China in the age of American decrepitude – Part 1
The breath-taking rapidity of China’s economic development over the last three or four decades races ahead of our ability to recognise the facts and their significance. What is unfolding in Asia is nothing less than the biggest shift in relations between the imperialist powers since the United States displaced Britain as the dominant imperialist power a century ago. The whole of world politics in the coming years and decades, including working class politics, will increasingly revolve around the axis of the conflict between a rising China and a declining United States. And just as the re-division of the world in favour of the United States was only finally resolved through inter-imperialist war, so will it be in this case too – unless the working class can intercept that motion.
Many readers will recall that in 2010 China officially overtook Japan to become the world’s second-largest economy. This announcement was based on the metric most commonly used to compare national economic activity, which is nominal Gross Domestic Product (GDP). However, this metric vastly understates the actual changes in the world economy in the past thirty years.
Wealth is created by productive labour – the production of commodities useful to human beings, which are sold on a market for profit. But GDP, both in the form of Nominal GDP and in its Purchasing Power Parity (PPP) form, counts the market value of all goods and services, including those ‘services’ that create no new wealth. In the imperialist phase of capitalism, where much economic activity has a parasitic character, GDP therefore becomes increasingly inaccurate as a measure of national economic capacity.
I propose instead to look at the production of the key industrial commodities, beginning with steel. The data I am using are taken from Wikipedia, which many people consider to be an unreliable source. But in each case, the original source of the Wikipedia data is stated – for instance, in the case of steel production, it comes from figures published by the World Steel Association, the international trade body of that world industry. In some cases, the data are drawn from industry publications or press articles. This table is condensed from a larger table on this page. I have limited this table to the top ten steel producers, and more or less to the decade marks. The figures are in million metric tons. If you are the kind of person whose eyes glaze over at the sight of a table of numbers (as most of us are) I urge you to make the effort to read and seriously consider this table, even if you read no further.
Annual steel production by country and decade (million metric tons)
|Russia||71.6||71.7||66.9||59.1||est 100.0||est 100.0|
Some salient points:
- China’s production in 2020 was more than ten times the output of the next-highest producer, which was India, and accounted for over half of the world’s entire production.
- China’s output was fourteen times the US output, and eight times the output of the entire European Union (Germany + France + Italy + Spain + Poland + 22 others)
- In 2020, China’s steel production increased over 2019, while in almost all other countries production declined
- In the 29 years between 1990 and 2019 (i.e. even based on pre-Covid figures which are less favourable to China), China’s steel output increased 15 times over and India’s 7 times over (from a much lower starting point) while the output of US, Japan, and Russia, the big three steel producers in 1990, and also of Germany, all declined in varying degrees. (The Soviet Union’s output of 154 million tons (mmt) in 1990 included 54 mmt from Ukraine; most of the rest would have been from Russia, so 100 mmt is my estimate from Russia).
- Due almost entirely to the growth in China, and to a far lesser extent in India, in that same period of time since 1990 world steel production has more than doubled – a 143% increase.
Here is a part of that table represented in graphic form. If this graph doesn’t convince you that a qualitative change has occurred, I don’t know what will:
The significance of these figures can hardly be overstated. Steel is a pivotal commodity in capitalist industry; on its production depend many other huge industries – building construction, shipbuilding, railways, and the manufacture of vehicles, tools and machinery, electrical appliances and weapons. On the other hand, steel also drives the demand for mining – both the iron ore that is its raw material, and the coal which provides its energy. If a single industrial product can be used as a measure for the development of capitalist industry as a whole, that product would have to be steel. Lenin used the development of railways as an index and summation of the development of capitalist trade and bourgeois civilisation in general – but given the changes in the technology of construction, road transport, shipping and electrical goods of all kinds, steel serves that purpose better today.
What can we draw from these facts?
The first thing to note is that the figures for steel production indicate a significant expansion of capitalist industry on a world scale in the past thirty years, far in excess of world population growth. This may not be news for economists who study such things, but it might be harder to accept for workers living in the United States, Russia, Japan or Europe, where the last thirty years have been a period of prolonged industrial stagnation or slow decline.
GDP figures by country show the starkly different rates of growth clearly enough, but world GDP growth figures conceal this world expansion of capitalist production. Annual growth of world GDP averages out at about 2.63%, for a total growth of 81% over the thirty years between 1990 and 2020 (with a few wild fluctuations up and down along the way). Considering that world population increased by 40% over the same period, this indicates stagnation or slow growth at most. You wouldn’t guess from these GDP figures that world steel production had increased by a factor of nearly two-and-a-half times in these thirty years.
