The Integration of China into Global Capitalism

Abstract

Although the current crisis has amply demonstrated the many challenges and contradictions the American state faces, it has also demonstrated that it nevertheless remains critical to the system's survival. Whereas it was still possible in the 1960s and 1970s to represent the capitalist relationship between the global north and south in terms of “the development of underdevelopment,” by the new millennium there was clearly a very remarkable, if still highly uneven, process of capitalist development taking place in the global south. Nowhere was this clearer than with the integration of China into global capitalism. At the same time, the severity and duration of the latest crisis in a global capitalist economy that the American state had been so central to constructing has, unsurprisingly, led to a resurgence of pronouncements that US hegemony was coming to an end. China's entry into the circuits of the international economy, many commentators now predicted, marked a fundamental “re-orientation” of the global capitalist order. However, far from displacing the American empire, China rather seems to be duplicating Japan's supplemental role in terms of providing the steady inflow of funds needed to sustain the US's primary place in global capitalism. Were this to change, it would require deeper and much more liberalized financial markets within China, which would entail dismantling the capital controls that are key pillars of Communist Party rule. Furthermore, a major reorientation of Chinese patterns of investment and production away from exports towards domestic consumption would have incalculable implications for the social relations that have sustained China's rapid growth and global integration. In this regard, though the outcome of the working class struggles now underway in China cannot be known, this cannot but impinge on, and possibly even be affected by, the direction working classes elsewhere take out of the current crisis.

Keywords:

• China
• globalization
• US state

Acknowledgements

This paper is substantially drawn from part 3 of chapter 12 of our book, The Making of Global Capitalism: The Political Economy of American Empire (New York: Verso, 2012), the research and writing of which was supported by a Canada Research Chair in Comparative Political Economy funded by the Social Science and Humanities Research Council of Canada.

Notes

¹For Marx's formulation of his classic thesis in 1848 on the bourgeoisie creating “a world after its own image,” see The Communist Manifesto (Marx 2008, 38–39). For Andre Gunder Frank's formulation, over a century later, of the counter-thesis, see his “The Development of Underdevelopment” (Frank 1966).

This article was originally published as a book chapter in The Making of Global Capitalism, Verso: London and New York, 2012, and is reproduced here by kind permission from Verso.

²The notion that the US was in “terminal decline” as the center of capital accumulation shifted to East Asia was the central theme of Giovanni Arrighi's The Long Twentieth Century (1994), and was taken up again in his Adam Smith in Beijing: Lineages of the Twenty-First Century (2007). See also Andre Gunder Frank (1998).

³See: Public Broadcasting Service. Accessed November 18, 2007. http://www.pbs.org/newshour/bb/white_house/july-dec99/barshefsky_11-18.html.

⁴Derived from World Trade Organization (WTO) (2011, appendix tables A1 and A14).

⁵The data in this paragraph is drawn from the World Bank's World Development Indicators (2011).

⁶For the “systematic discrimination against Chinese indigenous firms,” see also Branstetter and Lardy (2008, 649).

⁷It is the strategic importance of US investments in such high sectors that is not recognized in more general surveys like Branstetter and Foley (2007).

⁸It also exceeded the total for India (24,000), South Korea (26,000) and Taiwan (23,000). National Science Foundation (2010, 2–27, tables 2–6).

⁹“China's transition to a capitalist state has been carried out through a remarkable marriage of central power and decentralized authority” (Walker and Buck 2007, 46).

¹⁰Peter Kwong, citing a report by the China Rights Forum in his “The Chinese Face of Neoliberalism,” summarizes the relationship between the Party elite and the owners and managers of business as follows: “only 5 per cent of China's 20,000 richest people have made it on merit. More than 90 per cent are related to senior government or Communist Party officials … China's new ‘princelings’ took over China's most strategic and profitable industries: banking, transportation, power generation, natural resources, media, and weapons. Once in management positions, they get loans from government-controlled banks, acquire foreign partners, and list their companies on Hong Kong or New York stock exchanges to raise more capital” (Counterpunch, October 7–9, 2006).

