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China’s Position in the Hierarchy of Global Capitalism

The question of China’s place in the international order is central to characterizing where the world capitalist system is heading. This article is part of an ongoing and as yet unconcluded process of elaboration and discussion on the topic within the Trotskyist Fraction–Fourth International (as part of which we have been publishing a variety of contributions). The positions taken below are the author’s own and do not reflect those of the Trotskyist Fraction as a whole.

Juan Chingo

February 10, 2021
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Unlike most of the colonial and semicolonial countries on the periphery of the capitalist world system, China has managed to take off in recent decades, achieving a level of development that has surprised many, including this writer. Such an achievement is not without precedent if we consider the few other exceptions, such as South Korea and Taiwan, which China has tried to emulate. It has never, though, happened in so huge a country — the most populous on earth, with enormous economic, social, and geopolitical consequences on a planetary scale. But at this point, China’s maintenance and balance of its development has become a far more complex and difficult goal to achieve than the feat achieved in recent decades. A difficult transition, still in its infancy, will determine whether China becomes an imperialist country — that is, whether it succeeds in consolidating its progress. In this article, I attempt to establish the limits and obstacles that China must overcome to achieve that goal.

The Superpower’s Technological Fragility

China’s technological fundamentals are still fragile, as the trade war with the United States has revealed. It is true that China is the only country that has been able to develop Internet giants that can, in some ways, approximate their Silicon Valley counterparts. At the same time, some Chinese companies have achieved credible positions in certain industrial technologies, including solar power, cellular infrastructure, and high-speed rail. They are also making good progress in consumer electronics, from smartphones to drones. And Chinese companies have a plausible opportunity to lead in emerging technologies such as artificial intelligence and quantum computing. But simplistically extending the success of a limited set of frontrunning technology leaders to the whole fabric of Chinese business would be a mistake: the innovative capacity of the vast majority of China’s 30 million small companies is quite limited, and their reality is far removed from that of the firms born in the technology hubs of Shenzhen and Beijing.

It is also difficult to see the consumer Internet as the highest form of technology. It is doubtful that apps like WeChat, Facebook, Tencent, and others that people use to have fun contribute much to work productivity. After all, they distract human resources from more fruitful R&D fields such as materials science or semiconductor manufacturing in favor of advertising optimization and game development. In other words, we must distinguish (a) innovation in business models and leveraging network effects from (b) a qualitative leap in R&D and the creation of new patents. For China in particular, it is not certain that the population’s high consumption of and dependence on the Internet makes the country more technologically advanced. Put another way, while Alibaba and Tencent are clearly technically impressive in software development, their business success depends mostly on the size of the market and the social and regulatory environment. The ubiquity of mobile payments is the result not only of technological innovation (however substantial it may be) but also of the financial regulatory regime and the absence of credit cards. China’s e-commerce works very well because the country has built a world-class infrastructure and because there are many migrant workers available to deliver goods in densely populated urban areas. These are good businesses, but they can hardly be put forth as scientific and industrial achievements.

More generally, despite China’s central position in the global manufacturing of industrial goods, only a few native Chinese companies occupy leading positions in industries, including steel, solar power generation, and telecommunications equipment. The bulk of China’s industrial sectors still have a long way to go before they can truly be considered the peers of the German, Japanese, Korean, and American giants. Overall, Chinese companies are underperforming. Few domestic companies have become successful global brands, and Chinese companies still lag far behind in more technologically sophisticated industries such as aviation and semiconductors. Although China is the world’s second-largest market, it is generally more difficult to name global Chinese brands than Japanese and Korean ones, even when they were approaching China’s current level of GDP per capita.

If we consider the position of Chinese companies in relation to established technologies, Chinese companies have a poor track record of making inroads into these industries. That is the case with semiconductors, machine tools, and commercial aviation (whose efficiency is measured by clearer technical and commercial benchmarks), which are considerably more difficult than steel and solar panel manufacturing. Thus, the United States takes advantage of having many decades’ experience in semiconductor design and manufacturing, developing a virtuous ecosystem that allows it to maintain its leadership in a critically important technology. When it comes to factory automation systems, machine tools, robotic arms, and other types of technologically complex production machinery, the most advanced suppliers are in Japan, Germany, and Switzerland (the United States is paying the price of its deindustrialization in this domain, so closely linked to the industrial process).

There is a wide, persistent gap in innovation and technology between China and the United States, Germany, Japan, and, to some extent, South Korea — advanced economies whose productivity and prosperity rest on economies made up of thousands of competitive and innovative firms.

This weighting is much more realistic than the emphasis often placed on quantifying inputs. Several papers on China’s progress and its technological advances focus on growth in patent filings, R&D spending, peer-reviewed journal publications, and other types of inputs. These are metrics for which data can be found, and so measures of “innovation” are often built around them. But these inputs are irrelevant if they do not yield results,1“In terms of sheer numbers, China’s overall performance in terms of publications and patents is impressive. Measured by the number of papers published in all journals indexed by Science Citation Index (SCI), in 2016 China ranked second in the world, accounting for some 20 percent of the world’s total. Chinese inventors also have filed the most patent applications in recent years. China’s State Intellectual Property Office (SIPO) recently released its 2017 report on patent activities in China. According to the report, the number of patent applications increased 14.2 percent from 2016, registering 1.38 million, while the number of patents granted reached 420,000, with a strong concentration in China’s east coast region. According to Science & Technology Indicators, recently released by the U.S. National Science Foundation and National Science Board, ‘China has become — or is on the verge of becoming — a scientific and technical superpower,’ in terms of R&D spending, technical papers, and its technical workforce.

“It is unclear whether quantitative measures actually represent an upward trend in the quality of Chinese science and innovation, or whether money is being wasted to some extent by merely producing a high number of papers and patents. … Chinese institutions of higher learning still focus on quantity rather than quality as key performance indicators. While quantitative measures provide objective assessment criteria that reduce the chance for performance evaluation to be manipulated or involve impersonal factors, they also invite an overemphasis on quantity rather than quality. The lack of full, democratic accountability may deprive China of an important source of information and feedback as to whether that issue is being tackled.” Richard P. Applebaum, Cong Cao, Xueying Han, Rachel Parker, and Denis Simon, Innovation in China: Challenging the Global Science and Technology System (Cambridge, UK: Polity Press, 2018), 175–77.)
and it is unclear that they often do, whether in China or anywhere else in the world. The wonderful charts on patent filings and R&D spending in China suggest that Chinese companies could invade the rest of the world at any time. So far, however, the business results are not that impressive.

Semiconductors: The Achilles’ Heel of China’s AI Ambitions

What about emerging technologies such as AI, quantum computing, biotechnology, hypersonics, and other trendy areas? There is no scientific consensus on China’s position in any of these technologies, but let’s at least consider a plausible claim that Chinese companies could be leaders in any of them. I base this assumption on the optimistic “China Technology 2025” forecast by Macro Polo, the in-house think tank of the Paulson Institute in Chicago. It states,

China’s technology ecosystem over the next five years will have matured and will be largely successful in executing a transition from the consumer internet to the industrial internet. Specifically, the Chinese Communist Party (CCP) and private industry will try to use powerful emerging technologies like artificial intelligence (AI) and 5G to revamp and upgrade Chinese cities and traditional industries, such as manufacturing, agriculture, energy, and transportation.

The forecast also states that

this focus will mark a notable shift from the last decade of consumer technologies centered on apps like WeChat, Alipay, and TikTok. Instead, the Chinese tech landscape will likely enter a more capital-intensive phase as it targets industrial applications such as smart grids, dark factories, and autonomous vehicles (AVs).

The result, according to this optimistic forecast: “By 2025, China will likely be a world leader in industrial technology applications, but that leadership will continue to depend on access to advanced semiconductors manufactured outside mainland China.”

The central node it highlights is that access to cutting-edge semiconductors remains a potentially serious obstacle to China’s medium-term technology trajectory. As the forecast puts it,

Here China faces two external challenges: 1) restrictions on the export of advanced chips to certain Chinese companies such as Huawei; and 2) restrictions on the export of semiconductor manufacturing equipment (SME) — the crucial tools needed to manufacture chips domestically.

Let’s dig a little deeper to see the distance that still exists today in this domain. As the forecast states,

Successive generations of semiconductors are classified by their “node” (also called “process”), with lower nodes representing more advanced chips. For much of the past 20 years, Chinese semiconductor fabrication plants (“fabs”) have lagged 2–3 nodes behind the world’s leading fabs. As of 2020, the world’s most advanced semiconductor fab (TSMC in Taiwan) has begun producing chips at the 5 nm node. China’s leading semiconductor manufacturer, SMIC, is currently three nodes behind, fabricating at the 14 nm node, though at low volume and with high manufacturing error rates. SMIC plans to begin limited production at the 7nm node in 2021.

Progressing to the next node is an immense challenge that often requires the purchase of new SME. Supply chains for SME are global, and the large majority of manufacturers use some U.S. components in their production process. Limiting Chinese access to crucial SME gives the U.S. government leverage, which it can exercise either by narrowly restricting direct U.S. exports to Chinese fabs (using the Entity List) or through more expansive international controls that bar international SME companies that use U.S. components from selling to China (using the Foreign Direct Product and de minimis rules).

If these expansive international controls were taken to the extreme, they could temporarily cripple Chinese fabs like SMIC by cutting them off from the supply or servicing of crucial SME components.

In our base case, the United States will likely selectively limit Chinese access to SME, effectively preventing Chinese fabs from progressing past the 7 nm node. It will, however, avoid the “nuclear option” of entirely cutting off Chinese fabs from foreign SME exports. … The goal of capping Chinese progress at 7 nm could be achieved by working with allies such as the Netherlands to formalize narrow controls on the export of the most advanced EUV photolithography machines, which are needed to make 5 nm or below chips.

These more targeted restrictions — blocking chip sales to Huawei and restricting but not entirely blocking SME exports to China — won’t pose a grave threat to Chinese technology over the next five years. Most Chinese companies will still be able to source leading node chips from abroad, and China’s leading fab will continue making incremental progress toward 7 nm fabrication.

But as leading global fabs like TSMC and Samsung progress from 5 nm to 3 nm and beyond, China’s inability to advance past 7 nm will present a major vulnerability for its technology ecosystem. That vulnerability will give the United States, Europe, Japan, and South Korea enduring leverage in dealing with China’s technological advancements.

