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Category: Economics

Behind Trump’s wishful thinking on ‘reindustrialisation’: Why China can do it and the US can’t

We are pleased to republish the following article by Sara Flounders, analysing the Trump administration’s proposed strategy to reindustrialise the US. Sara notes that Trump is not the first president to talk about the need for reindustrialisation; “Reindustrialisation was a huge promise of the Jimmy Carter and Ronald Reagan administrations in the 1970s and 1980s… Trump promised this eight years ago during his first term and former President Joe Biden promised a vast program to ‘Build Back Better’ and reindustrialise the US economy and modernise infrastructure.”

Action has never lived up to rhetoric, and US manufacturing continues its protracted decline. Trump’s tactic is to essentially pin the blame on China, imposing tariffs as a means of reordering the international economic system and forcing manufacturing to return to the US. “This is wishful or magical thinking”, writes Sara.

“The US, as a capitalist country, really can’t and won’t reindustrialise, because that is a fabulously expensive process involving many years of investment of the capitalists’ own money… Corporate CEOs know they will only survive by maximising profits and guaranteeing hefty returns every quarter. Any attempt to reindustrialise requires a rethinking of, and massive investments in, infrastructure and education needed for such an economy. This takes decades of investments.”

In reality, domestic investment in the US is directed to where private companies can make a quick buck: the military-industrial complex. “Investment money gravitates relentlessly to the highest guaranteed profits, and that is usually the military budget with its huge, guaranteed, multibillion-dollar annual subsidy”. Hence Donald Trump’s record-breaking trillion-dollar Pentagon budget.

China, by contrast, “has a socially planned economy where the greatest sources of wealth in society are owned by the whole nation”. As such, economic strategy and investment policy are controlled by the people, led by the Communist Party. Socialist economic policies and reorganisation of society “have ended dire poverty for 800 million people and transformed one of the poorest countries on the planet into today’s modern marvel”.

Sara concludes:

The interests of workers and oppressed people in the US are bound up with the development of the people of the whole world. Only through increased cooperation and solidarity will our class here develop the ability to solve the enormous global problems.

The ability to rationally plan and invest socially created wealth into rapidly improving technology and infrastructure is decisive. This requires socialism.

This article first appeared on Workers World.

In the 1950s, when Japan and much of Europe was in ruins, the U.S. accounted for 50% of the world’s global production. By the 1960s, this was 35%, declining to 25% by the 1980s. By 2025, the U.S. share of global production had fallen to 12% as production grew elsewhere. (itif.org, Feb. 18)

The capitalist class in the U.S. has grown frantic about this reversal. Its focus is on China, and it blames China for its spectacular level of modern industrial development. In advanced technology manufacturing the future is clear: China holds 45% of the global share to 11% for the U.S. 

Higher levels of production need a high-tech infrastructure to move what is produced to global markets. China dominates the global commercial shipbuilding market, producing over 50% of the world’s new ship orders, while the U.S. share has dwindled to less than 1%. China’s shipbuilding industry is backed by a vast industrial base with government support, allowing it to compete on a larger scale than the U.S. 

China’s high-speed railroads connect 500 cities and reach through Central Asia into Europe. Meanwhile in the U.S., freight and passenger railroads are in decline. 

Can this precipitous decline of U.S. capitalist hegemony be stopped? Can it be reversed? President Donald Trump would have us believe so, but evidence points to a negative answer. The corporate media presents the competition between the U.S. and China as a contention between two nation states, falsely accusing the Chinese government of not playing fair. In reality, China’s advantage arises from the sharp difference in two wholly different forms of organizing society. 

Fears of global financial collapse haunt capitalists

The head of the world’s largest hedge fund, billionaire investor Ray Dalio of Bridgewater Associates, recently warned of a global financial system collapse. Trump’s aggressive and erratic tariff policies and ballooning debt could trigger a breakdown of the global financial system. “I’m worried about something worse than a recession if this isn’t handled well,” Dalio said on Meet the Press on April 13.

Continue reading Behind Trump’s wishful thinking on ‘reindustrialisation’: Why China can do it and the US can’t

British Steel crisis leads to wave of anti-China propaganda

The following article by Paul Atkin, originally published in Socialist Economic Bulletin, analyses the response by British politicians and journalists to the announcement by Jingye – the Chinese company that acquired British Steel in 2019 – that it would be closing the blast furnaces at its Scunthorpe plant on account of making losses of £255 million per year. This response has been characterised by thinly-veiled Sinophobia and anti-China propaganda, with British politicians accusing Jingye of attempting to sabotage the country’s steel industry, and demanding that Chinese companies be prevented from future investment in British infrastructure.

Paul contrasts this hysteria with the relatively muted response to a very similar crisis at the Port Talbot steel works in 2024. “Both plants owned by companies based overseas. Both seeking a way out of unprofitable production. Both in negotiation for subsidy from successive governments for outcomes that would lead to massive job losses. Both looking to close aging blast furnaces earlier than originally planned because they have been making significant losses.” However, “Indian based Tata Steel’s ownership of Port Talbot was certainly mentioned in news coverage, but not on the blanket, verging on obsessive scale that British Steel’s Chinese ownership has… After Port Talbot, there has been no denunciation of Indian investment into the UK, nor any calls in the media or Parliament for any ‘urgent review’ into India’s role in the UK, or paranoid accusations … that the attempted closure is part of a dastardly plot to sabotage a strategic British industry”.

The article points out that the narrative on British Steel serves two purposes for the British ruling class. First, it feeds into building popular support for the US-led New Cold War on China. Second, it contributes to the fossil fuel industry’s resistance to meaningful action on climate change, given China’s global leadership in renewable energy and electric transport.

Paul notes that Spain is taking a considerably more far-sighted and progressive approach, “both encouraging inward Chinese investment – like the joint venture between CATL and Stellantis to build a battery factory in northern Spain – and deals signed last year between Spain and Chinese companies Envision and Hygreen Energy to build green hydrogen infrastructure in the country.”

It is crucial that environmental activists in the West do not fall into the Sinophobic trap being laid for them by the Cold War hawks in Washington and London.

The contrast between the way the crises in steel production at Scunthorpe and Port Talbot has been stark. Both plants owned by companies based overseas. Both seeking a way out of unprofitable production. Both in negotiation for subsidy from successive governments for outcomes that would lead to massive job losses. Both looking to close aging blast furnaces earlier than originally planned because they have been making significant losses.

In the case of Port Talbot, this led to a deal to convert to Electric Arc Furnaces to secure sustainable steel production at the site, but with the loss of 2,500 jobs and only 300 retained. This was dependent on a subsidy from the government of £500 million. A similar deal was not clinched at Scunthorpe, as the crisis was brought forward by Trump’s imposition of a 25% tariff on UK manufactured steel – which led to an announcement of imminent closure from the company the following morning. A closure would mean 2,700 jobs lost – on the same scale as Port Talbot.

In Port Talbot, in the absence of a serious just transition process involving the unions, which were excluded from the discussions by the company and the then Tory government, the job losses are being dealt with by the same sort of offers of retraining as have been proposed for the Grangemouth oil refinery in Scotland. In the case of Scunthorpe, also with no just transition process, the government has rightly stepped in to take charge of the plant to keep the blast furnaces running in the short term; which means that the losses previously borne by the company will now be borne by the Exchequer. With the company losing £255 million a year, the governments £2.5 billion steel transformation fund can absorb this in the short term. Workers at Port Talbot have expressed some bitterness that this was not considered for them.

