China in the post-pandemic 2020s

China’s National Peoples Congress (NPC) opened today, having been delayed by the coronavirus pandemic.  The NPC is China’s version of a parliament and used by the Communist party leaders to report on the state of the economy and outline their plans for the future, both domestically and globally.

Prime Minister Li Keqiang announced that for the first time in decades that there would be no growth target for the year.  So the Chinese leaders have abandoned their much heralded aim to have doubled the country’s GDP under the current plan by this year. That was bowing to the inevitable.

The pandemic and lockdown had driven the Chinese economy into a severe contraction for several months, from which it is only just recovering. The economy contracted by 6.8 per cent in the first quarter and most forecasts for the whole year are for less than half of the 6.1 per cent growth rate posted last year.  But even that figure would be way better than all the G7 economies in 2020.

Industrial production and investment is now picking up, but consumer spending remains depressed.

But Li said that main reason that there was no growth target was because of uncertainty about “the Covid-19 pandemic and the world economic and trade environment.” In other words, even if the domestic economy is recovering, the rest of the world is still depressed.  With world trade contracting, there are slim prospects for the exports of the manufactures that China has mainly depended for its expansion.

China is ahead of other major economies in coming out of the pandemic.  But even Li had to admit that a lot of mistakes were made in handling the pandemic and there was “still room for improvement in the work of government,” including delays in alerting the public allowed the virus to spread. “Pointless formalities and bureaucratism remain an acute issue. A small number of officials shirk their duties or are incapable of fulfilling them. Corruption is still a common problem in some fields,” Li admitted. Nevertheless, compared to the performance of governments in the West, China had done much better in keeping cases and deaths down.

In the short term, Li said the government intends to give a boost to the economy with some fiscal stimulus and monetary easing, similar to that in the G7 economies.  China is targeting a 2020 budget deficit of at least 3.6% of GDP, above last year’s 2.8%, and increased funding for local-government borrowing by two-thirds.  And for the first time, the central government will issue bonds to be used to help local government spending and firms in difficulty.  Unemployment is officially recorded at 5.5% but it is probably more like 15-20%, so the government aims to create more jobs and reduce poverty in rural areas to curb the flood of rural migrants to the cities.

That brings us to discuss the long-term future of the Chinese economy in the post-pandemic world and in the context of the intensifying trade and technology war with the US and other imperialist powers.

In my view there are three ways of looking at the economic development of China (this is something that I have written on in detail in a recent paper for the Austrian Journal of Development Studies). The mainstream economics view is that China should become a full ‘market’ economy like those of the G7.  Relying on cheap labour to sell manufacturing goods to the West is over.  Rising labour costs show that China’s state-driven and led economic model cannot succeed in developing modern technology or delivering consumer goods to the people.  This was the policy advice of the World Bank and other international agencies of global capital in the past and it gained some traction among a section of the elite, especially those closely connected to China’s private billionaires.  But so far, this option has been rejected by the majority in the current leadership.

The second view is what might be called Keynesian.  It recognises the success of the Chinese economy in the last 30 years in taking nearly 900m people out of the official poverty level set by the World Bank.  Indeed, the World Bank has just adjusted its figures for the decline in those who are now under its poverty level.  The decline seems impressive, until you realise that 75% of those brought out of poverty globally in the last three decades are Chinese.

This Keynesian view argues that China’s success has been based on massive investment in industry and infrastructure which has enabled the country to become the world’s manufacturing powerhouse.  But now that emphasis on industrial investment must be changed because household consumption is weak and in a modern economy it is consumption that matters.  Unless there is a swing to consumption, the Chinese economy will slow and the huge level of corporate and household debt will increase the risk of financial crises.

Actually, personal consumption in China has been increasing much faster than fixed investment in recent years, even if it is starting at a lower base.   Consumption rose 9% last year, much faster than GDP. And consumption growth would be even faster if the government took steps to reduce the high level of inequality of income.