Heavy Dependence on Imports for Technological Products

This overall weakness of China’s productive capacity is reflected in its heavy dependence on imports of technological products. For decades, China has pursued industrial policies to limit its dependence on foreign technologies, with at best mixed success. As noted above, it has made considerable progress at times, but China’s imports of the most complex technologies have increased unequivocally (see the graph below). China has built the basic foundation of a domestic semiconductor industry, although its companies are years or decades behind the world leaders in almost every sphere. Nevertheless, semiconductors — arguably the world’s most complex technology — are now China’s largest import. More generally, in industries such as automotive that use R&D-intensive technologies, the aforementioned semiconductors, and aviation, Chinese companies have a weak position even in the domestic market.

Chinese Industry, Particularly in Export-Oriented Sectors, Exhibits Extremely High Levels of Foreign Investment and Ownership

Contrary to the now-outdated view or caricature that China is only a major assembler or just a copier of foreign products, the reality is that it is making important inroads into higher-value-added sectors and is steadily increasing the technological intensity and domestic content of its exports. Consider the oft-cited example of iPhone production. A decade ago, China was a marginal contributor to smartphone production as measured by value. A famous 2011 study by scholar Xing Yuqing established that while the iPhone is presented as a Chinese export, the actual share of added value generated in the country was about 4 percent of total costs, mainly labor in assembly. The components themselves were imported from Japan, South Korea, the United States, and Germany. In a 2019 update, Xing finds that the Chinese share of value added in an iPhone reached 25 percent. In absolute values, China went from contributing $6 to the cost of a 2009 iPhone 3G to contributing $104 to the value of a 2018 iPhone X. In the case of Huawei, whose HiSilicon unit designs the phone’s processors, about 40 percent of the production value of your 2019 phone is Chinese.

China will almost certainly continue to increase its share of the value added to the world’s manufactured exports. But progress is gradual, and China’s higher-value production remains tremendously dependent on imported components as well as on foreign intellectual property and management.

Continuing with the smartphone example: China’s innovation strategy has successfully nurtured some homegrown brands, namely Huawei, OPPO, and Xiaomi. These companies combined accounted for more than half of all phone shipments from China in 2019; outside of the domestic market, Chinese phone makers account for about a quarter of the remainder of the world’s phone sales. But as Xing himself puts it:

Despite impressive success in both domestic and international markets, Chinese brand mobile phones remain heavily dependent on foreign technologies. The teardown data of Xiaomi MIX 2 and OPPO show that foreign companies supplied all core components of the phones, which account for 83.3 percent and 84.6 percent of their total manufacturing costs, respectively.

Based on the retail prices of these phones, the domestic value added of OPPO R11s and Xiaomi MIX2 rises to 40.3 percent and 41.7 percent respectively, indicating an increase in Chinese domestic value added.

Chinese companies have cornered the relatively simpler parts of the phone, which include the frame, acoustic components, and mechanical parts. But they are still lacking in the higher-value parts such as chips and display screens. It is possible that the gap will be filled, gradually, as Chinese companies develop the capacity to manufacture these more sophisticated components. China has a good track record of catching up to globally competitive levels faster than experts predict, particularly in industries in which there is dynamic domestic demand such as metal smelting, to name an old sector of the economy, or as described above with respect to the Internet and mobile payments, examples of the new economy.

But despite its successes, this wave of innovation appears to be restricted to certain companies and regions, and China in general remains technologically far behind the most advanced nations, notably the United States, Germany, and Japan. Thus, despite progress on the export front, foreign companies still dominate two-thirds of China’s high-tech exports. In the same vein, the lack of resounding success in global branding shows that Chinese companies (and not foreign companies producing in China) are actually poor exporters. In short, trade data show that while China is a major center of technological production, its production processes are largely controlled by foreign firms and rely heavily on high-value components produced elsewhere.

Another Touchstone: Royalty Payments and Patents

Even more revealing about China’s performance is the global trade in intellectual property (IP). In general, countries with strong technology industries earn large revenue streams when their technology is licensed to companies in other countries. For example, in 2016, the United States generated a huge surplus in international IP transactions, earning $125 billion and paying only $44 billion. The European Union (EU) generated roughly the same amount in revenue from IP rights (IPR), although it runs a deficit owing to the stronger net position of U.S. companies. By contrast, China’s international IPR revenues are negligible, barely exceeding $1 billion. And despite its questionable reputation as an IPR advocate, it paid out $24 billion in IPR in 2016, half as much as the United States and almost as much as Germany and Japan combined. China earns just one cent for every dollar it pays in IPR royalties, one-60th of what the United States earns. In this respect, China does not look like a country that is rapidly closing the technological gap with the more advanced economies. On the contrary, it remains much more dependent on licensing the rest of the world’s technology than vice versa.

What Is China’s Technological Strength?

Having come this far, it is important not to forget that thanks to its large domestic market, China’s main comparative advantage lies in the diffusion of technology. The country excels at adopting established technologies, improving them a little, and greatly reducing their cost, thus turning them into commodities. Wind turbines and solar panels are two prominent recent examples; Chinese companies have established themselves as the dominant volume producers, but at very low margins. This is a significant achievement, but by definition it implies that technological leadership lies elsewhere.

Let’s delve a little deeper into this underappreciated aspect of diffusion in the unbridled quest for innovation, in the fierce technological race that characterizes 21st-century capitalism. Researchers Dan Breznitz and Michael Murphree convincingly explain the origins of China’s strength in this domain:

As China has become the global center for many different stages of production, it has also developed a formidable competitive capacity to innovate in different segments of the research, development, and production chain that are as critical for economic growth as many novel-product innovations, and perhaps even more so. In addition, taken together, China’s regional and national systems have developed varied capabilities that amount to a specific and highly successful, though inadvertently created, national model. China’s accomplishment has been to master the art of thriving in second-generation innovation — including the mixing of established technologies and products in order to come up with new solutions — and the science of organizational, incremental, and process innovation. Thus, China’s innovation capabilities are not solely in process (or incremental) innovation but also in the organization of production, manufacturing techniques and technologies, delivery, design, and second-generation innovation. Those capabilities enable China to move quickly into new niches once they have been proved profitable by the original innovator. An example of such second-generation innovation is Baidu, the dominant search engine in China, founded in 2000. Baidu’s Web page bears an undeniable resemblance to Google’s. But the resemblance does not end with the visual representation; Baidu’s business model and interface mirror those of Google and take advantage of the defined market space and pathway it has blazed since the late 1990s. Nonetheless, Baidu is not solely an imitator: it has its own innovation capabilities and design strengths. Baidu has built its own proprietary Chinese-language search software and has taken full advantage of local market openings.2Dan Breznitz and Michael Murphree, Run of the Red Queen: Government, Innovation, Globalization and Economic Growth in China (New Haven, CT: Yale University Press, 2000), 4. This is quoted by researchers Alvin Y. So and Yin-wah Chu, who add that “China’s innovative state [is] quite different from that of previous late developers. Before the late twentieth century, the production of goods and services was mostly organized in vertically integrated hierarchical companies located in one country. The task of the state in late developers (e.g., the East Asian NIEs of Taiwan and South Korea) was to concentrate on imitation, utilizing the economies of scale and scope to excel by using the latest technologies developed elsewhere. The aim of the late developers was to develop the capabilities to excel in novel-production innovation and become true economic powers. In the past, late developers relied on national champions in the form of conglomerates that tried to master every stage of production. However, in an era of fragmented production in which each country specializes not only in specific industries but also in specific stages of production, and in which truly novel products are produced or sourced globally without being produced in the countries where they were developed, there are many modes of innovation that contribute to sustainable long-term economic growth.” Alvin Y. So and Yin-wah Chu, The Global Rise of China (New York: Wiley, 2015).

This element of the new world division of labor that has been in place since the 1970s is, in turn, conditioned by two internal factors. Alvin Y. So and Yin-wah Chu quote Breznitz and Murphree (as above) and write,

This dynamic, in which each region develops a unique set of capacities, enables China to dominate at many stages of the fragmented global economy yet inhibits businesses and technical researchers from engaging in cutting-edge, and highly risky, novel-technology and novel-product development. …The third component of Breznitz and Murphree’s explanation is the structural uncertainty in China’s political-economic system.3Ibid.

The result is a current system of innovation that is sustainable over time. Breznitz and Murphy call this course of development in China the “run of the Red Queen,” which is

a reference to the world of Lewis Carroll’s Red Queen in Through the Looking-Glass and What Alice Found There, who, in order to even stay in the same place, had to run as fast as she could. China shines by keeping its industrial-production and service industries in perfect tandem with the technological frontier. Like the Red Queen, it runs as fast as possible in order to remain at the cusp of the global technology frontier without actually advancing the frontier itself.

So and Chu continue,

China developed its Red Queen model by “accident,” partly as a result of local experimentation and administrative/fiscal decentralization; and the development outcome seems quite different from the central government’s stated goal (which instead aimed at novel product innovations and technological breakthroughs). China’s economic miracle is not the story of a developmental state carefully orchestrating its industrial modernization. Rather, it is a story of trial-and-error economic experimentation led by subnational entities, but shaped by political disputes between conservatives and reformers at the center, between influential interest groups and the Chinese Communist Party, and between the center and the provinces. The Chinese Red Queen’s Run model is, in essence, a story of how a new fragmented mode of global production in the 21st century, a dualistic innovation system (national and local), and structural uncertainty interact with each other to induce second-generation innovation (including organizational and process innovation) without novel product innovations and technological breakthroughs.4Ibid.

That said, the possibility of China taking a technological leap forward is theoretically not out of the question. First, the recent rounds of U.S. sanctions have created an unprecedented event. Although the lack of access to the richest and most demanding consumers in the United States and increasingly in other core countries will make it difficult to produce the world’s best products, these imperialist actions have unleashed a surge of interest in technological mastery not seen in perhaps any major country since Japan’s industrial boom in the 1950s. An entire generation of scientists and engineers must examine fundamental problems such as building cutting-edge tools and creating the best materials, with the strong backing of the state as never before. For their part, U.S. sanctions (which hardly any of China’s largest technology companies have escaped) have aligned the interests of China’s major tech companies with the state’s interest in self-sufficiency and technological greatness. Thus, as reported by Nikkei Asia on January 13,

Huawei has already taken stakes in 20 semiconductor-related companies over the past year and a half. … Those investments cover chipmaking sectors currently dominated by companies from the U.S., Japan, South Korea and Taiwan, such as chip design tools, semiconductor materials, compound semiconductors and chip production and testing equipment.

