Winter is Coming: China 2018-2019 (Wildcat)
Updated translation of “China: Der Winter kommt” from issue #103 (February 2019) of the German magazine Wildcat. We publish this as the first in a series of blog posts attempting to grapple with events and trends in China over the past year, on which we’ve remained silent partly because we were busy finishing up the second issue of our journal, and partly because we weren’t sure how to address some of these thorny issues. We find this article an excellent overview of the past year’s events, and thus a good starting point for our own engagement. It is the second part of a series, the first focusing on the Jasic struggle (which we will address in some of our upcoming posts). We look forward to the third part, which will explore economic trends in more depth.
“The economic winter is coming!” What was only occasionally heard from bankers in the summer of 2018 is now widespread table talk and the signs are everywhere and numerous: Employees were sent on unpaid holidays over the Spring Festival [i.e. Chinese New Year in January-February 2019], car sales collapsed last year for the first time in 28 years and have been declining for almost a year now, retail is weakening, venture capital is withdrawing, exports are sinking, trade war… The Chinese growth model of recent decades is coming to an end. “2019 won’t be a good year to buy an apartment or a car,” my colleagues say, “because we can’t predict how prices will change—and how long we’ll still have our jobs.”
Even the powerful Chinese Central Bank was unable to stop falling stock market prices in 2018. The domestic market, which has been praised as an alternative to exports, is growing disappointingly slowly (or is even declining), and even the much-hyped industrial robots are not being bought in the anticipated quantities. In addition to the bad economic news, there have been further scandals in recent months in which the failure of the authorities has hit the intermediate strata in particular. Repeated fake vaccine doses (250,000 cases), fires in holiday resorts, repeated rape-murders in Didi taxis [China’s answer to Uber], closure of public schools for lack of money, etc. It is precisely the mad surveillance with video cameras in public places, in buses, even in classrooms, facial recognition at the subway entrance, voice identification, obligatory real-time monitoring of electric cars, etc., that is making the trade in personal data flourish. You can buy the geographical location or the personal data of a mobile phone number on the Internet for less than one euro. Every year the personal data of several hundred million Chinese people are published on the Internet, often they come from public institutions and official databases. These data breaches fuel many cases of fraud, which only make the headlines when a victim dies.
Above all this, Xi Jinping sits as the most powerful head of state since Deng Xiaoping. He also owes his power to the stock market crash in 2015 and the fall of Li Keqiang, who, as Number Two, was given the main blame for the stock bubble. Xi’s measures to counter the economic slowdown include tightening censorship, centralizing the media and political control over schools, universities and religious associations, increasing influence of party cells in companies, consolidating state enterprises, a more offensive foreign policy… in short: the (re-)centralization of power in the state and the economy. The tightening of censorship not only produces absurd results, but also cuts into one’s own flesh. For example, a film cannot be licensed if it contains violence or even a murder that takes place in a police building, or any other State authority. And a change in the licensing procedure for computer games caused the world’s largest computer games market to collapse for almost ten months in 2018, when many Chinese gamers switched to foreign gaming platforms.
Update on Jasic¹
Four Jasic workers who were arrested for attempting to found a labor union are now under criminal investigation and await trial. Five of the supporters who were arrested at the end of August are still in detention or under house arrest, and two others are still missing [i.e. in detention at an undisclosed location]. On the 9th and 11th of November, 12 more supporters were abducted by Guangdong province police in Beijing, Shanghai, Guangzhou, Shenzhen and Wuhan.
Pressure on activists and Marxist or Maoist student university groups is also being increased elsewhere, and we have heard of further interrogations and surveillance. Some of the abducted supporters are graduates of elite universities, but workers and activists from labour NGOs are also involved.