The idea that China is heading for a crash because of under consumption and over investment is not convincing. It’s true that according to the Institute of International Finance (IFF), China’s total debt hit 317 per cent of gross domestic product (GDP) in the first quarter of 2020.  But most of the domestic debt is owed by one state entity to another; from local government to state banks, from state banks to central government.  When that is all netted off, the debt owed by households (54% of GDP) and private corporations is not so high, while central government debt is low by global standards.  Moreover, external dollar debt to GDP is very low (15%) and indeed the rest of the world owes China way more, 6% of global debt.  China is a huge creditor to the world and has massive dollar and euro reserves, 50% larger than its dollar debt.

It’s true that some of the fixed investment expansion may have been wasted.  Indeed, the Keynesian development model of China based on just rising investment and private consumption demand is increasingly flawed.  As President Xi Jinping said, “Houses are built to be inhabited, not for speculation.” But the government allowed capitalist speculation in property so that 15% of all apartments currently are owned as investments, often not even connected to electricity supply.  This property speculation was fuelled by credit funded by the state banks but also by ‘shadow banking’ entities.  This sort of speculation wasted resources and did not direct investment into areas like reducing CO2 emissions to meet the government’s declared aim to make China a ‘clean economy’.  With China’s population peaking in this decade and the working age population falling 20% by 2050, the aim of investment must be towards job creation, automation and productivity growth.

That brings me to the third development model, the Marxist one.  The key to prosperity is not market forces (neoclassical mainstream) or investment and consumption demand (Keynesian) but in raising the productivity of labour in a planned and harmonious way (Marxist).

In a capitalist economy, companies compete with each other to raise profitability through the introduction of new technologies.  But there is an inherent contradiction under capitalist production between a falling profitability of capital and a rising productivity of labour.  As capitalists try to raise the productivity of labour by shedding labour with technology and so lowering labour costs and increasing profits and market share, the overall profitability of investment and production begins to fall. Then, in a series of crises, investment collapses and productivity stagnates.

This is clearly an issue for China in its more mature stage of accumulation in the 21st century – if you accept that China is just another capitalist economy like the imperialist powers or the emerging ones like Brazil or India.  The argument goes, that China may be different from the ‘liberal capitalism’ of the West and instead is an autocratic ‘political capitalism’, as Branco Milanovic describes China in his book, Capitalism Alone, but it is still capitalism.

If you accept that view, then we can gauge the health and future of China’s economy by measuring the profitability of its burgeoning capitalist sector. In a new paper (Catching Up China India Japan (1)), Brazilian Marxist economists, Adalmir Marquetti, Luiz Eduardo Ourique and Henrique Morrone compared China’s development to that of India in catching up with the G7 economies. They show that the high capital accumulation rate in China has led to a fall in profitability even lower than in the US, so that further expansion is at risk.  In another paper, they argue that there is now an overaccumulation crisis brewing and further heavy investment would not work, especially given rising greenhouse emissions it would create. 71548-211901-1-PB (1)

Like Marquetti et al, I have measured the profitability of the capitalist sector in China (from Penn World Tables 9.1 internal rate of return on capital series) and I find a similar fall. The huge expansion of investment and technology, particularly once global markets were opened up to Chinese industry after 2000 when joining the World Trade Organisation, led to double-digit growth rates up to the Great Recession of 2008. But the increased organic composition of capital drove profitability down prior to global pandemic crisis, and eventually growth slowed.

Does this mean that China is heading for major slump along classic capitalist lines some time in this decade?  Marquetti et al seem to suggest that: “The larger profit rate explained the robust mechanization in the early stages of the process. Fast capital accumulation diminishes capital productivity and the profit rate. Then, the success in catching up must hinge on raising the saving and investment rates. It may further reduce capital productivity and the profit rate, putting the process at risk, which seems to be the case in China and India.” And they quote Minqi Li that ‘‘if China were to follow essentially the same economic laws as in other capitalist countries (such as the United States and Japan), a decline in the profit rate would be followed by a deceleration of capital accumulation, culminating in a major economic crisis.’’

