Upheavals in China

Even before the recent clashes between China and Japan, China was at the centre of the world's attention. That is even more the case now. Japanese Prime Minister Koizumi, faced with sizeable demonstrations in China and attacks on Japanese businesses, finally complied with some of Beijing's demands and expressed "deepest remorse" for the war crimes carried out by Japanese imperialism in the 1930s and the Second World War. Behind these demonstrations in Shanghai and a number of other cities (see previous CWI website reports) lies a mighty struggle between an emerging China and Japan, backed by the US, for the dominant position in Asia.

In this conflict, the Chinese regime has tapped into the deep wellsprings of Chinese nationalism. This is rooted in the justified belief of the Chinese people that they have been the victims of great historical slights inflicted on them by the Western capitalist powers. They understand that China was a significant power - in many respects more advanced than the West - before the emergence of capitalism in Europe and the subsequent occupation of China by imperialism and its cohorts. Added to this, is the terrible suffering of the Chinese people at the hands of Japanese imperialism in particular in the 1930s and during the Second World War. Therefore, an anti-imperialist and, particularly, anti-Japanese sentiment has always been an important strain in the "Chinese psyche" since then.

On some occasions, this has developed in a progressive direction. For instance, students in Beijing demonstrated in May 1919 against the handover of German "concessions" in China to Japan under the Versailles Treaty. What started as an anti-Japanese demonstration, however, turned quickly into a mass movement against weak, backward and authoritarian Chinese capitalism at the time. The present ruling elite also feared a similar outcome in the recent demonstrations and quickly drew them to a close.

However, with the demise of Stalinist ideology the increasingly capitalist Chinese regime has been forced to rely on nationalism as the one reliable tool allegedly holding China together. They have drawn on history to achieve this. Mao also drew on Chinese nationalism, as did Deng Xiaoping, the father of China's march towards capitalism, with his introduction of "patriotic museums" dedicated in the main to past Japanese atrocities. Similarly, anti-Japanese protests preceded the Tiananmen Square revolution of 1989, illustrating how demonstrations against Japanese militarism can quickly spill over into a criticism of the Chinese regime.

The recent demonstrations are drawing on the wellspring of legitimate Chinese resentment against the atrocities meted out to them at the hands of the Japanese ruling class, but nevertheless have an element at least of government support and backing. Automatic imprisonment is usually the fate of those who try to organise demonstrations in China. There were a number of factors which led to these demonstrations. The Chinese ruling class were irked by Japan's demands for a seat in the UN Security Council, the refusal of Koizumi, the Japanese prime minister, to suitably apologise for Japan's war crimes, the remilitarisation of Japan and the conflict over the drilling for energy resources in the South China Sea. Apologies have, it seems, been made for Japan's past crimes on 17 previous occasions. However, these have been mealy-mouthed and have inflamed the opposition of the Chinese. For instance, the Rape of Nanjing by Japanese military forces in 1937 - which involved the murder of an estimated 300,000 Chinese - is described as an "incident" in Japanese school textbooks.

Koizumi, in the teeth of the Chinese demonstrations and the fear that this could spill over into the economic field with mutual damage to the economies of both countries through a boycott, for instance, may cool the situation temporarily. However, the issues that triggered off the demonstrations in China remain unresolved.

Chinese economy

These events pose in a sharp fashion important geo-political questions and other crucial issues for China and the world. Will China be a lifeline for world capitalism? Will the growth of China's economic might be matched by the deployment of enhanced military and diplomatic muscle on the world arena? In turn, what will this mean for Asia and the world? What will be the social and environmental costs, both for China itself and the world, of its explosive growth? Above all, for socialists and Marxists, is posed the key question of the Chinese working class and its prospects for creating its own independent organisations, trade unions and parties.

How to contain, if not satisfy, this potentially mighty force is the dilemma, indeed the nightmare, which haunts the Chinese elite. Undoubtedly, the continuation of China's economic fireworks is perceived as a means of dazzling and holding in check the Chinese masses. This in turn will be affected by China's relations with the rest of the world, by the other giants or would-be giants in Asia - India and Japan - and particularly with the world's dominant power, US imperialism. For over 25 years, China's Stalinist elite has been engaged on a sustained march towards a capitalist economy. Under the signboard of Deng Xiaoping's famous aphorism, "It doesn't matter whether the cat is black or white, so long as it catches mice", the 'pragmatic' Stalinist elite that ruled China envisaged this as the only means for China to escape from the economic impasse resulting from its own bureaucratic rule. To do this it has been compelled to rely on opening the door to massive Foreign Direct Investment (FDI) and the technology that goes with this, which in turn has generated a phenomenal growth rate, particularly in Guangdong, the Pearl River Delta, Shanghai-Yangtze Delta, Beijing and other areas where foreign investment has been important.

The beneficiaries of this have been, to some extent, the Chinese masses who have enjoyed - particularly in the urban areas - access to more consumer goods and a growth in living standards for significant sections. Other sections of the population have become far worse off with levels of inequality at a far higher level than under the old Stalinist regime.However, China has a long way to go to catch up with Western capitalism. The Chinese executive vice-prime minister, Huang Ju, at the billionaires' convention at Davos in January 2005, pointed out that China's output today is $1.6 trillion and could soar to $4 trillion by 2020. More to the point, he says, "as a more accurate measure of wealth" China's output per capita will triple to $3,000 per person by then. Inadvertently, perhaps, the Chinese prime minister shows the impoverished state of the mass of the Chinese population even in 15 years time. However, this is not true for the elite, which is transforming itself into the new capitalist class of China. Most output in the economy (about 60 per cent) now comes from the private sector.