¹¹Official attitudes to private property expanded from being considered a “complement” to the state sector (in the Constitution in 1982), to being a “supplement” to the state sector (Thirteenth Congress of the CPP, 1987); to being an “important component of the economy” (Fifteenth Congress, 1997); to developing “side by side” with the publicly owned sector (2001) and “actively encouraged” (2004) (Clarke, Murrell, and Whiting 2008, 380).

¹²The overall share of SOEs and other publicly controlled enterprises in new fixed investment in 2003 was still 74% (two-thirds of the remainder was undertaken by foreign-invested enterprises). Key strategic industries such as steel remained in state hands (though there was great variation in firm size, productivity and profitability, the output of crude steel increased by 339 per cent between 1995 and 2006, while employment fell by 18%, implying a more than five-fold increase in output per worker, accompanied by an improvement in quality) (Brandt, Rawski, and Sutton 2008, 588, 594, 597; Perkins and Rawski 2008, 863).

¹³The data is collected by the China Enterprise Confederation & China Enterprise Directors Association and modeled after the Fortune 500. See Tang Xiangyang, “State Monopolies Dominate China's Top 500” (Economic Observer, September 9, 2009).

¹⁴Indeed, one major study concluded that, “the current model of technology import and imitation cannot in the long run sustain China's technological advance. As China narrows the gap with the world technology frontier, opportunities for easy gains from imitating will dissipate” (Hu and Jefferson 2008, 332). See also Dale Wen and Minqi Li (2006). Also, according to Gordon Fairclough's “China Slows Increase in Defense Spending” (Wall Street Journal, March 5, 2010), discounted should be claims about China's challenge to US military dominance: leaving issues of quality and technology aside, US military expenditures in 2008 were 4.9% of GDP and China's 1.4%. In actual expenditures, the United States spent close to $700 billion and China $60 billion and even if China's official numbers are doubled, as the Pentagon suggests, that still leaves China's expenditures at only 17% of the United States.

¹⁵In 2004, only 10% of them had medical insurance, less than half were paid regularly, over half were never paid overtime and two-thirds worked without any weekly day of rest. At the same time, employment in state-owned enterprises peaked in 1995 and over the next decade fell by 48 million (30 million of those being laid off and the rest transferred to TVEs) (Friedman and Lee 2010, 510–16; Cai, Park, and Zhao 2008, 168; Brandt, Hsieh, and Zhu 2008, 690).

¹⁶The number of arbitrated cases has gone from under 20,000 in 1994 to over 120,000 in 1999, 226,00 in 2003, and reached half a million in 2007. Ching Kwan Lee's work (2007) provides the most insightful and in-depth discussion of how the discourse and forms of protest differ between the workers in the state enterprises in the “rustbelt” and the new generation of migrants coming to the “sunbelt.” Though there are important differences in terms of a lingering sense of collective rights versus focusing on the individual rights other workers have, and in the readiness to use class or populist rhetoric rooted in Marx and Mao, and even in the forms of actions taken, in both cases there remains a dependence on a paternalistic state and a focus on individual rights as provided in the law.

¹⁷There are many problems in interpreting the data, but that there has been a major increase in inequality in China is not disputed. For recent analyses with comparisons to other countries, see Chen Jiandong et al. (2010). A recent OECD study (2010) provides a lower indicator of inequality than the Chinese Academy of Sciences does but still has Chinese inequality as being higher than the United States; it also argues that income inequality in China peaked in 2005 and has since stopped increasing.

¹⁸It was notable, for instance, that even Niall Ferguson, especially in his essay, “Empire Falls” in Vanity Fair in October 2006, fuelled such expectations despite his understanding of the “symbiotic economic relationship” between China and the United States that he dubbed “Chimerica.”

¹⁹BBC News, “Chinese State News Media Agency Xinhua Criticises US on Debt,” July 29, 2011. http://www.bbc.co.uk/news/world-asia-pacific.-4341626.