In the three decades since Deng Xiaoping began to introduce free-market reforms China has bounded up the world league of economic powers. It outstripped Britain and France in 2005 and Germany in 2007, and at the end of 2010 overtook Japan‘s faltering economy to become the world’s second-largest.[46]
China sales across the world are prodigious because it has very cheap labour and, in some industries, very modern means of production.[47] In 2014 the US trade deficit with China exceeded US$300 billion and is expected to exceed even that in 2015. The European trade deficit with China is about US$125 billion. The imperialists are of one voice: China is exporting too much, to the USA, to Europe, to the whole world.
China’s highly competitive industry is in direct conflict with US imperialism but the relationship between the two powers is deeply contradictory. Major US companies and most large internationals have invested heavily in China, are producing cheaply and selling their goods in the USA (and elsewhere) at prices determined by the world market. This is highly profitable for them. At the same time the US is one of China’s biggest export markets and because of the US trade deficit, China is the biggest holder of US Treasury bonds, and thus, for the moment, has an interest in maintaining the American dollar buoyant.
The CCP bureaucrats would prefer this cosy relationship to be ongoing, but that is out of the question. With the huge development of its productive forces and the consolidation of capitalist relations, it is logical that China behaves like an imperialist power. It imports raw materials and capital, and exports manufactured goods and capital in direct competition with the old imperialist powers.
The flooding of America and Europe with Chinese goods is likely to continue while China continues to be a major pillar supporting the profitability of US and European companies, and those countries are prepared to run up ever higher debts. However, the essential relationship between the US and China is conflict over world markets and resources, especially in Latin America. Already voices are being raised on Wall Street, Congress and the Senate that “unfair” Chinese competition must be curbed.
In 2003 the Bush Administration claimed that the Beijing trade surplus with the United States (about US$120 billion at that time) caused the loss of more than 1 million American jobs. The opposition of the USA to China’s expansionist aims were seen in August 2005 when Washington blocked a takeover of the American oil firm Unocal (which has extensive interests in Asia) by Sinopec, China’s largest oil refining company. That skirmish symbolises the growing trade and political tensions between China and the USA.
Nearly half of China’s foreign investments are in Latin America and the Caribbean, mostly through joint infrastructure products. In January 2015, the South China Post reported that China was planning to invest US$250 billion in Latin America over the next five years and increase bilateral trade to over US$500 billion in ten years. Specifically, in Venezuela, China concluded two large oil investment deals which were announced during the Venezuelan President’s visit to China in September 2013. China has agreed to invest a total of US$42 billion in two oilfields in Venezuela’s Orinoco Belt. Additionally, it is in the process of establishing a “strategic alliance” with Mexico in mining and energy projects.[48]
US Congressmen worried about the growing level of Chinese involvement in Latin America are invoking the “Monroe doctrine” that no foreign power should have more influence than the USA in Latin America. In response, China is building a large navy because it is clear that in the future it will need to control sea-lanes in the Pacific and elsewhere. This will inevitably bring China into increasing conflict with the USA. There can be little doubt that whichever of the Republicans or Democrats are in power, there exists the potential for a trade war which could plunge the world into economic chaos.
China might seem hugely successful but its very success is its Achilles heel. Exporting so much makes China highly dependent on the state of the world market. But there are signs of overproduction on a world scale – in large part due to Chinese growth – and any significant decline in world markets would drastically and adversely affect the Chinese economy. The reverse is also true, any slowing down of China’s rate of expansion would have a serious knock-on effect on national economies around the world.
This is causing alarm because already, many Chinese industries including, coal, iron ore, steel, heavy machinery and ship-building have problems of over-capacity. The result is falling prices and decreased demand on a global scale. In the UK, for example, the Thai owners of the Redcar steel plant (sited in the north-east of England and the second largest in Europe) placed it in liquidation in October 2015 as no longer commercially viable. In an area already hard-hit by recession the remaining major employer fell victim to the anarchy of the world capitalist market. The Guardian of 25 July 2015, estimated that some 12,000 workers in the South African mining industry would be laid off as a result of the fall in demand for raw materials. These are symptomatic of the problems that China and the world is increasingly going to continue to face in the future.[49]
Currently China’s rate of economic growth (7.3% for 2014) means it is doubling its productive capacity every decade, a rate of growth that in a capitalist economy will, inevitably, lead to an even more massive crisis of overproduction. However, every indication is that the CPR’s solution is to wade even deeper into market reforms because with a capitalist economy it needs a rate of increase of at least 7% to maintain present levels of employment.