Category: Economics

While the US provokes chaos, China promotes development

Embedded below are the video and transcript of the 36th episode of Geopolitical Economy Hour, in which Radhika Desai, Michael Hudson and Mick Dunford discuss the significance of the 75th anniversary of the Chinese revolution; the reasons for China’s continued economic successes; China’s role in the construction of a multipolar system of international relations; China’s people-centred development versus the West’s capital-centred development; the structure of the Chinese economy and land ownership; the likely impact on China of a new Trump presidency; and much more.

The video and transcript were first published on Geopolitical Economy, edited by Ben Norton.

Transcript

RADHIKA DESAI: Hello and welcome to the 36th Geopolitical Economy Hour, the show that examines the fast-changing political and geopolitical economy of our world. I’m your host, Radhika Desai.

MICHAEL HUDSON: And I’m Michael Hudson.

RADHIKA DESAI: And working behind the scenes to bring you our show every fortnight are our host Ben Norton, our videographer Paul Graham, and our transcriber Zach Weisser.

Thanks to many conferences I’ve been to, our usually fortnightly show has become a monthly show, that is, it’s been a month since our last show. And what a month it’s been. The historic U.S. election results came in while I was at the Valdai Discussion Club conference.

Traditionally, it ends with a speech, usually a landmark speech, by President Putin. This time was no different. Two days after the U.S. election results had been declared, Putin reviewed the fundamental principles of Moscow’s foreign policy, giving a wide berth to the U.S. election results. However, he ended with two key sentences that laid bare Moscow’s stance towards them.

Putin said, “Everyone should be clear that putting pressure on us is useless, but we are always prepared to sit down and talk based on the consideration of mutual legitimate interests in their entirety.”

“In that case, there may be little doubt that 20 years from now, in the run-up to the 100th anniversary of the United Nations, future guests of a Valdai Club meeting will be discussing much more optimistic and life-affirming topics than the one we are compelled to discuss today.”

That was what Putin said at Valdai.

The U.S. election results were followed by the almost immediate collapse of the German government. A Western discursive shift from the illusion that Ukraine could defeat Russia to talk of a negotiated end to the conflict, even with territorial concessions. Announcements of layoffs in German industry, which picked up pace at a funereal drumbeat.

Trump’s cabinet appointments, the resumption of the Syrian conflict, the apparent ceasefire between Israel and Hezbollah, which has been immediately violated, a Georgian attempted color revolution, the Baku COP meeting, the Sri Lankan elections that brought a Marxist to power; the list is very long.

Indeed, in retrospect, the liminal period between the U.S. presidential election in early November and the U.S. presidential [inauguration] in late January was bound to be rocky, and so it is proving to be. Our conversation will likely touch on many of these topics.

However, for the leitmotif of the conversation today, we’ve chosen a topic we’ll be meaning to cover this year; the 75th anniversary of the Chinese Revolution, which most of you know took place in 1949.

For if the United State’s destructive and malevolent presence can be seen in each one of the events rocking the world today, so is China’s constructive and benign [presence].

An entire army of U.S. and Western commentators are busy trying to talk down the Chinese economy, the foundation of China’s international influence.

It is allegedly suffering from the prospect of deflation, faces Japanification, has a real estate crisis and is losing domestic legitimacy. Moreover, we are told, it will not be able to stand up to U.S. sanctions.

So clearly, to understand China’s role in countering the U.S., we need to understand the secrets of the longevity of the Chinese Revolution.

To do this with us today is a familiar guest, Professor Mick Dunford of Sussex University and of the Chinese Academy of Sciences. Mick, as you know, is a geographer and a scholar of China. And as we have seen in other shows, he also keeps a keen eye on events in Russia, in Europe, and the world in general. So welcome, Mick.

MICK DUNFORD: All right. Thank you very much, Radhika. And thank you, Michael. It’s a great pleasure to join you again.

RADHIKA DESAI: Yes, we’re really pleased to have you. And I want to start, Mick, with a very important article you wrote recently, in which you provided a framework for the understanding of the history of revolutionary China’s success along two parameters.

One was about how China’s development has been determined by the interaction of internal and external constraints, and these constraints caused regular crises, but China had to operate within them.

And the other parameter was exactly how the Communist Party of China experienced these crises and these constraints and responded to them. So perhaps you can start us off by laying out briefly how you understand China’s achievements.

Continue reading While the US provokes chaos, China promotes development

“Nothing like before” — China is out-competing the West on EVs

The following article, written by Paweł Wargan for Progressive International, examines the neverending accusations by Western media and politicians regarding China’s putative ‘overcapacity’ in electric vehicles (EVs). Paweł explores the reasons for these accusations, and comprehensively refutes them.

The article observes that China’s industrial utilisation rates and inventory levels are similar to those of the US, and furthermore Chinese profit margins are soaring. These factors indicate that there is no significant overcapacity in China’s EV sector.

As for the notion that China’s rise has caused the decline of Western industry, Paweł points out that the decline of Western manufacturing predates China’s rise. “In the US, the trade balance has seen a sustained deficit since the late 1970s. As the productive structure of its economy shifted, industrial capital made way for financial capital. The number of manufacturing jobs decreased from around 20 million at their peak in 1979 to under 13 million today — a period in which the US saw its population rise by 100 million.”

Describing some of the extraordinary innovations taking place in China’s EV sector – in particular a ‘road-cloud-vehicle’ integration that improves safety and reduces energy use – Paweł comments that “this degree of integration is only possible through control over the entire EV value chain”. Particularly in the light of US-led sanctions and tariffs, “China began to move quickly towards technological sovereignty in all areas, from chips and artificial intelligence to cars and batteries”. As a result, “it competes not only with the automobile industry — historically the domain of the West. It also now competes with the tech giants of Silicon Valley”. Obviously, this speaks to the superiority of a socialist economy where decision-making lies ultimately with the people, rather than a few billionaires.

Paweł writes that the accusations of overcapacity provide a convenient pretext for the West to embark upon its own program of protectionism – exactly what it accuses China of doing – as well as “allowing the Western leadership to blame China for the structural long-term decline of the global capitalist economy”. Alarmingly, the situation also shows that the West would rather sabotage China’s economy and the global green transition than cooperate sensibly with China on the basis of mutual benefit.

Paweł Wargan is an activist, researcher and organiser. He serves as Political Coordinator at the Progressive International, an international coalition of over 100 popular movements, political parties, and unions. He contributed to our conference marking the 75th anniversary of the founding of the People’s Republic of China.

The past year has seen a concerted effort by Western politicians, regime intellectuals, and media stenographers to accuse China of “overcapacity”. The coordinated narrative has accompanied a choreographed escalation in the West’s economic war on China. What is motivating these accusations?

In May 2024, the White House announced a series of new tariffs on Chinese products, including a 100% tax on imports of Chinese electric vehicles (EVs), set to take effect later this year. The European Union followed closely behind. In July, the Commission announced duties ranging from 17.4% to 37.6% on Chinese EV manufacturers. And in August, Canada announced 100% tariffs on Chinese EVs along with 25% tariffs on Chinese steel and aluminium.

The White House insisted that the measures would “protect American manufacturers from China’s unfair trade practices” and ensure that “the future of the auto industry will be made in America by American workers.” The European Commission cited China’s “unfair subsidisation” and Canada warned of the threat of China’s “intentional, state-directed policy of overcapacity”. In this narrative, now choreographed and ritualized across the West, China’s “overcapacity” is to blame for the West’s rising trade deficits and persistent inability to reindustrialize.

China has responded firmly to these accusations. In a meeting with French President Emmanuel Macron and the European Commission’s Ursula von der Leyen in May, Chinese President Xi Jinping said that there is no such thing as “China’s overcapacity problem”, and emphasised China’s contribution to the green transition. China’s Foreign Ministry said that the “overcapacity” thesis was a “pretext” to create new restrictions on China’s energy products.

China’s “overcapacity” and the West’s industrial decline

Overcapacity can be measured in three ways. First, we can look at the “capacity utilization rate”, or the degree to which available industrial capacity is being used. Second, we can look at inventory levels; a high number of unsold goods gathering dust in warehouses might suggest that production exceeds demand. Third, we can look at profit margins, which would have to fall to help empty the brimming warehouses and make way for new goods.

As French economics commentator Arnaud Bertrand found, China does not show signs of “overcapacity” across any of these measures. On the contrary, its industrial utilization rates and inventory levels are similar to those of the United States, and Chinese profit margins are soaring.

Continue reading “Nothing like before” — China is out-competing the West on EVs

Richard Wolff: US shifts blame onto China because it cannot address capitalism’s flaws

In the following video interview with Global Times, prominent Marxist economist Richard Wolff explains the central contradiction in the US ruling class with respect to its relationship with China.

On the one hand, the US business community is eager to maintain good economic relations with China, which represents an important market, trading partner, avenue for investment, and source of investment. US companies “want to be able to produce in China, and even more, they want to sell into the Chinese market, which is one of the fastest-growing and largest markets in the world.”

On the other hand, the US political establishment is increasingly hostile to China. This hostility is driven to a significant degree by the fact that China is challenging the US’s global hegemony. “The last century has been the century of the American Empire, and it now sees its role in the world economy – financially, in export and import, and in other areas – being challenged above all by the People’s Republic of China.”

Meanwhile the US is facing a deepening crisis of capitalism, with growing inequality, economic instability, and a shrinking middle class. Politicians have identified two convenient scapegoats for these problems: 1) immigrants from Latin America; 2) China. Wolff points out: “Capitalism has always moved in this way. But because our politics are controlled by big business, politicians can never blame capitalism. They cannot blame the big businesses that fund them. So, who do they blame? China.”

Wolff conjectures that it may be possible to use this division in the US ruling class to pursue an agenda of peace and cooperation; that the peace movement may be able to work together with the business community to prevent a war with China.

Solidarity with China is necessary for the collective future of humanity

The following article by Sara Flounders, originally posted on Workers World, takes up the question of China’s social system: is it socialist, as it claims? Or is it just another capitalist-imperialist country?

Sara lists a number of ways in which China’s emergence is helping the countries of the Global South – from the Belt and Road Initiative to the provision of financial and technical assistance for infrastructure construction. “China is a lifeline for the Global South. The Africa Summit just held in Beijing confirmed this a thousand times over.”

Meanwhile, as a result of sustained efforts over decades, China has eliminated extreme poverty and “achieved the fastest growth in living standards of any country in the world”. Furthermore: “China has gone green and solar and put a half-million electric city buses on their streets. US city buses are still belching out pollution coming from fossil fuels.”

One outcome of this progress is that “US imperialist strategists see China’s gains as an ominous threat to their domination of the world, and have moved to counter China with a whole new level of aggressive militarism”.

Sara notes that mass opposition to a rising US-led New Cold War against China is essential, but that the left is sometimes reticent to defend China because of a misunderstanding of its social system. “Many in the West said that the enthusiasm engendered by Western corporations’ heavy investments in China had already succeeded in bringing China back into the capitalist orbit.”

The article points out that, while China today has vast wealth disparity, along with private capital, its market is “built on socialist pillars”, and “central planning remains decisive”.

The key economic role is assigned to the state, a state controlled by the working class. Every major industry, especially banking, remains under state control — a state controlled by a massive communist party. The central banks play a crucial role in subsidizing and developing key industries.

Meanwhile the Communist Party of China, with its close to 100 million members, exercises overall control of the country’s economic development.

Sara concludes that “stepping up the defense of China, its revolution and its accomplishments is necessary for the collective future of humanity.”

An ideological assault on China is taking place that cannot be fought piecemeal, answering each lie. Of course, it is crucial to refute the lies and propaganda, but it is not persuasive if the reason behind the U.S. ruling class’s extraordinary and pervasive hostility to China is not exposed. We must expose the class differences between People’s China and U.S. imperialism.

China’s emergence is a game-changer on a world scale today, with its Belt and Road Initiative, the Shanghai Cooperation agreement and the BRICS+ meeting this September at the United Nations. China has become a resource, an alternative to the International Monetary Fund and World Bank, with their brutal structural adjustment, deregulation and privatization programs (SAPs). China is a lifeline for the Global South. The Africa Summit just held in Beijing confirmed this a thousand times over.

China was able to end poverty for 800 million people — something neither the U.S. nor any other capitalist country has been able to do. Life expectancy is higher today in China than in the United States. China has achieved the fastest growth in living standards of any country in the world.

