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China's Rise to a Political and Economic Superpower |
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by Ulrich Berger Email: mbatko (nospam) lycos.com (verified) |
11 May 2005
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The US is increasingly losing its economic sovereignty.. For the Chinese the third Iraq war was the harshest defeat in the short his-tory of reintegration in the world economy.. The more the US acts unilaterally the easier China finds allies and forges alliances. |
CHINA’S RISE TO A POLITICAL AND ECONOMIC SUPERPOWER
Was the Iraq War the First Chinese-American Battle for the World’s Oil Supplies?
By Ulrich Berger and Christoph Stein
[This book review published in the German-English cyber-journal Telepolis, April 18, 2005 is translated from the German on the World Wide Web, http://www.telepolis.de/r4/artikel/19/19949/1.html.]
Since the beginning of the 1990s, the Chinese economy has boomed at an average growth rate of 10% while the western industrial states lagged behind at 1% to 3%. The Chinese domestic product rose from 760 billion (Renminbi Yuan (10 Renminbi Yuan is equivalent to $1.2, firmly bound to the dollar and regarded as undervalued) to 7.2 trillion Renminbi Yuan ($864 billion), increased nearly ten fold in the last 25 years. At an even speed, the Chinese economy doubles every 6 or 7 years.
China floods the western markets with its goods. For a long time, China has not only been the workbench of international corporations. It grasps established worldwide markets, as for example the PC-division of IBM (1). Chinese developers set their own standards and produce their own multi-media chips (2) to save licensing costs. Chinese corporations successfully take the world stage. China piles up enormous currency reserves in its account in the form of American government bonds. China has an insatiable hunger for raw materials of all kinds. Its need for oil is very great. China itself controls only 2% of worldwide oil reserves and invests hundreds of billions in the oil fields in Sudan, Venezuela, Kaschikistan, Nigeria, Canada and Indonesia. China was strongly represented in Iraq before the US invasion and is engaged today in Iran and Saudi Arabia.
That China’s ascent drastically changes the weights in the world economy and world politics is ignored. Sooner or later China will turn its economic power into political power. The West should not count on China forgetting its 150-year humiliation by the West or on China becoming a liberal state.
What changes will the Chinese boom trigger in the worldwide power structure and in the global streams of wealth? What does China’s economic ascent mean for the US, Europe and Germany? Is China only a new potent player in the global neoliberal game? Will the new Chinese competition ring in a new round of globalization? Who will be the winners and who will be the losers?
Or is China playing a very different game? Will China join in the global game as it is or will China change the rules of the game? What is China’s strategy in power politics and in economic policy? What resources does China control to assert itself?
Three books that focus on China as a phenomenon appeared recently: Wolfgang Hirn’s “China as a Challenge,” Karl Pilny’s “The Asian Century” and Frank Sieren’s “The China Code.”
CHINA AS A NEW PLAYER
For Wolfgang Hirn, China is a new and very successful global player. China shifts the weights in the world. In his book “China as a Challenge,” Hirn defends the thesis that China will be the “factory of the world.” The past great industrial states, the US, Japan and Europe, will de-industrialize and experience mass unemployment. The Chinese are “highly gifted capitalists,” a nation of traders for centuries. Socialism in China has long been only a hollow façade. China is becoming a new capitalist superpower. Hirn does not expect any democracy in the Western sense in the future but a development autocracy according to the Singapore model.
For Wolfgang Hirn, China is a new and very successful global player. China shifts the weights in the world. In his book “China as a Challenge,” Hirn defends the thesis that China will be the “factory of the world.” The past great industrial states, the US, Japan and Europe, will de-industrialize and experience mass unemployment. The Chinese are “highly gifted capitalists,” a nation of traders for centuries. Socialism in China has long been only a hollow façade. China is becoming a new capitalist superpower. Hirn does not expect any democracy in the western sense in the future but a development autocracy according to the Singapore model.
For Wolfgang Hirn, the losers and winners are certain. China wins everything. The established West loses since it is no match for the Chinese competition.
The de-industrialization cannot be stopped by any of the discussed reforms. I assume the West will take protectionist measures. Protectionist measures are already vigorously discussed. [Wolfgang Hirn in an interview (13)]
Unfortunately his book was written in a muddy and superficial way. Hirn seemingly emptied a card index file of newspaper clippings and pressed them between two book covers. Every conceivable theme is treated superficially on 2 or 3 pages usually introduced by an anecdote to give the impression that the author was physically present in everything he describes.