What has been different is the mobilisation of Sinophobia around British Steel’s ownership by a Chinese company, Jingye. Indian based Tata Steel’s ownership of Port Talbot was certainly mentioned in news coverage, but not on the blanket, verging on obsessive scale that British Steel’s Chinese ownership has. Tata’s brinkmanship in negotiations was also mentioned, but they were not accused of “negotiating in bad faith” in the way that Jingye have. Both companies have behaved as you’d expect a capitalist company to behave, though if you read Jingye’s Group Introduction you can see how their operations inside China are turned to more positive social objectives –  from a high wages policy to greening their workplaces – from being based in a country run by a Communist Party, not by their own class. But here, both Tata and Jingye are in it for the money. Their UK operations have only been viable as a tiny loss making fragment of a much larger business, as part of an attempt to implant themselves in a variety of global markets in the hope of profitability in the medium to long term. Steel production at Port Talbot in 2022, for example, was just 10% of Tata’s global production of 35 million tonnes.

After Port Talbot, there have been no denunciation of Indian investment into the UK, nor any calls in the media or Parliament for any “urgent review” into India’s role in the UK, or paranoid accusations made explicitly by Farage but echoed by “senior Labour figures” as well as Tories in the media but not in the recent Saturday debate in Parliament, that the attempted closure in Scunthorpe is part of a dastardly plot by the Chinese government to sabotage a strategic British industry, not a commercial decision in which a company is seeking to cut its losses in all the ways British capitalist company law allows them to; including cancelling orders for the raw materials they’d need to keep running the blast furnaces they want to close. Instead, there has been serious negotiations with the Indian government to set up a trade deal, which was reported last week as “90% done”.

No decoupling there.

The attack on commercial engagement with China fulfills two objectives. One is a straightforward attempt to mobilise popular sentiment in defence of steel workers jobs behind a Cold War sentiment in a wider context in which the Trump administrations policies have shaken up popular faith in deference to the US. An anti Chinese attack distracts from that and pushes people back towards habitual hostilities.

The other opens another front in the resistance to any serious action on climate change that could threaten the profits of the fossil fuel sector. Accusations from the Right have been:

  1. The blast furnaces could have been kept running with locally sourced coking coal from the cancelled Whitehaven mine. This misses the point that the coke from this mine – had it been developed – would have had such a heavy sulphur content that it was too poor quality to be used at Scunthorpe, so this is a consciously mendacious and fundamentally unserious talking point.
  2. High energy prices in the UK are because of “Net Zero”. This, as they know, is the opposite of the truth. The UK has high energy costs because they are tied to the price of gas far more than any other country in the G7. See Figure 1. We should also note that the oft repeated “solution” to this problem from Reform or the Tories is massive investment in nuclear power instead. The problem with this is that the cost per Kilowatt hour of energy generated by nuclear power is higher than gas, which is higher than renewables. See figure 2. So their way forward would actually compound the problem. Paradoxically, their attack on Chinese investment in UK nuclear power development, and the withdrawal of Chinese investment from Sizewell C in Suffolk and Bradwell in Essex, is making the financing of these projects almost impossible. So, in this case, the contradictions of their politics means they will neither have their cake, nor eat it.

These themes came together in a front page broadside from the Times on 15th April directed at Ed Miliband’s recent trip to China aiming to improve relations and develop better sharing of expertise on the climate transition. Miliband’s is the head that the right wing press is keenest to have on its trophy wall of sacked ministers, hence quite limited and inadequate targets being described as “swivel eyed” and “eye watering” in a constant hammering of lead articles from the Sun to the Telegraph and all the low points in between. Attacks on solar panel installations are increasingly taking the form of accusations of “forced labour” in China, which are untrue, but because it is almost universally believed at Westminster, this threatens a reactionary result on the basis of an apparently progressive concern – as China is the source of 80% of the world’s solar panel supply. However, even if the UK sabotages its green transition by impeding imports of Chinese solar panels this will have little effect globally, as China is increasingly exporting them to the Global South.
 See Figure 3  Miliband is nevertheless the most popular government minister among Labour members in Labour List’s survey – in which he has a positive rating of 68, compared to Keir Starmer’s 13 – because he is seen as getting on with something positive and progressive, while Liz Kendall and Rachel Reeves are in negative territory.

The call from Dame Helena Kennedy for “an  urgent security review of all those Chinese companies operating within our infrastructure which could pose a threat to our national interests – and maybe not just confined to China” threatens to compound the damage already done by the UKs removal of Huewei’s investment in the 5G network, ensuring that the version the country has is slower and more expensive, and the financial difficulty set for Nuclear power station projects by the removal of Chinese investment on the basis of “national security” paranoia. Applied more widely, this neatly lines the UK up with Trump’s trade war against China and sets the UK up for a potential trade deal in which US capital is looking hungrily at the NHS, wants to sell chlorinated chicken and other additive saturated and nutrition less food from their agricultural industrial complex and open up a tax and regulation free for all for their abusive big tech companies, while their President is actively sabotaging global progress towards sustainability by doubling down on fossil fuels. China is doing none of these things. A more positive approach is that being taken by the PSOE government in Spain, which is both encouraging inward Chinese investment –  like the joint venture between CATL and Stellantis to build a battery factory in northern Spain and deals signed last year between Spain and Chinese companies Envision and Hygreen Energy to build green hydrogen infrastructure in the country.

Farage, and others on the Right are arguing for nationalisation as a temporary measure just in order for the company to be “sold on” – treating nationalisation as an emergency life support process for private capital -is that there is not exactly a huge queue of companies waiting to buy, and any that did would most likely to be looking at asset stripping. Jingye was the only company interested in 2019, when previous owner Graybull capital gave up on it.

This would also be the government’s preferred approach, because they are nervous of the capital costs involved in making the plant viable. There are three intertwined problems with this.

  1. Attracting a viable private company prepared to put serious money into reviving the plant means attracting overseas capital. Given that more than 50% of global steel production is made by Chinese companies (see figure 4 below) Jonathan Reynolds has changed his tune since the weekend debate in Parliament. That Saturday he was decrying allowing Jingye into UK steel manufacturing as a national security issue, but by mid-week, a few days later, he was prepared to be more pragmatic about it.
  2. Making the plant viable cannot mean investing in new blast furnaces. These would become stranded assets before they had reached the end of their design life. Despite the determined rearguard action from Trump and others, trying to carry on as though the world isn’t changing makes no business sense. In 2024, for example, all new steel plants developed in China were Electric Arc Furnaces, designed to use scrap steel as raw material. As yet, production of virgin steel has been dependent on coking coal, but the first production using (green) hydrogen and electricity looks like coming on stream in Sweden by next year; so if virgin steel production is considered an imperative for the Scunthorpe site, that model will have to be looked at and emulated as a matter of urgency.
  3. New investment in different production on the site – like almost all capital investment – replaces labour with capital. As with Port Talbot, far fewer workers would be needed for EAFs. Reynolds has talked about “a different employment footprint” for the plant; which is one way to put it. So, the issue of how the transition can be made in a way that opens up alternative employment with decent terms and conditions has to be negotiated with the workers themselves through their unions.

What’s needed is a clear industrial plan that consolidates the nationalisation as a precedent for other sectors and builds on the Scunthorpe plant’s strengths in producing, for example, 90% of railway tracks used in the UK, as part of a strategic plan for green transition. This has hitherto been focussed on a transition to Electric Arc Furnaces, but linking the production of green hydrogen to new generation furnaces capable of producing the tougher virgin steel needed for a full range of industrial applications should also be part of the process; because blast furnaces can’t be kept open indefinitely if we are to stop the climate running away out of a safe zone capable of sustaining human civilisation by mid century.

Appendix

UK steel production is the 35th largest in the world, comparable to Sweden, Slovakia, Argentina and the UAE. Its 4 million tonnes in 2024 is just over a tenth of the production of Germany, a twentieth of the United States, a thirty seventh that of India and a 250th that of China. 