So U.S. imperialism is doubling down. Candidates Kamala Harris and Donald Trump agree. The Pentagon agrees. NATO agrees. New sanctions, new tariffs, new rounds of propaganda directed at China are aimed at preparing for war by 2025.

In the Pacific Ocean and South China Sea, U.S. strategists are rushing to construct a military alliance similar to NATO. It will include Japan, Australia, New Zealand, South Korea and the Philippines and is directed against China.

Every arm of the imperialist colossus is predicting and planning for this war. The vicious and relentless propaganda, the expanding military budget, the relentless war “games” and military maneuvers and the total agreement of both Democratic and Republican parties testify to the danger.

Which side are you on?

“Which side are you on?” is the oldest formulation in the class struggle.

The group Friends of Socialist China provides a valuable framework to explain the country’s most important contribution. Political movements, parties and organizations of the working class that take sides in the global class struggle are the most valuable anchor to withstand the crisis confronting the working class and all oppressed peoples. Without this anchor, this basic understanding, workers and activists are cast adrift in the onslaught of each imperialist flood.

An important part of understanding the changing world situation can be found in Workers World Party’s evaluation of China’s rapid development. U.S. imperialist strategists see China’s gains as an ominous threat to their domination of the world, and have moved to counter China with a whole new level of aggressive militarism. We say China’s gains hold a liberating potential for humanity.

If we can explain the reason for U.S. imperialism’s hostility and why Washington calls Beijing “the greatest threat,” it can strengthen popular resistance to the U.S. war drive.

Continue reading Solidarity with China is necessary for the collective future of humanity

Canada’s unjustifiable tariffs on EVs from China

The following opinion piece, written by International Manifesto Group convenor and Friends of Socialist China advisory group member Radhika Desai for CGTN, critiques the Canadian government’s recent decision to slap 100 percent tariffs on Chinese electric vehicles (EVs).

Radhika notes that the Trudeau government’s stated justification for the tariffs – that “China has an intentional state-directed policy of overcapacity and oversupply designed to cripple our own industry” – is pure misdirection. The real reason is to prove Canada’s loyalty to the US in the run-up to the renegotiation of the United States-Mexico-Canada Agreement. As for China’s “intentional state-directed policy”, “the most authoritative development economists will agree that there are no known instances of successful industrialisation where the state has not played a central role. This is as true of Japan or Germany or South Korea as it is of the US itself and even Canada.”

China’s government has intentionally concentrated resources on the EV industry for over 20 years, “particularly focusing research and development in making lithium iron phosphate batteries that were safer and cheaper than lithium nickel manganese cobalt batteries almost as energy dense as the latter.” The authorities provided further support by buying vast numbers of electric buses to provide low-emission public transport, and by building EV charging infrastructure throughout the country.

As for the oft-repeated trope about China’s “overcapacity”, Radhika writes that “if anything, the world needs more production of these things” – echoing the sentiments of former under-secretary-general of the United Nations and former executive director of the UN Environment Programme Erik Solheim.

Radhika observes: “What such complaints really mean is that there is a market for high-technology goods that is no longer being supplied by the US or the West, thus endangering their 200-year-old monopoly on such goods. Well, for all the crocodile tears Western politicians weep over the poverty and lack of the development in so much of the world, they do get mighty upset when one part of it, namely China, manages to develop and even push back the technological frontier.”

The article concludes by noting that the US and Canada, having followed the path of neoliberalism and financialisation for several decades, have precious little chance of success in competing with China on advanced manufacturing.

Three months after the U.S. announcement slapping 100 percent tariffs on Chinese electric vehicles (EV), Canada has followed suit. As local observers see it, the Trudeau government faced a choice. On the one hand, it could risk retaliatory tariffs from China on Canada’s much smaller economy: The memory of those imposed on Canadian canola, pork and soybeans worth billions in trade in 2019 in retaliation for Canada’s illegal arrest of Meng Wanzhou remains fresh. On the other hand, it could risk U.S. anger should China extend even part of its EV supply chain into Canada to get the United States-Mexico-Canada Agreement access to the U.S. market. Such anger would be bound to spill over into the renegotiation of that agreement in 2026.

Canada chose to avoid risking U.S. anger. But that was not how it justified the decision. Instead, Canadian Deputy Prime Minister and Minister of Finance Chrystia Freeland claimed that “China has an intentional state-directed policy of overcapacity and oversupply designed to cripple our own industry … We simply will not allow that to happen to our EV sector, which has shown such promise.” This justification is clearly cooked up.

Let’s take all the elements of that statement in turn.

The reference to “intentional state-directed policy” is a bizarre instance of trying to tar a virtue as a vice. The most authoritative development economists will agree that there are no known instances of successful industrialization where the state has not played a central role. This is as true of Japan or Germany or South Korea as it is of the U.S. itself and even Canada.

The right to pursue industrial policy was recognized by the erstwhile General Agreement on Tariffs and Trade and is recognized by its successor, the World Trade Organization. Moreover, both the U.S. and Canada are themselves talking about industrial policy and state subsidies to sectors facing competition from China. 

As a study by the Massachusetts Institute of Technology pointed out, China’s success in EV development is a classic case of a successful industrial policy. It began investing in the sector as early as 2001 when it became clear that its internal combustion and hybrid car industries were too far behind major manufacturers in the U.S., Germany and Japan.

Moreover, EVs would also have beneficial effects in reducing pollution and oil imports. Chinese authorities concentrated resources on this nascent industry, particularly focusing research and development in making lithium iron phosphate batteries that were safer and cheaper than lithium nickel manganese cobalt batteries almost as energy dense as the latter. They also began providing the fledgling industry with markets by buying its vehicles for public transport.

Nor was China at all autarkic. On the contrary, it invited Tesla in, giving it the same tax and subsidy treatment as domestic producers. Tesla extended its supply chains into China while also stimulating domestic producers to compete with it.

Next, let us come to “overcapacity and oversupply.” Since when did the production of low-cost and high-quality products, particularly those that advance the world towards its critically important climate goals, become a matter of overcapacity and oversupply? If anything, the world needs more production of these things. Canada, the U.S. and the West should join in the effort to produce such goods.

What such complaints really mean is that there is a market for high-technology goods that is no longer being supplied by the U.S. or the West, thus endangering their 200-year-old monopoly on such goods. Well, for all the crocodile tears Western politicians weep over the poverty and lack of the development in so much of the world, they do get mighty upset when one part of it, namely China, manages to develop and even push back the technological frontier.

As for “crippling our (Canadian) industry,” that’s pretty ridiculous coming from countries that have been sparing no effort – sanctions, tariffs, military alliance and base building, “freedom of navigation” and other military exercises, propaganda, fear-mongering and false “development” advice – to prevent the rise of China and, one might add, that of most of the developing world.

Finally, Freeland speaks of Canada’s own EV sector “that has shown so much promise.” Undoubtedly, the thing that countries like Canada and the U.S. ought to do is find a sector or product that they have the unique strengths to develop, as China did with EVs, knowing that it could not compete internationally on conventional cars or hybrids.

However, there is a big distance between “should” and “can.” Today, notwithstanding the corporate subsidies that the U.S. and Canada are giving to their manufacturers, it is unlikely that they will be able to replicate China’s success in manufacturing, not least because, as they have gone down the road of neoliberalism and financialization, they have lost the capacity for sustained industrial policy they once had.

US economists ‘expose’ China’s economy

In the following article for Fighting Words, Chris Fry unpicks and debunks a recent Axios piece about how China’s economy is supposedly failing.

According to the Axios article, it is a serious problem that “household income growth is outpacing that of spending”, with per capita disposable income rising by 5.4 percent in the first half of 2024. Chris comments: “In the US, 60% of the workers live paycheck to paycheck, putting them and their families at risk in case of an unforeseen crisis. Yet bourgeois economists seem to believe that it is a bad thing for Chinese families to be able to sock some of their income away for emergencies.” Meanwhile, “banks in China, unlike in the US, are publicly owned, so the savings are used to fund the country’s development instead of stock buybacks and cryptocurrency manipulation.”

Another major ‘problem’ is that prices in China are barely rising. “To the well-heeled economists at Axios, it’s a bad thing that the inflation rate in China is a fraction of 1%, while in the U.S. workers now face an inflation rate of some 4%, with prices remaining sky high after previous climbs of over 9% for essential items like food and gas.”

Chris goes on to contrast China’s merciless war on poverty with the alarming rise in poverty, inequality and homelessness in the US. And yet, “whoever wins the next election, the billionaire class and their minions from both parties in Washington will no doubt blame the unfolding crisis here on the People’s Republic of China”.

The article concludes with a powerful call to take inspiration from, and show solidarity with, Chinese socialism:

The high prices that we face for food and gas, the lack of affordable housing, the sky-high prices for education, health care and childcare, the collapse of the infrastructure, the catastrophic effects of global warming, the monstrous prison system, the billions wasted on the war industry, none of these are the fault of the Chinese working class or their Communist Party. The blame lies entirely with the tiny parasitic ruling class of billionaires right here at home.

We must explain to our class here that the extraordinary development by China provides us a beacon of hope. It tells us that the struggle here to empower the workers and oppressed communities, to wrest the ownership and control of the productive apparatus from the billionaires, to use scientific planning to direct both the production and distribution of goods and services instead of Wall Street’s drive for massive profits, all this can offer real benefits for ourselves and our families and for the planet as a whole.

Bourgeois economists, ever ready to proclaim the impending demise of the socialist economic model in the People’s Republic of China (PRC), find every opportunity to throw shade on China’s economic system.

At the same time, they devote their energy to proclaim the supposed superiority of the capitalist economies in the imperialist world, in Europe and the U.S.

And sometimes they have to stretch all logic and common sense to make their billionaire masters and the workers and oppressed here believe in the eternal superiority of U.S. imperialist hegemony over the social and economic system of China, even as the Pentagon scrambles to prepare their war on the PRC.

Continue reading US economists ‘expose’ China’s economy

Remy Herrera: the foundations of China’s economy clearly distinguish it from capitalism

The following text is the English translation of an interview with Rémy Herrera, a research analyst at the National Center for Scientific Research (CNRS) at the Sorbonne in Paris. The interview was carried out by Tang Xiaofu for the Observers’ Network, Beijing, and was recently posted in Workers World. While covering similar ground to the interview we published in June 2024, it contains a number of additional insights and is well worth reading in full.

In the interview, Herrera firmly rejects the characterisation of China by David Harvey and others of “a neoliberalism with Chinese characteristics”, and points to the foundations that clearly distinguish China’s system from capitalism:

1) The persistence of powerful and modernized planning; 2) a form of political democracy, obviously perfectible, but making collective choices possible; 3) extensive public services, conditioning political, social and economic citizenship; 4) ownership of land and natural resources that remains in the public domain; 5) diversified forms of ownership, adequate to the socialization of productive forces and boosting economic activity; 6) a general policy which consists of increasing labor remuneration more quickly compared to other types of income; 7) a desire for social justice displayed by public authorities in the face of rising social inequalities since 1978; 8) the priority given to the preservation of the environment, the protection of nature being now considered inseparable from social progress; 9) a conception of economic relations between States based on a win-win principle; and 10) political relations between States based on the search for peace and more balanced exchanges between peoples.

Herrera goes on to discuss the unique role of the state-owned enterprises in China’s economy, in particular that “the compass that guides them is not the enrichment of private shareholders, but the priorities given to productive investment and the service provided to their customers”.

The public sector “still represents a large part of industrial assets (in construction, steelmaking, basic materials, semi-finished products, etc.) and almost all of them in strategic areas for the country’s, like infrastructure in energy, transport, telecommunications, and of course armaments — in addition to the banking and financial sectors.” As such, public ownership sits at the heart of – and is able to guide – China’s development strategy.

The planning system “is the place where collective choices are developed and decided, as expressions of a general will. It is the authentic space where a nation chooses a common destiny and the means for a sovereign people to become its own master, in all areas of its existence: way of life, ways of consuming, housing and occupying or developing the national territory, precise definition of the relationships maintained by human beings with their environment and nature.”

Herrera also addresses the US’s trade war, launched by Trump and continued by Biden, assessing that the “problem” from the US’s point of view is that the unequal relationship between the US (an imperialist country) and China (a developing country) is becoming less unequal – “there is an erosion of the advantage of the United States in the exchange”. The trade war “was an attempt by the administration led by President Trump to curb the slow, continuous erosion of the advantage of the United States, observed for decades in trade with its emerging rival, China.”