Notwithstanding this, in the neo-colonial world, China, in some quarters, is held up as a 'model' for a successful escape route out of economic and cultural backwardness. Sections of the 'radical' and even 'left' intelligentsia, looking for an escape from the blind alley of landlordism and capitalism, eschew clear socialist and genuine Marxist ideas and now look towards China as the way forward. The same applies to some parties, such as the Communist Party of India - Marxist (CPM) which argues that China's "mixed economy" offers a development path for India itself. It is incredible that the CPM, a party which allegedly stands for the defence of the workers and poor of India, can praise a system - emerging Chinese capitalism and imperialism - which presides over the ruthless exploitation of the working class and the poor of China.

There is nothing remotely 'communist' or 'socialist' in this 'project'. It is a particularly pernicious modern-day example of the "primitive capitalist accumulation" of British capitalism described by Marx. This involves the intensified exploitation, indeed the super-exploitation, of the working class. With little or no organisation to resist the onslaught of capital, it pays a terrible price in low wages, long hours and drastic effects on health and safety (one example of this is the 6,000 miners killed annually in China). Not least are the fatal consequences on the environment, both for China and the world. The 'Communist' leaders of India have themselves embarked on the same path, offering transnational corporations special conditions in West Bengal where they are in government. They have never understood the Marxist opposition to the mixed economy championed by social democracy. Perhaps they tell their members that this is a kind of holding operation. In the future, in a more favourable situation, this will be redressed and the economy will move in a more socialist or communist direction. On the contrary, the arrow for the future of China points in an opposite direction, towards the remorseless growth of capitalism and the systematic dismantling of the state sector.

This does not rule out that the Chinese regime, under mass pressure or faced with a serious economic crisis, may be forced to temporarily halt the privatisation process and even renationalise some industries. However, as the examples of Russia, Japan or elsewhere in the 1990s have shown, such measures are 'state capitalist' in character. Capitalist governments can take over ailing industries, renovate them and hand them back to the private sector. Only a revolution - socialist and democratic in character - by the Chinese working class and poor could decisively halt China's march towards capitalism and set it on the road towards socialism. This would involve the halting of the catastrophic dismantling of state industries, the renationalisation of the privatised sectors, the dismantling of the one-party regime and, through workers and peasants' democracy, the establishment of a real socialist planned economy.

It is true that the European Union (EU) has preferred not to designate China as a "full market economy". This is partly because the Chinese have not as yet, internally at least, applied completely the 'neo-liberal' model of capitalism - it still has a significant state sector. Also, it is not sufficiently 'open' and 'transparent'; it is not prepared to give foreign capital a completely unrestrained free hand within its borders. Nevertheless, the direction in which China is travelling, to a full capitalist economy and state, is well advanced. There are still significant obstacles to the completion of the process, in the form of the resistance of the working class. Another is the intrinsic nature of capitalism itself, of booms followed by recessions or slumps, sometimes of a most catastrophic kind. With its increasingly capitalist character, China is now subject to some of the contradictions and maladies of capitalism elsewhere - of booms followed by recessions or slumps.

China could be on the verge of such a collapse, as it displays some of the same features which afflicted the countries of South-East Asia before the 1997 crash. It has an 'overheated' economy with huge 'excess' capacity, visible in the empty or half empty buildings and factories in Shanghai and other urban centres. It has a shaky banking sector and faces growing hostility from its capitalist rivals, with demands for 'protection' against Chinese goods from countries who are suffering or claim to be suffering from the effects of China's seemingly unstoppable economic juggernaut. Not least of the problems facing the Chinese ruling class is the fact that the working class and poor will not tolerate for ever the slave wages and conditions which exist at present. Even some foreign capitalist investors, fearing a massive social upheaval and its effects on their profits, as well as facing pressure from the workers' movement in the West, have urged a rise in rock-bottom Chinese wages. They have even gone so far as to advocate the formation of 'trade unions', of the tamest kind of course. China's future development is therefore likely to be anything other than smooth and harmonious.

Lifeline for world capitalism?

It has been championed as a possible lifeline for world capitalism, particularly in the event of a serious economic recession or slump. It accounts even now for a significant part of world manufacturing. However, it is still only responsible for 7 per cent of world factory output, although this could, according to some capitalist 'think tanks', escalate to 25 per cent of the world total within two decades. Significantly, unlike most growth China has experienced up to now, from capital and consumer exports, it is expected that in future this will increasingly come from soaring domestic demand for consumer and industrialised products among its 1.3 billion population.

All of this assumes, of course, a smooth increase of China's economic prowess and a benign acceptance of this by other capitalist and imperialist powers who are its rivals. Because of this, some commentators discount the economic prospects of China in the future as a dominating power on the grounds of its present limited economic weight. Yet, only a few years after its entry into the World Trade Organisation (WTO), China's influence on global commerce is, according to the Financial Times, "no longer merely significant. It is crucial." In markets such as base metals, shipping, coking coal, soya beans and other agricultural commodities, China has become either the dominant price setter or big swing factor in these sectors.

Its colossal growth rate - 9.5% in 2004 - is a magnet for worldwide capitalist investment and crucial, for instance, as the main engine of growth for Asia. China may have a huge trade surplus with the US but it has a deficit with the rest of Asia. For Japan, China could jeopardise political and economic stability in Asia and above all, threatens Tokyo's claims for dominance in the region. An indication of this threat posed to both the US and Japan is underlined by the fact that now, "China is the single largest contributor of export recovery in the Asian region." [Asia Times]

China is an assembly base of relatively low technology goods imported from the rest of Asia and their re-export to the American and other markets of the world as higher-level technology goods. It has overtaken Japan as the third most important trading nation in terms of trade volume after the US and Germany. It has, moreover, overtaken the US to become Japan's biggest trading partner. At the same time, the Chinese central banks, together with the Japanese, effectively underwrite the US dollar - despite the huge deficits that have accumulated in the US. This is an unofficial quid pro quo - the price that Asian capitalists are forced to pay in order to maintain the buoyancy of the US market, a source of growth for Asian exports. Larry Summers, the ex-US Financial Secretary, has aptly characterised this as an unstable "balance of financial terror".