The niche, almost token, position of UK based steel manufacturing reflects a wider process in which UK based capital is no longer primarily engaged with manufacture.

The last time the steel industry in the UK was nationalised in 1967 it had 268,500 workers from more than 14 previous UK based privately owned companies with 200 wholly or partly-owned subsidiaries. These companies were considered increasingly unviable because they had failed to invest and modernise, so were increasingly uncompetitive. This is part of a wider story about how the UK capitalist class has transformed itself since the 1960s. While the quantity of manufactured goods has increased since then, the proportion of manufacturing in the economy has shrunk from 30.1% in 1970 to 8.6% in 2024. The service sector  has grown from 56% to more than 80%. UK based capital primarily makes money from selling services, mostly financial, to manufacturing capitalists  at home and abroad. They are spectacularly bad at large scale manufacturing start ups, as the debacle of British Volt  (whose approach of setting themselves up a luxurious executive office suite before they’d secured funding to even build their factory might be described as cashing in on your chickens before you’ve sold any).

What that means is that most of “British Industry” is owned by firms based overseas, so might be better described as “manufacturing that happens to take place in Britain”. Consider the automotive sector. While there are locally based SMEs in the supply chain, all the big manufacturers depend on overseas investment. Nissan, Stellantis, BMW, VW, Geely, Tata (again). As with locally based steel production, firms like Morris, Austin, even Rover, are long gone for the same reasons as BSA – once the world’s biggest motorcycle company – now only builds retro classic designs as a niche luxury product and Guest Keen and Nettlefold had to be nationalised to save its assets.

Chinese Embassy comments on government takeover of British Steel

Republished below are the remarks by a spokesperson for the Chinese Embassy in London regarding the UK government’s takeover of British Steel.

The spokesperson points to the surge of anti-China propaganda among politicians and in the media following the announcement by Jingye, the Chinese company that owns British Steel, that it would be shutting down the blast furnaces at its Scunthorpe plant. For example, UK business secretary Jonathan Reynolds told Sky News that the British government had in the past been “far too naive” about UK-Chinese trade. Various commentators have resurrected tropes about China using its investments in Britain to conduct espionage or to “disrupt infrastructure for geopolitical leverage”. This sort of anti-China rhetoric is “extremely absurd, reflecting arrogance, ignorance and a twisted mindset”.

The spokesperson notes that the Jingye Group is a private enterprise that works on the basis of normal commercial principles, and that the Chinese government has no control over its operations. Having poured vast amounts of money into British Steel and lost hundreds of millions of pounds in the process – and given negotiations with the UK government over the future of the plant had failed to yield results – Jingye made a commercial decision to shut down the blast furnaces. “British Steel’s plan to close its blast furnaces and build electric arc furnaces is a normal decision, and it is understandable that the company conducted negotiations with the government on investment for the transition.”

The comment notes that, in general, “Chinese companies in the UK have operated in compliance with law and achieved steady progress”. Given the importance of Chinese investment and trade in supporting the Labour government’s stated commitment to economic growth, it seems foolhardy to politicise the issue of Jingye’s operations and create a discriminatory business environment.

This message was reiterated by Chinese Foreign Ministry spokesperson Lin Jian: “We hope that the British government will treat Chinese companies investing and operating in the UK in a fair and just manner, protect their legitimate rights and interests, and refrain from turning economic and trade cooperation into political and security issues lest it should undermine the confidence of Chinese companies in their normal investment and operation in the UK.”

The remarks by the embassy spokesperson also highlight the hypocrisy in fiercely criticising China whilst not offering even the mildest critique of the Trump administration’s unilateral tariff war. “At a time when the US is wielding the tariff stick against all countries, the UK included, and engaging in unilateral and protectionist trade bullying, those British politicians just keep slandering the Chinese government and Chinese enterprises instead of criticising the United States.”

The comments were first published on the website of the Chinese Embassy in the UK.

Question: Recently, there have been various comments in the UK regarding the government’s takeover of British Steel. Several politicians took the opportunity to attack all Chinese companies and the Chinese government. What’s your comment?

Embassy Spokesperson: The anti-China rhetoric of some individual British politicians is extremely absurd, reflecting their arrogance, ignorance and twisted mindset. Regarding the issue of British Steel, I’d like to share a few basic facts.

1. The Jingye Group is a private Chinese enterprise that makes business investments in the UK on the basis of market principles and conducts operation on its own.

2. It is well-known that British Steel had been losing money for many years before its acquisition by Jingye in 2020 and actually went into compulsory liquidation in 2019. After taking over, Jingye put in substantial funding to keep the company afloat to this day. Had it not been for the involvement of this Chinese company, British Steel workers might have already faced the risk of unemployment.

3. It is understood that under the UK government’s net zero strategy, steel companies that use iron ore to make steel must achieve net zero emissions by 2035. To that end, British steel companies including British Steel have all negotiated with the government to find a path to decarbonisation transition. Among them, the Port Talbot Steelworks in Wales closed its blast furnace in July 2024. British Steel’s plan to close its blast furnaces and build electric arc furnaces is a normal decision, and it is understandable that the company conducted negotiations with the government on investment for the transition.

4. Generally speaking, Chinese companies in the UK have operated in compliance with law and achieved steady progress. They have made positive contributions to the local economy. According to statistics available, Chinese companies in the UK have contributed over 115 billion pounds to the UK economy and created nearly 60,000 jobs.

5. At a time when the US is wielding the tariff stick against all countries, the UK included, and engaging in unilateral and protectionist trade bullying, those British politicians just keep slandering the Chinese government and Chinese enterprises instead of criticizing the United States. What on earth are they up to?

6. Any words or deeds that politicise or maliciously hype up business issues will undermine the confidence of Chinese business investors in the UK and damage China-UK economic and trade cooperation. We urge the British government to follow the principles of fairness, impartiality and non-discrimination and to make sure that the legitimate rights and interests of Chinese companies in the UK are protected. At the same time, it is hoped that the British government will continue to engage in consultations and negotiations with Jingye to actively seek a solution acceptable to all parties. We will continue to follow the development of this situation.

China Daily editorial: the US is not getting ripped off by anybody

We are pleased to republish below a brief editorial in China Daily about the US administration’s hysterical claims that China and other countries are “ripping off” the US via their trade policies. The editorial notes that such claims are being used to justify the US’s unilateral imposition of tariffs, which in turn “provides leverage for the US administration to extract concessions in terms of the real trade war it is waging against China and in reshaping the bilateral relations with the US’s other trade partners in favour of the US by extorting undue concessions”.

The author writes that the US’s trade deficit is not the result of unfair trade practices pursued by other countries, but rather the US’s own economic policies of several decades, pursued in the specific interests of the US capitalist class. What’s more, even if the unilateral tariffs result in more companies investing in manufacturing in the US, this will not create the vast wave of employment being touted by the White House. “The cost of labour in the US means it is more economically viable for machines to do the work than humans.”

In reality, “the US is not getting ripped off by anybody. The problem is the US has been living beyond its means for decades. It consumes more than it produces. It has outsourced its manufacturing and borrowed money in order to have a higher standard of living than it’s entitled to based on its productivity. Rather than being ‘cheated’, the US has been taking a free ride on the globalisation train.” These comments were sufficiently persuasive that they were reported more-or-less neutrally in the Guardian, which is notable given the paper’s usual anti-China stance.

The editorial concludes:

The US should stop whining about itself being a victim in global trade and put an end to its capricious and destructive behaviour. Instead, it should commit itself to working with its trading partners to establish a fair, free and WTO-centred multilateral trading system that is in line with the times.

The US administration has long accused foreign countries of taking advantage of the United States at the expense of domestic jobs and US industries. In US President Donald Trump’s view, the US has received less return value and resources for what it has given the world in terms of the amount of money, trade preferences and other resources. “They’re ripping us off” is his constant refrain.