But the question for me is whether the capitalist sector in China’s economy is dominant. Does China follow the same law of value as other capitalist economies?  China seems to be more than just an autocratic, undemocratic, ‘political’ version of capitalism compared to the ‘liberal democratic’ version of the West (as argued by Milanovic).  Its economy is not dominated by the market, by investment decisions based on profitability; or by capitalist companies and bosses; or by foreign investors. Its economy is still dominated by state control, state investment, state banks and by Communist apparatchiks who control the big companies and plan the economy (often inefficiently as there is no accountability to China’s working people).

I remind readers of the study I made a few years ago of the extent of state assets and investment in China compared to any other country. It showed that China has a stock of public sector assets worth 150% of annual GDP; only Japan has anything like that amount at 130%.  Every other major capitalist economy has less than 50% of GDP in public assets.  Every year, China’s public investment to GDP is around 16% compared to 3-4% in the US and the UK.  And here is the killer figure.  There are nearly three times as much stock of public productive assets to private capitalist sector assets in China.  In the US and the UK, public assets are less than 50% of private assets.  Even in ‘mixed economy’ India or Japan, the ratio of public to private assets is no more than 75%.  This shows that in China public ownership in the means of production is dominant – unlike any other major economy.

And now the IMF has published new data that confirm that analysis.  China has public capital stock near 160% of GDP, way more than anywhere else.  But note that this public sector stock has been falling faster than even the neo-liberal Western economies.  The capitalist mode of production may not be dominant in China, but it is growing fast.

Which way will China go?  In the post-pandemic decade will it move towards an outright capitalist economy that is just like the rest of world?  In other words, adopting the neoliberal mainstream model.  So far, in the light of the disastrous failure of ‘liberal democratic’ market economies in handling the pandemic, with death rates 100 times higher than in China and now deep in a slump not seen since the 1930s, that market model does not seem attractive to the Communist dictatorship or the Chinese people.  Instead Xi and Li seem to want to continue and expand the existing model of development: a state-directed and controlled economy that curbs the capitalist sector and resists imperialist intervention.

Indeed, China looks to expand its technological prowess and its influence globally through the Belt and Road investment initiative and its huge lending programmes to the likes of African and other states.  And it will be able to do so because its economic model does not rest on the falling profitability of its admittedly sizeable capitalist sector.  An IIF report found that China is now the world’s largest creditor to low income countries.

That is why the post-pandemic strategy of imperialism towards China is taking a sharp turn.  And this is the big geopolitical issue of the next decade.  The imperialist approach has changed.  When Deng came to take over the Communist leadership in 1978 and started to open up the economy to capitalist development and foreign investment, the policy of imperialism was one of ‘engagement’.  After Nixon’s visit and Deng’s policy change, the hope was that China could be brought into the imperialist nexus and foreign capital would take over, as it has in Brazil, India and other ‘emerging markets’.  With ‘globalisation’ and the entry of China to the World Trade Organisation, engagement was intensified with the World Bank calling for privatisation of state industry and the introduction of market prices etc.

But the global financial crash and the Great Recession changed all that.  Under its state controlled model, China survived and expanded while Western capitalism collapsed. China was fast becoming not just a cheap labour manufacturing and export economy, but a high technology, urbanised society with ambitions to extend its political and economic influence, even beyond East Asia.  That was too much for the increasingly weak imperialist economies.  The US and other G7 nations have lost ground to China in manufacturing, and their reliance on Chinese inputs for their own manufacturing has risen, while China’s reliance on G7 inputs has fallen.

Source: Manufacturing shares from World Development Indicator online database. Reliance computations by authors, based on OECD ICIO Tables (https://www.oecd.org/sti/ind/inter-country-input-output-tables.htm).

So the strategy has changed: if China was not going to play ball with imperialism and acquiesce, then the policy would become one of ‘containment’.  The sadly recently deceased Jude Woodward wrote an excellent book describing this strategy of containment that began even before Trump launched his trade tariff war with China on taking the US presidency in 2016.  Trump’s policy, at first regarded as reckless by other governments, is now being adopted across the board, after the failure of the imperialist countries to protect lives during the pandemic. The blame game for the coronavirus crisis is to be laid at China’s door.