The acceleration of investment and the range of targets underscore the company’s eagerness to free itself from U.S. restrictions and maintain its tech development.

The Chinese national tech champion is also quietly building a small-scale chip production line for research purposes in Shenzhen, where it is headquartered.

For its part, China’s leading memory chip manufacturer, Yangtze Memory Technologies, plans to double production by 2021.5As reported by Nikkei Asia, the company “plans to double its results this year and start producing high-quality chips competing with those from Samsung and other world leaders. … The Yangtze targets, if achieved, will be the most important step in recent years for China’s prospects to create a complete internal semiconductor distribution chain. NAND is an important part of memory and storage used in almost all computer equipment, from mobile phones and PCs to servers and connected vehicles, but production is controlled by only a handful of players in the world.” In turn, “the 192-layer Yangtze memory pieces, by definition, are of a higher standard than those manufactured by Samsung and Micron, but market observers are cautious, saying it remains to be seen whether Chinese company chips will boast of the performance and quality required beyond the market.”

More generally, in China’s favor is the fact that Chinese workers today produce most of the world’s goods (China still accounts for about one-fifth of total world manufacturing exports since few multinationals so far have transferred their Chinese production), which means that they participate more than anyone else in the technological learning process. Although few Chinese companies are leading global brands, as noted above, workers and engineers in China are using the latest tools to manufacture many of the world’s most sophisticated products. For example, Chinese workers could replicate the largely foreign capital equipment that they currently use, manufacture more of their own intellectual property, and build globally competitive end products. This has already been the case in technologies such as high-speed rail, shipbuilding, and telecommunications equipment. At the same time, on the demand side, they have a huge and dynamic domestic market. But this positive outcome is not entirely assured in advance. Apart from the technical difficulties themselves, it must be taken into account that strong state intervention restricts competitive pressures, which can be an obstacle to the “creative destructions” that have characterized, for example, the American model since the mid-19th century. In the last decade, productivity growth has already slowed. And more fundamentally, perhaps market conditions are not yet right for engaging in high technology. It is difficult to see the point of investing in the development of the world’s best software and robotics systems when Chinese workforce remains much cheaper than in developed countries.

No Technological Breakthrough

Still, as we have seen, China’s main advantage remains its impressive ability to deploy and modify existing technology, not technological leadership. Thus, as Damien Ma wrote in December, while there is much discussion in the West about the impact of China’s emergence,

one important area where China barely registers influence is on Western industry’s practices and management thinking. In fact, when compared to Japan, China’s influence is notably weak in the corporate realm.

The rise of “Japan Inc.” (~1950-1980) was accompanied by one of the most influential management concepts of the post-World War II era: the Toyota Production System, or commonly referred to as lean production. It wasn’t simply an idea, but an organizing principle with concrete practices that led to a transformation of the prevailing mass production model in the Western auto industry.

In contrast, the rise of “China Inc.” (~1990-2020) has seen no equivalent management philosophy or practice that has come anywhere close to the influence that Japan’s lean production has exerted.

This is important because companies, and their relative success, are both an extension and crucial indicator of a country’s influence. This isn’t merely a derivative of the vague and broad “soft power.” McDonald’s golden arches may symbolize Americana around the world, but it’s the company’s trailblazing standardization and franchising model that make the Big Mac taste the same from Beijing to Berlin, reshaping the food industry in the process.

That is the kind of definitive and extensive influence Japan’s lean production generated. It has been universally taught in business schools across America and implemented by executives across various industries, extending far beyond autos.

Both the international and domestic characteristics that gave rise to the Chinese productive and technological system are the deep and structural reasons that have so far prevented any novel product innovation or radical technological advance. As explained in the previous section, this does not mean that Chinese companies have nothing to offer or are devoid of novel management practices; fundamentally, their main advantages are speed, scale, and flexibility, which respond to the objective of maximizing growth quickly in order to defend themselves against what will inevitably be the entry of many market participants within a few months. But as Ma also writes,

These strengths are essentially necessary survival tactics in an environment where the default setting is a scarcity of opportunities matched to an over-supply of entrepreneurs who chase after the same opportunities. For many private companies, there appears to be very little thinking on developing systematic models aimed at transforming industries. Even Pony Ma, the founder of Tencent, has quipped that “Ideas are not important in China — execution is.”

To perfect a system requires patience, and Toyota could afford that patience. That’s because the Japanese government protected the auto industry from foreign competition and the automaker didn’t have to face 50 domestic competitors. The very concept of kaizen requires diligent patience to improve the system, day by day. But if “continuous improvement” defines Japanese corporate culture, then “continuous change” — and the constant adaptations in response — may be an apt principle that applies to Chinese companies’ modus operandi.

An eloquent example of this structural deficiency is the 2020 paradox of the Chinese aerospace industry, in which its last lunar mission was a complete success while its closest-to-earth aircraft programs face difficulties.6The ARJ21 regional jet, the first program developed by COMAC (Commercial Aircraft Corporation of China) has just entered full commercial deployment, 12 years after its first flight in 2008. The much larger C919 narrow-body program, which should compete with the Airbus A320 and Boeing B737, has just obtained its Type Inspection Authorization (TIA), marking the official start of certification test flights, 43 months after its first flight in 2017. A French researcher sums it up in a smiling and graphic way, but no less true, when he writes that “it’s easier to reach the Moon than Shanghai” — and explains why in his title: “A Tribute to Long-Lasting Efforts.” As he writes,

The paradox of that situation is a tribute to the huge complexity of building airliners. But it is also the result of historical factors. China’s Space program is heir to the country’s ballistic missiles program. And the latter, along with nuclear weaponry, is the only industrial program to have gone through all the turbulences of the first years of the People’s Republic of China.

In other words, in an ever-changing environment of extreme uncertainty, with high risks and large returns, all of this has had a far-reaching effect on the behavior of economic actors. That is, rational actors have chosen to focus on securing short-term gains while trying to minimize risk. Because high-tech R&D, especially novel product innovation, is both long term and high risk, the peculiarities of Chinese reform have prevented actors from engaging in it.

Finally, another qualitative sample of my point is that

despite rising gross expenditure on R&D, which reached 2.1 percent of China’s GDP in 2016, more and better-trained researchers, and sophisticated equipment, Chinese scientists have yet to produce cutting-edge breakthroughs worthy of a Nobel Prize in science. Few research results have been turned into innovative and competitive technology and products.7Appelbaum et al., Innovation in China, 134. Tu Youyou of the Chinese Academy of Medical Sciences was the first scientist from China to win the Nobel Prize in Physiology or Medicine in 2015 for her discovery of an entirely new malaria treatment, artemisinin, which made it possible to treat thousands of patients in China in the 1980s..

The Strong Geopolitical Obstacles Standing in the Way of China’s Rise

Decisive U.S. Control of Maritime Routes

After the failures of its interventions in Afghanistan and especially in Iraq, and more generally because of its population’s imperial fatigue after the end of the Cold War, the United States has refused to play the role of global gendarme at least since Obama and even more decidedly since Trump. But this shift to a policy of greater balance of powers in different regional and continental arenas after the overactive interventionism of the neocon era cannot make us forget the decisive role that the U.S. plays as policeman of the seas. Dominion over the oceans is essential for the United States, both to secure its strategic interests and to maintain the stability of the international trading system.8It is this importance of the oceans that explains why the United States continues to allocate more than $1 billion to the Egyptian regime to allow its ships to control the Suez Canal. It also explains Beijing’s promotion of the construction of the fabled Nicaragua Canal in an attempt to free itself from the Panama Canal, firmly in American hands. According to the United Nations Conference on Trade and Development (UNCTAD), an “estimated 80 percent of the volume of world trade [is] carried by sea,” and the percentage is even higher in most developing countries.

For China maritime routes are a vital issue. That is why, beyond an assessment of the magnificent Silk Belt and Road Initiative, it is good to keep in mind that from a strategic point of view its two facets are not of equal importance. As the Australian geopolitical expert Rory Medcalf points out,

Whatever else it may prove to be — munificence or folly — China’s Belt and Road spree of loans and infrastructure has become a geoeconomic powerplay, a strategy for pre-eminence. The “Road” is the Indo-Pacific with Chinese characteristics, a bid to extend influence into the Indian Ocean and the South Pacific. The “Belt” of overland connectivity through Eurasia is of secondary importance, given that transport of bulk goods and energy by sea will remain cheaper and arguably no riskier — albeit slower — than by land. As pointed out by Cuiping Zhu, one of China’s leading Indian Ocean experts, China needs sea transportation for 90 percent or more of its imported oil, iron ore, copper and coal.9Rory Medcalf, Contest for the Indo-Pacific: Why China Won’t Map the Future (Carlton, Australia: La Trobe University Press, 2020), 40–41.

Feeling redoubled pressure from the United States on its coasts at the end of the 20th century, the CCP bureaucracy gradually adopted a maritime strategy.10The Taiwan crisis of 1995–96 was the turning point. Communist Party leaders’ fears about the island’s independence prompted Beijing to conduct at least four missile tests in the East China Sea between July 1995 and March 1996 to demonstrate its ability to control the waters of the Strait. In response, the United States sent the aircraft carriers Nimitz and Independence to the area — and U.S. military presence in Beijing’s foreign maritime neighborhood had become more frequent ever since. This led, in April 2001, to a U.S. scout ship sailing 104 kilometers southeast of Hainan Island. China responded by scrambling a warplane. The incident ended with a collision between a Beijing Air Force J-8 and an American Ep-3, after which a Chinese pilot was declared missing. These incidents revealed to the People’s Republic that it had a naval power gap with the United States in terms of military technology and operational experience. The turn to maritime was made possible largely by the disappearance of serious land-based threats to China’s national security, especially the danger of a major Soviet invasion from the north, although China must still devote considerable military force to defending its multiple land borders. For Beijing, this is a key issue — since mainland China has no direct access either to the Pacific or Indian Ocean. Taiwan sits between the mainland and the Pacific, and Chinese ships must pass through the Strait of Malacca to get to the Indian Ocean. Since then, though, there is no question that the People’s Republic has expanded its maritime reach. In material terms, the transformation is impressive. Far from concentrating solely on the most representative and spectacular programs, such as anti-ship ballistic missiles or aircraft carriers, Beijing has chosen to invest in all the platforms and weapons systems of its fleet: drones, mines, cruise missiles, aircraft, submarines, destroyers, frigates, corvettes, patrol vessels, amphibious units, logistics units, hospital ships, and C4ISR support systems.11Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance Systems (C4ISR) encompass a wide number of computer and communications architectures and systems. Their purpose is to obtain information on the status of operations, deliver it to people in command of an operation in a format that gives them a clear view, and help them make the right decisions. C4ISR also serves as a communications platform to transmit orders and any other information deemed appropriate. From 2000 to 2017, China’s construction of ships intended to form the backbone of its fleet in the crucial nearby seas (destroyers, frigates, corvettes, and submarines) reached and exceeded the aggregate production capacity of the three major regional navies in the Indo-Pacific region, Japan, South Korea, and India, whose naval expansion programs nonetheless remained substantial. In 2015–17, thanks to the contribution of the more than 150,000-ton Shandong aircraft carrier — the first unit in a new series of auxiliary ships and three refuelers — Chinese naval production surpassed even that of the United States. In terms of individual ships, however, most of the units coming out of Chinese shipyards remain the small, 1,300-ton class I/II Jiangdao corvettes — which are intended to operate en masse in the China Sea, thus confirming that Beijing’s main maritime interests will be purely regional, at least for the foreseeable future.

