September 2023 marked a decade since Chinese Communist Party (CCP) president Xi Jinping unveiled plans for what became China’s Belt and Road Initiative (BRI). This, along with other ‘soft power’ initiatives, has been a key feature of the growing geo-political rivalry between China and the US, writes PHILIP STOTT.
Few understood the significance of the announcement in 2013 in a speech by Xi in Kazakhstan in which he declared the ‘Silk Road economic belt’ would be the ‘project of the century’. As the Economist magazine commented in its feature to mark the tenth anniversary: “No one predicted that the project would become a defining feature of his foreign policy and dramatic symbol of China’s rise as a global power”. They went on: “The West was in for a shock”.
Fast forward ten years and the BRI has had a major international impact in vast parts of the world. Up to June 2023, “China had signed more than 200 belt and road cooperation agreements with 152 nations and 32 international institutions across five continents”, according to the National Development and Reform Commission (NDRC), China’s major economic planning agency.
The BRI was, in essence, a route for the CCP dominated Chinese state to export a large amount of capital investment available to it from the profits accrued from the turbo-charged growth of the state capitalist economy. South-East Asia, Africa and Latin America have all seen big Chinese investment. Over the past decade, China has become the largest creditor and a major source of investment in many developing countries. They claim that 420,000 jobs have been created in BRI countries and 40 million people have been lifted out of poverty as a result of BRI-generated growth.
An estimated $1 trillion has been lent, overwhelmingly by China’s state-owned banks, to developing nations – mainly through the BRI – for infrastructure projects. These include ports, roads and railway lines. The BRI has also been a major lever in the geopolitical rise of China as well. The use of this so-called ‘soft power’, with the belt and road being a key element, has seen China increasingly challenge a declining US imperialism for global influence.
Some have attempted to portray the BRI and China’s foreign policy generally, not least the CCP itself, as more benign or even progressive when compared to hard-nosed, exploitative US and Western imperialism. By lending a helping hand to the global south, the argument goes, China is not exploiting but assisting the development of poorer nations. Close examination shows this to be a bogus claim.
Investment and loans from China come at a cost. The infrastructure projects are drawn up to ensure a capital return for China’s state banks. Loan repayments carry major risk. Where defaults take place, these are renegotiated but still with onerous conditions attached for the debtor nations. Between 2016 and 2021 China extended $185 billion in bail-out loans, according to a report by AidData, an American research group. It says that in 2010 less than 5% of Chinese lending abroad supported borrower countries in distress. By 2022 that figure had risen to 60%. AidData claimed interest on a rescue loan from the IMF was typically 2%. The average rate on a Chinese one was 5%.
In 2016 Greece, then under pressure from the EU and the IMF to privatise state assets after the anti-austerity Syriza government capitulated to the Troika, agreed to sell a 51% stake in Piraeus – Greece’s main port – to the Chinese state-owned shipping company, Cosco. Cosco now own almost 70% of the port. In this case China was cashing in on an opportunity afforded it by the crushing of the ‘left’ government in Greece.
Somewhat belatedly the alarm bells have been ringing among China’s rivals, particularly the US. They are increasingly concerned, not just at the CCP’s and China’s economic rise to become the second largest power, approaching 20% of global GDP, but also its growing geopolitical influence as well.
At the same time as acting as a rival to US-dominated institutions like the IMF and the World Bank, China also has a seat at the table and the third largest voting share in these organisations as well, undermining yet further the idea that China is acting as an ally to the masses in the neocolonial world. The recent IMF deals or proposed agreements in Sri Lanka, Pakistan and Zambia all come with onerous conditions, including the imposition of VAT, removal of fuel subsidies, privatisations and other anti-poor policies, and were not publicly opposed by Chinese representatives.
The CCP policy under Xi’s leadership is to position China as the leading pole of power in key regions that make up some of the fastest growing emerging capitalist nations, not least South-East Asia and Latin America. Over the past decade China has become the largest creditor and a crucial source of investment in many developing countries. “For the first time ever, China exported more in the early part of this year to the developing world – as represented by the countries that make up the Belt and Road Initiative – than it exported to the US, EU and Japan combined”, according to data collected by Dongwu Securities, a Chinese company.
US imperialism has recently ratcheted up its economic war with China over advanced semiconductors – the so-called Chip Wars. In response, China is relying on sourcing alternatives from other near neighbours. As the International Institute for Strategic Studies (IISS), based in London, argued: “No region is more strategically important to China than South-East Asia. It wants to use the BRI to create alternative markets for its goods and alternative links in its supply chains”, particularly for China’s high-tech products. South-East Asian countries are critical to those chains.