Some commentators have tried to discount the long-term threat to other rival powers from China, economically at least, on the basis that the bulk of China's technology exports are actually low-margin commodity products such as personal computers, DVD players, etc. That is undoubtedly the case at the moment, with a lot of research, development and innovation being the product of either China-based foreign companies or companies part-owned by the state in collaboration with international capitalism. But the long involvement of China in this process has, in turn, meant a drive to assimilate, as with other "newly-industrialised countries" in the past, the technology of more advanced economies. The consequences are that China is advancing hugely in technical and scientific innovation, stem-cell research, the number of students involved in top-grade PhDs, etc.

In the modern world, as in the past, it is impossible to maintain a 'monopoly' of technological innovation. Those left behind by the more 'advanced' inevitably borrow or steal the technology of their competitors. The same is true of China. Its new capitalist leaders have absorbed very well the idea that all means are necessary in order to enhance the position of the capitalists and the state which increasingly represents them: "The one and only social responsibility of business is to make profits," says Milton Friedman, in the film 'Made in China'. This economic guru of Thatcher was justifying the brutish conditions of the Chinese masses under the whip of international capital but it applies with equal force to the relations between individual capitalists and between the states that represent them.

Another argument is that US imperialism will never allow the rise of China as a challenger for its economic and military supremacy.

US weakened

However, US imperialism, in the aftermath of the Iraq War, does not hold a similar dominant sway as appeared to be the case beforehand and particularly in the wake of September 11, 2001. The perception of a 'unipolar' world, the domination, militarily in particular but also economically, by one superpower, the US, has been severely undermined. The US is a military colossus but the same is not true economically. Its economic situation is so parlous, underwritten for the time being by Asian capitalism, that faced with this in any other country IMF inspectors would be descending with an austerity programme in their back pocket. This is a direct reversal of the past when the overwhelming economic might of US imperialism underwrote its military prowess. In 1945, for instance, it was responsible for 50 per cent of world production with three quarters of the world's gold reserves concentrated at Fort Knox. That position has gone like the snows of yesteryear as the US, along with many other 'industrialised' countries, has been hollowed out with the decline of their manufacturing industries and their outsourcing to the low-wage areas of the world such as China.

US supremacy was, to some extent, tolerated prior to the Iraq War. But the hostility of most of the European bourgeois to the neo-conservative gang of Bush and Co occupying the White House, partly reflecting the antiwar mood of their populations and their separate interests, has enormously deepened. The Atlantic has got wider and deeper as the outlines of an intensified inter-imperialist rivalry has broken out between the US and European capitalism - excluding, of course the lapdogs of the US such as Blair in Britain or Berlusconi in Italy, and some capitalist minnows in Eastern Europe. Following his re-election, Bush, through Condoleezza Rice, engaged in a hasty job of 'bridge building'. But the genie is out of the bottle. Relations between the capitalist powers have been fractured and, in a sense, have become even more aggravated through the continuation of the Iraq War.

Indeed, this inter-imperialist rivalry is more akin to the clashes between the rival gangs of imperialist capitalists prior to the First World War than the jostling which took place, for instance, in most of the post-1945 period. Then, the existence of an antagonistic social system to capitalism - the planned economy but with totalitarian rule by the bureaucracy in Stalinist Russia - acted as the glue to maintain these rivalries in check. Other capitalist rivals to US imperialism were prepared to tolerate its dominance and shield themselves under its military umbrella. The fall of the Berlin Wall put paid to this. The glue had come unstuck. However, throughout the 1990s the US, because of its overweening military power, ruled a 'unipolar' world and an increasingly US 'unilateralist' world as well. The war in Iraq, however, has, in effect, ended this. All the latent tensions burst to the surface as the populations of Europe and the world demonstrated en masse their opposition to the Iraq War. The European bourgeois openly expressed its opposition to US imperialism. They were scathingly dismissed as "old Europe" by US Defense Secretary Rumsfeld who, following Bush's re-election, has tried to 'humorously' distance himself from his previous harsh statements.

The same determination to face down the US was displayed by Europe's initial decision to lift its arms embargo against China. However, the threat to do so was first met with furious denunciations from Washington. When the hapless Jack Straw stepped in and said that this was a "misunderstanding" on the part of the US, he was savagely attacked by US government representatives. This hostility is motivated by the US, and by its Asian allies such as Japan, partly because of the fear of a rearmed China upsetting the geo-political order that presently reigns in Asia. This is, of course, an 'order' presently dominated by the US and Japan, which is rearming in order to supplant Australia as the US's 'Deputy Sheriff' in the Asian region. They see the growth of China's military power and the modernisation of its armed forces as a future threat to them.

They are therefore doing everything to prevent this, as has been seen in the success, for the time being, in 'persuading' (read blackmail of) Europe into backing away from lifting the arms embargo of China. The US in particular has pressurised European capitalism into taking this decision by invoking the spectre of future Chinese "aggression". Countering this, Wen Jiabao, the Chinese Prime Minister, said at the close of the annual session of the National People's Congress in April: "China's national defence policy is one of self-protection." The US, in turn, answered this by declaring to a recent meeting of the US Pacific Command that Chinese strengthening of its navy is "Disconcerting… it is more than might be required for their defence." Ditto the US which, despite its claims, is not defending its borders when it invades other countries like Iraq. Moreover, the official Chinese defence budget of $30 billion is dwarfed by the expenditure of the US Pentagon of over $400 billion.