In other words, at least for the time being, this increase in naval capabilities does not go so far as to call into question the dominant geopolitical fact that the United States has decisive control of the sea lanes. A key point to take into account is that despite the impressive numerical output and very high entry rates of new Chinese units, transforming this mass of ships into a fearsome armada will require time, effort, and patience. More than just the sheer number of ships, what will really have an impact is the Chinese ability to combine all available resources to achieve crucial tactical and operational advantages at sea. The Chinese Navy still lags behind in terms of inter-force operations, anti-submarine warfare remains an Achilles’ heel, and warfare expertise is all but absent.

At the same time, it should be kept in mind that in the Indo-Pacific, China is surrounded by naval powers besides the United States, such as Japan and India. The Chinese navy will not be able to close the experience gap with its rivals in the short term, which may then limit its reach to the Asia-Pacific region. These geopolitical limits can be seen in Africa. This is what Italian expert Francesco Sisci underlined when he stated,

The Chinese presence in Africa is bringing attention to new players. Japan and India are joining hands in moving into Africa. Japan has economic and technological muscle that may prove helpful to African countries.

India has a huge potential market and has a shared historical experience because Indian bureaucracy was used to run the British empire on the continent.

Turkey is making inroads again on the continent, leveraging the old Muslim heritage. Europeans and Americans are also paying more attention after decades of absence. This new attention, of players wanting to compete with China, is helping Africa.

This competition also creates new difficulties for China. Plus, strategically, Africa is dangerously far from China. If trade and investment increase in Africa, they also increase liabilities for China.

Chinese vessels are not protected by the Chinese navy, which has little or no projection capabilities, and could be easily damaged or cut off by any number of players on the continent or outside.

In other words, China’s African strategy in hindsight was too simple. China thought about its foreign ventures in terms of money only, without considering the culture, the anthropology, the broad security element. That is: China took for granted the goodwill the U.S. was providing globally for China in the whole world.

As long as the U.S. goodwill is disappearing and China didn’t replace it by creating global alternative goodwill, the whole exercise crumbles.

Moreover, the projection that Chinese naval capacity will remain limited is counterbalanced by a strong U.S. presence just off China’s coasts. The United States dominates the passage through the Strait of Malacca and prevents China from regaining Taiwan,12The new Biden administration is unlikely to maintain Trump’s military agreements with Taiwan, including the continued training of Taiwanese soldiers by a contingent of Marines. while increasing the so-called Freedom of Navigation Operations (FONOPs13FONOPs are designed to challenge China’s claim to maritime rights and dominance over several island chains in the region, which have put the United States and its allies at odds with China.) in the South China Sea. In 2019 the U.S. Navy conducted nine operations in the region, the highest annual number since 2015, when it began these operations, which seek to challenge more aggressively China’s claims in the South China Sea, thus building a formidable encirclement of the enemy.

The Growing Geopolitical Barrier to Chinese Hegemony in Asia

For the Chinese leadership, control of Southeast Asia is linked to the security of the country’s maritime borders, which in turn is a necessary, although insufficient, condition for aspiring to the role of superpower. Beijing’s tactics in this region are multifaceted. They range from interacting with the diaspora, managed directly since 2018 by the Chinese Communist Party itself; combining cultural, media, and tourism activities to spread the narrative of China’s peaceful rise; and leveraging trade, loans, and infrastructure investments (including in 5G) to catalyze consensus with foreign governments and entrepreneurs. Diplomacy — bilateral and multilateral — serves to placate the persistent discontent of the coastal countries over the assertiveness of the People’s Republic in the South China Sea. This soft-power foreign policy is combined with the political-geopolitical coercion that hides behind the so-called “debt trap.”14The handover to China in late 2017 by the government of Sri Lanka of a 99-year lease of the strategic port of Hambantota, in exchange for U.S.$1.1 billion, was perhaps a turning point that negatively alerted all of China’s economic partners in the region.

Despite Beijing’s advances in the region, however, Southeast Asia is not yet Beijing’s backyard. U.S. naval and military pressure is accompanied by a growing geopolitical encirclement in that region and in the Indo-Pacific. Last year, the United States gained open support from India and Australia for the anti-Chinese camp, an alignment that had not occurred even during the Cold War. Thus, after clashes with Chinese soldiers in the Himalayas last June, the Indian government abandoned its nonalignment approach to engage in the Quadrilateral Security Dialogue (the Quad) to contain its rival. Australia, which depends on trade with the People’s Republic, took the same course, becoming the vanguard of the U.S. offensive on the instrumental issue of human rights, regardless of the inevitable economic consequences. The two have joined Japan in its strategic crusade to prevent any hegemonic moves by China in a region that it considers its own sphere of influence.

It is important to remember that Japan is one of the most technologically advanced economies in the world. At the same time, as the Australian specialist in East Asia Gavan McCormack reminds us, it is important to know that:

Over time the constitutionally pacifist Japan became world no. 8 on the scale of military power, spending around $50 billion annually on weapons and weapons systems. Its 247,000-strong military is larger than that of the UK, Germany, or France. It also subsidizes the Pentagon to the tune of almost $7 billion annually (as of 2016), providing generous financial support for a major U.S. global military presence (over one hundred bases), from which U.S. troops can be dispatched at will to battlefronts from Korea and Vietnam in the 1950s and 1960s and to the Middle East and North Africa since then. It now possesses fighter aircraft, battleships and submarines, even two aircraft carriers (coyly described as “heli-carriers” being “only” 248 metres-long). And it cooperates with the U.S. not only in “conventional” military programs but also in those designed to establish hegemonic control over space and cyber-space (the Ministry of Defence budgets for a 540-person cyber unit and 70-person space unit from 2021).

Over the past decade, especially during the second Abe Shinzo government (2012–2020), purchases of U.S. weaponry multiplied, the ban on arms exports was softened and the self-imposed expenditure limit of 1 percent of GDP dropped (in March 2017). Japan’s air force and navy are already second to none (save the United States itself) in the Western Pacific. That regional superiority has been slowly eroding. Despite Japan steadily increasing its military spending under the Abe government, by 2020 it amounted to just 5.688 trillion yen, or about one-quarter of China’s (20.288 trillion yen equivalent). Japan’s ruling Liberal-Democratic Party now calls on government to double defence expenditure to reach the NATO (nominal) level of 2 percent of GDP. There can be no good outcome if East Asia’s two great powers continue to seek military advantage.

Contrary to any economistic view that hastily places China at the center of the Asia-Pacific, the striking thing about Southeast Asia is how the growing economic link with China does not extinguish the strategic animosity against Beijing. In other words, while China guarantees their welfare, these countries turn to Washington to preserve their own security. Thus, Vietnamese prime minister Nguyen Xuan Phuc has threatened Beijing with serious repercussions if it goes ahead with the construction of the Sambor hydroelectric dam in Cambodia, which would affect the lower reaches of the Mekong River, on which Vietnam’s national agriculture depends.15The Cambodian government has finally scrapped plans to construct the Sambor dam and has implemented a 10-year moratorium on any new dams on the river’s main channel. That is why Vietnam hosted the nuclear-powered aircraft carrier USS Carl Vinson on a historic five-day visit last March, in the first U.S. military landing in the country since the fall of Saigon. Then, in October, Japan signed a strategic military agreement with Vietnam. At the same time, Vietnam is securing equipment and training from Russia and India.

For its part, the Philippines, while interested in Chinese investments, has also distanced itself from the People’s Republic. In 2016 the Permanent Court of Arbitration in The Hague ruled against Beijing’s claims to islands in the South China Sea. This heated dispute was exacerbated in February 2020 by a collision in the same sea between a Philippine corvette and a Chinese warship. As a result, Philippine president Rodrigo Duterte in late May asked the Pentagon to maintain a contingent of 250 U.S. military personnel in his country, reversing an earlier evacuation order.

In 2019 wealthy Singapore renewed for a third time the memorandum of understanding allowing the United States to use the Changi and Paya Lebar naval and air bases. It bought, in turn, some 40 Lockheed Martin F-35 fighters, designed to replace as many F-16s, signaling its strategic affiliation beyond a seemingly neutral foreign policy. Malaysia is behaving in the same way. In mid-April a clash between a Chinese research vessel and a Malaysian one operated by the state-owned oil company Petronas prompted U.S. and Australian warships to enter waters controlled by Kuala Lumpur. For its part, Indonesia has used the Hague ruling in favor of the Philippines to ask the UN Secretary-General to condemn Beijing’s maritime ambitions publicly. For many months, Jakarta has rejected the intrusion of Chinese vessels near the Natuna Islands, threatening the People’s Republic with retaliation if it extends its Exclusive Economic Zone to the edge of its waters.