To mark Mao Zedong’s birthday on December 26th, a group of supporters organized a small protest against the arrests at Mao’s birthplace in Hunan. They had believed that the proximity to Mao would protect them from police persecution, but it did not take long for the authorities to arrive. Throughout January, other activists, some from Shenzhen or Guangdong, some from other provinces, were interrogated and arrested. On the 21st of January, about seven supporters were arrested, after they blogged about the content of the forced confession videos of other supporters that security forces had played to them. The security forces, also behind the kidnappings of Shen Mengyu and Yue Xin, seem to have forced various detainees to make confessions in which they severely incriminate themselves. Those arrested on the 21st say that the “confessors” in the videos talk about “using workers” to overthrow the state and the CCP, working for foreign agents, etc. Supporters who were shown the confession videos say that presenting the confessions was supposed to make supporters renege, and of course they were forbidden from talking about it. But their blog posts made this police tactic public. It is to be expected that the arrests will continue as long as the students and other supporters do not rest.
The Struggle of Construction Workers Suffering from Silicosis
Dying of silicosis is a terrible death. In China it is the most common occupational disease, a symbol of reckless exploitation. The silicosis workers have literally built modern China. The official authorities have reported over 200,000 cases. NGOs estimate that up to six million people are affected. In 2016, less than ten percent of all workers with silicosis had an employment contract.
The mining, jewelry and gemstone processing sectors are particularly affected, as is the construction industry (sandblasting, drilling and blasting with totally inadequate occupational safety). In regional terms, Leiyang County of Hunan Province has a particularly high number of silicosis cases. Through neighborhood relationships, many people from there had found work as drill operators on construction sites in Shenzhen in the 1990s. Leiyang provided the largest group of drilling workers. Workers from other parts of Hunan also came and operated drills. They blasted the foundations for the new skyscrapers, some of which were ten, twenty and more meters deep. In the meantime, several hundred workers from Leiyang and elsewhere have fallen ill with silicosis, while many others have long since died.
In the 1990s, between 30-100 RMB per day was paid on construction sites in Shenzhen, and wages for drilling were at the upper end. This was about 10-30 times the income in Leiyang. (For comparison, today apartments in Shenzhen cost between 50,000 – 200,000 RMB per square meter.)
The silicosis workers’ fight for compensation began in 2009, when a foreman from Leiyang was able to win [the equivalent of] about $14,000 [USD] from his old employer in court. As a result, 170 workers from Leiyang teamed up for medical examinations to claim compensation. Over a hundred people were diagnosed with silicosis. However, since only 17 had a formal employment contract and the others, according to the first offer of the Shenzhen government, were to receive only about $4,500 USD, they returned to Shenzhen and began sit-down protests in front of government offices. Finally, the government agreed to pay “humanitarian” compensation (i.e. without an employment contract): $10,800 for first-degree pneumonia, $15,400 for second-degree pneumonia and $20,000 for third-degree illness. Among those with a contract, a worker with a third-degree illness was able to enforce the statutory compensation claim of $46,200.
The workers are well connected and organized through hometown relations and contacts from different construction sites. Since 2009, their protests have received some media attention and have been supported by student and other groups. Thus, the news spread quickly among sick construction workers, and other groups such as the workers from Zhangjiajie [also in Hunan province] started direct actions. Eighty people occupied the entrance of the Treatment Centre for Occupational Diseases in Shenzhen. In the end, they achieved similar results as their fellow workers from Leiyang. Since then, many more workers have fallen ill or their condition has worsened. The workers have organized many more protests and often received small compensation sums after long arguments. The sick workers primarily aim for compensation, since they have long left the construction sites. This is why improvements in occupational safety do not play an important role in these disputes.
Only those who have a contract can legally enforce compensation, which usually takes from two years to four and a half years. In early November 2018, workers from Leiyang were able to enforce compensation, albeit on a transitional basis, even for workers without an employment contract. They thus showed that even workers from informal jobs who have no access to legal means can assert themselves through collective organizing. Turning directly to the government, rather than to the former employer, is likely to be crucial in speeding up compensation. However, the government’s “humanitarian” compensation is often only one third of the legal amount. The government thus splits workers into those with and without contracts, with and without occupational accident insurance.2
The Real Estate Bubble
Another, even relatively large group of protesters are homeowners or homebuyers who feel cheated over the value of their expensive properties. The scams are manifold. But only when the prices collapse do owners really get angry, as during the national holiday week in early October 2018 in Guangxi, where discounts of 30 to 50 percent were suddenly offered on apartments.
