears and other violations of labour rights. “At some point”, writes the CLN, “the union will be forced to listen”.

This is not certain. The development of local independent worker initiatives and democratic fighting unions organised from below could lead to a new movement developing as well as splits within the official ACFTU structures.

In recent years there have been major strikes like those at Foxconn and some that have spread further than one enterprise or city. In 2018 crane-drivers – key workers in China’s massive construction industry – took strike action on May Day involving tens of thousands of workers from at least ten provinces. Other important strikes have taken place in factories like Foxconn, Honda and Fords.

Workers’ struggles have even found support amongst young members of the ruling ‘Communist’ Party. A New York Times report quotes them using the teachings of Mao and Marx to argue against China’s embrace of capitalism and its exploitation of workers!

Fear of protests probably motivated Xi Jinping’s swift response to the second batch of Covid-19 cases occurring in Wuhan. Every one of its 11 million residents was tested in a matter of days to avoid any new scandal.

China’s president has appeared to be in an impregnable position as head of government since March 2013. He is not challenged in elections nor is he held to account by the thousands of delegates who assemble at the National People’s Congress. They approve all proposals from the ruling bodies and go home. But the fall-out from this crisis could yet cause problems for Xi Jinping.

Like Donald Trump, Xi is not averse to using attack as the best form of defence and picking quarrels with geo-political and economic rivals. Xi has already clashed with European governments over complaints about the quality of masks and China’s censorship of an article written by an EU ambassador. Representatives of Europe’s business interests have complained about deals “Where state-backed companies were distorting competition”. (Financial Times 13 April)

The Covid-19 crisis has also soured relations between China and Australia. Canberra’s demand for an inquiry into the origins of the Coronavirus outbreak led Beijing to threaten a boycott of Australian products and the Chinese state-owned ‘Global Times’ to accuse Canberra of leading a “panda-bashing” campaign.

China is Australia’s biggest trading partner and a market for more than a third of all its exports and is heavily reliant on Australian iron ore. Total trade between the two countries was worth $150bn last year. But the Australian government is threatening import tariffs on Chinese goods in spite of Australian companies standing to lose big profits from sales to China. Likewise, Beijing’s threat of a ‘consumer boycott’ would cause big damage to China’s own supply chains.

Slow-down

Before the Coronavirus crisis hit China’s economy, GDP growth had been slowing. In 2008 it was at a high of 17.5%! Last year it was at just over 6% – the worst figure since 1990, but still by far the highest in any major economy. Then, the first quarter of this year saw a massive drop in GDP of nearly 7%, the first time the economy has shrunk in 40 years. Unemployment rocketed.

In April as the country’s lock-down was eased, there was a small rise in construction and manufacturing. But Chinese exporters complained: “First we had orders but no workers to fulfil them; now our workers are back but we don’t have orders to fulfil”.

Full-year growth for 2020 is expected to be between 2% and 3%. A new stimulus package was launched as the epidemic struck, on nearly the same scale as that which followed the 2007/8 crisis – a massive 4 trillion yuan ($564bn). China’s national debt already stood at 300% of GDP.

When the much publicised National People’s Congress met in May and formally ‘discussed’ the state of the economy, the size of a further rescue package was not finalised. For the first time in at least 30 years, no growth target was set. The severe problems can be blamed on Covid-19 but they are exacerbating the deep conflict that exists between the world’s two major geopolitical powers.

Class nature

There is widespread talk of a new ‘cold war’ between China and the US. In fact, with the emergence of China as a global power rivalling and, in some respects, overtaking the US, a cold war is already happening.

The relationship between the US and China has never been easy, going back as far as the nineteenth century. In the post-1949 decades, rivalries were based on economies with completely different social systems. Until the signing of a bilateral trade agreement in 1979, trade between them was minimal. They stood opposed to each other even, for a time, after the collapse of Stalinism across Eastern Europe and Russia. At the same time, the Stalinist and imperialist regimes leaned on each other, whipping up fear amongst their own populations about the ‘communist’ or ‘capitalist’ nuclear threat that was posed, in order to try to curtail domestic working class opposition.

While there is not a cold war today of the same character as the stand-off between Stalinist states and the capitalist west, there are some similarities with those decades – growing and sharpening tensions between China and the US over trade, markets, influence and prestige – which increasingly find expression in military build-ups and exercises, massive arms production, disputes over territories and bellicose rhetoric and threats.