This runs counter to any bipolar vision of the confrontation between China and the United States. It is not only a geopolitical carbon copy of the conflict between the former USSR and the United States during the Cold War — as well as a mechanical and mistaken copy — but Beijing’s hegemonic ambitions in Asia-Pacific must also be considered. China not only faces the difficult geography of the region but will also be especially conditioned by strong regional rivalries.16In his recent book In the Dragon’s Shadow, Sebastian Strangio sums up this difficulty well: “Southeast Asia occupies a pivotal role in this project of national rejuvenation. This stems from the challenging realities of China’s strategic environment. Seen from Beijing, Asia is a claustrophobic place: on three sides, China is enclosed by land borders with fourteen nations, including nuclear-armed rivals India and Russia. Off its east coast, it confronts an island barrier, running from Russia’s Kamchatka Peninsula in the north to the island of Borneo in the south, constraining its access to the oceanic thoroughfare. Forming part of this barrier are three U.S. treaty allies — Japan, South Korea, and the Philippines — as well as Taiwan, which enjoys close ties to Washington. As Meng Xiangqing of China’s National Defense University laments, these are airless confines for an aspiring great power: China ‘borders on big powers on land and is encircled by an island chain in the sea,’ he writes. As such, it ‘has never been able to enjoy any benefit from having both the land and the sea.’” Sebastian Strangio, In the Dragon’s Shadow: Southeast Asia in the Chinese Century (New Haven, CT: Yale University Press, 2020), 46–47. As the Australian geopolitical expert Rory Medcalf puts it,

Of course, simple binary choices are a tempting way to make sense of some of the more mind-numbing headline statistics about the sheer size of the Chinese and American economies. In isolation, such data tells a compelling story: that China has either already overtaken America as the world’s largest economy, or soon will, and not much else matters. But it is illuminating to play with some other numbers — statistics that embed the two leading powers in a system of many substantial nations, the region we now call the Indo-Pacific.

This complex reality includes many “middle players”: significant countries that are neither China nor the United States. It is a core contention of this book that, working together, the region’s middle players can affect the balance of power, even assuming a diminished role for America. Consider, for instance, the possibility of a different quadrilateral: Japan, India, Indonesia, and Australia. All four have serious differences with China and reasonable (and generally growing) convergences with each other when it comes to their national security. They happen to be champions of an emerging Indo-Pacific worldview. And they are hardly passive or lightweight nations. In 2018, the four had a combined population of 1.75 billion, a combined gross domestic product, or GDP (measured by purchasing power parity, or PPP, terms), of U.S.$21 trillion, and combined defense expenditure of U.S.$147 billion. By contrast, the United States has a population of 327.4 million, a GDP of U.S.$20.49 trillion, and defense spending of U.S.$649 billion. For its part, China’s population is 1.39 billion, its economy U.S.$25 trillion, and its defense budget U.S.$250 billion. (This assumes, of course, that official Chinese statistics about economic growth and population size are not inflated, and there is reason for doubt).

Project the numbers forward a generation, to mid-century, and the picture of middle players as potent balancers becomes starker still. In 2050, the four middle players are expected to have a combined population of 2.108 billion and a combined GDP (PPP) of an astounding $63.97 trillion. By then, America is estimated to have 379 million people and a GDP (PPP) of $34 trillion. China will have 1.402 billion people and a GDP of $58.45 trillion. Even just the big three of these Indo-Pacific partners — India, Japan, and Indonesia — would together eclipse China in population and exceed it economically. By then their combined defence budgets could also be larger than that of the mighty People’s Liberation Army (PLA). Include one or more other rising regional powers with their own China frictions, such as a Vietnam that may have about 120 million people and a top-twenty global economy, and the numbers are stronger still. Even the combination of just two or three of these countries would give China pause. And all of this, for the sake of the argument, excludes any strategic role whatsoever for the United States west of Hawaii.17Medcalf, Contest for the Indo-Pacific, 25–27.

It is important to keep all this in mind because of the potential for an anti-Chinese front if it solidifies. Deepening Beijing’s coercive strategy would entail myriad risks that could unnecessarily undermine China’s long-term strategic objectives. China needs friends, and is not yet powerful enough to win allies simply by dictating conditions — particularly in a region where many other powers wield considerable influence. The pressures that China exerts on weaker nations collide with other powers’ traditional spheres of influence; at the same time, China is not powerful enough to do so without prompting rival states to act. Thus, India will not let China use the Belt and Road Initiative.18Translator’s note: The Belt and Road Initiative is a global infrastructure development initiative undertaken by the Chinese government beginning in 2013 to invest in nearly 70 countries and international organizations with infrastructure projects to aimed at creating a large, unified market both internationally and domestically. to grab Sri Lanka, the Maldives, Bangladesh, and other countries without a fight. The same goes for Australia and the island nations of the South Pacific and for Japan and the Philippines, Thailand, and Malaysia, or more generally Southeast Asia, which it considers its own. In other words, China is not Great Britain of the 19th century.

The Ever-Present Fear of Class Struggle and Initiative from Below

The liberalizing or neoliberal orientation of the Chinese state since the beginning of capitalist restoration is clear. The increase in actions by the working class and the poor are also well known, as is the growing number of what are officially called “mass incidents.” Recently, the China Labour Bulletin predicted that

If workers continue to suffer pay cuts and oppressive working conditions while business owners’ profits increase next year, it is possible — and even likely — that China will see another round of strikes and protests similar to the wave that followed the Nanhai Honda strike in Guangdong in the summer of 2010.

The structural reality is that the reforms, while modernizing mainland China in an unequal and combined way and transforming it into a great economic power, have created a new proletarian swarm, gigantic workers’ concentrations never before seen in human history. This enormous strengthening of the working class is an ever-present element of the relationship of forces. This fundamental element has not impeded the advance of capitalist restoration. This structural character of “the country’s global rise” has led So and Chu to define it as “state neoliberalism,” a contradiction in terms, but aimed at describing “China’s trajectory of post-socialist development and to distinguish it from the East Asian developmental states, from the neoliberal state as practiced in Western capitalist societies, and from the post-socialist state in Eastern Europe.”19So and Chu, Global Rise of China. The authors precede this with the following: “In advancing our state-centered argument, which we call ‘state neoliberalism,’ we do not claim to put forth a comprehensive account of China’s development, much less trace the contours of a Chinese variety of capitalism, as some authors have attempted. Instead, we seek to delineate the critical roles played by the Chinese state in the country’s global rise and the tension-ridden strategies underlying the country’s trajectory of development. Specifically, we argue that the communist party-state has played an instrumental role in guiding and facilitating the country’s post-socialist development. However, apart from instituting policies that are in many ways similar to a developmental state, a large dose of its policies involve deregulation, marketization, privatization, and the reduction of welfare support — policies that some observers call neoliberalism.” Although there was an initial pause in neoliberalization after Tiananmen, it is the growing social conflict after the progress of the reforms that had led to the consolidation of “state neoliberalism” in the 2003–12 period.20They write, “We argue that the above new policies indicate the consolidation of state neoliberalism between 2003 and 2012. Unlike the emergent phase of state neoliberalism right after the Tiananmen Incident, this consolidation phase lasted longer (ten years), was more clearly articulated through the concepts of ‘balanced development, a new socialist countryside and harmonious society,’ and had more policy impacts (e.g., the abolition of agricultural tax) than the stopgap measures between 1989 and 1992. … The policies of state neoliberalism would get further consolidated when China faced the challenge of the 2008 global economic crisis.” Ibid. As the two authors write:

Responding to China’s escalating social resistance and class conflicts, and perhaps reflecting a change of ideological orientation in the Chinese state, the new regime began to institute “state neoliberalism.” While market reforms would continue, the state would also play a more active role in moderating the negative impacts of marketization.21Ibid.

But contrary to the views of those nostalgic for Maoism, who still see the Chinese capitalist state as progressive, these turns, when the class struggle tightens, should be seen as minimal concessions from above in order to prevent the generalization and politicization of local struggles against the ruling bureaucracy and especially the independent entry of the workers and their confidence in their own forces. As Alvin So and Yin-Wah Chu put it,

As policies of reparation, there were obvious limits to Hu’s initiatives for a harmonious society. In the first place, those policies were introduced in the context of escalating dissatisfactions and inflammatory social conditions. They were by no means attempts to facilitate a fundamental alteration of state-society relationships. Second and related, despite better social welfare and enhanced “rights” for workers and peasants, these were handed out without any intention of enfranchising these subterranean social actors. The policies were to be implemented through government agencies, and measures were taken to prevent the emergence of autonomous labor and peasant organizations.

At the same time, Hu Jintao and Wen Jiabao were presented as enlightened leaders, or indeed patriarchs, who in their genuine care for the poor and benighted people had gone out of their way to help them. It was perhaps not accidental that they addressed themselves as “Hu Yeye” (Grandpapa Hu) or “Wen Yeye” (Grandpapa Wen) when coming face-to-face with the nation’s young people.

In the third place, although Hu Jintao demonstrated his concern with distributive justice and talked about the need to develop socialist democracy, the rule of law, and improve the governing capability of the party, his inclination was far from liberal in the Western sense. In responding to the problems of corruption and the alleged inability of the central government to control sub-provincial officials, he actually called for the strengthening.

Finally, and most importantly, the policies failed to address the country’s key contradiction. As argued above, policies introduced after 1978 and those in the aftermath of the Tiananmen crackdown encouraged the nascent capitalists and local-level state managers to undertake profit-making activities, whereas the “tax assignment system” and “cadre responsibility system” effectively forced the local cadres into embracing neoliberalism, however ruthless it was. The central state could continue to hold the moral high ground, maintain its authority, and condemn local state managers and nascent capitalists for the exploitation of workers, plundering of the environment, and corrupt behavior. However, so long as the neoliberal policies and the central–local relationship remain unchanged, all the initiatives to promote a “harmonious society” could do no more than to contain the worst damage or tackle the surface symptoms of neoliberalism. 22To this could be added that apart from China’s “global rise,” there are initial factors that also influenced this choice. The fact that the Maoist bureaucracy never settled on a historical defeat of the mass movement, as was the case in the former USSR after the Stalinist counterrevolution or even in the countries of the East as an effect of the various defeated or aborted political revolutions (Hungary in 1956, Czechoslovakia in 1968, and Poland in 1980), means that the power of the Maoist bureaucracy was always weaker. After the convulsive years of the Cultural Revolution, and despite the reactionary pro-capitalist unity of the ruling caste, there was after Mao a deep anxiety regarding the survival of the Communist Party. As a result, reform and opening up has never been linear and if it has allowed liberalization to unleash the dynamism of pro-capitalist forces, it has always maintained control of the process, while maintaining its gradualist approach. Deng’s faction was a direct witness to the crisis in the former USSR and Eastern European countries that culminated in the tumultuous processes of 1989–1991 when these regimes collapsed one after another. In precisely the same period, the events of Tiananmen Square highlighted the danger of the Chinese bureaucracy ending up the same way as the Russian one. But as these authors show, the very contradictions of the reform and the growing inequality and social resistance were further entrenching these initial features during all these decades of profound change.

