The Colossus Rises

by Asad Ismi

February 2006

China has emerged as a significant countervailing force to US imperialism, enabling newly defiant developing nations the world over to chart their own course of economic and social development beyond the sway of US power. But, as Asad Ismi writes, this opportunity has emerged on the backs of Chinaï¿½s own rural poor, among whom resistance is growing daily.

CHINAï¿½S ECONOMIC ASCENT OVER the last two-and-a-half decades has been nothing short of astounding. It now has the fastest-growing large economy in the world, having increased by an amazing 9 percent a year since 1979—-a historical record. China has replaced the United States as the largest consumer market in the world, and is now the third largest trading nation, as well as the global manufacturing centre.

At the present rate, China is doubling incomes and output every decade. Beijing has quadrupled the average Chinese income since 1979, lifting 300 million people out of poverty.

China has become the second largest importer of oil, and is also the second largest holder of US dollars in the world ($600 billion) after Japan. Through its purchase of American Treasury bills, China is literally keeping the US economy afloat. As the (UK) Financial Times states: “China’s influence in global commerce is no longer merely significant. It is crucial.”

China’s New World Order

CHINA’S RISE HAS QUIETLY DISPLACED US influence all over the world. Rather than flexing its military or economic muscles to advance its interests, the Chinese way is to make bilateral and multilateral trade deals with countries, buying their resources and giving them access to its market. As the nation’s prosperity becomes increasingly important to the economies of other nations, China is shifting from the periphery to the centre of the global economy. Li Junru, vice-president of the Central (Communist) Party School, explains: “The policy of heping jueqi (merging peacefully) means other nations need not fear. China’s rise will not damage the interests of other Asian countries because, as China rises, it provides a huge market for its neighbours. At the same time, the achievements of China’s development will allow it to support the progress of others in the region.”

Given this policy, it is not surprising that Asian economies are integrating around China. Most significantly, China and the Association of South East Asian Nations (ASEAN) are creating an Asian trade bloc to rival the European Union. The ASEAN-Plus-Three (China, Japan, South Korea) summit meeting in December 2004 laid the groundwork for an East Asian Community (EAC) that “should build a free trade area, cooperate on finance, and sign a security pact…that will transform East Asia into a cohesive economic block.” This is a significant defeat for the US, which scuttled a similar initiative in 1990.

As Robert W. Radtke explains in the Christian Science Monitor, “China’s peaceful rise was introduced to Asia by Chinese President Hu Jintao on his tour of south-east Asia in October [2004]—-on the heels of President Bush’s visit to the region that month. The contrast in tone between the two leaders couldn’t have been more striking. In short, China’s message was, ‘We’re here to help,’ while the US message was, ‘You’re either with us or against us’ in the war on terror. It’s not hard to imagine which was the more effective diplomatic strategy.”

“Especially for developing countries, Beijing’s emphasis on ‘mutual trust, mutual benefit’ is a great improvement over Washington’s endless wars and its constant interventions in their affairs.”

An important example of China’s “merging peacefully” policy has been its historic rapprochement with India. The two Asian giants make up more than one third of the world’s population and represent the two economies with the biggest potential for growth. The countries have been rivals since 1962, when they fought a brief border war over boundaries. On April 11, 2005, however, India and China announced a new “strategic partnership,” pledging to resolve border disputes by “peaceful and friendly consultations.” China gave up its claim to Sikkim province, and the two countries signed agreements on trade, technology transfers, and economic cooperation. These steps followed a summit between Chinese Premier Wen Jiabao and Indian Prime Minister Manmohan Singh in New Delhi. As Singh put it, “India and China can, together, reshape the world order.”

Russia is another former rival that has aligned itself with China. In October 2004, when Russian President Vladimir Putin visited China, both countries announced that their relations had attained “unparalleled heights.” The two countries held unprecedented joint military exercises in August 2005, and China is now the leading buyer of Russian military equipment, with $2 billion in such purchases in 2004. In the same year, overall trade between the two countries grew by one third to $21.3 billion, and Chinese investments in Russia increased by 82 percent.

China and Russia are also members of the Shanghai Cooperation Organization (SCO), along with the Central Asian countries Uzbekistan, Tajikistan, Kazakhstan, and Kyrgyzstan. The SCO was set up at Beijing’s intiative, and through it China hopes to defeat what it considers US moves to encircle it with military bases in Tajikistan, Kyrgyzstan, and Uzbekistan. Beijing also aims to ease access to the massive oil deposits of Central Asia, which are mainly in Kazakhstan.