Statistically, over 90 percent of Chinese households are homeowners. But the apartment or small house is usually not near the place where they can find work. (Migrant) workers and young people basically all rent places in cheap neighborhoods or dormitories. Housing prices are unbelievably high: often the price of an average family apartment is 20 to 70 times the annual disposable income. But, because there is virtually no legal protection for tenants, those who can finance it somehow still try to buy an apartment. Tenant-landlord relationships are hardly regulated at all. If there are contracts, they are limited to one year and protect only the landlords. School attendance of children is tied to the residence permit called hukou and often to residential property. Only in exceptional cases does a rented flat entitle one to attend the neighborhood public school. Without residential property or hukou no child has access to a good school. It is therefore unattractive in all respects for migrant workers to raise children in rented accommodation. By the time they start preschool or primary school, they almost always have to move back to their hometown to live with their grandparents. In Shenzhen, for example, children are divided into six ranks, depending on whether their parents own residential property in the school district, have a local hukou, etc.
In recent years, rents have also risen and the effects of real estate speculation are passed on to tenants unfiltered. A new phenomenon in the very large cities is “studio flats” (i.e. kitchenet, living room and bedroom in one room) in upscale apartment blocks, especially for young tenants with white collar jobs. Despite the tiny size of barely more than 10 square meters, rents from 1300 RMB are hardly affordable for workers, for whom only the narrow, dark and damp apartments remain in unregulated “urban villages” (slum-like quarters with miserable infrastructure and narrow alleyways into which hardly any daylight falls).
To expand this lower rental market, the city of Shenzhen has commissioned Vanke, one of the country’s largest real estate developers, to gentrify around 200 urban villages. Either a house fire, as in Beijing in November 2017, is used as a pretext for this, or Vanke buys apartments directly via the village community, evicts the tenants within a few days, sprays new paint on the wall and upgrades the furniture and then rents out the apartment for two to three times as much. Foxconn has been reducing its number of dormitory places in Shenzhen for years, and while workers were still able to find small, very rudimentary one-room apartments without air conditioning for 600-700 RMB [a month] in 2017, Vanke is now offering almost the same apartment (now including AC) for almost 2000 RMB.
The unoccupied residential towers are widely known witnesses of a “real estate development” that bypasses the needs of the masses, with vacancy rates estimated at 22 to 24 percent nationwide. In order to prevent the real estate bubble from bursting too soon, all major cities have introduced regulations on housing purchase and lending in recent years, dampening price increases in the upper segment. The hot spots for rising housing prices have then migrated to the smaller cities in the 3rd and 4th tiers. Country Garden, another of China’s biggest real estate developers, had more than a dozen fatal accidents on its construction sites in autumn of 2018 alone, partly due to the insane pace of work.
Analysts predict the collapse of the real estate market in lower-ranking cities by mid-2019, and apparently an attempt is being made to sell off all the land bought as quickly as possible. Prices at land auctions in several large cities have fallen by up to 20 percent in the past year, further exacerbating local government financing bottlenecks. Real estate prices in Hong Kong are also stagnating. This is why new government building programs are being launched to replace older houses with new ones, and 15 million houses are to be built in the next few years. The granting of credit for housing purchases has also been eased again.
The real estate bubble has inflated the Chinese economy, and many homeowners are rich on paper. But the small owners, who have one, two or three apartments, cannot freely dispose of these assets and sell them for money or shares because there are no other relatively secure investment opportunities. As long as prices are high, homeowners remain invested in the sort of stable order that only the CCP can offer. But this dependence goes in both directions. In view of the prices and the vacancy rate, the market can hardly grow, but if it collapses, all the value will suddenly be gone and there will be a lot of resentment. In such a situation the centralization of power on Xi includes a cult of personality. His unique position and the anchoring of his ideology in the constitution could be a tremendous risk for the Party. Because, who else could they blame?
