China: economic miracle or capitalist mirage?

For years the developed countries have been piling up huge budget deficits; levels of debt have increased at a constant and almost uncontrollable rate. The welfare state is being dismantled in numerous parts of the world, massive lay-offs are on the agenda, and all the promises of an imminent recovery prove to be without substance. And yet in the midst of this bleak situation we are being bombarded with propaganda about the 'Chinese economic miracle': economic growth in China, 'the triumph of Red Capitalism', is being interpreted as a sign of a new phase of development for the world capitalist system.

Staggering rates of growth...

The growth of GNP in China is certainly beating all the records: 7.8% in 2002, 9.1% in 2003, and two-figure predictions for 2004. Since it joined the World Trade Organisation in 2001, when world trade was visibly falling off, trade between China and the rest of Asia was showing a strong increase and in 2003, when world trade was only progressing by 4.5%, trade in Asia was going up by between 10 and 12%; China's levels of trade were explosive, with imports going up by 40% and exports by 35%. Between 1998 and 2003, exports went up by 122%; car production increased by 172% and hi-tech production by 363%. In 2003 China became the leading zone for international investment with levels reaching $53 billion, even by-passing the USA.

In two years, China has acquired the status of the locomotive of the world economy. Certain economists predict that it will have caught up with Japan in 15 years and with the USA in 45 years. Its GNP is already the equivalent of France or Britain.

Japan, the USA, and Europe are grabbing products 'made in China' and new Chinese industrial regions are springing up like mushrooms, attracting vast amounts of investments. The European Union is looking to strengthen its partnership with China and to make it its main trading partner. The American bourgeoisie is pouring investments into the country, with the aim of encouraging the development of the Chinese economy and of avoiding a situation where it loses its competitive edge to the Chinese state. In 2003, as a result of the invasion of the American market by Chinese products, the US budget deficit vis-a-vis Beijing hit the $130 billion mark.

...built on sand

The picture seems idyllic: staggering growth which appears to defy the crises of 1997 in south east Asia and the collapse of the financial bubble of the 'New Economy' in 2001, the date China entered the WTO.

Joining the WTO was not a real rupture for the Chinese economy, but a step in its policy of economic liberalisation which goes back to the 1970s. At the beginning, this policy favoured the export industries and protected others - cars, food industry, industrial capital goods. Over the past 10 years, China has set up a customs regime which gives preference to export industries concentrated on the coastal areas.

However, despite the displays of wealth highlighted in this so-called bastion of 'Communism', the destructive tendencies of capitalism are still at work.

The bourgeois experts themselves are clearly posing the question: how long can this go on? And they have called for a slow-down in investment, noting almost with relief that investments in fixed capital had only grown by 18% at an annual rate last May! Inflation is at the galloping stage, a sure sign of the 'overheating' which all the economists are so worried about. In April, inflation was officially at 3.8%, but in reality it's more like 7%, according to analysts who are familiar with the vagueness of Chinese statistics. In the sphere of food products, it has reached 10%. But it's the market in raw materials, given the rapidity and insatiable hunger of industrial demand, which has seen the most violent price increases for 30 years. Steel, aluminium, zinc, cotton and above all oil are shooting up in price, fuelling a speculative bubble which is already out of control.

The Chinese state itself is trying to limit the rate of growth, imposing credit freezes and blockages on consumer prices, which are currently rising at a rate of more than 1% a month. It has already expressed its satisfaction at limiting growth to 15% in July.

However, all kinds of dangers remain. The housing bubble for example is making the Chinese authorities break out in a cold sweat; the banking sector is in a state of semi-bankruptcy with at least 50% of credits being doubtful. 60% of investment does not feed the cycle of production but is recycled in Hong Kong or in tax havens - in short, it goes into financial speculation or money-laundering.

The astronomical profits being grabbed in China today are actually the result of the frenzied speculation going on all over the world; they don't derive from the real sale of commodities and the valorisation of productive capital. The commodities which are inundating the world market will find it harder and harder to find buyers, despite their low prices. Thus the real perspective is a further deepening of the historic crisis of capitalism. What's happening in China today has nothing in common with the type of development of the productive forces which took place in the 19th century. Whereas in those days phases of growth contained the promise of a more and more impetuous development of the productive forces, today they bring with them the certainty of aggravated contradictions for the system.

Growing misery for the working class in China

What the Chinese population is going through clearly expresses this reality. Despite all the claims about China reducing poverty, the tragedy of the Chinese cockle pickers in Britain, speaks otherwise: if your living standards are improving, you don't flee a country to work in the kind of horrifying conditions that resulted in the mass drowning in Morecambe Bay.

To give an example: in the famous Pearl Delta, in the province of Guangdong between Shenzen and Canton, a rice growing region which in the last ten years has been transformed into the planet's biggest manufacturing region, wages - considered to be among the best in China - are around 100 euros a month, and the workers have only 9 days off a year!

As for unemployment, it has become massive. Officially it stands at 4.7% but in certain regions such as Liaoning it has reached 35%. At the end of 2003, 27 million proletarians had been laid off by bankrupt state enterprises. Millions of jobs have been cut in the countryside where there have been a number of revolts. The balance sheet is that no less than 150 million peasants have migrated to vast slums in the urban centres in eastern China, looking for jobs which the majority of them won't find

The education system has been abandoned and sanitary conditions are terrible. With no sickness insurance, with hospitals having to charge for their services to keep going, a real catastrophe is brewing. Hepatitis B and C affect over 200 million Chinese; between one and two million are HIV positive and within 6 years the figure could have reached 15 million. 550 million people have tuberculosis, with about 200,000 dying each year.

At the level of food supply, the incredible chaos of the Chinese's state's economic policies has resulted in a dangerous fall in cereal reserves and the total disorganisation of agriculture, while the countryside is emptying out. The intensive exploitation of the soil is threatening 80 million hectares (out of 130 million under cultivation) with desertification. All this brings the danger of famine in the future.

The environment is being devastated by the frenetic burning of coal and the construction of huge dams, spurred on by the ever-growing demand for electricity. Thus China is already the world's second biggest producer of greenhouse gases on the planet. Pollution in the cities is reaching crisis point: 16 Chinese towns are among the 20 most polluted on the planet.

A true disaster is looming in China. What's happening in China today is not the harbinger of a new phase in the development of the productive forces, but of a new plunge into economic collapse. Since capitalism entered into open economic crisis in the 1960s, the bourgeoisie has boasted about the Brazilian model, the Argentinean model, then about the Asian tigers. It has also told us about the miracle of the 'New Economy' driven by the internet. It will not be long before the demise of the Chinese dragon shows what lies behind these miracles - the sombre reality of a bankrupt capitalist system.

ES, 2/10/04.