These conflicts pitting the US and its allies against China can only increase amid a slowing world capitalist economy, with global output expected to be 3% lower than expected pre-pandemic. Martin Wolf, writing in the Financial Times in October, outlined some key threats facing capitalism globally. “One is that China’s property crisis becomes far worse. Another is the possibility of further volatility in commodity prices. Another is that consumption weakens as Covid-era savings become exhausted, especially in the US. Yet another is that inflation proves more resilient than expected… Finally, fiscal policy will prove more tightly constrained in this new world. Not least it means that developing countries are struggling with expensive debt. Further financial shocks seem likely”.
China’s pivot using the BRI to expand its influence in the neocolonial world comes at a time when, according to the IMF, the expected number of years needed for emerging and developing countries to close half the gap in incomes per head with high-income economies has risen sharply, from 80 years to about 130 years. This almost doubling comes in the wake of the 2007-08 crisis and the Covid shockwave, alongside signs of a significant new world economic slowdown.
At the same time, the days of the ‘Chinese miracle’ are coming to an end. The economy is beset by problems of rapidly slowing growth, the impact of the trade war with the US, a drying up of the internal market in China, and a property crisis that threatens to eclipse that of the real-estate giant Evergrande when it went bust. China’s biggest private sector property company is Country Garden, with four times the number of housing projects than Evergrande had, which is heading towards a default. With huge debts, it’s likely to go under unless the CCP decides to intervene. Either way, the slowdown of economic growth in China will add further pressure on the world economy as a whole.
Countering China’s rise is a major preoccupation of the US ruling class. Democratic Party president Joe Biden has argued for billions more in funding for the IMF and World Bank. He has proposed directing $21bn in US funds to deliver financial aid to ‘low-income nations’. Effectively, the thinking is that if China is the only one offering support to the developing nations, China will ‘shape the future’.
“I cannot think of a time when the US Treasury secretary and president have focused this kind of sustained attention on the multilateral development banks [MDBs] and the IMF”, says Karen Mathiasen, ex-executive director for the US at the World Bank. Such efforts, she argued, feel “more acute and existential, because you have an increasingly polarised global environment, making the importance of multilaterals delivering even more essential so they can show that they’re relevant”.
These interventions come in the wake of China’s banks and financial institutions providing bailout packages that totalled $240 billion between 2000 and the end of 2021. That amounts to more than 20% of total IMF lending over the past decade. This all comes with a strategic element to it as well: increasing China’s influence as a counter to the US.
An added concern for the strategists of US capitalism is the prospect of a second Donald Trump presidency and the current gridlock in the US Congress. Trump started the trade wars with China that Biden has continued with, but he also withdrew the US from a number of multilateral organisations and agreements while pursuing an ‘America First’ strategy, which was seen by the majority of the capitalist class to have weakened US influence globally.
Amidst the scramble for power and influence, Xi Jinping and the CCP have also recently launched a number of new concepts. The Global Development Initiative (GDI), the Global Security Initiative and the Global Civilisation Initiative are early in their development, but the GDI is already being seen as a direct appeal to the ‘Global South’ to adopt China and not the US as their partner.
The GDI is supposed to promote “development, alleviate poverty and improve health in the developing world”. In reality it will do none of this. Only the struggle for socialism can achieve that. As we have pointed out in previous issues of Socialism Today, the wealth gap in China has grown to astonishing levels. Just 0.03% of the richest people in society own an incredible 67.4% of the national private wealth. For the working class and the poorest 94% of the population, they own only 7% of the wealth.
China’s economic rise has been based on the brutal exploitation of the working class. Mass industrialisation based on long hours, low wages and extortionate living costs have allowed for the massive accumulation of capital by the Chinese bourgeois and the state itself. It is this capital that Xi and the CCP have exported as part of the BRI, and which comes from the surplus value created by the proletariat in China.
Through the Belt and Road, supply chains and ownership of companies domestically and internationally, Chinese state capitalism has been able, in turn, to broaden its exploitation to other parts of the globe. The Chinese regime is not acting to alleviate poverty and inequality in the neocolonial world. On the contrary, it is adding a new dimension to that exploitation, including through onerous financial loans to under-developed nations.
It will be the task of the Chinese working class, alongside the working class globally, to carry out a revolutionary socialist transformation of society. One that takes the economic levers of power out of the hands of the capitalist class and the state directors in China and puts them into the hands of the majority of society, through nationalisation and democratic working-class control and management of the economy. A world socialist plan of production would be based on cooperation and the utilisation of the economic resources of society to eradicate poverty, hunger, oppression and environmental degradation.
Divided world order
Today, under capitalism, we have the exact opposite. Destructive competition, trade wars, military conflict, national oppression, and colossal wealth inequality are in the DNA of the capitalist world disorder. A central factor for this is that commodity production for profit, while it has created a global economy in its own image, is still organised on the basis of the nation state. With each ruling class pursuing its own national interests, which includes seeking to weaken and undermine its rivals, a harmonious development of society is impossible.
While the US emerged as the unipolar entity in the world following the collapse of Stalinism and the bureaucratic planned economies of the former Soviet Union and Eastern Europe in 1990-91, it is clearly not in the same position today. The weakening of US imperialism and the rise of China is creating a bipolarity, with both vying for domination over each other.