But this average figure conceals big differences in rate of growth between the developed industrial economies and China. Over those thirty years, US GDP grew by 70%, Japan’s by 33%, Germany’s by 49%, and Russia’s by 23%. China’s GDP growth over the same thirty years was 380%.
It is also worth noting in passing that this is not what I or most other Marxists expected in the 1990s. In the wake of the Stock Market Crash of 1987 and the collapse of the Soviet Union, it appeared that the much-hyped renewal of capitalist growth that was projected to come from the re-imposition of capitalist market relations in the former Soviet Union, or anywhere else in the world, was wishful thinking on the part of the bourgeoisie. Any major expansion of capitalist production, whether based on the development of new technologies or the opening up of new resources anywhere in the world, seemed to be out of the question.
In respect of the Russian Federation and the newly-independent nations of Eastern Europe and Central Asia, the sober expectations of the Marxists were fully borne out – from 1990 to 1998, cumulative GDP growth in the Russian Federation was minus 56%, by World Bank figures. (It has recovered somewhat since then.) But not in China.
Secondly, in terms of capitalist production, these figures show that China is not the second-largest economy in the world. It is by far the greatest industrial power in the world today; its industrial supremacy over all the others is as great as that enjoyed by the US in the past. You may well find this hard to believe: consciousness lags behind reality.
Perhaps you think: in steel, maybe, but what about all the other industries? Figures for other key industrial commodities present a similar picture.
In aluminium, the metal of aviation, China produces about ten times the output of the next highest producer, India. Aviation, or more precisely commercial airliners, is one of the few industries where China still lags behind. The US and European nations, France, UK, and Germany, are the big players in this market – such is the as-yet-unchallengeable power of the worldwide duopoly of Airbus and Boeing.
The best measure of construction is cement production: China produces about 60% of the world’s entire production of cement. In the three years 2011-2013 China used more cement than the United States did in the entire twentieth century.
China is the biggest producer of shipping (22.3 million gross tons [mgt] in 2019, just ahead of South Korea’s 21.3 mgt and Japan’s 16.1 mgt). The vast majority of Korean production is for export, while China’s ships are mostly for its own use. These three Asian countries account for 90% of global production of ships, while the US, which only forty years ago was the world’s largest producer of commercial shipping, now produces less than 1%. This article in Forbes magazine openly worries about what that might mean in the event of war.
In 2020 China manufactured 32% of the world’s motor vehicles – 25 million vehicles, more than the combined production of the next four biggest car-makers: the US’s 8.8 million, Japan’s 8 million, and Germany’s 3.7 million and South Korea’s 3.5 million. China’s production is a 50-fold increase since 1990, when China ranked 14th among car manufacturers, producing about half a million cars annually.
China is the greatest consumer of electricity, using 7.5 million Gigawatt-hours per year, more than the next four highest consumers combined – the US (3.9 million Gwh/y), India (1.5 million Gwh/y), Russia and Japan, (both about 0.9 million Gwh/y) (mostly 2019 figures).
It is harder to find information on the electronics industry, being much more varied in both the range of product categories and markets, but it is estimated that China accounts for about one-third of the world’s production of all types of consumer electronics and 68% of smartphones.
The oldest modern industry in China is textiles, another light manufacturing industry. China is the giant of this industry too, producing more than half of the world’s textiles – seven times the output of India, the next-largest producer, and ten times that of the US.
With the raw materials of industry, the picture seems a little different at first glance. The dominance of Chinese industry shows clearly here too, but in different ways.
China produces about five times as much coal as the next highest producer, India, and eight times as much as the US.
However, the US has become once again the biggest oil producer in the world, thanks to the development of hydraulic fracturing technology. It now produces 11 million barrels per day, compared to Russia’s 9.9 million, Saudi Arabia’s 9.3 million, and China’s 3.9 million barrels. The US is still the largest consumer of oil, using 20 million barrels a day compared to China’s consumption 14 million barrels, due to China’s far greater reliance on coal as the energy source for its industry. Nonetheless, China has overtaken the US to become the biggest oil importer in the world, the largest part being supplied by new pipelines from Russia, followed by shipments from Saudi Arabia and Angola.
Australia is the giant of iron ore mining, producing 930 million tons in 2019, 37% of world production, followed by Brazil with 480 million and China with 350 million tons. The US produced 48 million tons of iron ore in 2019. Australia is also the largest producer of the aluminium ore, bauxite.