It is this fabricated premise of a long-standing grievance that has been the launchpad for his administration’s sweeping “Liberation Day” tariffs targeting almost all foreign imports, and which have set up a global trade war and promise to upend the decades-old global trading order.

Though the US leader hit a 90-day pause button on many of the tariffs after his radical power play resulted in US stocks volatility, bond yields surging and recession fears intensifying, his administration’s haughty demolition job on the global trade system is far from over, not least because there is still a 10 percent tariff on virtually all exports to the United States. This provides leverage for the US administration to extract concessions in terms of the real trade war it is waging against China and in reshaping the bilateral relations with the US’ other trade partners in favor of the US by extorting undue concessions.

One of the aims of the US administration is to use the tariffs to close, if not reverse, the trade deficits with nearly all of the US’ trade partners. The preoccupation with trade deficits stems from a warped idea that they are proof that the US has been exploited by other countries. This has also made the US president and his trade advisers wrongly claim that the current rules governing global trade have put the US at a distinct disadvantage.

This is contrary to the belief of mainstream economists that a trade deficit simply means a country is importing more goods and services from a given country than it is exporting to that market, and has nothing to do with the state of a country’s economic health.

While bemoaning surging deficits in the US’ trade of goods with other countries, the US administration has deliberately ignored the fact that the US sells far more services than it buys from other countries, which means the US’ service sector enjoys a trade surplus with almost every trading partner around the world, including those at the center of the ongoing trade war such as China and the European Union. The service sector includes retailers, software, internet and telecom providers, movie studios, as well as health care providers, law firms and accounting agencies. According to the US Commerce Department, the US’ trade surplus in services rose to $293 billion in 2024, up 5 percent from 2023, and 25 percent from 2022.

Trade in services, especially finance, legal, entertainment, and high-tech services, has become a major source of US economic strength. In 2023, US services exports were worth more than $1 trillion, accounting for 13 percent of the global total, and they expanded a further 8 percent last year, according to the World Trade Organization. “Global trade in services … is booming. And there is a clear winner on this front: the United States,” wrote Ngozi Okonjo-Iweala, WTO director-general.

Moreover, Trump’s claim that foreign countries steal US manufacturing jobs through unfair trade practices, and that only sweeping tariffs will help the US reverse the decades-long decline in manufacturing and create related jobs is out of step with historical realities.

This is because service sector jobs have long driven the US economy — the sector employed 57 percent of private sector nonfarm workers in 1939, when the US Labor Department started tracking US employment, and today, service sector businesses account for 84 percent of those jobs.

The modern manufacturing reality suggests that, even if US companies do reshore, the cost of labor in the US means it is more economically viable for machines to do the work than humans.

The US is not getting ripped off by anybody. The problem is the US has been living beyond its means for decades. It consumes more than it produces. It has outsourced its manufacturing and borrowed money in order to have a higher standard of living than it’s entitled to based on its productivity. Rather than being “cheated”, the US has been taking a free ride on the globalization train.

The US should stop whining about itself being a victim in global trade and put an end to its capricious and destructive behavior. Instead, it should commit itself to working with its trading partners to establish a fair, free and WTO-centered multilateral trading system that is in line with the times.

Some aspects of China’s development model

The following article by Shiran Illanperuma, originally published in the Sri Lankan daily newspaper The Island, explores some of the key elements of China’s economic rise, in particular debunking the myth put forward by neoclassical economists that China is “the model par excellence of market liberalisation and the superiority of private sector driven growth”.

Shiran argues that the main competitive advantage of China’s labour force is not its low cost – after all, there are far cheaper labour markets in the world – but the fact that it is well-educated and healthy, and benefits from excellent transport and energy infrastructure. “This, combined with a domestic value chain, is China’s main strength and why economic growth has been combined with rising wages and standards of living.”

Foreign direct investment (FDI) has been leveraged very purposefully in China particularly from the 1990s onwards in order to develop the domestic economy, and to build up the country’s technological capabilities. Meanwhile, “state-owned enterprises (SOEs) are the elephant in the room when it comes to China’s development model”.

Broadly speaking, SOEs in China perform four ‘macroeconomic’ functions. First, they conduct the low-cost production of upstream inputs such as metals, chemicals, and rare earth minerals. Second, they manage essential commodity reserves and intervene in commodity markets to stabilise prices. Third, they engage in countercyclical spending on public works during economic downturns. Fourth, they are deployed to respond during emergencies and external shocks such as the 2008 Sichuan earthquake and the COVID-19 pandemic. The through line in these functions is to keep costs low and smoothen out business and commodity cycles. This is why China has not yet faced a recession comparable to many capitalist economies.

The leading role of the CPC in China’s economic strategy is also crucial:

The Communist Party of China, which has around 100 million members (almost five times the population of Sri Lanka!), has been key to the process of China’s development. The party remains committed to developing Marxist-Leninist philosophy and applying it to the country’s concrete conditions. It retains deep roots in all levels of Chinese society, engaging in consultation during the policymaking process.

As such, China’s remarkable rise cannot be separated from its system of Socialism with Chinese Characteristics.

Shiran Illanperuma is a researcher at Tricontinental: Institute for Social Research and a co-editor of Wenhua Zongheng: A Journal of Contemporary Chinese Thought

China’s rapid development over the last few decades has been the source of much debate among economists. Some claim China as the model par excellence of market liberalisation and the superiority of private sector driven growth. Others equally argue that China’s model is one of planning and state intervention.

On 28 March, I was invited by Nexus Research to deliver a presentation on China’s development model alongside former Ambassador to China Dr. Palitha Kohona. Unfortunately, the contents of this presentation have been misreported in an article in the Island published on 4 April (Dr Kohona: developing countries should covet China model). The article claimed that my presentation touched on “low-cost labour, foreign direct investments, and global trade agreements”. In fact, such simplistic tropes were precisely what I had intended to counter.

China’s development model challenges many of the axioms of neoclassical economics. If low-cost labour were the decisive factor for take-off, then investment should be pouring into much-cheaper labour markets in sub-Saharan Africa. On the contrary, rising wages in China have not led to the outflow of capital one would expect under such a model. This is because the advantage China offers is a healthy and skilled workforce (relative to price) and an infrastructural system that keeps non-wage operating costs (such as transport and energy) low. This, combined with a domestic value chain, is China’s main strength and why economic growth has been combined with rising wages and standards of living.

While foreign direct investment (FDI) has been a huge part of China’s success story, it is possible to overstate their importance. First, FDIs only really took off from the 1990s onwards, yet to begin there would be to ignore the decades of work done to develop the country’s agricultural self-sufficiency, basic industrial system, and institutional structure. Second, what has mattered for China is the quality of FDI, which is determined by government policy. By the standards of the OECD Foreign Direct Investment Regulatory Restrictiveness Index, China remains fairly selective on what FDI is allowed and encouraged. FDI is promoted not as an end in itself but as a means to acquire technology that should be transferred to national champions.

Role of Local Government

A significant portion of my presentation for Nexus Research was on the role of local governments economic policy – something that is often neglected (though there is a growing literature on the subject). China has a fairly decentralised system of governance, a product of its vast size and geography, as well as the institutional changes and experiments in direct democracy during the period of the Cultural Revolution.

Chinese economist Xiaohuan Lan, in his book How China Works (2024), has said that “In China, it is impossible to understand the economy without understanding the government.” While the central government in China formulates indicative plans and the overall goals and trajectory for development, implementation of these plans is delegated to local governments. Local governments have a broad remit to interpret these plans, experiment with implementation, and compete with each other for investment. This leads to a much more dynamic and decentralised development process that encourages grassroots participation.