The Situation of Students
Students played an important role as supporters of the Jasic workers. For ambitious and educated young people, a political career is just as blocked as the prospect of economic success is becoming increasingly poor, and the cultural field that serves as an outlet in such cases is strictly censored under Xi. Only as long as they remain apolitical do artist scenes enjoy a certain freedom. But at the same time, the exchange with foreign countries continues to increase. Tourism and, in particular, almost half a million students who go abroad every year, do not ensure cultural isolation. The party therefore focuses on mutual monitoring of students abroad. If a student abroad expresses herself all too unpatriotically, the media will start an online debate about patriotism. Domestically, too, surveillance at universities has increased. Whoever wants to study for a Master’s degree has to attend long compulsory courses on party ideology. From time to time one hears of students who are to be subjected to political tests, or of others who denigrate their lecturers.
Compared to less educated workers, the situation on the labor market is much better for university graduates, but it is also far from easy. Housing is usually unaffordable for them too, and many therefore live in urban villages or, if they are entitled to it, in urban housing, otherwise they commute two to four hours each day. The number of graduates from universities and technical colleges continues to rise. After graduating, many people are employed at first as (paid or often unpaid) interns and after entering the labor market they often change jobs and industries. Even for programmers, a similar personnel policy applies as in the low-wage factories: they start with 4500-5000 RMB [per month] and apply after one or two years for jobs that are only slightly better paid. Only after several years of work in companies or educational institutions do salaries rise as, for example, primary school teachers in Guangzhou can reach 12,000 to 15,000 RMB a month. It remains to be seen to what extent job hopping to increase one’s wage will still be possible in the “economic winter.”
Education and Children
After overpriced kindergartens, which can devour half a doctor’s salary per child, there are usually inexpensive public primary schools, but ambitious parents who want a good place for their little ones to study bring them from the age of two or three years to private learning and private tutoring schools. This market is enormously inflated, valued at around 90 billion USD. One hour of math tutoring in downtown Shenzhen, for example, easily costs 90 USD. For a comparatively cheap 25 USD you can hand in your three- to seven-year-old child for one hour in the Lego school, where engineering students play Lego with them in small groups. If you want, you can also play Lego with a foreigner in English. The school pays the teachers 10 to 25 percent of the hourly fees charged. Such institutions are booming, even though it’s inconceivable why so many people sacrifice so much money and time in urban traffic jams when they could just play Lego with their children at home.
The pressure to learn and perform then increases through to high school, where many pupils only have a day off every two weeks and can count on two hands how many hours per week they have at their free disposal. Near-sightedness among children is increasing explosively, not least because they spend too little time outdoors. The pressure to perform also weighs on many mothers, who are mainly held responsible for their children’s education, care and emotional support.
These competition anxieties among the ambitious intermediate strata are contrasted with poor regions where the average class size exceeds 65 pupils. Leiyang County, where many of the construction workers suffer from silicosis, is such an area. The local economy is heavily dependent on coal mining, and since the decline in coal mining, the local government has lacked income. In order to save costs at public schools, the latest austerity measure requires children to attend private schools starting in the 7th grade. Because of the high school fees, the long distances, the miserable teaching quality and the suspected asbestos contamination of the school buildings, more than a thousand parents protested in front of the Leiyang County Government. More than 50 of them were arrested.
The school education system primarily serves to reproduce social classes and strata. Its very success at safeguarding the educated elites has become the crisis of this educational system, which subjects almost everything to the purpose of justifying the reproduction of social inequality, poor wages and social exclusion through inequality of knowledge, education and culture. No wonder then, that despite the end of the one-child policy and massive social and cultural pressure, birth rates remain low. Public discussions are already testing how the population would react to the introduction of childlessness penalties. However, the economic and social circumstances for the low birth rate remain unchanged.