Hirn views China’s development from the narrow perspective of a mainstream economist. He can only imagine China as a new West intent on monopolizing economic power for itself. But will China become the “workshop of the world” and slave away for the rest of the world? How will the West pay for the products of this “workshop of the world” in the long run?
NEW LINES OF CONFLICT IN ASIA
In his book “The Asian Century,” Karl Pilny looks at the relation between the established economic power Japan and the rising power China. Pilny is an intimate expert of Japanese culture, language and history and advisor to an English solicitor’s office.
His book on China is noticeably marked by this experience. His description of China’s economic development never abandons the jargon of Anglo-Saxon economic papers. The reader often misses the ordering hand of an editor. For him, there is only one successful way of economic development, i.e. democratization and liberal reforms. Pilny lacks sensitivity for the peculiarities of Chinese economic policy.
His reflections on Japan are more useful. Japan bears a heavy burden that poisons its relations to Asian neighbors: the crimes of its belligerent history. In Japanese society and in relation to its neighbors, an unresolved conflict swells that makes Japan incalculable especially if it feels threatened by China’s ascent. Therefore no one can predict how the relation between Japan and China will develop. Everything seems possible from close cooperation to the most severe conflicts.
Karl Pilny asks about China’s character as a superpower. For him China is still the Confucian kingdom of the middle. Therefore China will be interested in “harmonic and complementary” relations, not in one-sided dominance. The world will change with China’s rise to the global superpower of the 21st century. The new world will be a multi-polar world that emphasizes prosperity for everyone and no longer struggles for power and dominance. “Despite all the possible conflicts and catastrophes, the 21st century could bring an unparalleled material and spiritual wealth of humanity. In Pilny’s mind, Europe is better prepared for this new multi-polar world than Japan or the US.
CHINA IS NOT THE WEST
The book “The China Code” by Frank Sieren is distinguished from the two other China books. Frank Sieren writes from his own ideas. He lived in Peking for 10 years as an economic correspondent, knows the country and people and Chinese history. His gripping book forces the reader to look beyond the European plate and question traditional “assumptions.” China is different than the West. This difference should be stressed. Frank Sieren describes China’s history in detail.
In the Chinese consciousness, China’s rise is the re-strengthening of the greatest and oldest culture of the world than has overcome a 150-year phase of weakness and humiliation. China’s strength at the beginning of the 19th century was paradoxically the reason for its weakness. China had everything. There were no goods that western merchants could have sold the Chinese because China produced all its necessities itself. The quality of its products was often superior to European products. English and Dutch merchants could only gain Chinese goods, tea, porcelain and silk for silver. The West lost enormous amounts of silver to China.
As an expedient, western traders shifted to drug smuggling with opium that Brits grew in their colony India. In the forties of the 19th century, a million Chinese were addicted to opium, 1% of the population. By the end of the 19th century, there were already 12 million. The opium ruined the economy and did more than make the population addicted. China exchanged silver for opium sickness. The silver was scarce. Purchasing power fell. Unemployment soared.
The Chinese emperor reacted too late. In 1838 the emperor first intervened and confiscated massive amounts of opium to stop the opium trade. The Brits were furious and demanded compensation. The Chinese ignored the demands. Negotiations did not lead to any solution. The English let weapons speak. In 1842 they conquered Shanghai and the old imperial city Nanjing and blocked the great canal, China’s most important transportation route. They could dictate their conditions to the emperor. The southern harbors had to be opened. China could hardly levy tolls and foreigners could not be prosecuted by the Chinese administration of justice. The Chinese had to accept the first of a whole series of unequal agreements.
With the opium war and the “unequal agreements” in the 19th and 20th centuries, China experienced painfully its dangerous underrating of the “barbarians from the West” and had rested on an illusory sense of cultural superiority. Chinese politics lost control over foreign trade, industry and the army to foreigners. China was the plaything of the European colonial powers, the US and at the end the Japanese.
The victory of the communists under Mao and the founding of the People’s Republic in 1949 restored the political sovereignty of the Chinese over their country. That the “great chairman” is still revered in China today can only be understood on this background. Since then, no Chinese politics will ever allow foreigners to gain a dominant power position in China. In the same way, the unity of the country or “one China policy” has been an inviolable principle of Chinese politics.