The aim is to weaken China’s economy and destroy its influence and perhaps achieve ‘regime change’.  Blocking trade with tariffs; blocking technology access for China and their exports; applying sanctions on Chinese companies; and turning debtors against China; this may all be costly to imperialist economies.  But the cost may be worth it, if China can be broken and US hegemony secured.

China is not a socialist society.  Its autocratic one-party Communist government is often inefficient and it imposed draconian measures on its people during the pandemic.  The Maoist regime suppressed dissidents ruthlessly and the cultural revolution was a shocking travesty.  The current government also suppresses minorities like the grotesque herding of the muslim Uighurs in Xinjiang Province into ‘reeducation camps’.  And nobody can speak out against the regime without repercussions.  And now the leadership has announced the introduction of military rule in Hong Kong, ending parliament and suppressing the protests there.  And it still looks to ensure that Taiwan, the home of the former warlord nationalists who fled to Formosa and occupied it at the end of the civil war in 1949, is eventually incorporated into the mainland.

China’s leadership is not accountable to its working people; there are no organs of worker democracy.  And China’s leaders are obsessed with building military might – the NPC heard that the military budget would rise by 6.6 per cent for 2020 and China now spends 2% of GDP on arms. But that is still way less than the US. The US military budget in 2019 was $732bn, representing 38 per cent of global defence spending, compared with China’s $261bn.

But remember, all China’s so-called  ‘aggressive behaviour’ and crimes against human rights are easily matched by the crimes of imperialism in the last century alone: the occupation and massacre of millions of Chinese by Japanese imperialism in 1937; the continual gruesome wars post-1945 conducted by imperialism against the Vietnamese people, Latin America and proxy wars in Africa and Syria, as well as the more recent invasion of Iraq and Afghanistan and the appalling nightmare in Yemen by the disgusting US-backed regime in Saudi Arabia etc.  And don’t forget the horrific poverty and inequality that weighs for billions under the imperialist mode of production.

The NPC reveals that China is at a crossroads in its development. Its capitalist sector has deepening problems with profitability and debt.  But the current leadership has pledged to continue with its state-directed economic model and autocratic political control.  And it seems determined to resist the new policy of ‘containment’ emanating from the ‘liberal democracies’. The trade, technology and political ‘cold war’ is set to heat up over the rest of this decade, while the planet heats up too.

41 Responses to “China in the post-pandemic 2020s”

  1. Peter K Says:

    Michael I like your work, you have great insights, more so than other econmists, but I cant see how you can rationalize the following: “As capitalists try to raise the productivity of labour by shedding labour with technology and so lowering labour costs and increasing profits and market share, the overall profitability of investment and production begins to fall. ”

    just because inefficient labour is shed, doesnt lead to disaster. Infact adoption of new technology is “paying” some new inventor/creater. Shedding inefficient labour is an improvement in production efficiency, the reward is a larger profit… this is a good thing. At the end of the day economics is about providing people with a better living standard, and NOT inefficient low value jobs. If i a person invents /creates he is rewarded,, he has money a store of wealth, then he doesnt have to work. Keeping him at the table of a mundane job for the sake of having a job is not what economics is about.

    Wrt China, i think it is a savvy communist country that has enough natural wealth to prolong it beyond the USSR’s 70 year lifespan, because they learned to save/invest and be semi capitalist. The USSR survived as it was already wealthy, and it took 70 years to destroy that wealth, but the chinese opened up to capitalism earlier, so they are leveraging that wealth.

  2. Manu Quiroga Says:

    Very interesting article.
    Do you think that state capitalism could be a suitable category to define such a combined economic regime?