The interview concludes with an appeal to move beyond a moribund imperialism. “We must dismantle the logic of crisis and war driven by high finance by imposing democratic control on it, and therefore think about alternatives to capitalism. The defense of peace and the reactivation of the socialist project are today’s priorities. In this context, China has a fundamental role to play in these transformations.”

I. How the West interprets China

Tang Xiaofu: 1) You have visited China multiple times, but now many scholars are trying to distort Socialism with Chinese Characteristics into State Capitalism. What’s your view towards State Capitalism? And what’s the difference between State Capitalism and Socialism with Chinese Characteristics?

Rémy Herrera: The speeches of many current leaders of the Communist Party of China (CPC) suggest that China would still be in the “first phase of socialism,” that is to say, in a stage considered essential for developing the productive forces and which would take a long time to reach its goal. According to them, the historical goal sought would indeed remain that of developed socialism — even if, it is true, the contours of the latter are far from being clearly and precisely defined. However, in Western countries, many researchers claim that these official political declarations claiming the persistence of socialism in China are only a facade, or the cover-up of a hidden form of capitalism, and that socialism is really dead and buried in China. I do not share the opinion of these Western researchers. On the contrary, I think that these statements by Chinese leaders deserve to be taken seriously.

Moreover, even within the debates among Western Marxists, a clear majority of them affirm that the Chinese economy would henceforth be purely and simply capitalist. This is the case of certain well-known Marxists, such as David Harvey, who believes he has seen, since the 1978 reforms, “a neoliberalism with Chinese characteristics” where a particular type of capitalist market economy has incorporated more and more neoliberal devices operated in the framework of very authoritarian centralized control. This is also the case of Leo Panitch, for example, who analyzes the contemporary integration of China into the circuits of the world economy as the duplication by China of the role of “capitalist complement” formerly held by Japan, as a support that China would provide to the United States through capital flows allowing the latter to maintain its global hegemony, and as the trend towards the liberalization of financial markets in China leading to the dismantling of instruments of control of capital movements and undermining at the same time the bases of the power of the CPC. I do not agree with these researchers either. I defend the idea that today, the Chinese system still contains key elements of socialism, and the interpretation I give of its nature is compatible with socialism.

Thus, I read the Chinese political-economic system as a market socialism, or socialism with a market, based on some pillars which still distinguish it quite clearly from capitalism. I will cite, among these foundations: 1) the persistence of powerful and modernized planning; 2) a form of political democracy, obviously perfectible, but making collective choices possible; 3) extensive public services, conditioning political, social and economic citizenship; 4) ownership of land and natural resources that remains in the public domain; 5) diversified forms of ownership, adequate to the socialization of productive forces and boosting economic activity; 6) a general policy which consists of increasing labor remuneration more quickly compared to other types of income; 7) a desire for social justice displayed by public authorities in the face of rising social inequalities since 1978; 8) the priority given to the preservation of the environment, the protection of nature being now considered inseparable from social progress; 9) a conception of economic relations between States based on a win-win principle; and 10) political relations between States based on the search for peace and more balanced exchanges between peoples. Socialism “with Chinese characteristics” is not very far from this reading grid.

Continue reading Remy Herrera: the foundations of China’s economy clearly distinguish it from capitalism

State intervention an indispensable factor in China’s economic success

The following article by Michael Roberts reviews and summarises a new book by Brazilian Marxist economists Adalmir Antonio Marquetti, Alessandro Miebach and Henrique Morrone, entitled Unequal Development and Capitalism: Catching Up and Falling Behind in the Global Economy.

The central focus of the book is measuring the progress of Global South countries in catching up with the imperialist countries in terms of economic development. Roberts summarises the authors’ key finding as follows: “The ‘follower’ countries (the Global South) will generally have higher profit rates than the ‘leader’ countries (the imperialist Global North) because their capital-labour ratio (in Marxist terminology, the organic composition of capital) is lower.” However, “as these countries try to industrialise, the capital-labour ratio will rise and so will the productivity of labour.” As a result, “capital productivity will tend to decline and this eventually will slow the rise in labour productivity.”

Consequently, “many Global South countries will never ‘bridge the gap’ on labour productivity and thus on living standards because the profitability of capital in the Global South will quickly dissipate compared to the Global North”.

How to overcome this contradiction where increased productivity of labour leads to a falling rate of profit, thereby decelerating development? The book’s authors write: “This issue is observed in many middle-income trap countries. In these cases, state intervention becomes essential, expanding investment even as the profit rate declines, as in China.” To which Roberts comments: “Exactly. China’s success in catching up, which so frightens US imperialism now, is down to state-led investment overcoming the impact of falling profitability on capital investment.”

China has “a model of development based on dominant public ownership of finance and strategic sectors and a national plan for investment and growth”. As a result, “only China is closing the gap on per capita GDP with the imperialist bloc”. This chimes with Samir Amin’s observation that “China is the only authentically emergent country”.

Brazilian Marxist economists Adalmir Antonio Marquetti, Alessandro Miebach and Henrique Morrone have produced an important and insightful book on global capitalist development, with an innovative new way of measuring the progress for the majority of humanity in the so-called Global South in ‘catching up’ on living standards with the ‘Global North’.

In this book Marquetti et al argue that unequal development has been a defining characteristic of capitalism. “Throughout history, countries and regions have exhibited differences in labor productivity growth – a key determinant in poverty reduction and development – and although some nations may catch up with the productivity levels or well-being of developed economies at times, others fall behind.”

They propose a model of economic development based on technical change, profit rate and capital accumulation, on the one hand, and institutional change, on the other.  Together these two factors should be combined to explain the dynamics of catching up or falling behind.

They base their development model on what Duncan Foley called the ‘Marx-bias’ and what Paul Krugman has called ‘capital bias’; namely that in capitalist accumulation there will be a rise in the organic composition of capital (rising mechanization compared to labour input) leading to an increase in the productivity of labour, but also a tendency for the profitability of accumulated capital to fall.

Continue reading State intervention an indispensable factor in China’s economic success

China’s Third Plenum directed towards quality growth and improved living standards

The following analysis of the Third Plenum of the CPC Central Committee, written by British Marxist economist Michael Roberts, counters the “China collapse” narrative that continues to pervade Western media coverage.

Roberts observes that “Western media and economists argue for a ‘rebalancing’, by which they mean a switch to a consumer-led, private sector-led economy from the current investment-led, export oriented, state directed one.” Essentially, they want to see an economy more akin to that of the US and Europe – deregulated, privatised, and directed towards the interests of shareholders. In contrast, the Third Plenum communique indicates that China will continue to focus on planning, regulation, improving living standards, developing new productive forces and placing ecological issues at the heart of its economic decision-making.

“China is fast developing a ‘new economy’ based on high value-added tech sectors. These sectors have significantly outpaced headline GDP growth in recent years.” Furthermore, “far from shifting towards a more Western-style economy, “the Third Plenum release reminds us that China still has planning, not the centralized one of the Soviet Union, but ‘indicative planning’ with targets set for many sectors”.

China’s economists probably don’t need to take advice from their Western counterparts, given that “China’s economy is still expanding at around 5 percent a year, more than twice as fast as the US economy, the best performing of the top seven capitalist economies.”

Roberts cites another useful recent piece in Asia Times:

Do we really want tech billionaires or do we really want tech? Value is not being destroyed; it’s accruing to consumers ins lower prices, higher quality and/or more innovative products and services… What is economic success, what is value creation? Maybe, just maybe, it’s the approach that delivers the most tangible improvements in people’s lives, instead of trillion-dollar companies and billionaire CEOs.”

NB the article refers to China as a “one-party state”. While the CPC is the leading party in the government, there are eight other political parties represented in the National People’s Congress and the Chinese People’s Political Consultative Conference.

The Third Plenum of the Communist Party of China ended last week.  The Third Plenum is a meeting of China’s Communist Party Central Committee composed of 364 members which discusses China’s economic policy for the next several years.  As China is a one-party state, in effect this sets out the policies of the government and, in particular, that of President Xi.

What did we learn from the Third Plenum about China’s economic policies?  Not very much that we did not already know. According to the state media release, the Plenum agreed that economic policy should concentrate on achieving a new round of “scientific and technological revolution and industrial transformation,” Chinese-style. In the next decade, “education, science and technology, and talents are the basic and strategic support for China’s modernization.”

So it appears that the CPC leaders are looking to sustain economic growth and meet all their proclaimed social objectives through what they have called ‘quality growth’.  The expansion of the economy mainly through using plentiful labour from the countryside coming into the cities to work in manufacturing, property development and infrastructure is over.  It has been over for some time.  Urbanisation is slowing.

Continue reading China’s Third Plenum directed towards quality growth and improved living standards

EU tariffs on China: a script written in Washington

The following article by Carlos Martinez, first published in the Morning Star, comments on the European Union’s recent decision to impose tariffs of up to 38 percent on Chinese electric vehicles (EVs). The only enthusiastic supporter (and presumably instigator) of these tariffs is the US, which is embarked on an escalating New Cold War against China.

Carlos describes the negative reaction to the tariffs not just in China but within much of the European business community and among environmentalists. Ultimately, aside from likely inspiring reciprocal tariffs from China, the move will have the effect of “making the EU’s transition slower and more expensive” – in the words of a Chatham House article.

Carlos further notes that “imposing tariffs on the basis of Chinese public investment creates a precedent that any such central investment in sustainable development is unacceptable”, and as such, “would render any sort of green new deal out of the question”.

The article concludes: “For the sake of peace, development and the habitability of the planet, Europe must change course.”

Last week the EU notified Beijing that, following a nine-month investigation into alleged unfair state subsidies, it will impose new tariffs of up to 38 per cent on Chinese electric vehicles (EVs).

Given the existing 10 per cent tariff on car imports, this will mean Chinese EVs will be hit with tariffs of up to 48 per cent. These new tariffs are due to kick in on July 4.

Germany, Sweden and Hungary have been vocal in opposing the move, with German Chancellor Olaf Scholz stating the obvious: “Isolation and illegal customs barriers ultimately just makes everything more expensive, and everyone poorer.”

Of course, this reflects the importance of the Chinese market for German car manufacturers, who will be hoping beyond hope that the authorities in Beijing haven’t been studying the Book of Exodus and thus are not minded to apply the principle of “an eye for an eye.”

BMW CEO Oliver Zipse commented: “The decision for additional import duties is the wrong way to go. The EU Commission is thus harming European companies and European interests.”

This sentiment was echoed by a spokesperson for Volkswagen: “The negative effects of this decision outweigh any potential benefits for the European and especially the German automotive industry.”

Indeed there seems to be little enthusiasm for these tariffs anywhere outside the White House. The Bloomberg editorial board argues that “tariffs won’t bring the EU prosperity” and that the increased price of EVs will decelerate Europe’s green transition.

Similarly, an article for Chatham House — titled “Imposing tariffs on Chinese electric vehicles will make the EU’s transition slower and more expensive” — notes that the EU has a legally binding target of reaching net-zero greenhouse gas emissions by 2050.

Meanwhile “decarbonisation technologies like solar panels, wind turbines and electric vehicles share a characteristic that sets them apart from other traded goods: when swapped for fossil fuel alternatives, they reduce the quantity of planet-warming gases being pumped into the atmosphere.” Such technologies “are needed in vast quantities, and in very short order, to give any chance of avoiding the worst impacts of climate change.”

It is noteworthy — and presumably not entirely coincidental — that the EU’s announcement came just a month after the Biden administration announced tariffs on Chinese EVs of 100 per cent.

In the case of the US, the material impact of these tariffs is virtually non-existent, given that Chinese-made models constitute just 2 per cent of all EV sales; and this in a market where EVs only make up 8 per cent of all car registrations (compared with almost 50 per cent in China).

The US tariff increase is simply an attempt by Biden to appear “tough on China” in the run-up to the presidential election. Donald Trump, not to be outdone on such matters, has promised tariffs of 200 per cent. As such, what we’re talking about is yet another component in the US-led new cold war on China, for which there is bipartisan consensus.

So it would appear the EU is acting in accordance with the strong recommendations (instructions) of Washington.

This certainly wouldn’t be the first time Europe has compromised its climate commitments and economic stability in order to participate in the US’s pursuit of 21st century hegemony.

In 2022, in order to punish Russia and to generate profits for the US’s domestic fossil fuel industry, the Biden administration heavily promoted sanctions on Russian natural gas. The result has been a major increase in US exports of fracked shale gas to Europe.