From colonial time, the Chinese have learned that they can only integrate their country in the world corresponding to their interests and abilities. In other words, when a foreigner earns money in China, a Chinese must earn even more through the same business. No mammoth foreign business – whether in the steel-, chemical-, pharmaceutical-, banking- or insurance branch – can move in China in a direction disapproved by the government.
Frank Sieren
CONCUBINE ECONOMY
How can China successfully integrate in the world economy without losing political control over economic development? In the western understanding, this seems like squaring the circle. According to the dogmas of economic liberalism, abandoning political control is the prerequisite of economic development. However China is not concerned with liberal dogmas and is nevertheless successful. How is this possible? Frank Sieren discusses this question in detail.
With the expressive term “concubine economy,” he describes the skilful cunning game that Chinese economic policy plays with the greed of western corporations, for example in the China-engagement of the large automobile manufacturers.
The likelihood of giving birth to the emperor’s son and eventually becoming the mother of the ruler was greater than the chance of gaining a decisive influence in the China auto market.
Frank Sieren
China is the largest domestic market of the earth and Chinese economic policy does everything to increase mass prosperity and purchasing power. China holds a monopoly. The markets of the industrial countries are satiated. The purchasing power is ruined in most countries of the third world. Global conglomerates are forced to seek a foothold in the Chinese market. China can dictate the conditions, a position of power that the Chinese government exploits mercilessly. Its goal is development without loss of control. China’s leadership has gambled with high stakes but the corporations obviously have no choice. Auto sales stagnate worldwide and the analysts put management under terrible pressure. The analysts want to see positive business figures or at least pioneering business deals…
Foreign auto-companies can only invest in community businesses where the Chinese are in the majority. Their number is limited and will decline even more through merger regulations. Two or three auto-companies court the same Chinese partner. The price is high. Western or Japanese corporations invest billions and their know-how without the certainty that their engagement will actually count and that they can gain a dominant market role in the long run. Rather they must expect their cooperation partners will put successful competing models on the market with the help of imported know-how.
The bus line of Daimler-Benz painfully experienced this. A hundred million Euro investment was a flop. Instead of the planned 7000 luxury buses yearly, only a few hundred came down the line. On the other hand, a nearby Chinese partner produces 8000 buses a year on their own in a new plant with the know-how of Daimler-Benz.
Profits may not be transferred abroad. They must be reinvested in China. These restrictions crassly contradict the WTO guidelines. Whoever complains loudly must expect painful consequences.
Even though the regulations were loosened recently, attempts to escape the concubine system are punished harshly. BMW can sing a sad song about this. Against the urgent advice of the planning authorities, Hort Teltschik, BMW-chairperson, sought a small private business for BMW without cooperating with one of the mammoth state enterprises. A contract was signed. On account of alleged tax debts, the cooperation firm was converted into state control and since then BMW has fought the maliciousness of a vindictive Chinese bureaucracy.
The Chinese increasingly apply the concubine system developed in the auto-sector in other economic areas. China lets its progress be financed by global capital. This is an economic innovation and diametrically opposes the usual corporate interaction with developing countries. That the Chinese government will change this success model to its own disadvantage cannot be expected.
China follows a strategy that calls to mind Asian martial arts. It uses the energies of world corporations for its own goals by tapping their know-how. China will have a longer upswing phase than Japan. The country is much larger. It will take at least five times longer until its markets are satiated. A hundred year upswing is possible.
Frank Sieren
CHINA REMAINS STABLE
All three authors regard speculations about an imminent Chinese economic crisis as misleading. The Chinese boom is not a hollow bubble but rests on a functioning business model. The Chinese boom does not live from debts and wild promises of future profits but from real investments and a rising living standard of 1.3 billion citizens of the country. The development is breathtaking and certainly not free of problems. However China has an astonishingly good grip on its problems. All these authors agree about this.
The CPCs discuss openly the pressing problems of the country and take measures to solve them. To European observers, this is unusual for a communist party.
One problem is the growing number of migrant workers. This is a consequence of the rural exodus of underemployed farmers into the cities in which too few new jobs arise. To counter this, the government massively increases the income of farmers.
Politics meets the growing energy hunger of the country with a twofold strategy: improving electricity capacities and energy-saving efforts. On both planes, enormous investment is made in research and development. A new innovative electricity grid (4) should relieve pressure and encourage development of low-energy houses (5) and renewable energy (6).