Australia’s production of iron ore was overwhelmingly destined for the steel furnaces of China, as is much of its coal. China buys about 70% of Australia’s iron ore exports; Australia supplies 62% of China’s ore imports. Over the fifteen years from 2000 to 2015, the value of Australia’s exports to China went from $A6 billion to $A92 billion. On the back of this trade in 2017 Australia chalked up the record for the longest run of uninterrupted GDP growth in the developed world – a run which lasted eventually for 29 years. (China’s own run of uninterrupted growth lasted nearly half a century, until the effects of Covid-19 shutdowns ended it in 2020, but for historical reasons it is not categorised as part of the ‘developed world’!)
But supplying the raw materials for another country’s industry – this has generally been the role of the colonies in the past. It signifies a relationship of dependence on the industrial power: the possibility of Australia using that ore to develop its own steel industry is totally precluded, and it has few alternative markets for this level of production. This is yet another indication of the reversal in relations between states that has taken place.
A final aspect of production worth noting: To a far greater degree than in the older industrial countries, there has also been a simultaneous ‘industrialisation’ of agriculture and development of the rural infrastructure, so that the lag of agriculture behind industry is less pronounced. From drone-guided rice-planting machines to video-monitored and data-driven factory-farming of pork, China leads the way in the industrialisation of farming. (Industrial farming methods have also contributed to some disasters, including the spread of African Swine Fever, a highly contagious viral disease which devastated the national pig herd in 2019, and seems to have returned recently. The disease is believed to have been spread through feeding pigs a cheap swill made from, among other things, pork products.)
In cereal production, in 2019 China stood in first place in rice (210 million tons, about 27% of the total world production of 755 mt), followed by India with 177 mt. China was also the biggest producer of wheat, (133 mt, about 17% of the world’s total) compared to India’s 103 mt and US production of 52 mt. The United States still ranks highest on maize (corn) production, with 392 mt, about 34% of world’s total, but China, which is not traditionally a big grower of maize, ranks second with 257 mt. In both China and the US, the bulk of the maize is used for stock feed, with smaller amounts used for industrial production such as corn syrup sweeteners and ethanol fuels, and only a very small proportion for unprocessed starch for human consumption. This has enabled much higher consumption of meat in China in recent years.
With 18% of the world’s population, China produces about 20% of the world’s food, including 18% of its cereals, 29% of its meat (including 50% of the world’s pork), and 50% of its vegetables China is a close second to India in cotton production, mostly in the drier western province of Xinjiang.
Some further economic indicators complete the picture. In banking and credit, suffice it to note that as recently as the early 1980s, the United States was the world’s banker, a status it had held since the early years after the First World War. Already by 1986 it had become the world’s most indebted nation, and it has retained that distinction ever since. The meaning of this reversal is the subject of some discussion: Japan, whose industrial stagnation over the last three decades is comparable to that of the United States in many ways, remains a major creditor. But China recently overtook Japan to become the world’s top creditor. It now accounts for 65% of official bilateral debt, worth hundreds of billions of dollars, across Africa, Eastern Europe, Latin America and Asia. This clearly indicates that China has “entered into the highroad of world brigandage – i.e. the road of imperialism,” – to borrow an expression that Trotsky used in respect of the United States a century earlier.
For an indication of changing patterns of world trade, the Economist recently produced this map, showing how the number of countries that have greater trade with China than with the US has grown in the last 20 years. Seven of the world’s ten busiest container ports are in China.
How was this remarkable transformation achieved? What is it that has favoured such rapid industrial expansion in China at a time when almost everywhere else in the world industry is stagnating or declining? Some of the factors include the following:
- China’s industrialisation coincided with the long-term stagnation of capitalist investment in industry in the old imperialist countries in 1990s, an inescapable consequence of the falling rate of industrial profit. This impasse took the form of a drive to shift production to low-wage countries (including, but not only, China) in an attempt to shore up rates of profit. There was therefore a ready supply of foreign capital hungry to tap into the market of one billion that China seemed to offer. Large direct foreign investments in China remain a feature of the Chinese economy today.
- At the time that this massive export of capital from the US and other industrial countries began, China was, as a consequence of its economic isolation during the Mao years, less burdened by crippling debts to the imperialist banks than the industrialised countries of Latin America and Asia, and thus less burdened by the interest payments which sucked the profits from those investments back to the imperialist banks.
- The principal driving force of China’s industrialisation is the historic migration of labour power from the countryside to the cities, supplying both a huge labour force, and at the same time a burgeoning domestic market. Peasants are often largely self-sufficient in food and have limited needs for manufactures; urban workers meet all their needs through the capitalist market. A corresponding urban migration underpinned the rapid expansion of industry in Britain in the 19th century, and the US and the Soviet Union in the twentieth. China’s rural population was much larger than any of these countries; the impulse it gave to industrialisation, correspondingly greater.