Clash over arms

China's update of its arms technology would undoubtedly enhance its position in relation to the ongoing clash between China on the one side and Taiwan and the US on the other over Taiwan. At the same time, the colossal US arms industry wishes to exert a virtual monopoly of arms sales worldwide. Part of the reason for its bellicose stance towards China and in support of Taiwan recently is precisely to ratchet up the arms expenditure of Taiwan, which has "seen a steady decline in Taiwanese defence spending as a proportion of Gross Domestic Product over the past decade". [Financial Times.] The Taiwanese parliament, from the capital Taipei, has been stalling over a proposed US arms procurement package. The US is the main beneficiary of this increase in arms expenditure. Pressurising the Taiwanese, they have drawn a parallel between the threat to Taiwan from China and Saddam Hussein's attack on Kuwait in 1990.

Backed by Japan, they have vehemently criticised the European Union's plans to lift its arms embargo. This is despite the fact that China currently buys military hardware from Russia, Israel and Eastern Europe. Israel has been forced to back away from arms sales to China as the US has threatened to hold back some military assistance from Israel itself. All of this is because "the US fears western European components, subsystems and technology could ultimately help Beijing bring its command and control systems and military information technology dangerously close to US levels." [Financial Times.] Like British imperialism in its heyday, the US wishes to keep all rivals or potential rivals as weak as possible militarily; Lilliputians compared to Gulliver.

On the other hand, the claim of the Chinese elite, that its military modernisation is merely for "self-protection", does not hold water. They have undoubtedly tapped into the deep-seated resentment at the imperialist plunder of China in the past. The Chinese Prime Minister has declared: "Over the past 100 years, China has always been bullied by others. China has never sent a single soldier to occupy even an inch of another country's land." The first part of this statement is correct, the last part is not. What were the Chinese invasions of India and Vietnam if no incursions into "another country's land"? Moreover, Tibetans would argue that they have been under military occupation by the centralised Chinese state since 1950. In reality, the military build-up of China is linked to its emergence, not just as a capitalist but also an increasingly imperialist power, and one of importance and clout. In the past, in the period of Maoist austerity, China was largely self-reliant although poor. Now, the growth of the Chinese economy has resulted in a greater and greater dependence on the massive import of oil and raw materials. This is why the experts at the Central School for "Communist Party Cadres" noted recently: "China's 'lifeline' ran through the Taiwan Straits, South China Sea, Malacca Straits and the Indian Ocean all the way to the Arabian Sea. China has to strengthen its naval forces to guarantee the security of its access to ship resources and should actively develop a large shipping fleet capable of operating in distant oceans."

The building up of a powerful 'blue-water' navy is not for the purposes of strengthening the struggles of the working class or the poor worldwide, but of enhancing the power of the Chinese state in defence of the imperialist appetites of the emerging capitalist elite of China. China has acquired from Russia powerful destroyers equipped with supersonic anti-ship missiles and quiet Kilo Class diesel submarines. Experts say that this could challenge even the mighty US forces.

This process is transforming previous perceptions of China on the part of the US. The Bush administration, when it first came to power in 2000, classified China as a "strategic competitor" to the US. This attitude was partly softened when China did not oppose the US's 'war on terror' against al-Qa'ida. In Central Asia, the two powers even cooperated to support dictatorial regimes.Now, however, in reality if not in words, the original Bush doctrine towards China is increasingly the guiding philosophy of the US administration. This is manifested by the opposition to the lifting of the European arms embargo and, critically, in the conflict over Taiwan. US government spokespersons have warned about the military build up of China: "If this trend continues some day opinion in the US towards China might change." [Financial Times]

This is spoken in the future tense but the reality is that on all fronts - military, diplomatic and economic - the situation has either changed quite dramatically or, in the case of the economy, there are tendencies at work - threats of protectionism - which indicate a breach in the future. However, the EU, for its part, particularly key countries like Germany and France, look greedily to the future potential market of China. Already the EU rivals the US as China's biggest trading partner, with two-way trade of €135 billion (£93 billion) in 2003. In the words of the Financial Times: "European companies are keen to do more business in what is set to become the biggest economy in the world." Naturally, European arms manufacturers have been the biggest backers of the lifting of the embargo.

Geo-political effects

These developments have both geo-political and economic effects. The potential of China is an undoubted fact but its realisation is much more problematical. On the one side, China is displaying the same imperialist appetites as its rivals as it buys up, for instance, the US computer giant IBM's personal computer business - which sent shockwaves through the US - and has moved to take over Unocal, the massive US energy giant. At the same time, it is pushing to extend its influence in all areas of the world but particularly in those countries and regions rich in sources of energy and raw materials for China's burgeoning industries. From 2000 to 2003, China accounted for nearly 40 per cent of the growth in world output.

Latin America, for instance, is a potential beneficiary of the boom of raw material imports into China. On the one side, its textile industries and low value-added manufacturing have been affected by China's massive industrial upsurge like other areas of the world. At the same time, Brazil, Venezuela, Chile and many other countries have benefited from increased trade with China. Venezuela in particular - at odds with both the US and its proxies in Latin America, such as Colombia, who wish to overthrow the Chavez regime - is eager to exploit China's search for oil. Chavez has suggested that trade with China, involving heavy investment by the latter in Venezuela's oil industry and exports of oil to China, would hit $3 billion by 2005, more than double the figure of 2004. China, faced with food shortages because of the dilapidated state of its farming industry, is eager for the soya beans and wheat of Brazil to feed its hungry population. This could not serve as a permanent lifeline for Latin America, for the 'underdeveloped world', let alone the world economy as a whole. Nevertheless, China is seeking to assert itself as both an emerging superpower and a champion of the downtrodden African, Asian and, to some extent, Latin-American world.