There are also similarities in the present situation with that prior to World War One. There were growing clashes between imperialist powers over colonial markets and influence prior to, and between, both world wars. At that time, Britain was a diminishing world power in collision with rising powers, like Germany and the USA. Today, the US is a relatively declining economic power – albeit still with the biggest military budget in the world – contending with the rise of China. Like imperial Britain (or ancient Athens under threat from Sparta!) the USA will not voluntarily step aside from its predominant position without a struggle.

Renewed trade war naturally gives rise to speculation about military clashes and actual war between China and the US. There is fierce competition over trade routes, markets and spheres of influence in the Asia-Pacific region and elsewhere, including Africa and Latin America.

Many young people and workers in Asia and across the world understandably fear these tensions could lead to greater military conflict, either by proxy or directly between the USA and China, even posing the use of weapons of mass destruction or a nuclear exchange.

The US and China are the two biggest military powers with the capacity to destroy the world many times over. The actual outbreak of a nuclear war is virtually ruled out because of the phenomenon known as ‘Mutually Assured Destruction’ with no winners.

Nevertheless, as the recent statement from the Committee for a Workers’ International (CWI) puts it: “In the South China Sea military tensions have escalated although not to the point of open conflict at this stage. China has occupied and fortified disputed shoals and reefs. Its naval manoeuvres have increased as have the US and Australian naval presences in the area. China has also been testing Taiwan’s defences with aerial sorties and in March undertook its first night-time exercise. Neither China nor the US is looking for war at this stage but accidental flare-ups and exchanges cannot be ruled out. This would clearly further dramatically heighten tensions.”

How do we characterise China?

The Chinese revolution was a huge step forward. It abolished landlordism and capitalism in China and expelled meddling imperialism. However, it did not usher in democratic workers’ rule. Mao and the others fundamentally copied Stalin’s regime in the then USSR. From 1949 onwards, the ruling ‘Communist’ Party in China retained monolithic control over a predominantly state-owned, bureaucratically planned economy.

But three decades on, with a change of leadership in the upper echelons of the ossified ruling Communist Party, capitalist relations were gradually re-introduced in China. Under Deng Xiao Pin, initially, the openings for capitalism were limited and were designed to overcome the hindrances of top-down arbitrary bureaucratic control over the economy.

By the 1990s China was moving in the direction of capitalism but the party tops were aiming to avoid at all costs the fate of Mikhael Gorbachev and the Communist Party of the Soviet Union, which were swept from power with the collapse, in 1991, of the USSR. There, state ownership and bureaucratic planning were brutally replaced by unfettered capitalist market forces – gangster capitalism. The economy shrank by more than 50%.

Democratic workers’ control and management of the economy or society, eroded by the 1930s in Stalinist Russia, had never been established in China. The ruling bureaucracy still leans on the reputation of Mao Zedong who led the Chinese revolution to victory in 1949.

Against the background of the Soviet Union’s demise, the Chinese leadership continued on the road to the market but retained their own control behind the trappings of the so-called “Communist Party” rule.

For a period, the CWI characterised the Chinese economy as a “hybrid” – part state-owned and part privately-owned. As capitalist relations developed and the Chinese economy grew at a phenomenal double-digit rate, China turned outwards for markets, for raw materials, for foreign investment and developing supply chains for increasingly sophisticated parts and finished goods. China joined the World Trade Organisation in 2001 and China has since evolved into what is best characterised as a special form of state capitalism.

Just as there were zig-zags in policy under Mao Zedong after the victory of the revolution he led, so, in the period of transition to capitalist market relations under subsequent ‘Supreme Leaders’, there have been periods of more centralisation and less. Xi Jinping has drawn more power into his hands than earlier Chinese leaders and to some extent, increased state control in the economy.

By the time of the 2007/8 global crisis of capitalism, because of its heavy involvement in the world economy, China’s economy suffered huge losses. But the still considerable control by the state over economic policy allowed it to organise its stimulus package on a much greater scale than elsewhere in the capitalist world.

Trade between the US and China developed exponentially over the years. As part of “a complex economic relationship”, the US State Department’s website explains “this trade grew rapidly to over $600 billion by 2017. There has been not only a growing, mutually advantageous exchange of goods and services between the US and China, but also the buying and selling of stocks and shares, huge investment in both directions. Vast sums of private and public money have flowed into US state bonds.

Unravelling, or partially unravelling the world-wide integration of supply chains – from raw materials to finished products – that have been based on ‘just-in-time’ production is complicated but not impossible. Many multinationals have shifted production or sourcing components to other Asian countries, e.g. clothing to Bangladesh, electronics to Vietnam; and US companies have shifted some production to Mexico and western European ones to central and eastern Europe. Most have evolved being based on the cheapest and fastest methods of production which inevitably means a massive global division of labour.