Traditionally, social discipline in China is essentially organized through family relationships and neighborhood affiliation. But decades of labor migration and urbanization have weakened the role of village communities, and while the power of parents over their children’s decisions is still blatant compared to Western European countries, for example, the dwindling economic outlook for the successful continuation of the family inevitably opens new perspectives for many young people. (An expression of this is also the failure of the authorities to prevent the supporters from participating in the Jasic movement by blackmailing their parents). Young people discuss, for instance, under the headings of “consumption downgrading” and “Sang Culture” (originally from Japan), a rejection of career ambitions and consumerism. The government does not like this. Keywords like “consumption downgrading” are censored and young people are officially encouraged to show more ambition because stagnating consumption is seen as a threat to the social order.
When China joined the World Trade Organization in 2000, its gross domestic product amounted to $1.2 trillion USD. Today it amounts to $13.5 trillion. In terms of purchasing power, the Chinese market is now larger than the EU, but this ignores the quality of the goods it contains and the actual usefulness of (partly empty) buildings and infrastructure. Calculated in US dollars, China accounted for less than 9 percent of global production of goods and services in 2017. And despite the rapid wage increases of recent decades, GDP per capita is only 45 percent of the global average and 15 percent compared with the US. Outside the major metropolises, China is still a “poor” country.
In 2018, car sales fell by 5.8 percent. The utilization rate of car factories was only 70 percent. According to official figures, the gross domestic product grew by only 6.6 percent, “the lowest in 28 years,” although this figure can hardly be compared with that of other countries—not only because bad investments or depreciation are not subtracted, but, as Michael Pettis argues, because Chinese GDP measures input, not output, as elsewhere.
In recent years, the economy has alternated between loosening credit and injecting money in response to economic downturns and regulating the dangers of bloated bad loans. Now the money injections, tax cuts and reductions in equity capital deposits at banks are being run up again. The tax allowance was increased to 5,000 RMB, and income tax was virtually halved for large sections of the urban middle class. From December to the end of January, the National Reform and Development Commission approved new infrastructure projects, particularly in road and rail construction, worth over USD 160 billion. New subsidies for cars, 5G mobile radio and 4K television infrastructure were also announced. Basically, all the measures are reactions to the mistakes and limitations of the previous measures and already indicate the next problems, such as the growing debt burden and the high foreign debt of Chinese companies. The two largest economic policy projects are Made in China 2025 and the Belt and Road Initiative (also called New Silk Road).
Made in China 2025
This is intended to change the old economic policy, for which low-wage mass production and joint ventures with state-owned enterprises are typical examples. The joint ventures in the automobile industry have filled the suitcases of the Chinese partners with cash, but they ultimately failed to build successful Chinese export brands. Xi’s new economic policy now relies on a combination of information technology and low wages as well as on national champions from the private sector, above all Huawei, Tencent, Alibaba and BYD. The program aims to boost research and industry funding in ten areas: agricultural machines (for mechanizing domestic agriculture), shipbuilding, electromobility, IT, robots, power stations, aerospace, materials, railways and biomedicine. The aim is to win significant parts of the world market in many areas and to combat rising wages through automation.
On the one hand, Chinese machinery makers are already successfully increasing their market share from the lower levels into the middle levels in terms of price and improving their quality and reputation; it remains to be seen, therefore, whether German machine and car manufacturers will succeed in escaping to the front with Industry 4.0 or not. Huawei essentially copies Apple’s sweatshop model with the only difference being that the profits remain in China, while Alibaba propagates small-scale manufacturing (sometimes described as “cottage industries”) including child labor with Internet access in its “Taobao villages.” And Tencent, with its monopoly in chat communication and mobile money transactions, presumably operates gigantic industrial espionage in its home country. Alibaba and Tencent also act like gigantic banks. Thanks to mobile payments currently amounting to about one trillion USD a month, the two companies earn a large part of their profits from investment, using the enormous amounts of user data as a competitive advantage. While a few new national champions can thus improve their position in the domestic market, investments in automation and productivity increases are slow overall. Private companies invest significantly less than SOEs.