The Stalinist elite, in the past, adopted this mantle with their participation in the Bandung Conference of 1955, comprising 29 "non-aligned" countries from Asia and Africa meeting without the participation of the industrial West. Seeking a counterweight to the influence of the US and Russian Stalinism, Chinese Prime Minister Zhou Enlai then intervened in this conference as a champion of the neo-colonial world. The regime of Mao then did not have the economic clout or the class basis for a decisive intervention in the neo-colonial world. There are differences between now and then. As the Asia Times comments: "While Beijing continues to stress the need for developing nations to band together as a counterweight to the industrialised West, these days China's initiatives are propelled not by ideology but by efforts to secure natural resources and political influence." This involves a drive to extend markets, sources of raw materials and to use as an inducement, like other imperialist powers, aid and loans. It recently offered Angola a $2 billion "soft loan", for instance, in order to win a contract to develop an offshore oil field for which India was bidding.

Courting allies

China is by far the largest donor to Pakistan, providing up to $9 billion in various forms of aid over the past two years. It courts the Musharraf regime in Pakistan for a number of reasons: "For China, [Musharraf's] continuance and success are essential for political stability in the Muslim-majority region of Xinjiang, for giving the Chinese navy a strategic presence on the Mekran coast in Baluchistan overlooking the supply routes for oil needed to keep the Chinese economy growing and for checking what they have always looked on - but which they no longer openly say - as India's hegemonistic ambitions." [Asia Times, 13 April 2005.] At the same time it is courting India, fearing that the US is building it up as a regional counterweight to China. In addition to bilateral grants, Beijing has pledged $100 million to the Asian Development Fund and the African Development Fund. It has deployed "peacekeepers" (troops) to war torn Liberia, and pledged to cancel the debts of $1.3 billion owed by 31 African countries. One third of China's trade is conducted with Asia and Africa. A recent visit of the Nigerian President Obasanjo is just one manifestation of China's interest in procuring the resources of Africa and the neo-colonial world for its burgeoning economy.

In percentage terms, China's exports are still small and its GDP is less than a quarter of Japan's at the present time. Moreover, while China is crucial as the base for massive manufacturing growth, largely produced in foreign-owned or partly foreign-owned companies, the internal market in China is not crucial, either for the US or the world economy. In 2003, for instance, US companies made almost the same profits in the Australian market of only 19 million people, and more in Taiwan and South Korea combined, with a total market of only 70 million, as they did in the potential 1.3 billion market of China. All of this leaves aside the possibility of a financial implosion in China. Therefore, China is not poised to immediately supplant the US as the new 'superpower' but, nevertheless, is a source of increased rivalry and potential danger on a capitalist basis to the US ruling class and its ally, Japan.

Since the 1870s, when Japan began to catch up with the west, it began to establish a dominant role in Asia, the 'model' for realising the pan-Asian dream of freeing the region from the control of the 'foreign outside colonial powers'. The Japanese ruling class perceived their Chinese counterparts as a weak, broken power which was a fiefdom of different, rival imperialist powers, which dismembered it and devoured its wealth and resources. Japan's 'mission' was to rescue China via its technology in the baggage train of conquering armies. This dream was shattered in the 1930s and by the Second World War, which saw China, particularly the Stalinist forces of Mao Zedong and his army of peasant guerrillas, defeat Japan, who also suffered an annihilating defeat at the hands of US and British imperialism.

Resurrected out of the ashes of this defeat by US imperialism as a counterweight to the emergence of Stalinist China, Japan was allowed to undergo an astonishing economic resurgence but was effectively debarred from reassembling an army and a war machine in consonance with its economic power. Now, however, these constraints have been loosened as the perceived threat from China to Japan and also the US as the dominant power in the Asia-Pacific region emerges. Faced with China's strengthening economic and military power, the United States and Japan are reinforcing "bilateral security" by changing Tokyo's 'pacifistic' military posture for their common interests - to prevent an ever-stronger China from emerging. The Asia Times makes the point: "For the US, China is the only country that has high potential to threaten US global dominance in the 21st century. For Japan, China could jeopardise political and economic stability in Asia, threatening Tokyo's credibility as the leading economic power in the region."

The Bush administration's preoccupation with Iraq has undermined US imperialism's influence in East Asia. This is exemplified by the stalemate over North Korea, a crisis that could provide several regional powers (Japan and South Korea for example) with the pretext to build their own nuclear 'deterrent'. China, which not least wants to avoid a nuclear-armed Japan, has used the Korean crisis to demonstrate its enhanced diplomatic weight in the region. Similarly, China has launched a major diplomatic offensive for new trade agreements in the East Asia region, upstaging Japan, which alongside US imperialism has been the region's traditional economic leader.

Economic crisis looms

China is buying so much from Asia because of the growth of its economy. 38 per cent of its imports are resource goods, which include agricultural products, chemicals, minerals, metals and textiles. The other 62 per cent of China's imports are manufactured goods - intensive products such as electronics, machinery, equipment and instruments. Mainland customs data show that nearly 50 per cent of goods imported into China are used for labour-intensive packaging or reprocessing and then re-exporting. However, the key question is, given the level of China's growth, can it be sustained? This is highly problematical; China will "likely replace the US as the major market for Asian exports and will eventually become a significant investor in the region". [Chi Lo.]

Indeed, China has already invested significantly in Asia; 510 outward-bound FDI projects in 2003 totalled just over $2 billion, an increase of 112.3 per cent over 2002. But it is about to run into the economic buffers. Some estimates predict that growth in the economy is likely to fall in the next period to 3 or 4 per cent per annum. It could exceed this figure but even if it reaches this kind of drop, it would be sufficient to significantly burn the capitalists of Asia and the rest of the world given their overdependence upon China at the present time. The Asia Times states: "According to Chinese scholars, over 50 per cent of America's daily consumer goods come from China." At the same time, if the Chinese economy was to contract, it would have a devastating effect: "The difference between China expanding at 9 per cent and a China growing at 4 per cent is an astounding $65 billion in annual output." [Asia Times.]