The double whammy of ending trade arrangements and entering a period of deep recession will cause untold human suffering in some countries. Donald Trump says he is determined to disengage totally from trade with China and put up other protective walls against foreign-made goods, especially the ‘Made in China’ products. Huawei has its tentacles throughout the world and the US will now be forced to find alternatives as well.

Differences

China has no less than 476 dollar billionaires, second only to the number in the US. Former state bureaucrats, who enriched themselves on the backs of workers, leeching from the state-owned planned economy, now rake in vast profits through being the beneficiaries of their personal private ownership. Forbes’ magazine reports: “Although the Middle Kingdom is still recovering from the effects of the coronavirus pandemic, its billionaires boast a collective net worth of $1.2 trillion.” China’s private sector is estimated to now account for 60% of GDP and 80% of urban employment.

Unlike Trump, Xi Jinping is not constrained by worries about re-election. The removal of the two-term limit on the presidency in 2018 effectively allows Xi Jinping to remain in power for life. He is General Secretary of the Chinese Communist Party and Chair of the Military Commission.

In 2017 he announced that the official ideology of the Communist Party was “Xi Jinping’s Thought on Socialism with Chinese Characteristics for the New Era”. He is surrounded by predominantly acquiescent and very rich oligarchs, with about 100 of them in his ‘Communist’ government. His pseudo ideological commitment to an equal society helps him periodically conduct corruption trials against too powerful challengers to his ‘Supreme’ leadership.

According to Michael Pettis, a finance professor at Peking University, under Xi Jinping, there has been a rolling back of the private sector over the past decade and greater government control. “Yet in the near and medium-term, this approach will do almost nothing to address either the real causes of China’s slowdown or its growing reliance on debt.” (Financial Times 27 April)

His regime holds no attraction for young people or workers genuinely seeking an egalitarian democratically run society, let alone one that implements workers’ democracy in the way that the Bolsheviks in Russia established at the time of the October revolution.

Maoists in various neo-colonial countries have the illusion that China, because of its victory over imperialism and landlordism in 1949 and the way it still honours the leader of that great revolution, represents an alternative to capitalism. But far from it! China’s foreign policy is most certainly imperialist, even if of a very particular kind, and posing as a better ‘partner’ than the US. The Chinese regime has not conducted ‘gunboat’ diplomacy or carried out colonial invasions like those of the western imperialist powers from the 19th century onwards. But China exports capital, and often its own work-force, as well as exploiting the cheap labour of foreign countries. It saddles those economies with large debt repayments for the infrastructure and other investments carried out as well as actual loans.

Challenges

There has undoubtedly been dissatisfaction with Xi’s handling of the coronavirus crisis at home as well as abroad and the search for some alternative will have been prompted. Xi will attempt to muster support in the face of the enemy afar (in the US) with the rallying cry posed in terms of “defence of the fatherland”, harking back to the western and Japanese imperialist carving up of China from the time of the First Opium War onwards.

But the embers of resentment against Xi Jinping’s dictatorship will stay alive. At the time of the First of May celebrations, more than 50 million internal tourist trips were taken as tens of millions of Chinese travelled to see relatives and visit tourist attractions. It is not difficult to imagine that, gathered around the tables of tens of millions of families, there will have been considerable grumbling and expressions of anger against the authorities.

National oppression

The Chinese regime around Xi Jinping, faced with discontent from below, will not be averse to playing the national card to mobilise unity against regional or internal threats. Bellicose noises have recently been made against Taiwan since the re-election of pro-independence Tsai Ing-wen as president.

Other national discontents can well up in places like Tibet, where freedom of expression and of religion has long been suppressed. Most explosive of all must be the accumulated anger and resentment of the Uighur Muslims of Xinjiang, one million of whom are reportedly held in internment camps. Many have now been press-ganged into carrying out the most dangerous tasks related to Covid-19.

In Hong Kong, the coronavirus outbreak inevitably cut across the indefatigable struggle for democratic rights in the territory that Xi Jinping has called a ‘political virus’. Under the cover of the lock-down, the Beijing-appointed authorities moved to arrest fifteen democracy activists, including elected members of the Legislative body.

With the partial easing of the health crisis, hundreds came back onto the streets shouting and singing their struggle anthems, braving the police firing pepper-spray at them and shouting their slogans of ‘Free Hong Kong!’ and ‘Revolution now!’.

On the eve of the recent National People’s Congress in Beijing, Xi announced a new national security law for Hong Kong to “proscribe secessionist and subversive activity” with the aim of rallying his troops for the coming period. Opposition politicians in Hong Kong warned that this is akin to announcing the death of ‘one country, two systems’ (South China Morning Post, 22 May).