The promotion of electric cars and batteries is an attempt to raise production in the global automotive industry. By 2020, over 60 percent of global production capacity for batteries will be located in China. Electric cars are exempt from driving bans, and many buses in the largest cities are already electrified. But the subsidy programs for electric carmakers are chaotic and only a handful of the almost 500 electric car manufacturers are likely to survive. The same applies to the more than one hundred robot companies. The recent slump in car sales has hit Chinese and US manufacturers particularly hard, with only sales of electric cars continuing to rise – though at a slowing pace.
Automation is particularly affecting workers in small and medium-sized companies. In Dongguan in the Pearl River Delta, 60 to 85 percent of the workers at various companies were made redundant after the introduction of state-subsidized robots. The Made in China 2025 plan does not provide for retraining or up-skilling of workers. After migrant workers (some of whom had been employed for decades) were made redundant, young university graduates with engineering bachelor degrees were hired to supervise the machines. The dismissed workers from other provinces were simply sent away. The attack on the existing workforce has therefore been carried out as disruptively as possible. The proportion of employees in the manufacturing industry is declining. The service sector is growing, particularly in the platform or gig industries such as food and parcel delivery services. According to official figures, 70 million people were employed in the platform industry last year, when huge sums are still being burned through for marketing, rental bicycles and market conquest.
New Silk Road
The Belt and Road Initiative or New Silk Road was adopted at the Party Congress in 2013. It now comprises over 120 countries and a planned credit line of over one trillion USD. However, this is not much money considering that these ambitious goals would require investments of several trillion USD.3
The focus is on the land route to Europe, Pakistan, the Indian Ocean, East Africa and Southeast Asia. More than 600 freight trains a year from China to Europe with their terminus in Duisburg have long been part of the daily routine of the Silk Road. Originally, the trains were set up by Foxconn to reduce delivery times from two months to two weeks.
In addition to setting up alternative transport routes, particularly as an alternative to the Strait of Malacca, the New Silk Road is also about militarily securing trade routes to Africa (including China’s military base in Djibouti) and creating new export markets—and presumably not least about unloading of overcapacities of Chinese state-owned enterprises, to which more than 80 percent of the contracts go.
Most of the loans are provided by Chinese state banks, the China Development Bank, the Chinese-led Asian Infrastructure and Investment Bank and the Silk Road Fund. Countries in which infrastructure projects such as ports, roads, rail links, power stations, etc. are being built, especially Pakistan, Mongolia, Tajikistan, Laos, Sri Lanka and Cambodia, only receive loans which they have to repay later, rather than the sort of financial support that the Marshal Plan provided to Western Europe. For many countries the debt to China increases considerably as a result. Local elites often accept loans from Beijing on terms that they agree to keep secret, and so China’s influence grows. For years, for example, Turkey supported Uighur independence fighters in Syria, that has now ended. Few Muslim countries are prepared to risk trade relations with China for public criticism of the detention of Muslims in Xinjiang.
Nevertheless, there are also headwinds. Since the Hambantota port in Sri Lanka fell to the Chinese lenders after insolvency last year, countries like Malaysia, Pakistan, Myanmar and Cambodia have also become more cautious about new projects with Chinese loans. The Hambantota port is not the only example of economic misinvestment, bright examples of successes are yet to come.
It is not easy to find out about the working conditions of the approximately 10 million Chinese who work in factories operated by Chinese abroad. Over a million Chinese work in Africa, often very separated from local workers. But despite the fact that Huawei, for example, pays two to three times the wages to its technicians in Africa, many do not want to go there. The already long working days in China with many overtime hours are even longer abroad, up to 14 hours, as a colleague reported about Huawei in Saudi Arabia. In addition, African countries are considered very dangerous. The Chinese government uses everything from blockbuster films to social media to give the impression that the well-being of its citizens abroad is guaranteed by diplomatic and military means. However, no one in China really believes that, but it illustrates the great ambition and aggressive approach.