This explains the frantic emergence of new trading blocs and agreements recently – with the US and China seeking out partners to advance their economic and geopolitical interests. And not only the two major world powers, but also other major regional powers as well. The announcement of the expansion this year of the five nation BRICS alliance to include Saudi Arabia, UAE, Argentina, Egypt, Ethiopia and Iran is one example of China further flexing its economic and geopolitical muscles.
The Regional Comprehensive Economic Partnership (RCEP) is a free trade agreement signed in 2020, which is the largest economic bloc in the world. Made up of nations with $25 trillion in annual GDP – around 30% of global GDP – it includes China, Australia, Japan, Malaysia, New Zealand and Singapore. The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) rose from the ashes of the Trans-Pacific Partnership (TPP) after Trump withdrew the US from talks to join the TPP in 2017. The CPTPP includes the UK, Japan, Malaysia, Vietnam, Australia, Singapore, Brunei Darussalam, New Zealand, Canada, Mexico, Peru and Chile.
In addition, Biden, on a recent tour to Asia in 2022, introduced the idea of the Indo-Pacific Economic Framework to try to counter China and bolster US interests in the area. It’s another question as to whether this fully ever gets off the ground. Not least because of the deep political polarisation in the US and an approaching presidential election in 2024.
There are many other examples of economic ties being made and broken as the global economic architecture has shifted dramatically over the recent period. This is only a reflection of the increasing instability and volatility facing world capitalism.
What is clear is that in addition to a multi-polar world we are also living in an era of multi-alignments and realignments. Significant regional powers, including Japan, India and Saudi Arabia, and others, are prepared to do deals with both the US and China in order to maximise their own national interests. Or in the words of the UAE regime: “We want to build bridges with everyone”.
This underlines a point Marxists have made that in the age of global capitalism ultimately trade and production is organised from competing nation states who are seeking profit and who are willing to ‘build bridges’ with whoever can offer a return in investment and opportunities to do deals. Even within the US there is significant pushback by US multi-nationals warning that their business will be harmed by the ban on trading with China.
The US government demand that business ‘de-risks’ from China has brought dislocation and cost challenges for US-based multinationals. Supply chains have had to be moved from China to India, Vietnam and Thailand. Dell is moving one-fifth of its laptop production to Vietnam. Apple is shifting 18% of iPhone production to India. US foreign direct investment in China fell from a peak of $20.9bn in 2008 to $8.2bn in 2022. In response, the call to stop buying US goods by Chinese consumers has been widely taken up, leading to a significant drop in sales. Yet such is the integration of China into the world economy, there is no real prospect of a full de-coupling. One example being that despite the ban on advanced chips to China, the new Huawei phone has these technologies anyway.
China is also planning to increase its influence in the United Nations – where it is already one of the five core members of the UN security council – the World Trade Organization and the G20. It also is seeking to play a diplomatic role in the Middle East.
In summary, as the FT described it: “The key to China’s blueprint is to steadily institutionalise its leadership over the developing world by creating, expanding and funding a raft of China-led groupings of countries, according to Chinese officials and commentators. They add that the aims of this strategy are largely two-fold: to ensure that a broad swath of the world remains open to Chinese trade and investment and to use the voting power of developing countries at the UN and in other forums to project Chinese power and values”.
The declaration that the Chinese currency – the yuan or renminbi – would be a global currency has taken on some legs. International trade deals with China are increasingly taking place using the yuan, rather than the dollar. China already is a huge international lender and a number of countries including Argentina now prefer to pay for imports in yuan rather than run down their dwindling supply of US dollars.
The increasing tensions between China and the US will inevitably lead to further clashes, including trade wars and even potential military clashes over flashpoints like Taiwan. Ultimately, China’s economy rests on capitalist property relations, but with a state in the form of the CCP that maintains an enormous amount of strategic control over the economy, even restraining the independence of the capitalist class where necessary.
However, China’s deepening involvement in the world economy and capitalist institutions like the IMF, World Bank and the UN, and the use of the Belt and Road, are deepening the suffering of the world’s working class and the poor, including in China. In this way, the Chinese state is playing an imperialist role globally and is an oppressive force domestically, despite the Maoist and communist rhetoric often employed by the Xi regime.
China’s increasing challenge to US dominance has meant that while the two powers are still co-dependent the axis has been decisively weakened. China now poses a threat in advanced production sectors in a way it was not when it was predominantly an assembly plant for the world economy. Its unique form of state capitalism has allowed it the resources to invest in economic development that has no example internationally in other capitalist states. But even this has begun to reach limits, unable as it is to overcome the contradictions of global capitalism.
The economic rise of China and South East Asia generally has enormously strengthened the global proletariat. It is this proletariat, alongside its brothers and sisters internationally, once they embrace the ideas of genuine Marxism and become conscious of their own power, that will be at the forefront of the coming world revolution.