  3. Ludovico Lamar Says:

    I’ve discovered the thesis of Michael Roberts on economic crisis that precede the coronavirus only now, reading the post “Profitability, investment and the pandemic”. I’m very happy! I’ve published a work in Italy on coronavirus and economic crisis with the same thesis (at the end of 2019 the world economy is at collapse). The title is “In morte della capacità critica” (www.sinistrainrete.info, 7 april 2020). I’ll read the other articles of Roberts… (excuse me for bad English)

  4. Sean Gacich Says:

    I am continually struggling with the importance of ‘growth’ measurements in the world’s economies, whether capitalist or state-planned. Often growth is touted as a desired end-in-itself, but I wonder how the planet can sustain a focus on ‘growth’, and at what rate. If the population of a region/country/the planet increases by 1%, then naturally an economy can be expected to increase by the same rate, caeterus paribus. But a growing economy by more than that will lead to a non-sustainable model (even the 1% growth rate will eventually lead to it). In short, growth rates cannot continually rise (since this is now an exponential formula), nor should they be a desired metric of the health of an economy.
    ‘Growth’ may be an important marker for the world’s capitalists, but I think its use as a valuable metric should be tempered, if only because a) it is an inadequate and distorted measure of human ‘economic’ activity; [As you know, there are myriad aspects of a balanced, sane human existence that measurements of GDP completely ignore, with its exclusive regard for paid work and direct economic measurability.] b) it is not a desirable object of pursuit in the long term for reasons of sustainability; and c) questioning this central aspect of the capitalist paradigm will get at a basic assumption about the ‘efficiency’ of capitalism itself.

    Hence I suggest that discussions of ‘growth’ should be laced with strong reservations and criticisms of its desirability under capitalism, or perhaps avoided altogether except to criticize it. Do you see any value in it?

    Finally, you write, “As capitalists try to raise the productivity of labour by shedding labour with technology and so lowering labour costs and increasing profits and market share, the overall profitability of investment and production begins to fall.”
    I don’t see why that necessarily follows: why does an investment in machinery and technology, at the expense of labour, cause a decrease in profitability? Are you saying that ALL types of investments will result in a declining rate of profitability under capitalism, or that it is the switch to capital investment which causes this decline in profitability? Would an increased investment in labour, instead, cause profitability to increase/stagnate? And in the case of a planned economy like China’s (your topic for this post), does it ALSO have this same challenge?
    This ties back to my first question about rates of growth: is the world necessarily dependent for its existence on growth? And if not, what are the limits in your view?

    [Sorry if these questions are too time-consuming and complex to answer here. If so, then perhaps a post on these specific concerns is more in order?]

    • michael roberts Says:

      Sean I agree GDP is not a measure of human well-being. or of the state of the planet and the environment. But capitalists are not interested in that. For them GDP is a useful measure of production of commodities and that is what they need to know. And thus so do we.
      The Law of the tendency of the rate of profit to fall is the most important law in the political economy of capitalism, according to Marx, because it reveals the contradiction in capitalist accumulation between getting more profit through substituting more machinery for labour and the productivity of labour. The law is clear. Not all investment leads to a fall in profitability, only labour shedding ones (and this is most). Capitalists can extract more profit by employing more workers from the industrial reserve army of labour and/or by making them work harder and longer. But as Marx explains, there is a limit to that in the hours in a day and the size of the potential labour force. So in trying gain market share and undercut rivals, capitalists look to introduce machinery to lower labour costs. In so doing, over time (decades), they spite their own face, by lowering average profitability. In this post, I argue that China’s planned economy can avoid (to some extent) the application of this law.

      • ralphiesmom Says:

        Thanks for this comment re falling rate of profit. I couldn’t absorb the whole article, but this definitely makes sense to me. Not a scholar.