Xi Jinping, more than any of his predecessors of the restorationist era, embodies this difficult balance. By the time he came to power, the excesses of reform and opening up had become an existential threat to the party, which had become sclerotic, corrupt, deeply factionalized, and, in Xi’s view, lacking a guiding ideology beyond the almighty yuan. Meanwhile, China’s growing prosperity brought with it rising expectations for quality of life, such as clean air and water, social safety nets, and more transparent governance that economic growth alone could not fix. China’s rapid industrialization since 1978 had undermined those goals, and the party had become unresponsive and ill equipped to deal with those new demands. The problem for Xi is that he must perform this already-complicated balancing act when the economy, unlike in the past, is declining, while at the same time people’s expectations have risen and differ completely from those that enabled the first decades of reform. As the reputed Chinese economist Zhou Qiren puts it,

The current general trend of the Chinese economy is downward, from a high position. It’s easier to climb up a mountain than to climb down. Many contradictions in the Chinese economy were hidden during periods of high growth. But during a downturn, it’s harder to maintain balance. Many old problems remain unsolved and many more are emerging. Challenges are popping up one by one for China, forcing the country to make decisions fast.

Additionally, younger people, who make up the bulk of society, have a different frame of reference for assessing systems, policies, and their own environments, and also have higher expectations of what society should look like. To the generation that experienced the great famine of 1959-61, the people’s communes, and the Cultural Revolution, the changes in China since the start of reform and opening-up are undoubtedly massive improvements. However, those born in the 1980s and 1990s have always lived in a relatively more-open China, and have a better understanding of world events. They have opinions about how the world should be, and if these expectations are not met, they are unsatisfied.

The people who make up the bulk of society today are also the most active participants in China’s industrial structure, consumption, and cultural activities. What are their expectations and frames of reference? Do they have higher expectations for social justice and a modern civilization, and lower tolerance for the negative consequences of incomplete reform? China’s economy is already the world’s second-largest by size. But precisely because of this, people’s expectations of their own country have gotten higher than they were in the past. We should not rely on constantly comparing the present with past misery to maintain the people’s satisfaction.

The danger that the masses could take their own course independent of the decisions and suffocating control of the party — this is what explains the increasingly ironclad and repressive Bonapartist course of the Chinese president, even at a time when he boasts, unlike the rest of the world’s leaders, of having liquidated Covid-19. The latest eloquent example of this is the conviction of Chinese journalist Zhang Zhan, who was sentenced to four years in prison for “picking quarrels and provoking trouble” after reporting on social media details about the first outbreak of the coronavirus in the city of Wuhan at the end of December 2019. In the same vein, and without even discussing the heavy crackdown on the Uyghur Muslim minority, the regime’s surveillance capabilities have been significantly expanded — with levels of control and censorship becoming widespread at incredible and surreal levels. WeChat blocks sensitive keywords, which today include “decoupling” and “sanctions.” And showing their exacerbated Stalinist tendencies, the film authorities have prevented science fiction films from being developed independently, and this year they published guidelines on the correct ideological direction for new films. Incredibly, despite the sharp loss of legitimacy of the United States and the imperialist governments as a whole during 2020 because of how they dealt with the pandemic, the Chinese regime seems congenitally incapable of allowing good stories to be told about itself. Not to mention that domestically there is a greater risk that the overall dynamism of society will decline because of the shrinking space for critical thinking.

All these examples show that the contradictions inherent to “state neoliberalism” (ignoring for the moment whether that is the correct term to describe the contradictions of the Chinese model on the social front) will be less and less sustainable in the coming years, forcing the regime into a sharp fall to earth and probably having to adopt stronger measures, which it has thus far tried to avoid. In particular, signs that a new generation of workers is coming along who cannot stand the rhythms of production and are already exhibiting underground resistance to them may be a puzzle for the CCP bureaucracy, as well as a strong obstacle to its economic model. These elements of creeping resistance gained momentum in 2020 in the midst of the coronavirus pandemic as China struggled to cope with its economic consequences. As one South China Morning Post reporter put it,

Young people slack off by refusing to work overtime, delivering medium-quality work, going to the toilet frequently and staying there for a long time, playing with their mobile phones, or reading novels at work.

They say their laziness at work is a silent rebellion against the culture of working overtime for little reward. It is also a reflection of disappointment with their salary, which they believe is far from enough to realise their dreams, such as buying a house. …

In general, Generation Z abhors the so-called 996 work rhythm — shifts that last from 9am to 9pm, six days a week — widely expected of employees by Chinese tech giants.

This new “philosophy” signifies a complete reversal of the harsh sacrifices the generation born in the 1970s and 1980s was willing to endure that were the basis of the Chinese economic miracle. If this element develops, the control of the ruling bureaucracy in the workplaces may be in trouble. Do the signs herald a hot Chinese autumn similar to that experienced in Europe and the United States in the late 1960s? What is certain is that if the intensity and long duration of work hours hit a kind of “social” limit, a crisis of their effectiveness as a technique of domination over labor, the entire structure and superstructure on which the restorationist bureaucracy is based may come into question.

The Ominous Specter of the Country’s Divisions

Despite overall progress in the country’s prosperity and official propaganda that poverty has been conquered, the reality in China today is that there is enormous social inequality and strong polarization between classes, between town and country,23As Shaohua Zhan explains about the reform era in New Left Review, “Growth in agricultural output has been significant, if inconsistent and regionally uneven. Grain production has more than doubled over the past four decades, from just over 300 million metric tons in 1978 to well over 650 million in 2017; China’s grain self-sufficiency rate is 85 percent, despite importing 121 million tons (including soybeans). Yet despite these impressive figures, the income gap between urban and rural households has remained wide: after peaking at a ratio of 3:1 in the mid-2000s, it has narrowed only slightly, to 2.7:1, as a result of government intervention. Of course, inequalities of income also obtain within metropolitan areas: the bottom 20 percent of the urban population earn roughly the same as the average villager — and given that living costs in cities are much higher, poor urbanites are likely worse off than the average rural resident.

“It is interesting to note that as in other areas already named in recent years, there has been a pendulum swing in China’s rural land policy. In 2013, the new Xi-Li administration introduced what was called the New Land Reform, which facilitated the sale and purchase of peasant use rights to large producers and investors in a new step to concentrate land and support agricultural development.” But as Shaohua Zhan continues, “Launched five years after the 2008 financial crisis, the New Land Reform was a sign of the increasing power of big capital and its alliance with the Chinese state. By pushing for the financialization of rural land, the consolidation of farms, and urban expansion, both state and capital intended to extract maximum surplus from China’s land and sustain high rates of economic growth. However, this mode of development has proved unable to provide secure livelihoods for the majority. Rising urban precarity has lent credence to those advocating for the protection of small-holder farming. Together with villagers’ struggles over land rights, which are likely to deepen in the coming years, this has forced the central government to reverse some of the measures introduced in 2013.” Shaohua Zhan, “The Land Question in 21st Century China: Four Camps and Five Scenarios,” New Left Review 122, (March/April 2020.)
and between the capitalist zones and former zones of state-owned industry.24As the South China Morning Post explains, “Geographically, China is split in two by the Qinling mountain range, also known as the Sichuan Alps, and the Huai River. In recent years, these features have also served to slice the country in two economically. To the South lies China’s most affluent regions, home to most of its innovation hubs and busiest ports.

“Southern China has the Pearl River and the Yangtze River Deltas, the nation’s two manufacturing hubs, and has seen its economic importance rise, with output covering 61.5 percent of national gross domestic product (GDP) last year.

“To the North lies much of its heavy industries, such as coal, which helped fuel China’s economic miracle of recent decades, but which will soon be relics of the past.

“The North-South divide is growing and has become increasingly apparent since 2013 when the North’s share of economic output fell to 38.5 percent, having previously been higher than 40 percent. This is despite containing 15 provinces, 42 percent of country’s population and 60 percent of its territory. …

“The trend is likely to worsen as the fight for skilled workers in China escalates. Employers in the affluent South often can offer higher wages and better career prospects than the North, which has found it increasingly difficult to retain local talent.

“The disparity is also apparent in the North’s reliance on government funding. As China’s economy slows and its old industries dwindle, northern governments last year generated enough revenue to cover less than half their spending. The South, in contrast, was able to fund 55 percent of its own outlay, according to a recent study from the Chinese Academy of Fiscal Sciences, a think tank affiliated with the Ministry of Finance.

“Furthermore, the infrastructure of the South, including the ports, make it a natural destination for foreign capital. This has helped it grow exponentially, as the resource rich North struggled with commodity price fluctuations.

“The foreign investment helped the South become an export hub and home to hi-tech industries. Its private sector boomed, with firms able to react more quickly to market forces than the state-owned enterprises in the North.” Sidney Leng, “China’s North-South Economic Divide Is Growing, Away from the Glare of the U.S. Trade War,” South China Morning Post, June 22, 2019.
But more ominously for the hard-won national unification resulting from the 1949 revolution, uneven development also affects different regions of China, some of which do not benefit from the growth taking place in the east and the coastal regions.

The division between the coast and the interior only partly results from the great disparities in wealth, although that certainly counts. But along with that, coastal China is oriented to world maritime trade, while the interior has far fewer trade opportunities. The coast tends to tie itself to its customers, to transform itself into comprador bourgeoisies, while the interior looks to Beijing to redistribute the wealth of the coast to help support the poor interior. If this balance breaks down, the risk of regionalization that haunted Chinese history will reappear. Along with keeping the class struggle at bay, the strengthening of the Bonapartism at the top of the CCP leadership responds to this specter by preventing coastal wealth from translating into political power, as well as preventing coastal elites from opposing its reform project. Thus, like his predecessor but more resolutely, Xi Jinping tried to lessen this source of tension when he took office in 2012. On the one hand, his anti-corruption campaign was aimed at reinforcing state control of the economy and the financial system, partly to keep the coastal areas dependent on the party and to convince the hinterland that it was not a pawn of the richest region. So too with his crackdown on private conglomerates (many of whose leaders went to jail) and on capital flight abroad. On the other hand, one of the objectives of Beijing’s massive infrastructure construction is to integrate coastal and inland markets tightly, allowing manufacturers to take better advantage of regional income differences and traditional exporters to focus increasingly on domestic markets. Linked to this, the Eurasian part of the Silk Belt and Road Initiative, beyond the totally overblown geopolitical fanfare of the Middle Kingdom, also responds in good part to this purely national objective of enriching the inland provinces that had become miserably impoverished compared to the more prosperous coastal regions, despite the country’s supernatural growth rates over the past three decades. There is also the matter of finding outlets to offload surplus production (without much concern about the sources of demand).