A comparison between China and India on the share of public employment at different levels of government is very revealing. For China, over 60% of public employment is at the level of local government, with federal and state governments comprising less than 40% of employment. In contrast, less than 20% of Indian public employment is in local government. India, therefore, despite its much-touted linguistic federal system, is far more centralised than China. The weakness of Indian local governments remains a significant barrier for its development.

Continue reading Some aspects of China’s development model

BRICS laying the groundwork for a more balanced global financial system

In the following article, which was originally published in China Daily, Endalkachew Sime, a former Minister of Planning and Development in Ethiopia, who is currently studying for his PhD at Peking University, provides a balanced overview of the trend towards de-dollarisation and the role played by the BRICS+ cooperation mechanism.

He notes that it has emerged as a pivotal actor in this regard, adding: “This strategic shift seeks to reduce dependence on the US dollar in international trade, investments and monetary reserves.” But “far from being an antagonistic move against the United States, it represents a pragmatic effort by the BRICS nations to assert financial autonomy and protect their economies from external shocks.” The New Development Bank, established by the BRICS nations in 2015, represents a concrete institutional response to dollar dominance and China’s trade with such major partners as Russia and South Africa have seen significant shifts away from the ‘greenback’.

BRICS nations have also developed alternative payment systems to bypass traditional US-dominated infrastructure. China’s Cross-Border Interbank Payment System and Russia’s System for Transfer of Financial Messages offer alternatives to SWIFT, while India’s rupee-based trade settlement mechanism challenges the US dollar’s dominance in regional trade. These systems enhance financial sovereignty by providing secure, independent channels for international transactions.

Moreover, by diversifying their foreign exchange reserves into alternative currencies and assets – such as the euro, yen and gold – BRICS countries aim to enhance financial stability. Gold reserves have seen particularly dramatic increases.

Sime notes that: “Developing economies face significant risks when their financial systems are closely tied to the US dollar. Changes in US interest rates, quantitative easing, or other monetary policies can trigger capital flows, currency volatility, and economic instability in dollar-dependent economies. By reducing dollar dependence, Global South nations can insulate themselves from these external shocks and maintain greater control over their domestic economic policies. US sanctions have become a powerful tool of economic coercion, particularly against countries such as Russia, Iran and Venezuela. De-dollarisation efforts provide a mechanism for these nations to conduct international trade and finance outside the reach of US sanctions.”

He adds that the current global financial architecture disproportionately benefits developed economies, particularly the US. By creating alternative financial institutions and mechanisms, BRICS nations contribute to a more multipolar system where multiple currencies and financial architectures coexist. This evolution could lead to greater fairness and representation for developing economies in global financial governance.

However, he goes on to warn: “Despite these advances, challenges remain in establishing a fully integrated BRICS financial architecture. The heterogeneity of economic structures, political priorities, and developmental stages among member countries complicates coordination. Furthermore, the US dollar retains its dominance in global finance, and transitioning to alternative systems requires significant investment and institutional development.”

Nevertheless, he concludes: “By creating alternative financial institutions and instruments, BRICS nations are laying the groundwork for a more balanced global financial system. This shift could potentially reduce the effectiveness of the US’ politically motivated unilateral sanctions, enhance financial sovereignty for developing economies, and promote greater stability in international monetary relations… De-dollarisation represents not a threat to the global economic system but an opportunity to create a more resilient and equitable architecture that respects the sovereign economic interests of all nations. For the Global South, this movement is fundamentally about protecting domestic economies from external shocks, asserting financial autonomy, and participating in a more multipolar world order.”

The “BRICS Plus” grouping — Brazil, Russia, India, China, South Africa, Egypt, Ethiopia, Saudi Arabia, Iran, the United Arab Emirates and Indonesia — has emerged as a pivotal actor in the global movement toward de-dollarization. This strategic shift seeks to reduce dependence on the US dollar in international trade, investments and monetary reserves. Far from being an antagonistic move against the United States, it represents a pragmatic effort by the BRICS nations to assert financial autonomy and protect their economies from external shocks.

The US dollar accounted for about 58 percent of global foreign currency reserves and 88 percent of the daily foreign exchange market turnover as of 2023. However, this dominance creates vulnerabilities for countries whose economies are closely tied to its performance.

The New Development Bank, established in 2015 with an initial capital of $50 billion, represents a concrete institutional response to the dollar dominance. By 2023, the NDB had approved over $30 billion in funding for infrastructure and sustainable development projects across BRICS nations, with approximately 30 percent of these funds disbursed in nondollar currencies. Further, the Contingent Reserve Arrangement, a $100 billion financial safety net established in 2014, provides liquidity support in nondollar currencies during financial crises. This mechanism helps BRICS nations mitigate the risks associated with dollar volatility and potential capital flight.

Bilateral trade settlements have seen significant shifts away from the dollar. For instance, the share of the US dollar in Russia-China bilateral trade settlement plummeted from nearly 90 percent in 2015 to 46 percent in the first half of 2020, while the use of local currencies in India-Russia bilateral trade surged from 6 percent to 30 percent between 2014 and 2019. Similarly, the renminbi’s usage in South African trade grew by 65 percent in 2016 alone. These changes reflect a deliberate strategy to reduce exposure to dollar fluctuations and enhance trade stability.

Continue reading BRICS laying the groundwork for a more balanced global financial system

Could China’s rise be Britain’s opportunity?

We are pleased to reprint below the report by Morning Star editor Ben Chacko, carried in that newspaper, of the meeting ‘China in Springtime: Sharing Opportunities with the World’, organised by the China Media Group together with the Chinese Chamber of Commerce in the UK (CCCUK) and the China-Britain Business Council (CBBC), with the support of the Chinese Embassy, and held at the Bank of China, in the City of London, the capital’s financial district, on March 17. The key purpose of the gathering was to report on and discuss China’s recent two (parliamentary) sessions and the resulting prospects for business and economic cooperation between China and Britain from the policies rolled out there.

Reporting on the keynote speech delivered by Chinese Ambassador Zheng Zeguang, Ben notes how he, “referenced President Xi Jinping’s three signature initiatives, the Global Development Initiative (for economic co-operation in place of trade systems that benefit corporations in rich countries at the expense of the Global South), the Global Security Initiative (replacing concepts of security based on power blocs like NATO with an inclusive international security architecture) and the Global Civilisation Initiative, which promotes multipolarity and argues for a world order based on respect for different civilisations, rather than one whose institutions have all been designed in the framework of the European political tradition.”

China would meet its five per cent growth target and its role as a scientific innovator should be recognised, he argued, pointing to its leading role in the global green transition (non-fossil fuels accounting for 40 per cent of Chinese electricity generation last year and 70 per cent of all electric vehicles worldwide being sold in China) as well as its progress in quantum technology and AI, most notably with DeepSeek, the “low-cost, open source large language model [which] has stunned the world.

“On sci-tech, we were playing catch-up but have now become a frontrunner.” But unlike the US, which seeks to stymie China’s development by blocking access to chips and software, “we don’t believe in ‘small yard, high fence’ — we believe in mutual learning and sharing.”

Sir Sherard Cowper-Coles, Chairman of CBBC, contrasted China’s “serious government” to too many in the West, pointing out China has a record of achieving its economic growth targets and should be seen as a key export market for British goods and services.

Lord (Neil) Davidson, Labour Member of the House of Lords and former government minister, said London should view China’s advances as opportunities, not threats.

The City should pay close attention to the “BRICS-Pay project – another platform for trade finance as an addition to the dollar-based system… this could be characterised as a threat to dollar hegemony, but historically the City has looked to assess financial innovations for their objective effects rather than rhetoric,” he argued, hinting that Britain too could benefit from an end to US financial supremacy.

“The view that China can be pressured into policies it rejects, if ever true, is plainly bankrupt. The view that China is dependent on the West for technology is eroding speedily. The view that China is merely a low-cost provider of goods belongs in the past,” he added.