New Cold Trade War?
The fierce trade dispute between the USA and China threatens to become a trade war. That has a history.
After Nixon had separated the dollar from gold at the beginning of the 1970s and thus ended the post-war currency order, a new constellation stabilized the global currency architecture in the 1990s: US companies relocated parts of their production to China, the USA consumed the goods from China on credit, China bought US promissory notes (government bonds) with the export proceeds. Historian Niall Ferguson and economist Moritz Schularick coined the term “Chimerica” to describe this contradictory and intimate relationship.
Since the global crisis of 2008, trade restrictions have increased and the growth of global trade has slowed significantly. However, the trade balance between China and the USA has not changed much for the time being: Apart from a small slump in 2015 and a larger slump in 2016, US imports and trade volumes have risen in the November to November annual balance since 2008 up to and including 2018. In contrast to the overall development of China’s trade balance, the US trade deficit has continued to rise. After the 2008/9 crisis, China’s export orientation was reduced in favor of the real estate and infrastructure boom and, in particular, the trade balance surplus was reduced from ten percent of GDP in 2007 to two percent today. A few years ago, exports accounted for 36 percent of GDP, now 18.5 percent. Made in China 2025 will finally blow up “Chimerica” if it survives the trade war. One reason for Apple’s declining sales was the competition from Huawei and Oppo. Their models are cheaper and often offer more. (Heike Buchter in der Zeit) From the point of view of the USA, Chimerica has turned against them. The trade deficit continues to increase, American companies are falling behind in the Chinese market, supply chains are working more and more for China.
The Chinese government is still trying to maintain the external framework. In 2017, more US government bonds were bought than at any time since the global crisis (thus offsetting the relatively strong sales of 2016). China currently holds US government bonds worth just under USD 1.2 trillion.
In the meantime, however, the foreign debt of Chinese private companies in particular has officially reached 1.4 trillion USD, unofficially more than 2 trillion. China’s room for manoeuvre is narrowing at every turn. Michael Pettis (quoted above) had vehemently argued against it in mid-June 2018 that China is outstripping the USA; the real problem is that the “beggar thy neighbor” policy of globalisation has come to an end, i.e. the export-oriented strategy of nation-states to keep domestic wages low and export with a trade balance surplus can no longer be driven forward. Chimerica dies from both sides.4
At present, it is not possible to predict how the trade conflicts between the USA and China will develop. On the one hand, both the Chinese and Trump seem willing to make concessions for an imminent end to the punitive tariffs or for a quick success, on the other hand, the intensified attacks from the USA against Huawei could be precisely here. Meanwhile, almost all Five Eye countries have enacted regulations to keep Huawei away from building the next generation of mobile phones, and similar measures are currently being discussed in much of Europe. The arrest of the Huawei manager and daughter of the company founder in Canada, the arrest of a Huawei manager in Poland and the indictment of Huawei in the USA are further escalations, all of which took place during the three-month ceasefire in the trade dispute and are hardly acceptable to the Chinese government. The example of Huawei shows once again that there is much more at stake than the trade balance.
Convergence: “West” and “East” continue to converge
The apparent contradiction between democracy and one-party dictatorship conceals the convergence of both systems of exploitation: growing authoritarian governments, living and exploitation conditions below the level of reproduction (low birth rates), extension of the working hours of miserably pay for the many, the almost limitless increase in the price of housing etc. plus the increase of the service sector, subcontracting, outsourcing, precarisation and isolation which make it difficult for workers to use labor actions to oppose this development. In China, this process is considerably delayed and happens compared to the old centers, but is also visible in the coastal industrial centers.