To get this gas from North America to Europe, it has to be liquified, stored at minus 70°C, and transported by ship. This whole process is extremely costly in both financial and ecological terms, certainly much more so than using existing pipelines running from Russia through Europe.

The European working class and progressive movement should oppose these tariffs on Chinese EVs and should resist the ongoing attempts by sections of the bourgeoisie to align Europe with Washington’s reckless foreign policy.

As noted in these pages in August last year, “major problems facing humanity require international co-operation — and China’s leading position in green technology makes co-operation in this field essential.”

China has raced ahead in renewable energy and electric transport because it has identified those sectors as being absolutely crucial for the future of not only China but the world.

As such, it has built environmental considerations into the core of its planning system and has targeted public investment accordingly. Rather than complaining about China’s investment in new productive forces, Europe should be following its example.

Imposing tariffs on the basis of Chinese public investment creates a precedent that any such central investment in sustainable development is unacceptable. This precedent would render any sort of green new deal out of the question.

Even the Economist acknowledges that “the potential gains to the West from a ready supply of cheap, green vehicles are simply enormous.” And, momentarily overcoming its Eurocentric instincts, it admits that Chinese cars “are not only cheap; they are better-quality, particularly with respect to the smart features in EVs that are made possible by internet connectivity.”

The article concludes that “if China wants to spend taxpayers’ money subsidising global consumers and speeding up the energy transition, the best response is to welcome it.”

Inasmuch as there’s such a thing as a sane bourgeois perspective, this is what it looks like.

In the words of former undersecretary-general of the UN and former executive director of the UN Environment Programme Erik Solheim: “China is now the indispensable country for everything green … And all historical experiences show that if you create closed-down markets and separate markets from different parts of the world, we will all be poorer.”

For the sake of peace, development and the habitability of the planet, Europe must change course.

Class character of People’s China: interview with research economist

The following text is the English translation of an interview with Rémy Herrera, a research analyst at the National Center for Scientific Research (CNRS) at the Sorbonne in Paris. The interview was first published in the magazine Harici (Istanbul, Türkiye), and the newspaper Cumhuriyet (Istanbul) in May 2024. The original French has been translated by John Catalinotto for Workers World.

Herrera, who has co-authored a book by Long Zhiming called Dynamics of China’s Economy: Growth, Cycles and Crises from 1949 to the Present Day, makes several important points about the nature, history and trajectory of China’s socialist market economy. First, contrary to Western neoclassical economists who see China’s emergence as a function exclusively of its adoption of market mechanisms and its integration into the global capitalist economy, Herrera argues that “accelerated growth was made possible only by the efforts and achievements of the Maoist period.” When opening up was introduced, it was “firmly and continuously controlled by the Chinese authorities, and it is under this condition that it can be considered as having contributed to the country’s indisputable economic successes”.

China has engaged with the process of globalisation, but the crucial condition for the success of this experiment has been subjecting it “to the constraints of satisfying internal objectives and domestic needs, … fully integrated within a coherent development strategy”. Engaging with the global economy is not by itself a solution to all problems; after all, “for more than a century before the victory of the Revolution in October 1949, ‘opening up’ had meant above all submission, devastation, exploitation, humiliation, decadence and chaos for the Chinese people”.

Herrera also discusses the nature of China’s state-owned enterprises (SOEs). These “are not managed in the same way as Western transnational corporations”; their primary goal is not the pursuit of shareholder profit at all costs. Rather, they are duty bound “to stimulate the rest of the domestic economy, and go beyond a vision of immediate profitability when higher strategic, long-term or national interests so dictate”.

On the underlying socialist basis of China’s economic system, Herrera makes the fundamental point that, in China, “the state controls capitalism, not the other way around”. For example, China’s authorities have “successfully confronted the power of the financial markets”, building a “great monetary wall” to defend the national currency. “Powerful strategic planning, whose techniques have been relaxed, modernized and adapted to today’s requirements — which is what makes it so effective — is a distinctive feature of a socialist approach. State control of the currency and all the major banks is an absolute requirement, as is close monitoring of the activities of financial institutions and the behavior of foreign firms operating on national territory.”

He continues:

The coexistence of public and private activities, stimulated by each other within a mixed, hybrid system, is the means chosen to develop the country’s productive forces to the maximum − including by attracting foreign capital and importing advanced technologies − and thus raising its level of development, with the stated aim of improving the population’s living conditions, and doing this not by abandoning socialism, but by deepening the socialist transition process that began in 1949.

Herrera also addresses the ongoing crisis of neoliberalism and its manifestation in an increasingly aggressive New Cold War on China. “All the conditions are in place for the system’s contradictions to become even more pronounced, especially as few reforms have been carried out since the 2008 crisis”. All progressive and peace-loving forces must unite in opposition to the US and its allies’ escalations. “The defence of peace is the priority”.

Q: Let’s begin with your books on China. Based on your research and observations during your visits to China, how do you interpret the Chinese miracle that everyone is discussing?

RH: Many commentators on the very high rate of growth in China’s gross domestic product (GDP), which has been observed for several decades now, use the term “miracle” to describe this phenomenon. I, for one, believe that this is no miracle, but rather the result of a development strategy that has been patiently conceived and effectively implemented by the country’s leaders and senior officials in successive governments, under the authority of the Communist Party.

We read and hear everywhere, in academic circles and the mainstream media, that the “take-off” of the Chinese economy is due solely to its “openness” to globalization. In my view, it’s necessary to add that such accelerated growth was made possible only by the efforts and achievements of the Maoist period. This opening up was firmly and continuously controlled by the Chinese authorities, and it is under this condition that it can be considered as having contributed to the country’s indisputable economic successes. It is because it has been subject to the constraints of satisfying internal objectives and domestic needs, and fully integrated within a coherent development strategy, that this opening up to globalization has been able to produce such positive long-term effects for China.

Let’s be clear: without the elaboration of such a development strategy, which is clearly the work of the Chinese Communist Party — let’s not forget that — and without the energy deployed by the Chinese people to implement it during the revolutionary process, the country’s insertion into the capitalist world system would inevitably have led to the destructuring of the national economy, or even its destruction altogether, as is happening in so many other countries in the South, or in the East. One fundamental point must be borne in mind: for more than a century before the victory of the Revolution in October 1949, “opening up” had meant above all submission, devastation, exploitation, humiliation, decadence and chaos for the Chinese people.

Q: How does China’s success differ from Western development models?

RH: The success of the Chinese government’s development strategy and the many benefits it has brought to the country’s people contrast sharply with the failure of neoliberal economic policy measures applied in Western countries, which have had catastrophic consequences for workers in the North, whether in economic, social, or even moral and cultural terms.

Let me give you a specific example. One explanation for the strength of Chinese state-owned enterprises (SOEs) is that they are not managed in the same way as Western transnational corporations. The Western ones — listed on the stock exchange and oriented towards the logic of shareholder value which demands the maximization of dividends paid to their private owners, shareholder value and rapid returns on investment — operate by squeezing a chain of subcontractors, whether local or relocated abroad. Chinese state-owned groups don’t behave like this. If they were to behave in such a rapacious manner, they would be acting to the detriment of local small and medium-sized enterprises and, more broadly, of the entire national industrial fabric. But this is clearly not the case. 

Most of China’s large state-owned enterprises are (or have become) profitable again because their guiding compass is not the enrichment of private shareholders, but the priority given to productive investment and customer service. In the final analysis, it doesn’t matter if their profits turn out to be lower than those of their Western competitors as long as they serve, at least in part, to stimulate the rest of the domestic economy, and go beyond a vision of immediate profitability when higher strategic, long-term or national interests so dictate.

Q: Can this model be defined in terms of the neo-classical or neo-Marxist model?

RH: First of all, I don’t think the Chinese see their development strategy as a “model.” Nor do they seek to impose or export it. They simply believe that certain lessons can be learned by the peoples of the world, but that it is up to them to define the objectives and means of their own development in their own specific historical, social and cultural conditions. This also differs markedly from the Western vision, which would like its “model” to be followed by every country in the world.

Neoclassical models have no application in China. If you’ll allow me, I’d like to add that neoclassical economics, which today constitutes the hegemonic or mainstream current in economics, basically serves no other purpose than to attempt to provide a theoretical and supposedly scientific justification for neoliberal political practices whose ideology is situated at the opposite end of the spectrum from measures for social justice and the development of public services. In reality, neoclassical economics is not a science, but science fiction or, as I put it in a recent book (“Confronting Mainstream Economics for Overcoming Capitalism,” Palgrave Macmillan), an ideology with scientific pretensions.

I am convinced, on the other hand, that Marxism has not yet been scientifically overtaken. Today, it has no serious competitor. It remains relevant, not least because we still live in a world where the capitalist system remains dominant on a global scale, even if its changes have been substantial, and need to be carefully accounted for. Despite the many attacks on Marxism since its foundation, and the repeated announcements of its death, it is enduring, resilient, “indestructible” dare I say, and the indispensable theoretical benchmark for anyone thinking about the ways and conditions of a better world. 

Despite the demise of the USSR and the Soviet bloc, within which it had all too often become dogmatized and sometimes turned against itself, Marxism remains indispensable today, an irreplaceable point of reference for those fighting for socialism. So it’s hardly surprising that it is still an important theoretical reference for China. 

Continue reading Class character of People’s China: interview with research economist

Narrative of ‘overcapacity’ is a complete failure: former UN under-secretary-general

Interviewed by the Global Times, Erik Solheim describes the West’s accusations of Chinese “overcapacity” in relation to solar energy and electric vehicles as “a complete failure”.

From the perspective of combatting climate change, China is doing crucial work and blazing a trail that others should follow: “We have all called for many more high-quality green products from everyone, from China, from Europe, from the US, from everyone. Why start blaming China for doing what is expected from everyone?”

Solheim further notes that, from an economic perspective, accusations of overcapacity make little sense, “because what creates the foundation for trade is overcapacity… My nation, Norway, for example, is a big exporter of salmon… We raise and produce much more salmon than we can eat ourselves. Then we sell some to others. And then, for instance, we can import electric cars from China… We should not fear overcapacity, but we should turn it into a mutual benefit where everyone benefits from Chinese leadership in electric cars as they benefit from our production of salmon.”

Ultimately, tariffs will slow down the green transformation “because China is now the indispensable country for everything green”, given that “60 percent of all green technologies in the world are in China” and “when it comes to solar energy, maybe the figure is even more than 90 percent.”

Solheim also describes some of China’s contribution to sustainable development in the Global South: “I was living in Kenya for quite a number of good years. In Kenya, China has constructed the Mombasa-Nairobi railroad, which goes through some very vulnerable ecological areas. But it is the cleanest and most well-functioning transport system in Kenya. It’s an absolute, wonderful, green contribution to Africa.”

Erik Solheim is former under-secretary-general of the United Nations and former executive director of the UN Environment Programme. He spoke at our event Building a multipolar world – Ten years of the Belt and Road Initiative in November 2023.

GT: During your recent visit to China, you posed a photo of your morning run. What was it like to go for a morning run in Beijing? 

Solheim: It was absolutely wonderful. The sun was bright, the sky was blue. You could breathe in the fresh air. It was a nice experience and highlighted a contrast to 10 years ago when the air pollution was thick and the sky was gray. It’s such enormous progress in such a short time. There is more to be done. But China has largely won the war against pollution.

GT: In the same tweet, you mentioned: “Why doesn’t the world start competing and stop complaining about China’s green leadership?” They are complaining about China’s “overcapacity.” Do you think China has an issue of “overcapacity”?

Solheim: I think the narrative of capacity is a complete failure for two reasons.

First, this is exactly what we all have wanted. This is even what the Joe Biden administration in the US has called for. We have all called for many more high-quality green products from everyone, from China, from Europe, from the US, from everyone. Why start blaming China for doing what is expected from everyone? A few years ago, the West was complaining that China’s production was emitting too much pollution. And now they’re complaining that China is making green products.

Second, this is complete nonsense from an economic perspective because what creates the foundation for trade is overcapacity. If the US had no overcapacity in its industries for the last 100 years, it would not have become a great nation. It became great because it had overcapacity – it could produce for global markets.