We also carry below the report on the event published on the website of the Chinese Embassy. It noted Ambassador Zheng as stating:

“China will promote the development of new quality productive forces, fostering industries such as biomanufacturing, quantum technology, embodied AI, and 6G, and continuously advancing the AI Plus initiative and AI application in different industries. China will expand higher-standard opening up, strengthening policies to stabilise foreign trade and foreign investment, and increasing the number of countries eligible for visa-free entry. China will promote green and low-carbon transition, improving incentives for green consumption, and accelerating the development of a green and low-carbon economy.”

The Ambassador also pointed out that China and the UK should seize opportunities, expand collaboration and create a new future of mutually beneficial cooperation. In the face of a turbulent and changing world, a stable and constructive China-UK relationship is even more important to both countries and the world.

“The two sides must uphold the principles of mutual respect, non-interference in each other’s internal affairs and equality, and properly handle differences and sensitive issues. We must say no to those who have been trying to talk China down. We must say no to those who have been trying to undermine normal exchanges between our two countries. We must say no to those who have been trying to disrupt China-UK collaboration.”

Following the formal proceedings and a networking reception, Creation of the Gods II: Demon Force, a 2025 historical blockbuster, was screened.

Could China’s rise be Britain’s opportunity?

Will Labour take a more rational approach to China than the Tories did? Or continue the drive to trade decoupling and war led by the United States?

Optimism was in the air at a China Media Group meeting bringing together the country’s ambassador to Britain Zheng Zeguang and business figures earlier this week. The Donald Trump government was not named, but its disruptive character was referenced — Zheng observed that “unilateralism and protectionism are on the rise and power politics runs rampant;” the chairman of the China-British Council, Sir Sherard Cowper-Coles, spoke of the “orange-coloured elephant in the room.”

China in Springtime reported back on the recent Two Sessions, as the simultaneous meetings of China’s national policy-making forums — the legislative National People’s Congress, and the advisory People’s Political Consultative Conference — are known.

Zheng countered propaganda depicting China’s rise as a threat to a “rules-based” — read US-policed — world order. “China champions an equal and orderly multipolar world and universally beneficial and inclusive economic globalisation.”

Here he referenced President Xi Jinping’s three signature initiatives, the Global Development Initiative (for economic co-operation in place of trade systems that benefit corporations in rich countries at the expense of the global South), the Global Security Initiative (replacing concepts of security based on power blocs like Nato with an inclusive international security architecture) and the Global Civilisation Initiative, which promotes multipolarity and argues for a world order based on respect for different civilisations, rather than one whose institutions have all been designed in the framework of the European political tradition.

Continue reading Could China’s rise be Britain’s opportunity?

In China, profit does not rule, social objectives do

While we don’t agree with the author’s characterisation of the Chinese People’s Political Consultative Conference and the National People’s Congress (on which issue readers may be interested in this article by Roland Boer), the article below offers very useful insights into China’s economic policy and performance.

The article notes that China’s GDP (measured in international market dollars, as opposed to purchasing power parity) remains behind that of the US, but the gap is closing fast. This is because, “although China’s annual real GDP growth is no longer in double-digits, it is still growing nearly twice as fast as the US economy.” Furthermore, the US’s relatively high GDP growth of 2.8 percent last year (which compares favourably with the other major capitalist economies) was in part down to an increased size of workforce due to immigration: “More people, more output. US real GDP growth per person was much less.”

The author further notes that “China has had the world’s largest manufacturing sector by output for 15 years running”, with manufacturing contributing 36 percent to GDP, compared with just 10 percent in the US. China’s economy remains firmly grounded in the real economy, and increasingly in new productive forces. “More electric vehicles are on the road in China than in the US, and Beijing’s roll-out of 5G telecommunications networks has been much faster. China’s home-grown airliner, the C919, is on the cusp of mass production and appears ready to enter a market currently dominated by Boeing and Airbus. The BeiDou satellite navigation system is on par with GPS in coverage and precision.”

The article asks: Why has China succeeded in avoiding slumps including the Great Recession and in the pandemic?

It’s because, although China has a large capitalist sector, mainly based in the consumer goods and services sectors, it also has the largest state sector in any major economy, covering finance and key manufacturing and industrial sectors, with a national plan guiding and directing both state enterprises and the private sector on where to invest and what to produce. Any slump in its private sector is compensated for by increased investment and production in the state sector – profit does not rule, social objectives do.

This article first appeared on Michael Roberts’ blog. Michael recently contributed to our webinar ‘DeepSeek and the challenge to US technological hegemony’.

The Chinese government is just completing its annual ‘two sessions’ or lianghui, where China’s political elite approve the economic policy agenda for the coming year. The ‘two sessions’ refers to two major political gatherings: the Chinese People’s Political Consultative Conference (CPPCC), a political advisory committee; and the National People’s Congress (NPC), China’s top legislative body.

Continue reading In China, profit does not rule, social objectives do

Trump’s tariff tantrums

With the Trump administration’s increasingly aggressive tariff measures, economists are warning of the risk of an international trade war, with the US and China as its major antagonists. To provide some much-needed clarity on this issue, we are pleased to republish below two recent articles from British Marxist economist Michael Roberts.

Michael describes the core of Trump’s tariff strategy as aiming to “make America ‘great again’ by raising the cost of importing foreign goods for American companies and households and so reduce demand and the huge trade deficit that the US currently runs with the rest of the world”. According to the US government, this will boost incomes and jobs in the US. Furthermore, the extra tariff revenues will boost Treasury coffers, supporting the administration’s plan to cut income tax and corporation tax.

What will the actual effect of the tariffs be? Michael argues that the tariffs will not reduce the US trade deficit, but will instead raise prices for US consumers and reduce the competitiveness of US companies. Inflation will rise, taxes will be cut, federal spending will be gutted – meaning that the consequences for the US working class will be dire. At a global level, “increased tariffs and other protectionist measures by all sides in retaliation will weaken world trade and economic growth. World trade growth showed some recovery in 2024 after contracting in 2023. Trump’s tariffs will stop that recovery in its tracks.”

Countering those economists who argue that tariffs have always been a valuable tool for nurturing domestic industry, Michael writes: “The US in the 21st century is not an emerging industrial power that needs to protect burgeoning new industries from powerful competitors. Instead, it is a mature economy with a declining industrial sector that will not be restored in any significant way by tariffs on Chinese or European imports.”

Further:

American capital did not invest to sustain its manufacturing superiority because the profitability of that sector had fallen too mcuh. Instead, they switched to investing in financial assets and/or shifting their industrial power abroad. In the last couple of decades they hoped to sustain an advantage in hi-tech and information technology including AI. Now even that is under threat. But this is not the fault of China running an ‘unfair’ industrial trade policy that is based on suppressing the living standards of its people; on the contrary, it is the failure of US capital to sustain its hegemony, just as Britain did in the late 19th century.

The two articles were first published on The Next Recession blog.

Trump’s tariff tantrums

Feb. 4 (The Next Recession) — Over the weekend President Donald Trump announced a batch of tariff increases on US imports of goods from the closest partners of US trade, Canada and Mexico. He proposed a 25% rise in tariffs (with a lower rate for oil imports from Canada). Then he announced a 10% rise in tariffs on all Chinese imports. Thus Trump started his new trade war.

And yet as soon as he started it, he stepped back. Trump announced that he was postponing the tariff increases with Canada and Mexico for a month because their governments had agreed to do something about the smuggling of fenatyl drugs into the US, which he claimed was killing 200,000 Americans every year. This figure is nonsense, of course, because under 100,000 Americans die from drug overdoses from all chemicals each year. As it is, the smuggling of fenatyl over the US-Canadian border is miniscule – certainly compared to the drug cartel operations on the Mexican border. Moreover, as Mexican President Sheinbaum pointed out to Trump, the cartels are able to operate their violent methods because of gun running operated by Americans in the US.