But this policy of the bureaucracy clashes with the structural character of the Chinese model characterized by high rates of investment combined with depressed incomes of workers and peasants, and thus depressed domestic consumption. As the Chinese Marxist Au Loong-Yu puts it,

While household consumption of 60-70 percent of GDP is considered normal internationally, in China it has always been low, on average as low as 50 percent between 1952 and 2019. What is more alarming is its continuous fall, from 47.7 percent in 2000 to 34.6 percent in 2010; since then it has risen again but only very slightly, to 38.8 percent in 2019.

Since the restorationist bureaucracy is completely opposed to a radical redistribution of wealth, with a significant increase in the share of national income going to the toiling masses so they can buy what is produced domestically, the only realistic option to this main contradiction of the Chinese model — which results in a narrow domestic market compared to production overcapacities — is its central dependence on the markets of the advanced industrial countries.

In this framework, there is always the danger that the hypermodern coastal areas, commercially interconnected with their neighbors and the rest of the world and thus exposed to Western contagion, may consider — under the pressure of changing international geopolitical conditions — leaving behind the benign framework in which the Chinese model has developed so far in favor of the opportunity to manage themselves to open up to trade in a better way. That is what they did in the 19th century, especially in favor of the British, generating a new cycle of fragmentation and violent internal conflict. At least, nipping that possibility in the bud is the message Xi is trying to send with his brutal ouster of Jack Ma as the Alibaba boss.

The same harshness is shown by Xi toward ethnic minorities such as the Uyghurs, Tibetans, and Mongolians forced to adopt the customs and traditions of the Han (the majority ethnic group), as confirmed by the use of the notorious reeducation camps in Xinjiang. More visible still was his repressive policy toward the mobilized masses of Hong Kong, who are reluctant to become an integral part of China as long as it is run with authoritarian methods — a message aimed at inducing Taiwan to accept reunification (and not necessarily peacefully). The bureaucracy considers it essential to consolidate the loyalty of the population to the dictates of the CCP in order to preserve control of the People’s Republic and complete the process of building the nation-state, a sine qua non for any imperialist claim. But this task of completing national unification and closing the century of humiliation from 1839 to 1949 is not proving to be at all easy, as Hong Kong illustrates, despite the strategic limits of the recent mobilizations and in terms of the Taiwanese question in particular, especially with the redoubled imperialist pressure that is increasingly using the island as a stinger against mainland China. Against this backdrop over the past year, even as nationalist sentiment was rising on the mainland, with calls for Beijing to act on issues such as the pro-independence forces in Taiwan, it was striking that the comments of Qiao Liang, a retired air force major general seen as a voice of the hawks in China, were aired in public. According to the South China Morning Post, the latter said that

China’s ultimate goal is not the reunification of Taiwan, but to achieve the dream of national rejuvenation — so that all 1.4 billion Chinese can have a good life. Could it be achieved by taking Taiwan back? Of course not. So we shouldn’t make this the top priority. If Beijing wants to take Taiwan back by force, it will need to mobilise all its resources and power to do this. You shouldn’t put all your eggs in one basket, it’s too costly.

In any case, what is clear is that the island is the touchstone of Sino-American competition. If by 2049 it is incorporated by the People’s Republic, U.S. influence in Asia will be defeated. Conversely, if the island proves irretrievable and Taiwan asserts its independence, China could enter another historic period of humiliation.

Despite Its Relative Strategic Autonomy, China Is Not Yet an Imperialist Power

It is clear that China has developed strong imperialist traits, as has been discussed in other articles that have been part of the Trotskyist Fraction–Fourth International discussion. There are several elements in particular, including, among others, the following: the important export of capital abroad (although this is a new characteristic of certain dependent economies that speaks to the extension of financial capital to different levels and hierarchies of the world economy); China’s enormous accumulation of reserves; a level of lending that sometimes puts China on par with the World Bank; and the importance of its domestic market, both for countries producing raw materials and for countries producing productive and/or consumer goods — a particularly important element in a world where the global market is narrowing. All these factors give China a special character in the unstable hierarchy of states in recent years, an issue further reinforced by China’s counter-tendency in the early stages of the global crisis of 2008–9 and more recently for having so far effectively contained the virus and resumed economic growth.25Outbreaks of Covid-19 in Heilongjiang and Hebei, however, indicate that the problem is not completely overcome. The Chinese government is tightening control measures (especially in Beijing) and discouraging “migrant workers” in the megacities from visiting their relatives in the countryside en masse to celebrate Chinese New Year. The health of the country, the legitimacy of the Chinese Communist Party, and the credibility of Chinese medical care at home and abroad depend on preventing the second wave of the disease. Moreover, although the Chinese state has been integrated into the capitalist world economy, capitalist restoration is not taking place in a colonial framework, as it did in the past, but under the arbitration of a state emerging from a revolution that achieved national unity. This gives the Beijing bureaucracy a margin of state autonomy incomparably greater than that of any other country on the capitalist periphery, a development that has essentially taken place outside the hegemonic relations of the United States. This political independence makes China a strategic challenge to the United States, particularly in East Asia, as shown by the severe clash between the two. But at the same time, its technological fragility, the persistence of its backwardness, and its dependence on the main imperialist powers despite the progress it has made while playing catch-up with many of them, the redoubled geopolitical barriers, as well as the latent tension over the class struggle and the failure over the national division that has not yet been resolved — all this still prevents China from being an imperialist power. There is also its low productivity of labor compared to the main imperialist centers, the persistence of significant structural poverty despite enormous advances in this area, and its still weak role in world finance.

The Chinese catch-up is surprising, a multiplication by 15 in the last 40 years. But regarding the dynamism of another social formation, the former Soviet Union, Trotsky explained in the first chapter of The Revolution Betrayed,

The dynamic coefficients of Soviet industry are unexampled. But they are still far from decisive. The Soviet Union is uplifting itself from a terrible low level, while the capitalist countries are slipping down from a very high one. The correlation of forces at the present moment is determined not by the rate of growth, but by contrasting the entire power of the two camps as expressed in material accumulations, technique, culture and, above all, the productivity of human labor. When we approach the matter from this statistical point of view, the situation changes at once, and to the extreme disadvantage of the Soviet Union.

This does not mean that China will follow the same fate as the regimes of Eastern Europe and the USSR, since even during Xi Jinping’s presidency, unlike the Maoist period, he has guarded against any policy of leaving the world market. But it helps us understand the fundamental distance that separates China from the imperialist powers, despite all its achievements and strengths.

Poverty reduction has long been a top priority and a source of legitimacy for the CCP. The extent of China’s progress is impressive: over the past four decades, more than 850 million Chinese have been lifted out of poverty, according to the World Bank. Nearly 90 percent of the population lived in extreme poverty in 1981, but by 2019, less than 1 percent will live in extreme poverty. This performance is largely the result of decades of rapid economic growth since the introduction of Deng Xiaoping’s policy of openness and reform policy in 1978. A recent study by the Washington-based Center for Strategic and International Studies (CSIS) states, “Among the world’s 15 most populous developing countries, China has seen the greatest drop in poverty rates.” But as an article in France’s Les Echos summarizes,

That is only part of the story. By international standards set by the World Bank, China has managed to eliminate extreme poverty (people living on less than $1.90 a day), but still faces considerable poverty. In its latest annual report, the World Bank notes that there are still 225 million poor people in China, or about 16 percent of the population living on less than $5.50 per person per day. By this measure, China’s poverty rate remains “noticeably higher than some other major middle-income countries,” says CSIS. China’s poverty rate is twice that of Turkey (8.5 percent) and only slightly lower than that of Brazil (19.8 percent). And China still has the world’s largest population of poor people, after India, in terms of the size of its total population.

What is even more surprising is how few resources the state still puts into this task. Dorothy Solinger, a specialist on the issue of urban poverty (rural migrants and urban homeless populations), explains this in her book Polarized Cities. Writing of the “minimum livelihood guarantee” (dibao) that the Chinese state provides the urban poor, she compares it with poverty-reduction programs in Latin American countries and notes that even when urban and rural funding of the dibao is added, the proportion of GDP devoted to poverty alleviation in China remains far below the Latin American average.26Dorothy J. Solinger, “Banish the Impoverished Past: The Predicament of the Abandoned Urban Poor,” in Solinger, ed., Polarized Cities: Portraits of the Rich and Poor in Urban China (New York: Rowman and Littlefield, 2018), 74–75.

Finally, in the key area of finance, the drive to internationalize the renminbi appears to have stalled. The currency’s inclusion in the IMF’s Special Drawing Rights basket in 2015 appears to have been only a temporary show of high quality.27Translator’s note: As the International Monetary Fund explains, Special Drawing Rights (SDRs) are “an international reserve asset … to supplement its member countries’ official reserves.” They represent a claim to currency that IMF member countries hold, and for which they may be exchanged. Thus, they are units of account for the IMF, not a currency per se. Since then, many indicators of the international use of the renminbi have receded. The share of Chinese trade settled in renminbi has fallen; direct investment transactions settled in renminbi have fallen to zero; overseas deposits in renminbi have also fallen; the renminbi’s share of international payments has stagnated at less than 2 percent and has fallen below the Canadian dollar; and China’s foreign institutional holdings of renminbi have fallen by about one-third from their peak in mid-2014. The renminbi represents a meager 1 percent of the world’s central bank reserves. These trends reflect that far from any vagary as an international financial center, Beijing consistently chooses exchange rate stability over full convertibility, which prevents its currency from becoming a serious one. More generally, the weaknesses of China’s financial architecture work against a move away from the centrality of the dollar and the New York/London-based international financial system.