- The huge size of the domestic market of 1.4 billion people, larger than the ‘world’ market that is actually accessible to exporters from any other country, allows China’s development to proceed a long way before it runs up against the limits of domestic consumption, freeing the Chinese capitalists from many of the constraints, tariffs and restrictions that inhibit trade in the world marketplace. When China banned Google from operating within its borders, it was able to challenge this gigantic monopoly – the only country in the world which has even attempted to defy its power – because the access to the world market that Google offers consumers in China can effectively be substituted by the Chinese equivalents. Who needs Amazon when everything you could possibly want is available cheaper on Alibaba?
- The form of ‘state capitalism’ inherited from the decayed Chinese revolution, deformed as it was from birth, and delivered its final death-blow by the violent suppression of the Tiananmen Square protests in 1989, fitted the needs of the moment very well. A large fraction of industrial capital is still under the direct control of the state. This state also enjoys stricter controls over the deployment of labour than just about any other country, and has great resources at its disposal to plug gaps, buy up surplus production in order to mitigate recessions, and finance make-work schemes and all manner of ‘stimulus packages.’ This is what enabled China to develop the rural infrastructure, for example, so that the progress of industry is not held back by the lag of agriculture. Chinese capitalism ‘with socialist characteristics’ is better suited to the epoch of moribund capitalism than most.
A friend who has read these lines raised three cautions against overstating China’s industrial prowess.
First, he said, production is measured not just in quantity but also in quality: a higher quality of steel is needed to build precision instruments, or a huge container ship, from that used in a washing machine. These figures for steel production tell us nothing about whether China is capable of producing the highest-quality steel, and in what quantities. Despite the colossal total production and exports, China still imports significant quantities of steel – partly from Chinese-built facilities in Southeast Asia, but partly also specialty steels.
The second caution he raised was the technological lag that is evident in some industries. China has struggled to produce its own commercial jet airliner, for example. The Comac C919 which has completed test flights and is expected to enter commercial service very soon, in competition with the Boeing 737 and Airbus A320, uses engines made by CFM International, a joint venture between the US General Electric and French Safran Aircraft Engines corporations. And despite great efforts to develop an indigenous semiconductor manufacturing industry, China still lags well behind the US in that important field, and still relies heavily on semiconductors imported from the US.
Both of these objections either have already been or soon will be overtaken by events. When you’re producing ten times the quantity of steel produced by your nearest rival, it won’t take you long to beat them in production of top-quality stuff too. China already dominates the production of stainless steel to such a degree that weapons manufacturers in Europe and the United States worry about their dependence on Chinese production.
And wherever China lags in technology, it is quickly catching up. When production is proceeding so rapidly with imported technology, the opportunities to borrow, copy and steal technical secrets are wide. A Chinese jet engine is in development, which will eventually be used on all new Comac airliners. With heavy government support, Chinese manufacturers are established and growing in every stage of the complex semiconductor industry.
And in some fields, especially in telecommunications and artificial intelligence, China already leads the world. With roughly the same land area as the US, China has a cellular network of 2 million sites, compared to the US’s 200,000, leaving it far ahead in its ability to roll out 5G technology. China’s facial recognition technology must be the envy of police departments the world over.
My friend’s third objection is more substantial and needs to be carefully considered. He quotes the writer on Marxist economics Sam Williams: “Does this mean that China… is in the process of replacing the United States as the world’s leading imperialist nation? Before we jump to these conclusions, we have to take certain things into account… imperialism is not based on the relative level of industrial capital but of finance capital. If I as a citizen of the United States own X amount of finance capital in stocks, bonds and interest-bearing bank deposits, this doesn’t mean that I am entitled to X amount of surplus value produced by the workers of the United States. No, I am entitled to X amount of surplus value produced by the workers of the entire world.”
This relationship which Williams alludes to – the mutually interpenetrating and interlocking web of capitalist ownership of finance capital, that great merging of money capital with industrial capital through which the big monopolies greatly extend their worldwide reach and domination – is in some ways the key to the puzzle, and I will return to this question in more detail later.
However, these facts outlined above are sufficient to demonstrate that – contrary to the expectations of any Marxist that I am aware of – in the early years of the twenty-first century a new imperialist power has emerged in China.
To put the same thought another way, if we accept these economic facts and still recoil from characterising China as an imperialist power, we rob the term ‘imperialist’ of its meaning.
The emergence of a new imperialist power has profound implications, not just in politics, but for Marxist theory too. We must bring our thinking into line with the new reality – which is not necessarily an easy thing to do. The first step is to gain a clearer understanding of the nature of the imperialist phase of capitalism, and the relationships between the imperialist powers. To that end, the next two articles will review some key Marxist writings on imperialism.
TO BE CONTINUED