Nevertheless, US capitalism, through the mouth of US Treasury Secretary John Snow and the White House, is threatening China with retaliation unless it comes to heel and accepts "currency flexibility", in other words revaluation of the Chinese currency the renminbi. It is currently pegged to the dollar but the US wishes to undercut the colossal export machine of China through an appreciation of its currency. This would make Chinese goods more expensive and therefore, in theory, less attractive to potential buyers worldwide including in the US. This would open up a breathing space for the US, amongst others, to recapture lost markets.

This, however, is very much an illusion. The recent G7 summit urged China to adopt such measures, even though China as the second biggest economy now in Asia, was not present at the G7 table. China, for its part, remains "unconvinced" and even the Asian editor of the Italian daily La Stampa argues: "An appreciation of the Yuan by 5 to 10 per cent [would mean that] the dollar would go further down and the euro further up. One isn't sure that would save any jobs in the US , but hot money rushing in and out of China could well disrupt the Chinese economy and , by extension, global finances. China is not sure if it - or anybody else for that matter - would gain anything apart from some currency punters."

In order to mollify the clamour for China to rein in its industrial powerhouse, the Chinese regime imposed "quotas" on textile exports, for instance. This is unlikely to satisfy the growing protectionist lobby in the US and elsewhere. These trends, together with the instability of the "financial balance of terror", could lead to a repetition of the 1997 Asian economic crisis, only this time with China at its hub and with massive repercussions for the region and the world.

Several capitalist economists even argue that the renminbi might not be overvalued. China is one of the principal credits of the US deficits. Martin Wolf, in the Financial Times of 20 April, warns the US: "Biting the hand that feeds one is folly." Economic disruption could result if "the flow of official international credit [was] cut off. The consequences would almost certainly include a dollar collapse, higher domestic prices, a jump in interest rates, a fall in prices of housing, a steep rise in household bankruptcies and, not least, a sharp US recession." (His source is Professor Nouriel Roubini of New York University).

Paradoxical relations of Japan and China

China, as we have seen, has begun to assert itself diplomatically and also militarily. Great powers have always seen the need for significant armed forces to reinforce their economic weight. China, however, in reaching out worldwide economically, does not have the military muscle, as yet, to back this up. It is unable to project the power of its army, the People's Liberation Army (PLA), beyond Taiwan, an island state off the southeast coast of China which Beijing regards as a breakaway part of its territory. (The search for arms technology in Europe is an attempt to correct this position.) But as in other matters China, in vying for domination in Asia in particular, rubs up against Japan and, more significantly, US imperialism as well.

Relations with Japan appear paradoxical as far as China is concerned. We have seen how integrated and dependent both economies are for each other. And yet, at the same time, this is combined with what can only be described as a mini-Cold War between the two giants. Some commentators have characterised this as "politically cold and economically warm". Japanese Prime Minister Koizumi's visits to the Yasukuni Shinto war memorial, including the burial grounds of "Class A" Japanese war criminals, are part of an attempt to court the nationalist wing of the political establishment at home and neutralise their opposition to his neo-liberal reforms. But these visits have aroused enormous opposition both in China and in South Korea, which suffered horribly at the hands of Japanese imperialism in the past. This has been accompanied in Japan with a xenophobic wave against so-called "Chinese crimes". A few murders by Chinese nationals domiciled in Japan have been utilised by right-wing politicians to give the impression that most crime in Japan is conducted by "foreigners", whereas 97 per cent of all crimes are the product of Japanese citizens themselves.

The perceived "China threat", taken together with the threat from North Korea - which actually fired missiles over Japan and also into the Sea of Japan - has allowed the Japanese ruling class to whip up nationalist sentiment. The result is that 58 per cent of Japanese now "fear China's long-term intentions". [The Guardian, London] The Japanese foreign minister recently asked Israel to halt weapons sales to Japan's "neighbours", which is code for China. The government has used the "external threat" to begin to rearm as a means of "standing up" to China. At the same time, the Japanese defence minister has drawn up plans to deploy 55,000 troops in the event of an invasion of disputed islands off southern Japan, and as one commentator stated, "There was no question as to who the most likely invader would be." These developments are part of a profound shift - the creeping "de-pacification of Japan" - which reflects Japanese capitalism's increasing desire to punch its weight in world affairs. This has seen it send token military contingents to East Timor, Iraq and now Aceh, as a means of gradually breaking down public opposition to the use of its armies overseas, something that has been taboo for 50 years.

The Chinese regime has utilised this increased muscularity of Japan to whip up anti-Japanese, nationalist sentiment. In effect, the ex-'Communist' Party of China, having abandoned the ideology of Stalinism, and of 'socialism' (although it finds it useful to deploy this term when necessary) now relies on nationalist Chinese sentiment to justify its actions, particularly externally. In early 2005, for the first time, the new Japanese defence policy guideline names China as a possible threat: "China, which has significant influence on the region's security, has been modernising its nuclear and missile capabilities as well as naval and air forces, and expanding its area of operation at sea." Japan is pushing to regain disputed islands occupied by Russia at the end of the Second World War and is prepared to lock horns with China as well on disputed territorial issues.

The US, on the other hand, is potentially in the same situation as Japan in its relations with China but on a much larger scale. The seemingly endless stream of cheap goods has significantly benefited US capitalism, fuelling the consumer boom in the US. The low prices of these goods, moreover, have acted as a deflationary factor on the world economy, keeping down, as with capitalist globalisation as a whole, the threat of inflation that plagued the world economy in the past, for instance during the 1970s. This in turn has been an important factor allowing the US Federal Reserve to keep interest rates at a historically low level. US imperialism is, therefore, conducting a complex balancing act. It is economically dependent on China, with American transnational companies investing hugely in the country, both for export and for the growing domestic market.