China is an El Dorado of research and development. China spends more money for research than Germany at a quarter of the wage costs. While 250,000 information scientists complete their studies every year in China, there are 5000 in Germany. The number of academies and universities rose 174 to 1731 in 2004. More than 14 million students were enrolled in Chinese academies and universities in 2004 (7). No country has more students abroad than China.
Chinese policy nips malformations in the bud and is not afraid of draconian methods. The GITIC, a financing company of Guangdong province, accumulated loans and credits in the billions in the 1990s and opulently financed its boom province with foreign capital. An ominous bubble arose, a weak point for international creditors.
The central government acted quickly and decisively. The provincial rulers were removed from their posts. Guangdong was directed strictly from the headquarters. The GITIC and other institutes were closed on account of heavy debts. The position of the central government regarding the debts of foreign creditors was rejected; the province did not adjust to the official guarantees of the headquarters as legally prescribed for its financial affairs. Despite wild protests that pressed into the German Bundestag (8), 110 foreign banks lost 75% of their deposits. That the debt bubbles are removed at the expense of foreign banks and not at the expense of the taxpayers of the indebted states contradicts the official practice of the past 30 years.
The successful concubine economy and the effective drastic methods for preventing the first signs of speculative bubbles show that a Confucian economic policy is more effective than a liberal economic policy.
The notion that German democracy is the highest wisdom and the Chinese dictatorship hopelessly outmoded can bring us great embarrassment. Democracy is probably the most convincing idea of the 20th century. That does not mean that it will also be the most successful idea of the 21st century in its present form.
Frank Sieren
Chinese policy is superior to western policy in strengthening the domestic economy and making global conditions dance.
THE WEST IN THE GLOBALIZATION TRAP
The Chinese strategy proved its advantages during the Asian crisis. Frank Sieren describes in detail how the IMF’s brutal market opening policy toward the Asian tiger states consolidated China’s power position in Asia in 1997/98. China refused devaluing its currency and continued coupling its currency to the dollar. International financial speculation could not influence China. China was the bastion of stability. Malaysia followed the Chinese concept and recovered quickly from the crisis while the Asian tigers were weakened by the prescriptions of the IMF. China skillfully used this gap and established its power in Asia.
China systematically escapes the influence of the international financial markets. China is financially independent, defends its independence with all its power and helps other states win the same independence. Whether China upgrades or devalues its currency or leaves it to the play of the market lies in the hands of the Chine national bank alone. The influence of the IMF and the World Bank on Chinese financial- and currency-policy is zero.
Through this independence, China is a heavyweight in financial policy that faces the US at eye level on the financial markets. The fate of the dollar is increasingly in China’s hands.
On 11/20/2004 the German daily paper Tagesspiegel titled its economic section “The Dollar Bomb.” It continued: “America’s descent to the world’s greatest debtor will be a danger for the world economy. China’s regents have the power of crashing the greenback.”
The US is increasingly losing its economic sovereignty. Trading streams with China allow China’s wealth to constantly grow and bleed the US white without the US being able to do anything. The US has shifted its industrial production, especially its consumer goods production, to China. The US can no longer get out of the debt trap.
A significantly higher interest-rate by the FED to stabilize the value of the dollar can be excluded. The internal indebtedness of the US, especially the mortgage debts that have grown exorbitantly and the more or less bad credit card debts, would collapse. The US will have to pay enormous debt interests on its government bonds to its creditors so the American deficit could explode. The value of the dollar cannot be stabilized in this way.
China is becoming the fright of American strategists and economic theoreticians. The pope of American economics, Samuel A. Huntington (9), recently irritated the economic community. He explained in a theoretical model that China could be the victor in trade with the US and the US the loser. On this background, the US invasion in Iraq can be understood as an attempt to pull the rug from China’s growing power over oil.
For China, the third Iraq war was the harshest defeat in the short history of reintegration in the world economy. This will not be the last conflict between China and the US around mineral resources. The third Iraq war will enter history as the first Chinese-American struggle around the world’s oil supplies.
Frank Sieren
Narrow limits are set to the belligerent American policy of containment. China’s buyers are underway worldwide. On the other hand, the US cannot march its armies into all oil countries of the earth. The US now strikes the limits of its military and financial capacities with the Iraq war.
QUO VADIS EUROPE?
China’s ascent will also have consequences for Europe. Wolfgang Hirn sees the future in gloom and despondency. De-industrialization and protectionism are the most likely alternatives. For Karl Pilny, Europe has long lost the connection to development. In contrast, Frank Sieren sees golden times coming for Europe. In his imagination, Germany will be transformed into a tourist paradise for the Chinese.
