China’s role in global capitalism, despite its impressive growth figures, has been an assembly platform for foreign multi-national corporations. This system has brought wealth to a minuscule layer of Chinese capitalists while enormously profiting Western and Japanese companies, and their East Asian contractors. Two-thirds of China’s exports are shipped from factories wholly or partially owned by non-Chinese companies. In high-technology industries, the ratio is higher: Wholly owned non-Chinese corporations account for 68 percent of high-tech exports and, if firms partially owned by foreign companies are included, the total is 83 percent. Chinese manufacturing is driven by multi-national corporations from the U.S., East Asia and Western Europe. State-owned enterprises account for 25 percent of China’s industrial output, down from 75 percent in the mid-1980s.
The world’s multi-national corporations profit immensely from China’s low wages and like the current Chinese system just as it is.
The communiqué stated that “The Plenum pointed out that we must closely revolve around the decisive function that the market has in allocating resources...The Plenum pointed out that to comprehensively deepen reform, we must base ourselves on the largest reality that our country will remain in the preliminary stage of Socialism for a long time, persist in this major strategic judgment that development still is crucial in resolving all of our country’s problems...We must relax investment access, accelerate the construction of free trade zones and expand inland and coastal openness”
Xinhua, the official Chinese news agency, focused on the word “decisive,” declaring the use of that word to describe the role of markets a development from the party’s previous use of “basic.” Xinhua wrote:
“The role of the market in China has officially switched from ‘basic’ to ‘decisive,’ and is key to understanding the reform agenda. The party communique … stressed profound economic reform, with the market to play the decisive role in allocation of resources. The previous socialist market economy — official policy since 1992 — attributed only a ‘basic’ role to the market. … A unified market for both urban and rural construction land and an improved financial system are definitely in the pipeline.”
More market capitalism then. Its ability to be the world’s workshop rests on its ultra-low wages, which are in turn based on systematic exploitation of its rural population. China to re-orient itself to producing for internal consumption would mean having to allow dramatic growth in workers’ income. But doing so would mean ending foreign capital’s reason to move production to China. China could try to switch to high-end manufacturing — to some degree, it is trying to extend its mix of production to do that — but it doesn’t have the capabilities of non-Chinese companies that are already making such products and it would have to compete by muscling out foreign competitors. (Much of China’s machinery is imported from Germany.) An upward pressure on wages would undercut China’s ability to export cheaply, and without much increased internal demand China would have a glut of capacity that would face shuttering.
Household consumption — all the things that people buy for personal use from toothbrushes to automobiles — constituted about 36 percent of China’s gross domestic product in 2012. In comparison, household consumption is 58 to 72 percent of the economy of the world’s largest advanced capitalist countries. Fixed capital investment continues to account for large and growing portions of China’s GDP — 46 percent in 2012, a figure more than double countries like Japan and the United States. What those numbers signify is that China, despite the repeated proclamations of its leaders, has made no progress in re-orienting its economy. The share of labor income in China’s gross domestic product shrank to 37 percent in 2005. Highly exploited workers in China not only receive ultra-low wages, but are increasingly precarious — virtually all job growth in China from 1990 to 2002, the author writes, was in irregular employment.
A bigger proportion of China’s surplus is being taken by capitalists, but not necessarily Chinese capitalists. A paper written by Yuqing Xing and Neal Detert found that almost all of the value created by iPhone production in China goes to manufacturing corporations outside of China. Chinese workers simply put all these parts and components together and contribute only US$6.50 to each iPhone, about 3.6% of the total manufacturing cost. The paper argues that the other $162 of the total manufacturing cost of iPhones (all of the cost other than the $6.50 contributed by underpaid Chinese labor) came from U.S., German, South Korean and Japanese manufacturers who supplied the parts and shipped them to the final assembly plant, which itself is owned by a Taiwanese corporation that is a subcontractor to Apple. The iPhone is designed and sold by Apple, which enjoys a large profit from it. Thus, the money from trade deficits fills Apple’s, and not necessarily Chinese, coffers.
Professor Hart-Landsberg writes in ‘Capitalist Globalization: Consequences, Resistance and Alternatives’:
“China is the world’s number one exporter of computers. Yet China’s contribution to this activity is limited to providing cheap labor and land. … Eight of China’s top ten exporters are now Taiwanese manufacturers that supply ‘branded personal computer sellers such as Dell with unbranded computers and components.’ … China’s rise as an export powerhouse is primarily due to its position as the final assembly platform for transnational corporate cross-border production networks.”
All too often various nationalists point fingers at China or other low-waged economies (all of East Asia is increasingly dependent on exports) , thereby obscuring the true culprits in the global race to the bottom.
Exploitable workers are needed in those factories, and China’s supply of labor comes from rural wages being consistently 40 percent or less that of urban wages and that local and regional officials continually take and sell off farming land to developers, partly for their own enrichment but also to generate revenue to fund local government. According to a Reuters report, about four million farmers lose their land annually — and those farmers receive an average of $17,850 an acre from local governments, which resell it for an average of $740,000 an acre. This is a domestic land-grab, similar to the African version. It is the modern equivalent of the Enclosures when the English peasantry were driven off the land and into the mill-towns and factories.
The vast disruptions, vicious exploitation and cavernous inequality of early capitalism is being repeated in China, at an accelerated pace. Earlier industrializing countries did so during a time when capitalism covered only a portion of the globe and thus had considerable room for growth. Wages could eventually rise because of the scope for expansion via exporting, capital controls and the difficulty of moving production to other countries. Mass organizing, including the creation of then-militant unions, leveraged those factors into rising living standards. Capitalism no longer has places into which to grow, having blanketed the Earth, and the capitalist class has succeeded in eliminating barriers to their moving production at will, accelerating a race to the bottom. The rise of China, or any other country, can only come by taking market share away from somebody else, and the growing mass of low-wage workers drags down wages globally. The alliance of party-connected Chinese capitalists with Western capitalists is profitable for them, but at the expense of working people in those countries and around the world.
Taken from a Counterpunch article by Pete Dolack of the Systemic Disorder blog.
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