      • Antonio Says:

        ‘’ In this post, I argue that China’s planned economy can avoid (to some extent) the application of this law ’’.
        Minki Li is not so optimistic. In his essay ” Profit, Accumulation, and Crisis: Long-Term Movement of the Profit Rate in China, Japan, and the United States ” he expressly says in his abstract ” This article finds that China’s profit rate is approaching a level that historically was associated with major crises in the United States and Japan. The decline of the profit rate is likely to continue in the coming years ’’
        For my part, I join the many who doubt the global and historical LTPF. True, the real and only question is whether or not there is empirical evidence to back it up. And, true, the data provided is quite forceful in favor of the law, but I still need to see evidence of this LTPT in empirical research ONLY on monopoly companies (with market power over 60%). I do not rule out that it exists in view of the fact that so many excellent Marxist intellectuals support it. Meanwhile, I am not optimistic about China’s future economic capacity, not because this country manages to avoid the LTPF, but because China has been dismantling and privatizing its state economy for decades (as you yourself publish), as all the real socialisms since the eighties, and as predicted by the thesis of the class struggle cycle. In other words, this is the economic-political phenomenon that the bureaucratic dictatorship of the Chinese Communist Party is sure it cannot avoid. In a few years there will be no doubt what kind of country is China: Capitalist. And Capitalism is in its final collapse, with or without LTPF.
        Regards,
         

      • Jack Says:

        Great article thanks! I am curious about your last sentence. Harman in ‘Zombie Capitalism’ argues that a state capitalist/nationalised industry that functions under the logic of accumulation cannot escape the tendency for rate of profit to fall. As you said, a contraction of world trade will lead leave a growth of output that cannot be absorbed by domestic consumption (I assume). It seems there will be significant restructuring of industry (assumption) but increasing the rate of exploitation has its limits.
        What do you think China will do to mitigate this? Will there be an increase in speculation finance say in the real estate market (a guess)? and to what extent do you think the increased military expenditure will attempt to mitigate this crisis?
        Thanks again for your work!

  5. ucanbpolitical Says:

    A well researched article with omissions. You should balance the ratio of public to private assets with the ratio of value added by the public sector to the private sector. While the former shows a preponderance of public assets the latter shows that the private sector produces more value added, which is the source of surplus value, than does the public sector. Yes you are correct to point to the fall in the complex rate of return in China. I use that term because China’s total assets include not only fixed assets but cross holdings as well. There is no separate data for fixed capital on which to base a regular and comparative rate of return. Stripping out as much of the financial assets (crossholdings) as one can and adding in inventory, the “rate of profit” in China currently appears to be in the 7 – 8% range for industrial companies or about 50% higher than in the USA for non-financial corporations. However, as in the USA the rate of profit is falling as is turnover since 2013, and this vital trend we agree on.

    What I would contest is the section where you cover the third developmental model I.e. the Marxist one where you suggest that China’s economy is not a normal capitalist economy driven primarily by considerations of market movements and profit. China’s economic model has always been misunderstood. The CCP always made clear that the state would finance upstream investments in order to nurture downstream private investments. China is a capitalist economy where the private sector remains dependent on the state sector because China on a world scale, has not moved from being a contract manufacturer to developing multi-national corporations that can stand on their own two technological two feet. Even Huawei, there rising star, is critically dependant on outside technology.

    I would also add in, that the importance of the rate of return can never be dismissed. A positive rate of return adds value while a negative rate of return destroys value. I have never seen any CCP document that has advocated ignoring this metric when evaluating the success of an investment.

    A hegemonic struggle is ensuing where the USA is seeking to contain China technologically and militarily. Let us not forget that the USA cut Japan off from its oil and iron ore before Pearl Harbour, just as today the US seeks to cut off China’s supply of chips and software.

    • mandm Says:

      “A hegemonic struggle is ensuing where the USA is seeking to contain China technological and militarily. Let us not forget that the USA cat Japan off from its oil and iron ore before Pearl Habor, just before as today the US seeks to cut off China’s supply of chips and software.”

      You seem to suggest that China is an imperialist power–though you also suggest it’s economy is comprador–like Japan, which, well before Pearl Harbor, had invaded and was occupying Manchuria.

      China has no foreign bases, and its military is clearly defensive in its posture, defending China against repeated military (S. China Sea) and paramilitary (militant moslem proxy) US provocations.

      China seems to present only two threats to the actual imperial hegemon: commercial and/or socialist. Neither one is satisfactory to permissible.