My nation, Norway, for example, is a big exporter of salmon. Why? Because we have overcapacity for salmon. We raise and produce much more salmon than we can eat ourselves. Then we sell some to others. And then, for instance, we can import electric cars from China. One of the most valuable companies in the world today is Apple, an American company. Why? Because they have an overcapacity in electric smartphones. Otherwise, they would have just been in the American market and they would have been a small company. We should not fear overcapacity, but we should turn it into a mutual benefit where everyone benefits from Chinese leadership in electric cars as they benefit from our production of salmon.

GT: Are there any green cooperation projects between China and other countries that have impressed you? What are the positive impacts of those projects?

Solheim: Absolutely. Two months ago, I was in Bangladesh, where China had constructed a bridge called the Padma Bridge. It is a wonderful rail and road bridge across the Padma River. That one bridge increased the GDP of Bangladesh by 1 percent because it connects the eastern and western parts of the land. That is a wonderful support for Bangladesh.

I was living in Kenya for quite a number of good years. In Kenya, China has constructed the Mombasa-Nairobi railroad, which goes through some very vulnerable ecological areas. But it is the cleanest and most well-functioning transport system in Kenya. It’s an absolute, wonderful, green contribution to Africa. 

GT: Some observers suggest that the US doesn’t want to live in a world where the world’s foremost energy provider is China, so they’re making huge efforts to catch up and, at the same time, attempt to slow China down with initiatives like this “overcapacity” rhetoric. What’s your take on this view?

Solheim: I think there are two aspects to this view.

First, the US is deeply concerned about having a peer competitor, such as China. For the past century, the US has been the dominant global power, or the only dominant power in the world, and it’s not used to sharing that position. However, it needs to get used to the reality that China’s economy will surpass that of the US, and China will play an increasingly important role in global affairs. Additionally, the US doesn’t only need to adapt to the rise of China, but also to the rise of other powers like India, Turkey, Indonesia, and Brazil. The era of US dominance is over, and it needs to adapt to the change.

On the other hand, President Biden wants jobs for his people. It’s natural for him to be more concerned about American jobs than the jobs in Liaoning or Guangdong.

But we should also explore how the green energy boom can benefit everyone and how Chinese companies can invest in and be welcomed in Europe and North America.

For instance, Tesla was invited to come to China. China invited Tesla to a large extent to create fair competition in the electric car market in China. It helped shape BYD, Hongqi, Geely, and all the other Chinese brands. Thus, the US should invite Chinese companies to invest in America, shaping the competition in the American market. Then maybe American companies would be more cost-competitive as well.

GT: We are now seeing the US government raising tariffs on Chinese EVs, advanced batteries, solar cells, and other goods. What impact will it have on the world if the US government continues to exclude Chinese new energy products?

Solheim: It will obviously slow down the green transformation because China is now the indispensable country for everything green. 60 percent of all green technologies in the world are in China. When it comes to solar energy, maybe the figure is even more than 90 percent. If we want to go solar without China, we can do it, but it will be much more costly. When it’s more costly, it will be slower. And all historical experiences show that if you create closed-down markets and separate markets from different parts of the world, we will all be poorer, including the Americans.

GT: Do you think Europe will follow the latest policies of the US? From your understanding, how does Europe view China’s green manufacturing capacity – is it more inclined toward cooperation or vigilance?

Solheim: That’s obviously a similar discussion in Europe. I don’t think Europe will automatically follow the US, but there is a concern with jobs in Europe. China can help in that discussion in two ways.

First, making very clear that China is ready to invest in other markets where Chinese companies are, and to create jobs in Europe.

Let me give one example. Very recently, I visited Contemporary Amperex Technology Co., Limited (CATL) in Ningde, Fujian Province, the world’s largest battery maker for electric vehicles. A Tesla normally comes with a CATL battery. But the guys at CATL repeatedly told me that one of the reasons why they have grown so big was the support from BMW in the early days. BMW was a very demanding customer, it helped with technology and was a partner in the rise of CATL. That’s exactly what we want to see – companies working together across borders. And now when Chinese companies tend to have the highest quality and the best technology, they should work with companies in India, Africa, Latin America, and also Europe to share their knowledge and experience so that we can all benefit from the green transformation.

On China’s overcapacity

The article below, written for Friends of Socialist China by Shiran Illanperuma, addresses the latest ideological weapon in the Biden-Trump trade war against China: that of ‘overcapacity’. According to Western politicians and neoliberal economists, China’s industrial subsidies and production capacity are to blame for the US’s trade deficit and its apparent inability to reindustrialise its economy.

Shiran, citing fellow Marxist economist Michael Roberts, observes that the US and EU have sustained trade deficits since decades ago, before China’s emergence as an industrial superpower: “In a previous era, it was Japan and Germany that were the source of the US’s protracted trade deficits.” This rather suggests that “the main problem is the decline in the competitiveness and productive capabilities of the US itself rather than China’s (or, for that matter, anyone else’s) industrial policies.”

The article shows that China’s capacity utilisation and inventory levels almost exactly match those of the US. Hence, according to standard metrics, China is no more guilty of ‘overcapacity’ than the US itself. What is true is that China is actively working to contain excess capacity in mature industries such as coal and steel. However, in emerging technologies – particularly those required for solving the climate crisis – China is leveraging its socialist market economy to rapidly innovate and develop its productive forces. It should be noted that this strategy is responsible for a decrease in solar PV and wind energy costs of around 90 percent over the last decade. From the standpoint of maintaining a habitable Earth, the accusations of Chinese ‘overcapacity’ are beyond absurd.

Ultimately, what’s driving these accusations is that “Western imperialism is in crisis and can no longer sustain the position of its old labour aristocracy.”

The thesis of Chinese overcapacity therefore serves a dual purpose. First, it provides the Western ruling class with a means to deflect criticism of its own neoliberal policies in order to scapegoat China for the destruction of its industrial base. Second, it allows that same ruling class to resort to protectionism and subsidies on behalf of monopoly capitalists.

Shiran concludes:

For its part, China is developing technologies that are crucial for the future of mankind. It has done so while the ruling elite in the West gamble away wealth produced by workers through stock buybacks and real estate speculation. It is up to the Western Left to organise workers against imperialism and anti-China chauvinism, and to fight to liberate the productive forces necessary to address the socioeconomic and ecological challenges of this century.

Shiran Illanperuma is an independent journalist and researcher. He is currently reading for a master’s degree in economic policy at SOAS University of London.

In the last few months, there has been an intensified campaign by Western politicians, academics, and mainstream media to popularise the narrative of “Chinese overcapacity.” Like the disproven narrative of the “Chinese debt trap” before it, this appears to be a coordinated attempt by the West to scapegoat China for structural problems and imbalances in the world capitalist economy.

The thesis of China’s manufacturing overcapacity has been in circulation since at least the global financial crisis. In short, the argument goes that China’s investment-driven growth model creates both local and global imbalances. It is argued that higher investment suppresses consumption (as a share of GDP) and drives income inequality and excess production capacity within China. It is further argued that such imbalances are to blame for China’s excessive exports and massive trade surplus, which is said to be at the cost of the United States’ trade deficit.

In academia, this argument has been popularised by Keynesian economist Michael Pettis, who is a Professor of Finance at Peking University. Brad Setser, a former senior advisor to the United States Trade Representative, has also been a champion of this argument. Notably, the overcapacity thesis has also been a consistent theme of the IMF on China.

In May, the IMF Mission to China published a report stating that in order to ensure growth, China’s key priorities should include “rebalancing the economy towards consumption by strengthening the social safety net, liberalising the services sector, and scaling back distortive supply side policies that support the manufacturing sector [emphasis added].”

The IMF is, of course, a Western-dominated institution, where China controls just 6% of voting shares despite contributing to 18% of global GDP.

The overcapacity thesis has been an increasing source of diplomatic tension. US Treasury Secretary Janet Yellen has attempted to rally the G7 on the issue and coax Global South countries such as India and Mexico into the debate. Meanwhile, European Commission President Ursula von der Leyen has argued that Chinese industrial policy is distorting the EU market for electric vehicles (EVs).

The Chinese side has reacted strongly to these allegations. Chinese President Xi Jinping said that there was no such thing as a Chinese overcapacity problem. Meanwhile, Chinese Ministry of Commerce spokesperson He Yadong has said that the accusation of Chinese overcapacity was a typical Western double standard. More recently, Chinese Foreign Ministry Spokesperson Wang Wenbin said, “Overcapacity is just a pretext the US uses to try to coerce G7 members into creating fences and restrictions for Chinese new energy products.”

Following in Trump’s footsteps, the Biden administration recently threw up a slew of new tariffs against Chinese products, including 25% on steel and aluminium, 50% on semiconductors, 50% on solar panels, and a whopping 100% on electric vehicles (EVs). As the US-led trade war against China intensifies, it is worth reflecting on the facts behind the overcapacity thesis.

Measuring China’s overcapacity

French entrepreneur and analyst Arnaud Bertrand has argued that the concept of overcapacity can be measured with a few standard metrics: 1. capacity utilisation rates; and 2. inventory levels.

In economics, capacity utilisation refers to the share of production capacity that is in use at any given time. Generally speaking, a prolonged period of high capacity utilisation can indicate a need to expand productive capacity. In contrast, a prolonged period of low capacity may indicate a need to reduce productive capacity. Bertrand points out that the capacity utilisation rate in China is 76%, which is around the same as in the United States, which is 78%.

Inventory levels are generally used as a measure of how well sales are doing. A growing inventory of goods might mean a combination of sluggish demand or overproduction, while a shrinking inventory might mean growing demand and underproduction. Bertrand points out that the finished good inventory index PMI for China stood at 49, while a similar index for manufacturing inventory for the United States stood at 50.

Neither of the above numbers suggests that China has any more overcapacity than the US. On the contrary, the fact that Chinese industrial profits continue to grow suggests that there is ready demand for Chinese manufactures. Several analysts have also argued that China’s drive to increase production capacity for new energy products makes it indispensable in the global fight for ecological sustainability.

Continue reading On China’s overcapacity

Tariffs, technology and industrial policy

In the following article, well-known Marxist economist Michael Roberts assesses the latest set of protectionist measures taken by the Biden administration against China. Roberts notes that these measures include “a quadrupling of the tariff rate to 100% on Chinese electric vehicle (EV) imports, doubling the levy on solar cells and more than tripling the fee on Chinese lithium-ion EV batteries.” These tariffs constitute a doubling-down by President Biden on the measures introduced by the Trump administration in 2018-19.

The article observes that “Chinese EVs are now better and cheaper than their Western counterparts”, and this reflects China’s rapid advance in several key areas of green technology.

China has scaled up its green industries rapidly. It now produces nearly 80% of the world’s solar PV modules, 60% of wind turbines and 60% of electric vehicles and batteries. In 2023 alone, its solar-power capacity grew by more than the total installed capacity in the US.

Biden’s protectionist measures are being justified on the basis that they will stimulate domestic production of green technology in the US. However, Roberts argues that this is unlikely to be the outcome, given historical precedent. Previous tariffs on solar panels, introduced in 2012 and later expanded, did not revitalise the US solar industry. “On the contrary, the American global market share of the solar industry has considerably decreased since the original tariffs were placed — from 9% in 2010 to 2% today. Meanwhile, China’s share of the industry rose from 59% to 78%. There’s no reason to believe that the recent tariff increase will reverse this trend. There’s even less hope that they will help spur a domestic EV industry.”

The article also points to the irony of the US accusing China of violating WTO rules with its green tech subsidies, whilst simultaneously introducing a substantial package of its own green subsidies. “It seems that China’s industrial policy of subsidies is ‘gaming the system’, while US industrial policy of similar subsidies is just ‘protecting’ US industry.”

Rather than boosting domestic production, the tariffs are likely to have the opposite effect, by raising costs for US consumers and businesses and disrupting supply chains. The article notes that “Trump and Biden’s imposition of tariffs risks hindering the adoption of low-emission technologies by American businesses and consumers.”

In general, the US’s strategy of attempting to stifle China’s development will not be successful and will certainly not benefit the US economy; indeed “the cost to the US economy and the profitability of US industry will be considerable, and even more to the real incomes of Americans.” However, in a context where “the US is losing its imperialist profit extraction from trade with China and increasingly being squeezed out of world markets by Chinese goods”, there appears to be a bipartisan consensus on continuing with these last-ditch attempts at destabilising and weakening China, even if ultimately they prove to be a classic case of “lifting a rock only to drop it on one’s own feet.”

The article was originally published on Michael Roberts’ blog on 20 May 2024.