On July 30, 2005, Uzbekistan evicted the US from the Karshi-Khanabad Air Base (known as K2), giving it six months to remove planes and personnel. K2 is an important base for supplying US operations in Afghanistan. In early July, the SCO asked the US and NATO to set a deadline for leaving Central Asian military bases that they have been using since Washington’s 2001 invasion of Afghanistan.

China and Russia have also moved to draw the line against US imperialism in the Middle East by forming an alliance with Iran, Washington’s likely next target after Iraq. China has become the leading market for Iranian oil exports. In October 2004, Sinopec, one of China’s state-owned oil companies, signed a $100 billion deal with Iran under which Beijing can import 250 million tons of liquefied natural gas (LNG) from Iran’s largest oil field, Yadavaran, over a 25-year period. China plans to invest a further $100 billion in Iran’s energy sector in exploration, production, and drilling.

China has sold Iran sophisticated surface-to-surface and anti-ship missiles, and, along with Russia, helped develop Tehran’s long-range ballistic missiles. The anti-ship missiles are capable of being used in the Strait of Hormuz, through which 40 percent of global oil exports are carried.

While the US and the European Union threaten Iran over its nuclear energy program, China and Russia support it. Both countries have made clear that they will not back United Nations resolutions or sanctions against Iran for its nuclear program. China and Russia hold veto power in the UN Security Council. As Asia Times explains, “the endorsement of Tehran’s nuclear energy program by Moscow and Beijing reveals the primary impetus behind the China-Iran-Russia axis: to counter US unilateralism and global hegemonic intentions…. The China-Iran-Russia alliance can be considered as Beijing and Moscow’s counterpunch to Washington’s global ambitions. From this perspective, Iran is integral to thwarting the Bush administration’s foreign policy goals.”

Having displaced the US all over Asia, China is now doing so in Washington’s “backyard,” Latin America, as well. For instance, China is now Chile’s largest export market and Brazil’s second biggest trading partner. In November 2004, Chinese President Hu Jintao toured Latin America and signed 39 commercial deals with five countries, declaring that China’s partnership with Brazil symbolized “a new international political order that favours developing countries.”

In January 2005, Chinese Vice-President Zeng Qinghong also made an investment trip to Latin America. During the two high-level visits, China offered more than $50 billion in investment and credits to Latin American countries. Most importantly, China signed an energy agreement with Venezuela under which the latter pledged to provide 100,000 barrels of oil a day to China and 3 million metric tons of fuel oil a year. China agreed to invest $430 million in 15 Venezuelan oil fields that it will be allowed to operate.

Venezuela is the US’s fourth largest oil supplier, and so the deal with China cuts into one of Washington’s “few remaining relatively stable sources of crude.” The US has twice tried to overthrow Venezuela’s left-wing President Chavez, causing him to warn Washington in March 2005 that “if there is any aggression, there will be no oil.” For Chavez, the deal with China helps diversify Venezuela’s export base and reduce its dependence on a hostile US, which currently buys two thirds of Venezuela’s oil production. In stark contrast to US hostility, China has offered Chavez a $700 million credit line for low-income housing, and will contribute to his social “missions” by building 10,000 houses on public land in Venezuela during 2006-7.

But as author Saul Landau points out, “Beijing’s real poke in Washington’s mostly blind eye came with the announcement that it would give credits to Cuba,” the US’s arch-enemy. China has pledged large investment credits for Cuban nickel, and a Chinese oil company will start exploring for oil off Cuba’s coast. These developments substantially undermine the US policy of economically blockading Cuba and denying it even basic necessities.

China has also been actively courting the US’s biggest oil supplier, Canada. In April 2005, two Chinese oil companies reached deals on the Alberta tar sands, which contain the biggest oil deposits in the world outside of Saudi Arabia. China National Offshore Oil bought a $150 million share in MEG Energy, a tar sands company, and PetroChina signed a memorandum of understanding with Enbridge for half the supply of the planned $2 billion Gateway pipeline, which will transport 400,000 barrels a day from Alberta to the Prince Rupert port in British Columbia. In total, there are about six China-Canada deals under consideration, worth $2 billion initially, and “potentially much more.”

According to Chinese oil executive Hou Hongbin, “Canada is a key link in China’s attempts to diversify its oil supplies. The more sources of import, the more safe those supplies are. We are looking for profitable projects, which could include everything from minority stakes to full ownership of oil sands companies.”

Murray Smith, Alberta’s representative in Washington, admits, “The China outlet would change our dynamic. Our main link would still be with the US, but this would give us multiple markets and competition for a prized resource.” Smith foresees Canada exporting a million barrels of oil a day to China eventually, out of potential total exports of more than three million barrels a day. In 2004, Canada exported 2.12 million barrels of oil a day—-or 99 percent of its oil exports—-to the US.