The Canadian and Mexican governments rushed to do a deal with Trump, promising batches of troops on the borders to stop trafficking and more joint anti-drug forces with the US etc. This seems to be enough for Trump to postpone his tariff move, although the tariffs on China will go ahead (no drugs there?). Also small package imports that have been free of import tax up to now will be brought into the customs system – and that will hit internet online purchases made by Americans for goods from abroad.

So what are we to learn from these shenanigans? Are the threatened tariff increases merely being used to browbeat other countries into concessions to Trump? Or is there a coherent economy policy in all this?

There is method in this madness. On the external front, Trump aims to make America ‘great again’ by raising the cost of importing foreign goods for American companies and households and so reduce demand and the huge trade deficit that the US currently runs with the rest of the world. He wants to reduce that and force foreign companies to invest and operate within the US rather than export to it.

He reckons this will boost incomes and jobs for Americans. And with the extra tariff revenues, the government will have sufficient funds to cut income taxes and corporate profit taxes to the bone (indeed, Trump says he wants to abolish income tax altogether). If this is the plan, then the tariffs will eventually be applied fully, with China probably getting an even bigger increase.

Continue reading Trump’s tariff tantrums

Challenging the purists: the Marxist debate over China’s path

The article below was submitted by Dan Farhat, an author and researcher based in Beirut, Lebanon.

Dan responds to the critique made of China by some of the (particularly Western) left, that the introduction of market mechanisms from 1978 onwards was a betrayal of socialism and that China has become – or is on its way to becoming – a capitalist country.

Comparing China’s Reform and Opening Up with the New Economic Policy in the Soviet Union in the 1920s, and drawing inspiration from the writings of the Italian Marxist philosopher Domenico Losurdo, Dan argues that China’s reforms constituted a creative and successful response to the conditions faced by the country at the time, and indeed have been a key factor in China’s successes in eradicating extreme poverty and raising living standards beyond recognition.

The article further notes that, while the spread of market forces introduces contradictions, risks and challenges, the Chinese leadership has been able to manage these by maintaining the leading role of the CPC and the state sector, and “preventing the bourgeoisie from becoming a cohesive and politically powerful class”.

The following story was shared by the former deputy editor-in-chief of China Daily, Kang Bing:

Growing up in the 1960s and 1970s, my childhood memory is closely tied to hunger. In my home city of Xi’an, the monthly quota for one urban resident was 100 grams of cooking oil, half a kg of meat, half a dozen eggs, and 100 grams of sugar. As for milk, it was given only to families with newborns. Many families today consume the entire monthly quota of oil, meat, eggs, and sugar in one day.

Although the ration system ensured everybody had a share of the available food and prevented starvation deaths, it led to malnutrition among children, adolescents, adults, and the elderly alike. Not a single boy among my 100 male classmates who graduated from high school with me in 1977 crossed 1.8 meters in height thanks to malnutrition.

Today’s picture is very different, with the country emerging as the world’s second-largest economy. Millions of people have been lifted out of poverty, and the quality of life in China has improved significantly – indeed, at a rate never seen before in human history. This incredible transformation is in no small part testament to the profound impact of Deng Xiaoping’s economic reforms.

Deng himself famously said that “to build socialism it is necessary to develop the productive forces. Poverty is not socialism. To uphold socialism, a socialism that is to be superior to capitalism, it is imperative first and foremost to eliminate poverty.” For Deng, true socialism was not about keeping everyone equally poor; it was about lifting people out of poverty. Deng saw a socialism that, through the utilization of market mechanisms, and by focusing on development and economic growth, could transform the lives of ordinary people and elevate China’s position in the global economy.

Continue reading Challenging the purists: the Marxist debate over China’s path

The exceptional economy

In the following article, British Marxist economist Michael Roberts responds to the neverending predictions of China’s imminent collapse, which have been a staple of Western commentary for decades.

Comparing the two countries on a range of economic indicators, Roberts finds that China is far ahead of the US in terms of GDP growth, wage levels, controlling inflation, managing debt and building infrastructure.

The Western consensus is that China is mired in huge debt, particularly in local governments and real estate developers. This will eventually lead to bankruptcies and a debt meltdown or, at best, force the central government to squeeze the savings of Chinese households to pay for these losses and thus destroy growth. A debt meltdown seems to be forecast every year by these economists, but there has been no systemic collapse yet in banking or in the non-financial sector. Instead, the state-owned sector has increased investment and the government has expanded infrastructure to compensate for any downturn in the over-indebted property market. If anything, it is America that is more likely to burst a bubble than China.

On accusations of Chinese manufacturing overcapacity, “this is another myth broadcast by Western experts”, since China’s manufacturing growth is primarily targetted at the domestic economy.

Roberts poses the all-important question: why is China exceptional?

It is because it is an economy that is planned and led by state-owned companies, so it can ride most obstacles way better than a privately owned system of capitalist production as in the US… China’s most important industries are run by SOEs: finance, energy, infrastructure, mining, telecommunications, transportation, even some strategic manufacturing. The total capital of companies with some level of state ownership in China is 68% of total capital of all firms (40 million). The vast majority of Chinese companies in the Fortune Global 500 list are SOEs. SOEs generate at least 25% of China’s GDP in the most conservative estimates, and other studies have found them to contribute to 30-40+% of GDP.

Which is to say, the most important reason for China’s continued success is the socialist foundation of its economy.

Next week US president Joe Biden finishes his term of office, to be replaced by the Donald. Biden would have been extremely popular with the American public and probably would have run and got a second term as president, if US real GDP had increased by 4.5-5.0% in 2024, and if during the whole of his period of office since end 2020, real GDP had risen 23%; and if per American, real GDP had risen 26% over those four years. And he would have been congratulated if the Covid death rate during the 2020-21 pandemic had been one of the lowest in the world, and the economy avoided the pandemic slump in production.

Above all, he would have been feted if the inflation of prices in goods and services after he came into office was just 3.6% in total over four years. That would have meant that, with wages rising at 4-5% a year, real incomes for average American households would have risen significantly. At the same time, strong growth would have allowed the financing of important new infrastructure spending in the US that could have led to an extensive rail network across the country using super fast trains; and with bridges and roads that did not collapse or crumble along with environmental projects to protect people and homes from fires and floods, and the introduction of cheap electric vehicles and renewables. How Biden would have been popular.

And with extra revenue from strong growth, the Biden administration would have been able to balance the government budget and curb or reduce government debt. And with zero to low inflation, interest rates on borrowing would have been near historic lows, enabling households and companies to afford mortgages and finance investment in new technologies.

Continue reading The exceptional economy

Ken Hammond: In China the interests of the working class are at the heart of everything

In the latest episode of The China Report, embedded below, hosts Amanda Yee and KJ Noh interview Professor Ken Hammond about his new book, China and the World. The three have a wide-ranging discussion about the trajectory of China’s foreign policy over the last half-century, as well as interrogating the dominant narratives about China in the West and exploring the nature of China’s economic development.

Ken details how the rapprochement between the US and China in the early 1970s, starting with the visits by Henry Kissinger in 1971 and Richard Nixon in 1972, opened a path for “China being able to open up to a broader range of outside engagements”, and in many ways enabled the Reform and Opening Up process that began in 1978. While improved relations with the US came at a not-insignificant cost to China’s role in promoting socialist and national liberation revolutions – contributing to some confusion in the West and elsewhere as to China’s political trajectory – “China was pursuing what could be described as a deep game, taking a long-term perspective that required making certain compromises or accommodations in the short term to achieve fundamental objectives in the long term”.