Last Tuesday, the trade and technology war launched by the US on China back in 2019 took another ratchet up. 

The US government announced a new series of protectionist measures on Chinese goods imported into the US. It included a quadrupling of the tariff rate to 100% on Chinese electric vehicle (EV) imports, doubling the levy on solar cells and more than tripling the fee on Chinese lithium-ion EV batteries.  These tariffs are equivalent to an annual $18bn of Chinese goods on top of the previous $300bn slapped down under Trump. 

The new tariffs specifically target ‘green goods’, most notably EVs, but tariffs on lithium-ion batteries, critical minerals and solar cells will also be substantially increased. The measures are set to take effect this year (with the exception of graphite, where Chinese dominance is most stark, so tariffs begin in 2026).

China is the world leader in EV production and innovation.  Chinese EVs are now better and cheaper than their Western counterparts.  Biden’s intention is to stave off Chinese competition while stimulating domestic EV supply.  But China’s EV imports are only 2% of the US market.  And all the goods that these new tariffs were slapped on constitute only about 7% of US-China trade.  What this shows is that, even the US government recognizes that the US still relies heavily on Chinese goods imports and cannot cut them all dead.

That’s because the tariff and technology war is not just about protecting the ailing US auto industry.  China is totally dominant in EV manufacture because it’s also totally dominant in battery (cell) manufacture. And it’s also totally dominant in the manufacture of the chemicals that go into those cells (cathode & anodes).  

China is also utterly dominant when it comes to the refining of the materials that then go into the chemicals that then go into the cells which go into the EVs.

Continue reading Tariffs, technology and industrial policy

The latest danger from China: too much clean energy?

This brief article by Friends of Socialist China advisory group member Stefania Fusero, originally published in Italian in Futura Società, brings some much-needed clarity to the question of US allegations concerning China’s “over-capacity”, particularly in green technologies such as renewable energy, electric vehicles and lithium-ion batteries.

Stefania rightly points out that, by demanding that China curtail its production of materials that are essential for a global green transition, US Treasury Secretary Janet Yellen “implicitly admits that the priority for the US government is not to join in the global fight against climate breakdown, but instead to sustain the profits of US corporations and financial elites.” This in turn serves to reiterate that “Western governments serve the interests of small oligarchic minorities, not the masses of their populations.”

Stefania notes that the diverging priorities of China and the US are amply evidenced by the fact that, while China directs enormous resources towards development, infrastructure, sustainable energy, and the fight against poverty, the US devotes enormous resources to war, domination, hegemonism, and the pursuit of a ‘rules-based international order’ where the rules are written in Washington and serve the exclusive interests of the US ruling class.

The article concludes by predicting failure for the US’s tactic, citing Radhika Desai’s recent article in CGTN: China “will not roll over and play dead when asked to harm its own economy, its own workers and the possibility of dealing with climate change, all only so that the interests of unproductive inefficient and financialised US corporations may be advanced.”

The article was translated into English by the author.

Giuseppe Masala gave an exhaustive explanation in l’Antidiplomatico of the real reasons which brought US Treasury Secretary Janet Yellen back to China.

Among other things, after quoting from a statement by Yellen – ”we now see the development of excess capacity in ‘new’ industries such as solar panels, lithium-ion batteries and electric vehicles” – Masala rightly states that, translated into simple language, Yellen is saying that the US productive system cannot cope with Chinese competition.

Simplicius the Thinker gets to the same conclusion in his post Yellen Dispatched to Beg China for Face-Saving Slowdown: “The fact of the matter is, China is simply leaping ahead of the decrepit, deteriorating U.S. by every measure and the panicked elites have sent Yellen to beg China to ‘slow down’ and not embarrass them on the world stage.”

There’s more to it, though. When Yellen denounces and laments China’s “overcapacity of clean energy” – specifically mentioning solar panels, electric vehicles and lithium-ion batteries – she gets straight to the issue of the global climate breakdown.

In this context, contrary to incessant Western smearing campaigns, China has acted consistently with the commitment to defend the environment Xi Jinping announced in 2014, and has translated it into a climate strategy the extent of which has never been seen before, as acknowledged by the president of the Environmental Defense Fund: “the world has never before seen a climate program on this scale.”

In solar energy alone, the International Energy Agency noted that China’s PV-focused industrial policies have contributed to more than 80 percent cost reductions, helping the sector become the most cost-effective electricity generation technology in many parts of the world – an important contribution to global decarbonisation.

Complaining about what she calls “clean energy overcapacity”, Yellen implicitly admits that the priority for the US government is not to join in the global fight against climate breakdown, but instead to sustain the profits of US corporations and financial elites. She lays bare the fact that Western governments serve the interests of small oligarchic minorities, not the masses of their populations.

Just take a simple look at the composition of the US public debt, which has reached the stratospheric figure of $34 trillion, of which 14 trillion has gone to military spending since the start of the war in Afghanistan. While the US has been throwing money into the bottomless pit of its endless wars ‘on terror’, China has been investing in the development of its economy, its infrastructure, as well as the fight against poverty, demonstrating that the priority of the PRC is development, whereas the priority of the US is war.

It is thus unsurprising that the foreign policies of the two countries are poles apart, both in the guiding principles and the parlance set out in their respective official documents, and in the posture adopted towards other countries.

China uses the language of diplomacy, rejects the logic of opposing blocs, is not part to any military alliances, and engages with partners for its various international projects, the Belt and Road Initiative first and foremost, in ways which are beneficial both to itself and to them. The US, on the other hand, does not want partners, but vassals from whom it demands exclusive allegiance to the point of agreeing to sacrifice their own interests, and does not hesitate to use the weapons of military and economic threat, in line with a purported ‘international rules based order’, which the US bends to its own will and convenience.

Will China bow to the requests and more-or-less veiled threats coming from the USA and its satellites?

As Radhika Desai writes in a recent article: “Sadly, for Yellen, China is neither Japan nor Europe but a socialist economy whose government is oriented towards advancing egalitarian development for its people. Yellen will find it willing to cooperate for the benefit of people and the planet. But it will not roll over and play dead when asked to harm its own economy, its own workers and the possibility of dealing with climate change, all only so that the interests of unproductive inefficient and financialized US corporations may be advanced.”

The Multipolar Challenge: Implications for dollar dominance and the shifting tides of US hegemony

We are very pleased to reprint the following article by Efe Can Gürcan, which was originally published in BRIQ Belt and Road Quarterly, Volume 5, Issue 1.

In his article, Dr. Gürcan, who is currently a Visiting Scholar at the London School of Economics and Political Science (LSE) and is a member of the FoSC Britain Committee, argues that the global political economy has long been characterised by the commanding presence of the US dollar – a linchpin that has steadfastly upheld US hegemony across decades. He further endeavours to illuminate the multifaceted interconnections between a multipolar world and the potential reconfiguration of the dollar’s global standing. His findings suggest that China emerges as the principal contender to US hegemony, spearheading initiatives aimed at dedollarisation, with the prevailing trajectory being towards asset diversification in a post-hegemonic context. Evident manifestations of such inclinations are China’s policies on RMB internationalisation, exemplified by the introduction of the CIPS (Cross-Border Interbank Payment System), UnionPay, and the Digital Yuan. These strategies complement the growing prevalence of bilateral trade in alternative currencies, a growing intention to conduct oil trading in non-dollar currencies, currency swap agreements, and the prospective advent of a BRICS currency. Institutionally, this shift is anchored in frameworks such as the New Development Bank, the Shanghai Cooperation Organisation (SCO), the Asian Infrastructure Investment Bank (AIIB), and the Belt and Road Initiative (BRI). The mounting view of dollar dominance as a manipulative instrument of US foreign policy, coupled with the perceived waning of US hegemony and diminishing confidence in the US dollar, impels developing nations to hasten their currency diversification pursuits. This momentum is observed particularly within the framework of South-South cooperation, with China’s proactive stance being a pivotal influence.

Developing his argument, Efe explains that this emergence of multiple power centres, each with its own economic and political clout, threatens to reshape the traditional dynamics of international economic relations, challenging the very sanctity of the dollar’s global supremacy.

He also considers it relevant to address the negative implications of dollarisation for the developing world. Adjustments in US monetary policy have frequently precipitated debt, exchange rate, and financial crises in various developing economies. Noteworthy instances include the Latin American debt crisis of the 1980s, the Asian financial crisis of the 1990s, and the 2018 exchange rate crises in Türkiye, Brazil, Argentina, and other economies, sparked by an increase in US dollar interest rates. Therefore, dollarisation is typically linked with high and unstable inflation, exchange rate fluctuations, and undisciplined monetary policy.

Global confidence in the US dollar has been foundational to its dominance. Such confidence has roots in the United States’ past contributions to global production, its unrivalled military prowess, and its capacity to maintain its currency’s purchasing power through technological advancements and a robust service sector. However, recent geopolitical shifts and the multipolarisation of world politics appear to be eroding this global confidence. China’s ascent as the leading producer and exporter of high-tech goods, combined with the repercussions of the 2007-2008 financial crisis and US military challenges in countries like Afghanistan, Iraq, and Syria, have raised questions about the dollar’s unassailable position.

He cites the work of Daniel McDowell to emphasise that sanctions are a crucial tool in the strategic use of the dollar to counter the emerging powers threatening US hegemony. Primary sanctions aim to directly isolate the targeted individual, company, or government from the dollar-based financial system. In turn, secondary sanctions are designed to exclude the target from global financial networks through the involvement of foreign financial institutions.

Turning to the trend towards dedollarisation, he explains that it emerged against the backdrop of the unprecedented rise of the Latin American left in the 2000s as an important catalyst in multipolarisation, which includes Lula’s Brazil, a leading BRICS+ member. Multipolarisation of the global political economy, he adds, goes hand in hand with the rise of South-South cooperation, embodied not only in the rise of the Latin American left and its social justice-oriented regionalism, but also in the proliferation of Eurasia’s security-oriented regionalism, including the SCO, the Eurasian Economic Union, the Collective Security Treaty Organisation, and other cooperation schemes such as the BRICS+, BRI, and the AIIB. These organisations hold the potential to serve as conduits for dedollarisation in forthcoming years.

Particularly significant are trends in the global energy market. If Saudi Arabia and potentially other Gulf countries start trading oil in yuan or other currencies, this would significantly erode the dollar’s dominant position in global energy markets. Additionally, the March 2023 agreement between Chinese and French energy companies to settle an LNG deal in yuan is also of historic importance. Given the magnitude and importance of energy deals, conducting transactions in currencies other than the dollar could set a precedent for future trade agreements. Equally important is China’s recent move to use the Shanghai Petroleum and Natural Gas Exchange as a platform for yuan settlements with Arab Gulf nations, a strategic effort to bypass the US dollar in energy trade. Given the vast volumes of oil and gas traded between the Gulf and China, this shift could have a significant impact on the demand for the US dollar in global energy markets. A similar situation goes for nuclear energy. The 2023 agreement between Bangladesh and Russia to use the Renminbi for the settlement of a nuclear plant transaction is yet another sign of countries seeking alternatives to the US dollar for significant infrastructure and development projects.

In this evolving landscape, therefore, China is seizing the opportunity to amplify its global financial footprint. In fact, China’s push to reform the dollar-centric global financial system began following the 1997 Asian financial crisis. Dai Xianglong, who was then the Governor of the People’s Bank of China (PBoC), expressed in 1999 that the instability caused by the dominant role of a few national currencies as international reserve currencies, as well as the system’s failure to address balance of payments imbalances, leads to international financial crises. In the wake of the 2007–2008 global financial crisis, Zhou Xiaochuan, Dai’s successor, emphasised the need to overhaul the international monetary system. He proposed an international reserve currency that would be independent of individual nations and identified the weakening dollar as a key factor in the global economic crisis.

China’s endeavours to reduce reliance on the US dollar and bolster the international stature of its currency, the RMB, have involved strategic maneuvers in global financial diplomacy. An integral part of this strategy has been the establishment of currency swap agreements with developing nations. By 2017, China had entered into swap agreements that amounted to more than $500 billion with 35 countries. Both the number of countries and amount of funds involved have continued to increase significantly.

China’s proactive steps towards dedollarisation and establishing the RMB as an international currency have manifested in various other innovative financial undertakings. Initiated in 2002, China’s UnionPay credit card system was instituted as a competitor to globally renowned credit card giants, Visa and MasterCard. By 2019, UnionPay’s ascendancy in the global credit card market was evident, as it held the lion’s share, accounting for 45% of credit cards in circulation. This significant development is not merely about market competition. It represents a strategic move to offer an alternative financial lifeline to nations, such as Russia, Iran, and Cuba, which, due to Western sanctions, find themselves estranged from the dominant international payment systems.