Even in China, capitalism is no longer in a phase where the capitalists enrich themselves by employing as many people productively as possible and by developing productive forces. The source of profit is shifting away from the manufacturing industry to real estate, pensions and new industries that do not gain their profitable advantage from rationalizing labor, but by automating the management of relatively simple activities. The ruling classes are more and more concerned with defending their looted wealth and status and no longer able to maintain the promise of integration and advancement. The educational systems established for the purpose of reproducing and justifying power and inequality are so bloated that they themselves become a threat and deter people from having children. In “East” and “West”, birth rates are falling, and the regions are becoming more and more similar.
However, the apparent certainty that at some point catching-up industrial countries (e.g. South Korea and Taiwan) will politically liberalize themselves is not certain for China. The rise of China in recent decades has been based on a gigantic over-exploitation of labor and the environment, and the ruling class, as in many other countries, is increasingly neither willing nor able to secure the demographic and climatic conditions necessary for the long-term continuation of its power and to make the necessary concessions. China’s population is aging fast.
Global Working Class
In the face of intensifying international tensions, saber rattling and emerging crises, the only hope is for a global working class that recognizes the main enemy in its own country. Global supply chains mean that, on an abstract level, labor works in cooperation. What does this mean in concrete terms? Through migration and spatial proximity, workers can enter into exchanges, but if distances are so great that only certain people travel and there is hardly any labor migration or only well-trained people can migrate for work, what then? Exchange does not fall from the sky. I believe that only through encounters, mutual support etc. can we learn what global cooperation can mean in concrete terms.
At a meeting and dinner with Chinese and German Amazon workers in China, the most spectacular thing was that there was nothing spectacular at all. We knew both groups quite well and had described the working conditions in the either country to our friends. The conversion quickly began to focus on differences and similarities in each others’ warehouses; the standardized Amazon conversation helped everyone to understand and laugh together. Afterwards, the German worker said that it was basically like meeting workers from other warehouses in Germany, Poland or France, except that in China they were particularly quick to talk about the details of the different working conditions.
When Chinese and German workers talk to each other, it’s no different than when colleagues from two different companies in Germany talk to each other. What makes it difficult is the distance, the language barrier and the income difference between “semi-developing” and industrialized countries. The reaction of some Polish Amazon workers when I told them about their colleagues in China was without any nebulous cultural distance. They just wanted to know exactly what the conditions and wages were so that they could compare them with their own conditions and those elsewhere. Many of them had already worked abroad after all, so China is just another foreign country in their eyes.
Few attempts to build up exchange and solidarity over long distances lead to success stories. But there are no other ways to learn and experience how exchange can take place and how ultimately connections and solidarity between different parts of the world can be formed.
- Chuang editors: “Jasic” refers to “the Jasic struggle,” i.e. the efforts of several employees at the Jasic welding equipment plant in Shenzhen to form a union, their dismissal in July 2018, their protests at the factory gates, their arrest on July 20th, and their subsequent protests at the police station until they and a couple dozen outside supporters were placed under criminal detention on July 27th. In a broader sense, “the Jasic movement” refers to the nationwide campaign calling for their release, involving hundreds if not thousands of leftists, most prominently members of Marxist student groups at several prominent Chinese universities, labor NGOs, networks of elderly Maoists, and at least a few politically minded workers. We will attempt to address this complex movement in a series of blog posts starting next week. Also see part 1 of this series of articles from Wildcat magazine, which focused on Jasic, and see our translation of two early documents from the movement.
- Chuang: Employees of several NGOs and media platforms involved in supporting the silicosis patients’ struggle were disappeared or placed under criminal detention in January, March and May. It is still unclear whether the main reasons they were targeted were these activities supporting silicosis patients, their alleged connections to the Jasic struggle or involvement in certain leftist social networks.
- Jayati Ghosh, “Decoupling is a Myth.”
- “U.S. Should Chill Out About High-Tech China Threat, Pettis Says.”