The reality is that the transition of the Chinese economy, once it took off with a view to transforming and consolidating itself as an imperialist country, is a much more complex stage than the challenges it had to overcome to get off the ground. That is the interesting point made by a renowned economist in Beijing, a supporter of the reforms, who states,

The impact of these problems on China’s economy after takeoff is very big. Although we have a considerable size, we are still decades behind the world’s advanced economies in the most critical technologies and fields. If international relations remain tense and the availability of advanced technology and knowledge diminishes, it will be difficult for an economy that has taken off to continue to fly, not to mention going through many violent bumps in the road.

The second big problem is that the plane of China is different from all previous studies by economists. It is huge and extremely unbalanced. If you look at the income gap between different classes, between urban and rural, between regions, there are huge gaps. The income gap is a phenomenon on the surface, which reflects differences in technology, industry and scientific knowledge.

In China today, some issues in different places are viewed in the same way. But if you go deeper into certain areas, you’ll find that some domestic views are much more different than those between China and the rest of the world. The challenge will also affect economies that have already taken off, because there’s a lot of tension inside the cabin, a lot of pressure inside. Take the Rust Belt in the United States as an example. We also have old industrial areas in Northeastern China. There are also a lot of things that were developed in the past but are now in decline or stagnating. If those aren’t handled well, and as you’ve already taken off, the challenges will be huge.

The third problem is maintaining a balance but also having a lot of momentum at the same time. When you’re on the ground and can slow down, you can more easily smooth things out. But the economy that has already taken off is going to face big challenges slowing down. China’s economy needs sustained and strong momentum, otherwise our cutting-edge sectors, which are still lagging behind the world’s best, will not have the strength and resources to keep climbing. At the same time, it is a difficult challenge to maintain the balance among aggregate supply, finance, industries, and regions.

With pressure and momentum in these areas, the takeoff promised by Rostow28Translator’s note: The reference is to the take-off model of economic growth offered by W.W. Rostow in his book The Stages of Economic Growth: A Non-Communist Manifesto (Cambridge, UK: Cambridge University Press, 1960). The theory is that developed countries have tended to pass through five states to reach their current degree of economic development: traditional society; preconditions for take-off; take-off itself; a drive to maturity; and an age of mass consumption. Rostow was an economist and political theorist who serves as national security administrator to President Lyndon B. Johnson from 1966 to 1969. might not inevitably lead to maturity and high quality of life. There may be twists and turns in the process after the takeoff.

As can be seen, the next few years will be dangerous and turbulent. They will decide the fate of the country and of the Communist Party.

Taking the set of internal and external elements I have discussed, perhaps the most adequate provisional definition of China today is “dependent capitalist state, with imperialist features.” This descriptive formula has the advantage of better showing what China is today, revealing its contradictory features, its dependence, and at the same time its imperialist traits. But above all, it has the merit of not taking for granted the enormous leap implied by the transformation of China into an imperialist power, taking into account the difficult internal and external challenges and obstacles it must still resolve despite its progress, leaving the way more open to eventual setbacks in China’s upward dynamic — something that would not be new for a society that was already the center of world trade before the Qing dynasty and that went through the century of humiliation between 1839 and 1949.

Where Is China Going?

The crisis of U.S. hegemony has taken an enormous leap as a consequence of its imperial fatigue, and this has led to deep division within the country. This is the main element of international relations today. But in the face of this weakening of the current hegemonic power, a replacement hegemon is still a long way off. The propaganda of a Chinese 21st century is just that: mere propaganda. If the United States thought its supremacy was at stake, it would consider renouncing its strong influence over Europe, in order to divide the adversary’s camp. If it were on the brink of the abyss, it would agree to risking the European status quo in order to engage the Russians in battle against the Empire of the Center. But Obama’s reset and Trump’s nods toward Putin have given way to a hysterical Russophobia, launched by the political-military power factors in the United States and fueled by NATO and the eastern European countries of the former Soviet bloc. They have done this to prevent the normalization of relations between the European Union and Moscow and to confine Europe geopolitically within the policies decided in Washington. The fact is that a strategic entente between Berlin and Moscow could achieve a formidable strategic complementarity between German technology and industrial power with the residual demographics and nuclear arsenal of the Russians that would give rise to a new superpower that could challenge U.S. hegemony. Washington would see its greatest geopolitical nightmare unfold.

While the visceral attachment to Europe (despite all its rhetoric to the contrary) shows us a United States that considers the People’s Republic quite distant from its imperial power, lacking the means to wrest the hegemonic scepter from it. At the continental level, while it is true that the United States is weakening in East Asia, it is not accompanied by a crisis of U.S. dominance, despite the economic, political, and even military advances that make China a strong strategic rival of the United States in the region. China’s control over that area remains, for the moment, far from being realized. On the contrary, the redoubled imperialist pressure of recent years, especially from the United States, seeks to overthrow the Communist Party regime and fragment China, returning it to the condition of total geopolitical inconsistency experienced during the century of humiliation. Seeing the cracks in its economic model and development, the United States tried to exploit them to isolate the People’s Republic from international value chains and to slow its growth. In particular, Washington demands that Beijing abandon its dirigiste or state capitalist model to reduce its ability to impose its will on the coastal economic potentates, who are reluctant to give up their accumulated wealth. Accepting economic liberalization would reduce the bureaucracy’s room for maneuver in its own territory, without being able to close the serious loopholes that already exist.

But in terms of forces, the objective of recolonizing China is opposed to that of preventing Germany from advancing on Russia, which allows China to advance on the latter (although without achieving a true alliance because of historical suspicions between the two and, at the same time, because the asymmetry of power results in both preferring to negotiate on their own with the various imperialist powers). With Trump, the United States sought to do so it in a completely unilateral way, but the two objectives at the same time are possibly greater than its current power. We will see how Biden manages to articulate the search for a broader imperialist front, but under his leadership in pursuit of the same strategic objective shared with Trumpism.

The key countries are Japan and Germany. Japan is very active these days. It has described Taiwan as a “red line” and China’s “possible next target” after Hong Kong. One of its energy companies has announced a joint alliance with a Vietnamese company to extract oil in the South China Sea claimed by Beijing. It has invited Germany to send warships to those same disputed waters to train with its own vessels and those of other Indo-Pacific countries. And 40 percent of its China-based companies that produce sensitive technologies plan to move some or all of them out of the People’s Republic. These are all signs of Japan’s imperial awakening. Tokyo is once again behaving like a powerhouse, stepping on Beijing’s toes, using strategic language, aligning its production sector with its geopolitical needs. All this unfolds with a terrified awareness of its own limits, of not being able to resist the rise of the Chinese on its own. So, speaking of Taiwan, Japan almost demands that the incoming Biden presidency take a clear stand in defense of the former Formosa, hoping to delegate to the United States the task of securing the island from Beijing’s aims. And to that end, Japan welcomes as many countries as possible into a nascent naval coalition: in 2021, France, Germany, Britain, and India will send warships east of Malacca to maneuver with the Rising Sun Navy. All this pushes in a direction vaguely favorable to the United States’ anti-China strategy. But from a tactical point of view, there is no complete alignment between the United States and Japan. The latter is moving not only to contain Beijing but also to quell Washington’s more bellicose appetites, as I wrote in a recent article regarding the RCEP trade agreement.

For its part, the European Union has also just signed a trade agreement with Beijing. That Brussels rushed to sign it before Biden’s arrival raises its price in the face of any possible alignment with the United States, while also signaling — for now at a symbolic level — its impatience with the approach taken by the Trump administration on trade matters both multilaterally and bilaterally (see, for example, the disputes related to the Airbus-Boeing affair). European countries (Germany in particular) do not share the decoupling that Washington is pushing. But at the same time, they have not remained insensitive to U.S. demands to contain Beijing’s technology and respond to its provocations in the South China Sea. Moreover, at the EU level, they have equipped themselves with an instrument to screen foreign investments targeting China. It is an example of the impossibility of ignoring the transatlantic ally and the change in perception of the forecast for the People’s Republic.

In other words, in recent years the international climate toward Beijing has become increasingly tense.29An expression of this is that for the first time this year, the circle of Xi’s critics has spread beyond the liberals. As journalist Richard McGregor reports: “Xi has always had his critics among China’s liberal scholars who blame him for provoking the U.S. with his assertive diplomatic and military policies.

“Beijing’s interests would have been far better served, they believe, by sticking with the low-profile policy counseled by Deng Xiaoping when China began emerging from the post-Mao era in the early 1980s, of ‘hiding its strength, and biding its time.’

“In truth it has long been impossible for a country as large as China, with an economy growing as quickly, to maintain a low profile in global affairs. But by citing the doctrine of a revered political leader like Deng, the liberals gave themselves political cover to criticize Xi, without mentioning him by name.

“In recent weeks, however, there have been signs of a debate stirring in hard line circles in Beijing as to whether China has overreached. ‘Wolf warrior’ diplomacy, the term used to describe the more aggressive posture taken by Chinese diplomats to push back against foreign criticism, seems to have taken a back seat for the moment. The wolf warriors in the Foreign Ministry sparked an intense backlash in many countries after China began to emerge from the Covid-19 crisis. For the moment, they seem to be keeping their heads down.

“Another straw in the wind was an article by Dai Xu, a PLA general and one of China’s most prominent hawks. In a recent article, titled ‘Four Unexpected Things and Ten New Understandings About the United States,’ Dai advocates China taking stock of its relative weaknesses compared to the U.S. and behaving accordingly.” McGregor, “Beijing Hard-Liners Kick against Xi Jinping’s Wolf Warrior Diplomacy,” Nikkei Asia, July 28, 2020.
In the coming years, China’s fate will depend on the strength of the imperialist front that opposes it. But above all, it will be the class struggle — both at home and abroad — that will ultimately determine Beijing’s fate. For example, India’s peasants are putting a heavy spoke in the wheel of Modi’s geopolitical ambitions by opposing his neoliberal reform in the countryside. And, domestically, it should be borne in mind above all that unlike an imperialist country such as Japan, which went from high to low growth without great social upheaval, China would almost certainly not be so fortunate. The social, geographic gaps that continued to develop despite China’s own “Thirty Glorious Years” could be poisoned if this growth comes to an end. The emergence of the Chinese proletariat as an autonomous factor could change the calculations of not only the bureaucracy but also imperialism. It will be these battles in the class struggle, as well as the struggle of the workers in the central countries against the new and ongoing restructuring of the capitalist economy as a result of the current crisis, that will determine the position of the Asian dragon.

First published in Spanish on January 24 in Ideas de Izquierda.

Translation by Scott Cooper


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Juan Chingo

Juan is an editor of our French sister site Révolution Permanente.



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