The continued expansion of China’s economy has enabled it to become the world’s second largest generator of new value, overtaking Japan. If current trends continue it would overtake the United States by 2020. But the strains – social and political – are taking their toll.
Though now slowing, China’s spectacular economic growth has continued despite the global recession, shored up by a massive injection of government spending. It now exports more than Germany. As some of its population benefits, it has become the world’s biggest market for cars.
China has invested in huge infrastructure projects. It has been able to use the vast reserves of foreign exchange accumulated from its exports, and is eyeing up the 49.5 trillion yuan ($7.3 trillion) corporations and households have saved during the 30 years in which globalising transnational companies transferred production there.
The distribution of wealth between the workers who produce all the value and the profits extracted from it by corporations has followed the pattern of worsening inequity in the rest of the world. Between 1983 and 2005, the proportion of China’s wealth comprised of wages and salaries fell from 56.5 per cent of GDP to 36.7 per cent.
During the latter part of the twentieth century, changing conditions set in motion by the Communist Party forced millions of former peasants from their villages and the land and into the factory production zones set up to attract inward investment. The proportion of city dwellers rose from 17.8 per cent of the population in 1978 to 45.7 per cent in 2008. Migrants to the cities don’t get residential status, so are paid less and get worse healthcare, social welfare and education benefits. By 2025, at least 220 Chinese cities will be likely to have more than one million people.
Until now, China has kept tight control over its national finances, whilst the majority of countries in the rest of the world have become subject to the demands of capital markets. But things are changing. Whilst shifting some of its risky investment support from the US, it too has fallen prey to the demands of finance capital.
Yesterday, the People’s Bank of China announced that overseas financial institutions will be allowed to invest yuan (the currency also known as the renminbi, or RMB) holdings in the nation’s interbank bond market in a pilot program to spur currency flows from abroad. Shanghai, China’s commercial hub, is striving to become a global financial centre by 2020 and is expanding investment products which would get access to the nation’s huge savings. China may allow foreign companies to sell stock in Shanghai next year.
China is certainly experiencing some hammer blows as the result of its conversion to capitalist production. Its rivers and cities are amongst the most polluted in the world. Recent landslips from heavy rains are much more serious as the result of deforestation.
The population has fallen prey to the tobacco companies, heavily marketing their death-dealing product in China, to offset shrinking markets in the West. According to the World Health Organisation, more than 300 million, mostly men, are now smoking heavily and 1 million a year are dying prematurely as a result.
The concentration of the workforce in manufacturing zones has created conditions for an organised response to poor working conditions and low wages. Strikes in factories operated by Honda and other global producers are becoming much more frequent and the authoritarian Communist Party bureaucracy is strengthening its internal security, harassing and locking up dissidents, as well as censoring internet access. It is a political system under massive strain which is certain to fracture in the coming period.
At the same time, the uneven development of capitalism, with many of the major economies, including the United States, now reduced to debtor status and increasingly dependent on Chinese financial support, is bound to increase the prospect of a global trade war with all that can lead to.