There was an immediate explosion of anger on the streets of Hong Kong over this issue as well as over the passing of a new law in the legislative Assembly allowing imprisonment of up to three years for ‘insulting’ the Chinese national anthem. Then came clashes with hundreds of demonstrators on 5th June after thousands had turned out to defy the authorities and commemorate the martyrs of Tiananmen in spite of a ruling that it would not be allowed this year – the first time for thirty years.

The constant battles on Hong Kong’s streets indicate a massive level of courage and determination – a movement that is irrepressible. But it needs to broaden its demands precisely to tackle the massive social deprivations in Hong Kong brought into stark relief at the time of the coronavirus crisis. The heroic movement, even if it escapes a brutal crushing by Chinese state forces, could ultimately be worn out. To avoid this it must strive to spearhead a movement that links up with workers and students in mainland China as the only way to spearhead and win a fight for democracy and real socialism.

The promises of help from the reactionary governments of US, Britain or the bosses’ EU are empty. How long have they tolerated, in the interests of maintaining their profits from business, banking and trading, some of the most horrific human rights offences carried out by the Beijing regime? Their criticisms of China now are because of the growing clash of interests not democratic rights, as is seen in how both Trump and the British government pander to the Saudi dictatorship. The fight must be stepped up for an independent workers’ alternative.

Change

The pandemic has confirmed the emergence of China as a global power which has, if anything, been strengthened in the battles taking place in today’s coronavirus-ridden world. As the New York Times of 22 April wrote: “Despite mishandling the initial outbreak of the coronavirus, China has sought to redeem its image and curry favour by helping governments across the world flatten their coronavirus infection curves.” It sent plane-loads of face masks, ventilation equipment and test kits across the globe.

China is now overtaking the influence of the US in its own backyard – Latin America. Since Trump’s protectionist turn saw him impose tariffs on long-standing trade partners in the hemisphere, China is now the top trading partner of Brazil, Chile, Peru and Uruguay. The governments of Mexico, Argentina and Brazil have expressed not only gratitude for China’s aid, but an eagerness to increase trade agreements covering the export of beef, soya beans and other foodstuffs.

The ‘Belt and Road’ initiative is President Xi Jinping’s $1 trillion programme to finance infrastructure projects across the world and pick up political allies in the process. However, at the end of last month, with economies worldwide hit by Covid-19, Beijing made it quite clear that loans connected with the ‘Belt and Road Initiative’ (BRI) are not foreign aid and would have to be paid back. There is nothing magnanimous, let alone socialist about China’s massive €461bn investment in the BRI since 2013.

Since the initiative started in 2013, China has lent up to $350 billion to countries, about half of them considered high-risk debtors. Just as with the IMF and World Bank, there is no question of debt forgiveness. Temporary deferment of repayment “could be considered”. But genuine socialists inscribe on their banner the demand for the complete cancellation of all debts of impoverished and so-called developing countries.

Future

All of this can lead to a growing resentment against the Chinese government and the Chinese people. The Chinese regime is increasingly seen as new colonialists on the hunt for cheap labour and raw materials. Correct conclusions will gradually germinate in the minds of the working and poor people of these countries and those of China, as well.

China is still a country of huge contrasts. As many as 45% of its population live in the countryside while skyscrapers dominate the skyline of the big cities – the combined and uneven development that Trotsky spoke of in ‘Permanent revolution’ in a different form. No big landowners, but widespread mass poverty and growing resentment against the billionaire at the top, now exacerbated by what the 21st-century plague has revealed.

Before the Covid-19 crisis, the Chinese regime was hoping to have achieved a doubling of the size of its economy in the course of the past ten years to celebrate the centenary of the founding of the Chinese Communist Party. What a contrast between the few brave souls who met in Shanghai in July 1921 to form the party and had their meeting attacked by the forces of the state! That handful of people set themselves the massive task of transforming the biggest nation in the world into a democratic socialist society. Compare this with those serried ranks of bureaucrats, billionaires and sycophants in the Great Hall of the People in the last two weeks of May.

Lessons will be drawn from the bitter daily experiences of the workers and poor of China as they pull themselves up from the tragic experiences of the first few months of this year. The world’s rulers will continue their verbal battles, their trade battles and maybe even engage in military battles.

May the workers of all countries, with determined socialist fighters in their midst, engage in a struggle to end all forms of capitalist exploitation, war, famine and disease on an international scale and establish a harmonious world of socialist cooperation.

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