The Bush administration is worried about China’s oil deals in Canada. “I’ve had a number of calls from US officials who assumed that the next three million barrels per day will go to the United States,” says Greg Stringham, vice-president of the Canadian Association of Petroleum Producers. As one Canadian newspaper editorialized in December 2004 before the Chinese deals went through: “Watch the Americans have a hissy-fit if a Chinese incursion materializes. So far, the Americans have taken Canada’s energy for granted.”

The Other China

CHINA’S METEORIC ECONOMIC rise has given Third World countries and “middle” powers like Canada a huge alternative market to that of the US, as well as a source of significant investment. Especially for developing countries, Beijing’s emphasis on multi-polarity in the context of “mutual trust, mutual benefit” is a great improvement over Washington’s endless wars and its constant intervention in their affairs.

“China’s rapid growth has been based on the hyper-exploitation of its peasants and workers.”

China’s advance, however, has come at a staggering price for many rural Chinese. Beijing’s economic reforms have indeed lifted 300 million urban residents out of poverty, but this has been done at the cost of impoverishing 900 million peasants. China’s rural population, the main force of the Communist revolution, has gained almost nothing from the pro-capitalist reforms introduced in 1979; in fact, China’s rapid growth has been based on the hyper-exploitation of its peasants and workers. China’s industrial expansion has been heavily dependent on a massive flow of foreign investment into coastal cities, which has been attracted by the cheap labour driven there from the countryside by the abysmal social conditions enforced by the Communist Party leadership.

The average annual income in rural Anhui, for instance, is 2,100 yuan, compared to a seven-times-as-high 14,800 yuan ($1,790) in Shanghai—-yet a farmer pays three times as much tax as an urban professional. Under the Maoist commune system that existed before 1979, medical care and education were provided free to villagers, and taxes were limited, but inequality in China is now among the worst in the world. Since 1995, more than 40 million peasants have been dispossessed of their land by corrupt rural officials who have then sold it to developers.

Driven out of their villages by poverty and corruption, 200 million migrant peasant workers (known as mingong) have become the main component of the labour force in the cities, fuelling China’s remarkable export and construction drives. But here, too, the peasants are denied decent wages and health care and education benefits (the last two because they do not have urban residential status). The average industrial wage is only 64 cents an hour (compared to $1.88 in Mexico), and 60 percent of mingong work more than 10 hours a day. Independent labour unions are banned in China.

Unemployment is rising in the cities with the dismantling of China’s state industrial sector (stipulated by its entry into the World Trade Organization) and the increasing domination of industry by foreign firms that do not employ as many people. The restructuring of China’s state industries has eliminated millions of jobs and closed thousands of factories. The number of industrial workers fell by 15 million between 1995 and 2002. With their own residents now unemployed, many cities are forcing the mingong to return to their rural birthplaces.

These conditions have sparked considerable worker and peasant resistance throughout China, with strikes and demonstrations multiplying. There were 74,000 mass protests in 2004, skyrocketing from 10,000 in 1995. More than three million people demonstrated in the month of September 2004 alone. About 7,000 workers from the state-owned Tianwang Textile Factory in Xianyang occupied the plant in that month to protest the hand-over of the company to China Resources, a company based in Hong Kong. The company had fired all the workers and wanted new employees to accept lower wages. Area residents backed the occupation, and when 1,000 police were sent to evict the occupying workers they were repelled by thousands of people gathered outside the factory.

The Chinese government is concerned about the escalating social unrest and has responded by eliminating the 8.4 percent basic agricultural tax (which goes to Beijing) and offering a grain-planting subsidy. But the many other taxes collected by local officials remain, and any subsidy has been offset by the recent introduction of foreign grain into Chinese markets (required by the WTO), which is driving down local prices.

Beijing has also adopted a new development strategy that looks to expansion of the domestic market (rather than exports) as the engine of future growth. However, it is unclear how this is to be accomplished, since official economic policy remains focused on attracting foreign investment with cheap labour. To increase domestic consumption, wages would have to be raised, and the state has demonstrated no willingness to support such a pay increase.

In essence, the problem with the Chinese economic model is its capitalist nature. Capitalism has impoverished four out of five people on the planet by putting most of its wealth in the hands of a privileged few. Social and economic inequality are now rampant in China, whose leaders will not be able to resolve the worsening national social crisis as long as they maintain the capitalist economic system that is fomenting it.

Asad Ismi has written extensively on US imperialism. This is an abridged version of the original article, which appeared in the CCPA Monitor, October 2005.