As we have seen, the Chinese state, alongside Japan, in effect underwrites the colossal US deficits by purchasing US government bonds. Added to this now is an agreement, although only in outline in character at this stage, for China and the ten-member Association of South-East Asian Nations (ASEAN) to establish a free trade area. In the past, the US opposed this, which it perceived as a threat to its economic grip on the region. But preoccupied with the Iraq War, the US was muted in its reaction when China revived plans for the establishment of such an arrangement two years ago. If China-ASEAN got off the ground as a rival to the EU and the North American Free Trade Area (NAFTA), encompassing half the world's population as it does, this could pose a significant threat to the other economic blocs. The US is likely, if not to pour scorn, then certainly to seek to undermine this attempt to unite the Southeast Asian nations and China. China, on the other hand, is using this as a wedge against the US, with the implicit threat to Japan that unless it joins in it too will be shut out, along with the US, from a 'dialogue', both on geopolitics in the region and on economic developments. This is yet again an example of where China is asserting its diplomatic and military power in line with its growing economic weight.


Another area of conflict is in Taiwan, a constant flashpoint in the past and potentially still the trigger for a major military confrontation in the region. This recently came to a head with the adoption by Beijing of the 'Anti-Secession Law' (ASL) which led to massive anti-ASL demonstrations - numbering possibly half a million - in Taiwan. Some of the same features in Japan's relations with China are present in Taiwan's relations with the mainland. The 'One China' position of the Beijing leadership means that any attempt to declare Taiwanese independence could be the trigger for military action: "Should the Taiwan authorities go so far as to make a reckless attempt that constitutes a major incident of Taiwan independence, the Chinese people and armed forces will resolutely and thoroughly crush it at any cost." [2005 Beijing Defence Policy Paper.]

If a conflict should break out between China and Taiwan, it would not end there. Under the defence agreement with Taiwan, the US would be "duty bound" to come to the assistance of Taiwan. This would mean two nuclear powers confronting one another in the region. Moreover, Japan, which is a military base and home to 50,000 US troops, from which the US would launch any defence of Taiwan, would also find itself sucked in, plunging the whole region into turmoil. The US's primary aim is its own strategic, military and economic interests; "Asked in Tokyo why the US kept so many troops in Okinawa, [Condoleezza Rice] immediately mentioned the rise of China. She went on to suggest that US ties with Japan, South Korea and India, were aimed at ensuring China's good behaviour." [Financial Times 23 March 2005.] Even a Chinese military blockade of shipping in the Taiwan Strait aimed at forcing the Taiwanese government into line, could inflict massive economic fallout on both economies and the rest of Asia. As a US executive warned, a conflict between China and Taiwan "would cripple the global electronics industry" [Financial Times].

The position of US imperialism has nothing to do with support for Taiwanese 'democracy' or self-determination. Its primary aim is stability in the region and for this reason it has been pressurising the Taiwanese government to moderate its pro-independence rhetoric. But despite its far greater economic interests in the mainland today, US imperialism could not just sit back if China tried to retake Taiwan by force. To refuse to assist Taiwan would effectively signal the end of US dominance in Asia, with major implications for its main allies in the region - Japan, South Korea, the Philippines and Australia for example.

Such a conflict appeared to be very close in the past. In 1991, both sides hurled shells at one another across the Taiwan Straits. Moreover, in the Taiwanese elections at the end of 2004, the governing Democratic Progressive Party (DPP) threatened that if it increased its support in the elections, the president would take action which would be a de facto declaration of Taiwanese independence. This seemed to correspond with the outlook of a growing section of the Taiwanese population, who saw themselves primarily as Taiwanese, which has risen from 17 per cent to 41 per cent, whereas those who see themselves purely as Chinese has dropped from 26 per cent to 6 per cent of the population. From the point of view of elementary democracy, never mind a Marxist and socialist point of view, the Taiwanese people should have the right to decide their own fate, free of bellicose threats from any quarter, and foreign military involvement whether from Beijing or Washington.

The fact that Taiwan territory 'belonged' to China in the past is of no decisive importance in determining its future. Important are the wishes of the Taiwanese people. Like any other people, the Taiwanese have the right of self-determination. As articles from Laurence Coates on the CWI website have indicated, the population seems to be divided between two bourgeois blocs, the 'Greens', who promote Taiwanese identity are opposed to unification with the mainland, and the 'Blues' and the KMT are generally seen as much more right-wing than DPP, although in practice the difference is not so big) who favour more rapid integration with China.

The position of the CWI and of Marxism is that neither camp offers a way forward for the working class. We defend the right of the Taiwanese people themselves to determine what relations they have with neighbouring states and the world. Unity between the Taiwanese and Chinese peoples, with historical, cultural and now economic ties, may be desirable but not if it is imposed from the top by a capitalist elite. At the same time, unless the Taiwanese masses forge links and win support from China's vast emerging working class, which is noticeably less nationalistic and keen on a Taiwan war than the urban middle classes and intellectuals, there is a very real risk that any popular movement towards a formal declaration of independence could unleash a devastating war with Beijing.

One of the main factors in Beijing's bellicose approach towards Taiwan is its fear of similar opposition and separatist movements, in particular on mainland China itself. By threatening Taiwan it is warning potential national or cultural rebels in China itself to desist. Yet, just as the Taiwanese have the right of self-determination, so do the Uighur Muslim minorities, those in Xinjiang and any other section of the population of China that feels oppressed by the centralised Chinese state.

Beijing has used the issue of Taiwan, again playing the nationalist card, in order to mobilise its people behind the government and suppress the criticisms of other issues, lack of democracy, lack of national and democratic rights in the rest of China, amongst Muslims, Tibetans, etc. In the aftermath of the Taiwanese elections the DPP softened its approach and the issue receded somewhat but the danger of military escalation has not gone away. Tension was high between China and Taiwan in September 2004, when the Taiwanese prime minister declared: "If you hit us with 100 missiles, we'll fight you back with 50 missiles. If you hit Taipei or Kaohshung, we'll strike Shanghai."