The advantages of the Digital Yuan are manifold. Beyond expediting financial transactions, the use of this blockchain-driven technology enhances China’s capability for comprehensive financial oversight and synchronisation – key attributes for maintaining a robust economy.

And the BRI stands out as one of China’s most ambitious global projects. While the initiative primarily focuses on infrastructural development and connectivity across continents, it also carries significant financial implications. By financing projects within the BRI framework, China can encourage or even mandate the use of yuan for transactional purposes, thereby promoting its global usage. If the BRI projects are primarily transacted in yuan, it could lead to an increased demand for the currency, thereby internationalising it and challenging the dominance of the US dollar.

Presently, dedollarisation represents a nascent trend, predominantly evident in developing nations seeking to diversify their monetary assets. In this context, the notion of “post-hegemony” encompasses not only the relative waning of US global influence and the rise of alternative power hubs, but also the burgeoning South-South collaboration.

Towards the conclusion of his article, Efe turns his attention specifically to Türkiye, which, he outlines, has articulated on multiple occasions its interest in deepening ties with non-Western multilateral organisations. Ankara has repeatedly signaled its intention to explore membership possibilities within the SCO and BRICS, two prominent platforms that present alternatives to the Western-centric global order. Furthermore, Türkiye’s engagement with the BRI is noteworthy. Within the BRI framework, Türkiye has championed its role in the Middle Corridor Initiative, serving as a critical bridge linking China to Europe, thereby reinforcing its geopolitical and geo-economic significance in Eurasia. Another testament to Türkiye’s eastward gravitation is its active engagement with the AIIB. As an institution primarily led by China, the AIIB has seen Türkiye emerge as one of its main beneficiaries, funneling considerable funds to support Ankara’s expansive infrastructure projects. Türkiye possesses a 2.54% voting share within the AIIB. Following India and Indonesia, Türkiye has emerged as the third-largest beneficiary of AIIB loans. As of 2019, Türkiye received 11% of the total loans extended by the AIIB. The majority of these funds are allocated to the energy sector. However, despite these efforts, and public statements opposing dollar dominance, Türkiye has achieved limited success in moving away from the dollar.

China’s efforts to promote the RMB on the international stage and challenge the hegemony of the US dollar, he concludes, are multifaceted. It is not just about the currency itself but is deeply tied to China’s broader strategic initiatives and global institutional leadership. In this context, the evolving financial landscape is a clear signal that the dominance of the US dollar is being actively challenged in the context of South-South cooperation, as a “post-hegemonic” form of international cooperation. Certainly, the perceived weaponisation of the dollar and the rise of the developing world as a site of resistance to US hegemony, is hastening this shift, as developing countries collaborate to develop and implement alternatives that insulate them from the economic risks of US policy decisions.

Efe Gürcan’s article is a serious study of a key issue in contemporary international political economy and one that deserves careful study.

The global political economy has long been characterized by the commanding presence of the U.S. dollar—a linchpin that has steadfastly upheld U.S. hegemony across decades. The dollar’s ascendancy, transcending mere economic value, has become emblematic of U.S. strategic influence in both the economic and geopolitical landscapes. However, as we witness the dawn of a new era marked by a multipolar global order, there is growing speculation about the potential waning of the dollar’s omnipotence. This emergence of multiple power centers, each with its own economic and political clout, threatens to reshape the traditional dynamics of international economic relations, challenging the very sanctity of the dollar’s global supremacy.

This article is anchored around the following pivotal inquiries: In what ways is burgeoning multipolarity in the global political economy reshaping perceptions and realities of the U.S. dollar’s dominance? How might a diminished dollar centrality impact the broader edifice of U.S. hegemony and the equilibrium of the global economic order? Which rising powers are at the forefront of this tectonic shift, and what strategic levers are they employing to influence the trajectory?

The present study endeavors to illuminate the multifaceted interconnections between a multipolar world and the potential reconfiguration of the dollar’s global standing. With this in mind, it also aims to elucidate the strategic implications for the United States and chart the evolving dynamics that will define the future global economic landscape. Using the method of Geopolitical Analysis Grid (GAG) (Cattaruzza, 2020; Cattaruzza & Limonier, 2019), moreover, this study systematically dissects the strategies and actions of pivotal emerging actors within the multipolar matrix. GAG facilitates a layered exploration of nation-states’ economic postures, geopolitical imperatives, and strategic alignments, all juxtaposed against their unique historical and socio-cultural backdrops. By assimilating these diverse insights, the present article uses this method to forge a holistic perspective on the emergent challenges and opportunities sculpting the global political economy. In this context, the article begins by establishing the conceptual and methodological framework that guides this research. The second and final section delves into an empirical analysis of multipolarization and de-dollarization.

Conceptual and Methodological Framework

To ensure a comprehensive and coherent analysis, it is imperative to commence by establishing a conceptual and methodological framework that will guide our examination of multipolarization and de-dollarization. The notion of U.S. hegemony is pivotal in framing this research. By “hegemony,” I refer to a scenario wherein a single state (or a group of states), “plays a predominant role in organizing, regulating, and stabilizing the global political economy (Du Boff, 2003, p. 1).” Notably, in the aftermath of World War II, U.S. imperialism emerged as the linchpin, driving the imperialist system and positioning itself at the epicenter of global hegemonic relations. It is essential here to clarify that my interpretation of “hegemony” does not necessarily require unanimous consent and unquestioned leadership. It rather encapsulates a nuanced interplay of consent and coercion in varying degrees, serving to relatively stabilize the international order and its alliance system led by a hegemonic power that pretends to act in the general interest, even in the face of discernible dissent (Gürcan, 2022b). For instance, the widely held conviction, prior to the 2000s, that the United States was unparalleled in global leadership—attributed to its economic superiority as a model nation, credibility in global governance, perceived military invulnerability, cultural appeal, and the dominance of the dollar—served as a quintessential illustration of U.S. hegemony.

Another essential term in this context is “multipolarization”, which describes the shift in the global balance of powers, as political, economic, and military clout becomes more evenly distributed, elevating the systemic importance of multiple states (Gürcan, 2019b). In turn, the term “dollar hegemony” describes a situation in which the U.S. dollar is widely adopted as the foremost instrument for international reserves, the main unit of account, and the primary means of payment, achieved through a combination of consensual and coercive measures. “Dollarization” is thereby the result of this hegemony, emerging from a process that entails the use of the U.S. dollar as a reserve of value, a medium of exchange, and a unit of account. Understood as such, one could identify three main types of dollarization. Financial dollarization pertains to the dollarization of assets and liabilities, whereas transaction dollarization relates to the payment system. Price dollarization concerns pricing units for goods and services (Vidal, et. al., 2022; Basosi, 2021; Levy-Yeyati, 2021).

Continue reading The Multipolar Challenge: Implications for dollar dominance and the shifting tides of US hegemony

What the US really means by overcapacity

In the article below, prominent Marxist economist and International Manifesto Group convenor Radhika Desai responds to the media hype about China’s putative “overcapacity” in renewable energy production – a story that gathered steam during US energy secretary Janet Yellen’s recent visit to China, in which she accused China of “flooding” the world’s energy markets with cheap green energy.

Radhika starts off with the very reasonable point that, given the number of climate records that were broken in 2023, “one might think everyone would welcome China’s plentiful and cheap clean energy equipment”. China’s unparalleled investment in solar and wind energy have resulted in a dramatic fall in the cost of these technologies worldwide, thereby providing a powerful boost to humanity’s efforts to avoid climate catastrophe.

Furthermore, when it comes to “distorting markets” via subsidies, “the US offers billions in industrial subsidies and talks of reviving industrial policy. Moreover, it denies the simple fact that no country has industrialized without protecting itself, and using myriad forms of state direction, including subsidies.” Indeed China’s subsidies are perfectly consistent with WTO rules.

The article notes that declining conditions of the US working class are caused not by Chinese “overcapacity” but by “pro-corporate and pro-financialization neoliberal US policies” which have “deindustrialized the US, stagnated working class wages and, by shifting income and wealth from the ordinary people towards a tiny elite, generated vast inequality”.

Radhika concludes by observing that, as a socialist government committed to the welfare of its people, China “will not roll over and play dead when asked to harm its own economy, its own workers and the possibility of dealing with climate change, all only so that the interests of unproductive inefficient and financialized US corporations may be advanced”.

This article first appeared on CGTN.

U.S. Treasury Secretary Janet Yellen was recently in China to talk about its “clean energy overcapacity.” What can that possibly mean? At a time when the world needs more and cheaper clean energy equipment to deal with climate change, isn’t China helping the world by making this equipment more widely available at prices more of the world can afford? Surely, that is just what the world needs in 2024.

After all, 2023 broke so many climate records. It was the warmest year on record. There were record-breaking forest fires and floods. It was the hottest northern hemisphere summer. July 2023 was the hottest month on record. Considering these facts, one might think everyone would welcome China’s plentiful and cheap clean energy equipment.

Evidently, not. The U.S. Treasury Secretary Janet Yellen accused China of flooding the world with cheap clean energy exports, distorting global markets and harming workers. What explains this perversity?

The crux of the problem is the U.S.’s stance on climate change. It would be understandable if it supported solutions that were beneficial to it and its people. However, not only does the U.S. seek benefits not for its people but its corporations, it seeks solutions that not only benefit them but also put them in a dominant position.

Yellen kicked off her campaign against Chinese overcapacity at a solar energy plant in Georgia just days before she set foot in Beijing. She alleged that China had previously inflicted overcapacity in steel and aluminium and was now doing this in the clean energy sector, particular in solar panels, lithium-ion batteries and electric vehicles. “China’s overcapacity distorts global prices and production patterns and hurts American firms and workers,” she stated.

Capacity can only be excessive in relation to demand. When the problem is labelled overcapacity the ‘solution’ is to cut (other nations’) capacity. One could always see it as a problem of restricted demand, to be solved by expanding it. U.S. elites have long approached the crisis of the 1970s as one of over-capacity and sought to deal with the problem by restricting or even reducing industrial capacity in its rivals. It did this to Japan starting in the 1990s. It is currently doing this to Europe, forcing it to deindustrialize, allegedly in order to fight the hyped-up danger that Russia poses. And now, Yellen has brought this effort to China.

If China’s industrial capacity is deemed excessive, it must be restricted so that, when such equipment becomes scarce, U.S. products of lesser quality and higher cost will find markets. It also amounts to saying that the U.S. absolutely does not wish to increase the rest of the world’s capacity to demand more by increasing development and therefore demand there.

In speaking of China distorting markets, Yellen is saying that China captures markets through subsidies. This is, of course, particularly rich when the U.S. offers billions in industrial subsidies and talks of reviving industrial policy. Moreover, it denies the simple fact that no country has industrialized without protecting itself, and using myriad forms of state direction, including subsidies. This understanding defined the terms on which China entered the World Trade Organization in 2000. The U.S. was willing to grant these terms only because it assumed that China would be no more successful than other developing countries in using such provisions to industrialize and become a technological leader. It was wrong.

Finally, Yellen speaks of China harming U.S. workers. The sad, even macabre, reality is that U.S. workers have been harmed over all these neoliberal decades not by China but by the pro-corporate and pro-financialization neoliberal U.S. policies. They have deindustrialized the U.S., stagnated working class wages and, by shifting income and wealth from the ordinary people towards a tiny elite, generating vast inequality.

Sadly, for Yellen, China is neither Japan nor Europe but a socialist economy whose government is oriented towards advancing egalitarian development for its people. Yellen will find it willing to cooperate for the benefit of people and the planet. But it will not roll over and play dead when asked to harm its own economy, its own workers and the possibility of dealing with climate change, all only so that the interests of unproductive inefficient and financialized U.S. corporations may be advanced.

Why is China’s economy doing so well and why is that a good thing?

In this thoughtful and highly informative article, Marc Vandepitte – an author on international politics from Belgium – uncovers some of the secrets behind China’s remarkable economic success, and explains why this success should be considered favourably in Europe.

Marc starts by debunking the narrative gaining ground among Western ‘China-watchers’ that China’s economic outlook is grim; after all, “the country is still achieving growth rates that we can only dream of”, in spite of a US-led containment campaign and assorted other challenges.