Germany has become the most popular travel destination of millions of Chinese vacationers. Germany is the fairy-tale castle and the merry dances of the bajuwarian minority in the south. Germany also stands for driving into Emsland with the old Tran rapid. Germany has red wine vineyards at the Rhine, a cabinet of horrors of the Nazi past in Berlin, industrial museums in the Ruhr with German machines that never break but are unneeded, beer of course, green coal, Beethoven’s Fifth, the Koln cathedral, fried sausage and experiences tailored for the harassed Shanghai middle class… Some of the faceless middle class will be waited on with their guests at trashy Chinese restaurants. Where is the authentically German, the traditional that the traveler seeks away from home?
CHINESE WORLD POLICY
China uses its growing economic weight in world politics. Africa, India, South America, Russia and the oil states in the Middle East are among its areas of operations. The more the US becomes entrenched in its unilateralism, the easier it is for China to find allies and forge strategic alliances.
China actively supports Russia in liberating itself from the domination of the IMF and putting the Russian oil reserves under the control of the Russian state. To finance the takeover of a division of the Yuko-corporation, the Chinese national oil company CNPC paid the Russian state company Rosneft an advance payment for future oil deliveries of $6 billion (10). Russian currency reserves have risen to a record high (11). Russian has completely paid back its debts to the IMF ahead of schedule (12).
Russia and China do not only cooperate in the oil- and finance sectors. Their cooperation also flourishes in the high-tech area. Russia signed 70 agreements with the Chinese on developing and distributing high tech products. Russia will build technology parks according to the Chinese model (13).
Up to now there were 87 technology parks in Russia though only 35 really function. China has 20,000 high tech zones. “Special economic zones” will be set up in the IT-area (14).
The Chinese prime minister seems very enthusiastic. Before Russian journalists, he explained (15) that Chinese-Russian relations are now in their best historical phase and will enter a new phase of extensive development.
In South America, the Chinese-Russian cooperation is being replicated. Venezuela will reduce its oil deliveries to the US and reroute them to China instead. “Chavez has repeatedly threatened to turn off the US oil spigot, most recently at the beginning of April 2005. He wants to sell the eight refineries of the Citgo gas station chain in the US that is a subsidiary of the Venezuelan state company PcVSA. The delivery of Venezuelan oil to North America will be reduced,” Venezuelan Avanza announced (16). At the same time Chavez is purchasing MiG 29-fighter aircraft and Mi-35 helicopters in Russia so Venezuela can be independent of US armament deliveries (17).
Similar cooperation exists (18) with other South American countries like Brazil and Argentina.
China’s economic elite stands ready today with the checkbook for urgently necessary raw materials and economic upswing in the kingdom of the middle. In 2004 $2.2 billion flowed from China into the Brazilian raw material sector. As a return favor for the delivery of oil and iron ore, China promised neighboring Argentina $20 billion in the next 15 years.
Chinese politics has not forgotten that China was given a hard time by the powers of the West. As a result, Chinese politics remains partisan in the boom. “The harassment of weaker countries by more powerful or richer countries should not remain unpunished,” Chinese Prime minister Li Peng said before the International Monetary Fund in 1998.
This cooperation goes beyond mere words. China actively supports an alliance of the states of the third world that forms an influential opposition against the West within the WTO. Since then the WTO has been blocked. All the ministerial conferences of the WTO since Seattle have broken down. The WTO stands before “broken glass” or “sad remains” as FAZ (Frankfurter Allgemeiner Zeitung) said (19).
China plunders international conglomerates, blocks the WTO, helps states of the third world escape slavery through the IMF and holds the future of the dollar in its hands. Its economic policy is superior to the policy of the West and it forges worldwide alliances. The signs multiply that the days of US-dominated globalization are numbered and that the West will be marginalized. The appointment of the neocon Paul Wolfowitz to lead the World Bank can be understood as the US answer to the changed balance of power.
We should prepare for turbulent times.
Frank Sieren, The China Code. How the Booming Kingdom of the Middle Changes Germany, 2005
Karl H. Pilny, The Asian Century. China and Japan as the new Superpowers, 2005
Wolfgang Hirn, China as a Challenge. How the Chinese Ascent Changes our Life, 2005 |
See also:
http://www.mbtranslations.com http://www.commondreams.org |
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