Role of Chinese masses

While these bellicose threats are made, with both sides using nationalism as a diversion from social problems at home, the underlying economic integration of Taiwan with the mainland is a fact. In 2002, China overtook Japan and Taiwan to become the world's second largest IT hardware producer after America. The steep upward curve of China's IT exports is almost exactly matched by its imports of IT components from Taiwan. China is now the world's biggest IT hardware exporter to America. Yet more than 60 per cent of these exports are made in China by Taiwanese companies. This underlines the role of the 'overseas Chinese' of which Taiwan investors are a vital component, in the economic development of China. Taiwanese companies employ some 10 million people on the mainland. At the same time, Taiwan is second only to Japan as a source of Chinese imports. Notwithstanding this, such is the clash of interests, particularly between China, Japan and the US, together with its suzerainty, Taiwan, that the region is a flashpoint for conflict and on a gigantic scale. Involved here is not a struggle for the interests of the majority of the population, the working class and poor peasants of the region, but the political survival of the rival ruling elites.

These events conclusively demonstrate that the Chinese masses are no longer to be considered as mere passive instruments for the realisation of the aims of Chinese and world capital. There are some comparisons in the process of privatisation - read daylight robbery - of collective state assets, in China and what happened in the former USSR and Eastern Europe. There are also profound differences as well. In the case of the USSR and Eastern Europe, a rapid introduction of "wild capitalism" resulted in the greatest economic collapse in the history of capitalism. The outcome in China up to now, as we have seen, has been entirely different, with, it seems, China's endless economic fireworks dazzling the world. In the case of the USSR there was mass impoverishment but in China there has been a significant growth in living standards, perhaps for the majority at least of the urban population.

Moreover, there are differences in consciousness as well. In Russia and Eastern Europe, such was the discrediting of the Stalinist regime that the majority of the population either supported or acquiesced in the return back to capitalism. They regretted their decision later. Consciousness in China is more complicated. The crucial difference from the former Soviet Union is that China has experienced a longer road, more of a controlled journey towards capitalism with all the contradictions this entails. This in turn means a longer experience of capitalism for the Chinese masses and a dispelling, partially at least, of illusions of broad layers of the population as to what kind of future is held out for them on the basis of this system.

Consciousness in China is not that of Russia today but perhaps more like nineteenth century Britain or the Russian working class in the period prior to the 1905 Revolution. The economy, in crude figures, might be going ahead, but it is on the backs of the Chinese masses and their sweat and suffering. They have had more than two decades of this to begin to draw conclusions about the nature of this system. Naturally, the first priority for the masses is to assemble basic organisations, the trade unions, with which to check the onslaught of capitalism, red in tooth and claw and 'vampire-like', as Marx described it more than 130 years ago, in its lust to suck out huge profits from the labour of the working class. This stage in the struggle is inevitable and mass resistance is growing. According to official Chinese government statistics, there were 58,000 incidents of demonstrations, strikes and other forms of oppositional movements in China last year. This represented a 15 per cent increase on the previous year. Moreover, recently a whole Chinese village rose up in opposition to widespread environmental damage. They organised mass demonstrations and, in the process, clashed with the authorities and police. At least two elderly women were killed. This is a portent of what is to come.

However, despite the huge numbers involved, the protests have not yet taken on a co-ordinated form, not just at national level but in a significant region, particularly in an urban centre of importance. If it should do so, as it will, it can become the heat lightning flash of the coming revolution of the Chinese working class and poor farmers. This will have elements of what we saw in the 1905 Russian Revolution and the great heroic enterprises of the Chinese working class in the past, particularly the Chinese Revolution of 1925-27, when the masses, kept at the level of pack animals, stepped onto the scene of human history.

In the course of this movement, the working class will generalise, select a leadership, search towards an alternative party, go back and find examples from the past to inspire their struggles today. They will find a road to the genuine democratic and socialist ideas, underpinned by a Marxist analysis and unbesmirched by the tainted ideas and methods of Stalinism. In so doing, they can begin to change their conditions. In other words, genuine Marxism, as understood by Lenin and Trotsky, Marx and Engels, will be rediscovered anew by the Chinese working class, above all by the new fresh layers in the first instance.

Additionally, from an environmental point of view, capitalism is unsustainable in China. This is not the conclusion of Marxists but of China's own State Environmental Protection Administration, officially a branch of the Beijing government itself. Its deputy director, Pan Yue, has declared: "If we continue on this path of traditional industrial civilisation, then there is no chance that we will have sustainable development. China's populace, resources, environment have already reached the limits of their capacity to cope." In the past 20 years the consumption of oil has risen 100 per cent, natural gas 92 per cent, steel 143 per cent, copper 189 per cent and aluminium 380 per cent. While China has only 21 per cent of the world's population, it has only a fraction of its reserves of oil, natural gas, iron ore, alumina and other resources.

Historically, the advocates of capitalism have extolled the idea that "industrialisation equals prosperity" and, conversely, "agriculture equals poverty". But this is the likely outcome only on the basis of capitalism; "If China wanted to live like Americans, we would need the resources of four worlds to do so." [Liang Congjie, China's leading independent environmentalist.] But this is a conclusion based on capitalism. Socialist and democratic planning could give everybody "US living standards" on the basis of environmentally friendly and sustainable growth.

Not only China but the whole world is crying out for a real democratic division of labour based on the planning, management and control of the development of the world. This is not possible so long as a handful of billionaires, their governments and system control society. Only by the mass of the population through their democratic organisations and representatives acting to change the situation can China and the world be saved from rapacious capitalism. Such a world is possible on the basis of the masses taking events into their own hands and reshaping society on a socialist basis. This is a mighty task which the Chinese working class will embrace in the next period.

Peter Taaffe
April 2005

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