The three talk about China’s economic reforms and how, while they introduced serious contradictions and imbalances into Chinese society, they ultimately enabled China to overcome poverty and underdevelopment. Ken points out that the country achieved an average of 10 percent GDP growth for several decades and that “this growth didn’t just benefit the wealthy; it flowed directly to the people”. On this topic, KJ recounts discussions with Chinese officials in the late 1990s and early 2000s, who described market reforms as “like getting onto a wild horse – but we believe we can contain this horse”. The record shows that they have indeed been able to do so.

Talking about China’s whole-process socialist democracy and its extremely high levels of public consciousness and engagement, Ken describes China as “a state in which the interests of the working class are at the heart of everything that goes on”, and contrasts this with the money-driven politics of the US in which the interests of the capitalist class are at the heart of everything.

China and the World is available to pre-order from 1804 Books.

Goals behind Trump’s tariffs: cut taxes on rich and escalate New Cold War on China

US president-elect Donald Trump has been touting tariffs as a means to reduce both income taxes and the national debt, which currently exceeds 120 percent of GDP. In the article below, Ben Norton describes these claims as “utterly false, and mathematically absurd”.

Ben notes that, during Trump’s first term, significant tax cuts were enacted, primarily benefiting the wealthiest Americans. These cuts resulted in the richest billionaire families paying a lower effective tax rate than the bottom half of US households. Consequently, federal deficits increased from 3.4 percent of GDP in 2017 to 4.6 percent in 2019, prior to the pandemic-induced surge to 14.7 percent in 2020.

The article observes that “every advanced economy got its start through protectionism”, but that the US from the 1940s has been preaching (and sometimes violently imposing) free trade as a means of opening up markets for its exports. “However, something happened in the 21st century that changed everything: the People’s Republic of China carried out the most remarkable campaign of economic development in history.”

China’s extraordinary rise has taken place in parallel with a sharp decline in US manufacturing and an increasing financialisation of the US economy. “The US capitalist class decided it would much rather be the banker of the world rather than the factory of the world, because creating parasitic financial and tech oligopolies that use monopolistic market control and intellectual property to extract rents is much more profitable than actually making things.”

Trump’s proposed tariffs will not help the US to re-industrialise – such a project would require massive long-term investment in infrastructure, education, and research and development. In reality, tariffs will be used “to justify cutting taxes even further on the rich” and, further, “to escalate the new cold war on China, which is a bipartisan gift to the Military-Industrial Complex that will only distract from the domestic problems caused by the US ruling class and externalise the blame”.

This article originally appeared on Geopolitical Economy.

Donald Trump cited billionaire egghead venture capitalist Marc Andreessen to advocate for high tariffs. Trump argued that tariffs will magically replace the income tax and pay off US public debt (which is more than 120% of GDP). This is utterly false, and mathematically absurd.

For Trump, tariffs are just another convenient excuse to cut taxes on the rich — which will in fact increase the US deficit, and therefore public debt.

Thanks to Trump’s tax cuts during his first term, the richest billionaire families in the US paid a lower effective tax rate than the bottom half of households in the country. Meanwhile, US federal deficits increased from 3.4% of GDP in 2017 to 4.6% of GDP in 2019 (before the deficit blew out to 14.7% of GDP in 2020, due to the necessary stimulus measures during the pandemic).

As Trump continues to reduce taxes on fellow oligarchs, tariffs will decidedly not make up for the lost revenue. A study by the Wharton School, the elite business school of the University of Pennsylvania, estimated that Trump’s economic policies will increase the US deficit by $5.8 trillion over the next decade.

Nevertheless, the sudden interest in tariffs shown by US billionaires is about much more than just taxes; what it is really about is industrial hegemony and economic dominance.

Here is the actual history, which oligarchs like Trump and Andreessen don’t know:

In the 19th and early 20th centuries, the United States used tariffs as a form of infant industry protection, to build up its domestic manufacturing capabilities, following the dirigiste ideas of Alexander Hamilton.

Every advanced economy got its start through protectionism (including Great Britain, France, Japan, South Korea, etc.). The state needed to protect infant industries during the initial industrial “catch-up” period, because it is very difficult for a developing economy to compete with a dominant economic power that already has an established industrial base that benefits from economies of scale.

By the 1940s, the US became the dominant industrial power on Earth, especially after World War Two destroyed its competitors in Europe. In 1946, US net exports were 3.2% of GDP; then, in 1947, they were 4.3% of GDP. This was a peak the US would never see again. (US net exports have been negative without exception since 1976, as the US has run the largest consistent current account deficits ever seen in history, which have only been possible to balance due to the fact that the US prints the global reserve currency, and can thus sell more and more Treasury securities and other financial assets to foreign holders of dollars.)

In the 1940s, US industry no longer had significant competition, so Washington lifted tariffs and began to preach “free trade”. This benefited the US, because at that time it had a large surplus, and insufficient domestic demand, so by imposing “free trade” (often forcibly), it could open new markets for its exports.

The US wasn’t concerned about losing local market share to a foreign manufacturer, because there weren’t any left at the top of the value chain. So US companies could dominate both foreign and domestic markets.

What the United States did was not unique; the British empire did the exact same thing in the mid 19th century. After the UK established industrial dominance, it repealed the Corn Laws in 1846, moved away from strict protectionism, and began to impose “free trade” on its colonies. (This history was detailed by economist Ha-Joon Chang in his groundbreaking book Kicking Away the Ladder.)

However, something happened in the 21st century that changed everything: the People’s Republic of China carried out the most remarkable campaign of economic development in history.

By 2016, China overtook the United States as the largest economy on Earth (when GDP is measured at purchasing power parity, according to IMF data).

Even more importantly, China rapidly industrialized and established itself as 
the “world’s sole manufacturing superpower”, responsible for 35% of global gross production.

Meanwhile, the US lost its industrial hegemony, due to the deindustrialization and financialization of its economy in the neoliberal era. The US capitalist class decided it would much rather be the banker of the world rather than the factory of the world, because creating parasitic financial and tech oligopolies that use monopolistic market control and intellectual property to extract rents is much more profitable than actually making things.

Just 10% of US GDP consists of manufacturing. More than double, 21%, is made up by the FIRE sector: finance, insurance, and real estate.

Today, US companies can no longer compete with Chinese firms. So what is the response of the US government, which is the representative of US monopoly capital? It has abandoned the “free trade” ideology it had spent decades imposing on the world, and has instead returned to its old strident protectionism.

During his first administration, Trump launched a trade war on China. But this is totally bipartisan (as is the case with almost all US wars). Joe Biden has continued Trump’s trade and tech war on China, imposing even more tariffs.

Demagogues such as Trump like to scapegoat China for the problems that were caused by US oligarchs like him and Andreessen, who got much, much, much richer thanks to the deindustrialization and correspondent financialization of the US economy.

Now they think tariffs are the panacea that will fix everything. But they won’t, because the US industrial base has seriously eroded, and that can’t be rebuilt quickly; it takes many years.

Even more importantly, billionaire oligarchs on Wall Street — who are close friends and allies of Trump, Andreessen, Vivek Ramaswamy, and Elon Musk — will fight tooth and nail against a significant devaluation of the dollar, which would be needed to re-industrialize, reduce production costs, and disincentive imports. Financial speculators want a strong dollar, to keep inflating the biggest bubble in the history of US capital markets.

So the logical result of this is that Trump will use tariffs not truly to re-industrialize, but rather for two main reasons: one, to justify cutting taxes even further on the rich (thereby increasing US public debt, which will be pointed to to demand neoliberal austerity and slashes to social spending); and two, to escalate the new cold war on China, which is a bipartisan gift to the Military-Industrial Complex that will only distract from the domestic problems caused by the US ruling class and externalize the blame.

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