Marc notes that China’s per capita GDP has increased by a factor of 50 in the last four decades, and that since 1990 China’s share of global industrial production has increased from 2.5 percent to 35 percent. What’s more, “in terms of industrial production of the future – green production – China is the absolute leader.”

The article goes on to explain how China’s economic success is based on a combination of factors, including its socialist model of land ownership, its huge investment in education and health care, its focus on science and technology, and its striking blend of state-led planning and decentralisation.

China’s dramatic successes are driving development throughout the Global South – in particular via the Belt and Road Initiative – but the country’s emergence is also a boon for the West. “Western economies are closely intertwined with the Chinese economy and in many areas the West needs China more than the other way around. For example, Europe cannot possibly achieve its climate goals without China.”

Marc concludes:

Europe stands at an important crossroads in history. Will it allow itself to be dragged into a destructive trade war initiated by the US, or will it succeed in charting its own autonomous course and building a constructive economic relationship with China, based on mutual benefit? The stakes are high.

Peculiar media framing

If you believe the mainstream media, China is in bad shape: the economic engine is said to be sputtering, or worse, the economy is in a downward spiral. Bizarre, as the IMF expects economic growth of 4.6 percent in China this year. That is almost five times as much as in Europe and more than three times as much as in the US.

The Western media are apparently struggling with China’s growth miracle, and so they focus blindly on the problems and challenges. By concentrating on what is going less well, they lose sight of what China is very strong at.

Certainly, the Chinese economy is facing some significant challenges, but despite an aging population and increasing hostility from the West, both in terms of investment and trade, the country is still achieving growth rates that we can only dream of.

In this article, we are exploring the reasons for this decades-long spectacular growth. We also look at why this is a good thing and what is the best way for Europe to respond.

Continue reading Why is China’s economy doing so well and why is that a good thing?

Government Work Report signals China’s commitment to peace, development, sustainability and common prosperity

Premier Li Qiang delivered the government work report on behalf of the State Council at the opening meeting of the second session of the 14th National People’s Congress, held at the Great Hall of the People on 5 March. The report provides an extraordinarily thorough and comprehensive account of the government’s work over the past year and the major tasks facing China in the months ahead.

The ambitious GDP growth target of 5 percent has already attracted a great deal of commentary. As FoSC co-editor Carlos Martinez points out in comments to China Daily (article republished below), this figure signals significant confidence in China’s continued economic rebound following the pandemic, as well as resilience to a complex and challenging international environment characterised by numerous conflicts, sluggish growth and attempts at decoupling. “However it also reflects China’s economic new normal, in which ultra-fast growth based on quantity is giving way to high-quality, sustainable growth based on innovation.” This is highly consistent with China’s medium-term modernisation strategy of becoming a moderately developed country by 2035.

The report notes China’s impressive advances in renewable energy, artificial intelligence, quantum computing and other high-tech fields which are increasingly becoming cornerstones of the Chinese economy. In terms of its commitment to humanity’s shared fight against climate breakdown, the report observes that, in the past year, China accounted for over half of newly installed renewable energy capacity worldwide. Furthermore, green development and the principle of nurturing harmony between humanity and nature are clearly recognised as key pillars of China’s economic strategy going forward.

Per capita disposable income has increased faster than GDP growth in recent years, and the increase in income is highest for low-income groups. This reflects the government’s ongoing commitment to common prosperity and its sincere efforts to reduce inequality. Living standards are improving, and the government is working to ensure that the benefits of economic growth are shared by all. This is an inspiration for those of us in the West, where inequality, poverty, homelessness, food insecurity and social alienation are all on the rise.

The report concludes by discussing China’s continued commitment to world peace and development, and its opposition to hegemony and bullying. At a time when the US and its allies are escalating their aggression against China, expanding NATO operations against Russia and supporting a genocide in Gaza, China’s commitment to peace, multipolarity and international fairness is a breath of fresh air.

China has set a rational GDP growth target that indicates substantial confidence and robustness in its economy and the government is working to ensure that the benefits of economic growth are shared by all, global experts said.

Premier Li Qiang delivered the latest Government Work Report to the National People’s Congress on Tuesday, in which he disclosed major targets for this year’s development, including GDP growth of around 5 percent. He also outlined major tasks for 2024, including striving to modernize the industrial system and developing new quality productive forces at a faster pace, invigorating China through science and education, expanding domestic demand, continuing to deepen reform and pursuing higher-standard opening-up.

Carlos Martinez, co-editor of the London-based platform Friends of Socialist China and author of The East is Still Red, said that China’s GDP growth target signals significant confidence in its continued economic rebound following the COVID-19 pandemic, as well as resilience to a complex and challenging international environment characterized by numerous conflicts, sluggish growth and attempts at “decoupling”.

“It also reflects China’s economic ‘new normal’, in which ultrafast growth based on quantity is giving way to high-quality, sustainable growth based on innovation,” he said.

He added that the Government Work Report showed that China’s per capita disposable income increased faster than GDP growth, and the increase in income was highest for low-income groups.

“This reflects the government’s ongoing commitment to common prosperity and its sincere efforts to reduce inequality,” he said. “Living standards are improving, and the government is working to ensure that the benefits of economic growth are shared by all.”

The report also discussed China’s continued commitment to world peace and development, and its opposition to hegemony and bullying. Martinez said that China’s commitment to peace, multipolarity and international fairness is “a breath of fresh air” compared with the United States-led West.

George Koo, a retired international business adviser in Silicon Valley, California, said that China’s GDP growth target of around 5 percent for this year is “a reasonable, general consensus target”.

He added that China has highlighted the development of “future industries” as a key part of its development plan for the next few years, and frontier technologies have to be an essential part of China’s future industries.

Hugh Goodacre, a lecturer in the history of economic thought at University College London, said the Government Work Report is a milestone document on the path chosen by China in pursuing its own characteristic model of economic development. Having in recent years advanced well beyond the former focus on extremely high growth, most notably in its export sector, the Chinese government and people are now confronting the tasks of orienting production toward domestic consumption with determination and energy as well as directing the country’s productive forces into the advanced sectors that count most in a modern economy.

Christopher Bovis, a professor of international business law at the University of Hull in the United Kingdom, said that China is ambitious in setting targets for economic growth at around 5 percent, a figure which when compared with other economies is a “near game changer”. To facilitate this growth plan, the Chinese government has set a proactive fiscal policy, coupled with a prudent monetary policy.

He said that what has taken the markets by surprise is the creation of conditions, including investments, that will boost domestic demand for products and services. The plan of the Chinese government has prioritized the features of research and development in disruptive and innovative markets to spearhead growth fueled by domestic consumption.

The report also prioritized sustainable agriculture to ensure food security, alongside an innovative approach to transitioning to cleaner energy production, contributing to global environmental objectives for decarbonization, Bovis added.

Cavince Adhere, a Kenyan scholar of international relations with a focus on China-Africa relations, said the Chinese economy exhibited remarkable resilience to beat last year’s growth target and “was the most important anchor of global economic wellness” last year. With the right environment in place, backed by responsive tools and policies, the new growth target of around 5 percent for this year will “certainly be achieved”.

Because of its economic stability at home, China has morphed into an important development partner for emerging economies, especially those in Africa. China has provided markets for Africa’s products and continues to be a strong source of technology and finance for the continent’s development, Adhere added.

Understanding the role of the private sector in the Chinese economy

We are pleased to publish below the text of a speech by Dr Jenny Clegg at a public meeting in Manchester, Britain, organised by the Greater Manchester Morning Star Readers and Supporters Group. The title of the event was China and the Western Left, and it aimed to uncover the nature of China’s political economy and its role in the world. The other guest speaker was Friends of Socialist China co-editor Carlos Martinez.

Jenny’s speech seeks to explain the role of the private sector in the current phase of China’s development. Jenny lays the ground for understanding today’s domestic capitalist class by uncovering the role of the national bourgeoisie in the history of the Chinese Revolution, including in the massive strike wave of the 1920s, the United Front to resist Japanese invasion, and the period of rebuilding during the New Democracy phase between 1949 and 1956. Jenny posits that this group, while not always reliable, “had an anti-imperialist side” and furthermore “was prepared to accept CPC leadership in the right circumstances – something still influencing the CPC’s attitude to today’s private entrepreneurs.”

The speech explains the unusual nature of China’s socialist market economy, in which the public and private sectors have an essentially symbiotic relationship, and where the state maintains overall control.

“The majority of large-scale private enterprises are linked into the state through mixed-ownership arrangements, with the state investing and divesting to shape industrial growth according to overall plans… Around 40 percent of private entrepreneurs are Party members and around half of private enterprises have CPC cells organised within them. Over 40 percent of workplaces so far are unionised, more than twice the rate here in Britain.”

As such, “the relationship then between the socialist state and the private sector is one of unity in developing the economy as well as struggle to ensure public benefit.”

A member of our advisory group, Jenny is a retired academic and an activist in the anti-nuclear, peace and friendship movements. She is the author of China’s Global Strategy: Towards a Multipolar World, published by Pluto Press.

The major stumbling point for the Western Left in understanding China as a socialist country is the question of the growth in recent decades of market relations and the private sector. This question requires in the first place a consideration of the contribution that the domestic capitalist class made in China’s revolutionary process before getting some measure of the private economy in China today.

The historical role of the national bourgeoisie in the Chinese revolution

One hundred years ago – minus one year – in 1925, on May 30, a British officer ordered the police in the Shanghai British concession to open fire on Chinese protestors, killing at least nine of them. The protests were part of a mounting strike wave in which the Communist Party of China (CPC) – founded in 1921 – was very active, and the incident sparked some momentous developments as anti-imperialist feelings surged.

Ayear-long strike in Hong Kong, starting in 1925, dealt a great blow to British imperialism, which from its island base had extended its influence, becoming the leading imperialist power not only in China but across Southeast Asia. The fact that Chinese capitalists supported and funded the strike, showing they too had an anti-imperialist side, was a particular lesson for the CPC.

The Kuomintang (KMT), supported by the CPC in the first United Front, began to prepare its army for the Northern Expeditionwhich set off in 1926to overthrow the feudal warlords and imperialist rule. As it advanced, peasant associations spread like wildfire.

The British Tory government launched a 20,000 strong expeditionary force; and in due course cities along the Yangtze came under British bombardment.

And in Britain, Hands off China became the largest anti-imperialist movement during the General Strike.

The situation in China became highly radicalised as peasants’ moderate demands for rent reductions gave way to land seizures and workers took over the British concession in Wuhan. These developments caused KMT Nationalist army officers to take fright, and what followed was a brutal massacre of communists in Shanghai, ordered by KMT head Chiang Kai-shek. Too late, the remaining CPC activists formed their own Red Army but, failing to capture an urban base, retreated to the mountains to set up worker-peasant soviets.

Over the next ten years, the CPC carried out various land reform policies with limited success. It was Mao who recognised the Leftist errors thatfailed to take capital into account in implementing reforms to eradicate feudal relations. Taking corrective measures, following the Long March (1934-35), by the time the Japanese escalated its occupation of China in 1937, the CPC was ready to meet the new anti-imperialist upsurge by entering a second United Front of resistance with the KMT. 

In the red base areas under its control, the CPC moderated its land reform policies, and the two-class Soviet strategy was replaced with a New Democratic alliance including the national bourgeoisie as well as the petty bourgeoisie.

These adjustment proved a great success: in the eight years to the defeat of Japan in 1945, the red bases grew from a population of one million to nearly 100 million people, almost a quarter of China, and the Red Army from 30,000 to 900,000.

New Democracy was to continue through the ensuing years of civil war (1945-49), the founding of the People’s Republic (1949), up to the 1956 transition to socialism.

In 1949, whilst others fled, some capitalists stayed on to make valuable contributions to China’s recovery. The fact that China was able to stabilise within three years to 1952 after a century of wars and economic ruin was truly remarkable.

Then in 1956, when private enterprises were nationalised, these former owners stayed on as managers, as Mao declared the contradiction with the national bourgeoisie, now antagonistic under socialism, was to be handled in non-antagonistic ways, that is by ideological struggle.

History thus shows the important role the nationalist capitalist class played in the Chinese revolution: if not always reliable, not only did it have an anti-imperialist side but it was prepared to accept CPC leadership in the right circumstances – something still influencing the CPC’s attitude to today’s private entrepreneurs.

Continue reading Understanding the role of the private sector in the Chinese economy