      The situation today seems eerily similar to the one before and immediately after ww2 (including denunciations similar to some of the other comments on this post) of Soviet betrayal of “real” socialism and of its imperial pretensions). The Nazis murdered 30 million soviets, effectively destroying the possibility of socialism in the Soviet Union.

      • mandm Says:

        correction: the last sentence in the 4th paragraph should read “Neither one is satisfactory to the actual imperial hegemony.”

  6. vk Says:

    My opinion is that the official definition – “Market Socialism with Chinese Characteristics” – is historically accurate.

    “Market Socialism”, according to the official definition, is the most primitive stage of socialism. It is “the transition of the transition”. I can’t argue against that, so I tend to agree with it for the simple reason there’s no reason not to agree with it from a scientific point of view. Socialism, after all, is simply the transition period between Capitalism and Communism; it is expected that elements of both systems are present at the same time.

    “Chinese Characteristics”, according to the official definition, is the centralized nature of Chinese bureaucracy. Let’s remember that, before the republican revolution, the Chinese dynasties operated in the same way. China was always a very centralized society: it collapsed many times, but always managed to get back together (contrary to Europe, which was never reunified again after the collapse of the Roman Empire).

    Historians don’t know for sure why that is the case, but it is speculated geography is decisive: there’s a natural corridor, with a center at the Yellow River Delta, that expands southwards and is contained in the west by a huge desert area (Gobi and Taklamakan). The Delta is highly fertile, and, with some water distribution technology, it is possible to expand to some adjacent areas where agriculture wasn’t viable before. It is speculated, then, that the peoples of the Yellow River Delta were quickly able to impose their rule by managing water distribution. Since water is essential and cannot be created, the center of gravity always came back to the Yellow River Delta society – no matter how many times the Chinese Empire was shattered. This system – where tribes multiply in number without significant developments in the productive forces – is what some call “Asiatic mode of production”, but it is doubtful such a system ever existed.

    The information the author got about the CCP being completely detached from the Chinese people is not precise. There are freely held elections at local levels, and anybody, theoretically, can become the most powerful person in China. Xi Jinping himself came from a very poor peasant background, and his father was a victim of the Cultural Revolution. That was also the case of the USSR: Gorbachev himself was a victim of the so-called Holodomor, and it didn’t stop him from becoming its General-Secretary. This is not indicative of political persecution.

    Yes, power is at the hands of the CCP. However, anyone can be a member of the CCP in China (the same was true in the USSR) and thus dispute elections with realistic chances of winning.

    The CCP is the absolute institution of modern China for one very simple reason: they won the war(s). In fact, it would be surprising if it wasn’t governing China. It would be weird – as weird as if the Continental Army gave shared governance of the newly-founded USA to the British Parliament after their victory in 1776. War is the annihilation of societal norms, where the victor gets everything or most of it. The CCP won the wars it had to fight in order to control China, so it gets to control China. This is not a communist or autocratic innovation: it’s simply a fact of life.

    During the Civil War, the CCP was on the side of the minorities. The Nationalist Party was Han supremacist, and wanted to exterminated them. The CCP promised to give the minorities autonomous status if they fought on their side – this promise was kept, and those autonomous regions do exist, alongside the official definition of the Popular Republic of China as a multi-ethnic nation.

    I’m not aware the CCP doesn’t enjoy majoritarian popular support. I don’t see any significant disconnection between the CCP and its people. There’s also no reason to judge the CCP is sabotaging its own people: it lifted 800 million from poverty, after all. I think this impression comes to the West by the fact most news from China comes from Hong Kong and other clearly USA-backed NGOs.

    The Uighur question can be easily explained by the fact there’s direct CIA intervention in the region, to foment a terrorist group under a Muslim flag. A lot of trained Uighurs – after failing to make an independent Xinjiang – were sent to fight alongside the “moderate rebels” in Syria, which confirms American intervention on the region.

    • ralphiesmom Says:

      Thanks for these remarks. I’ve read the comment about the fact of local elections being something of an antidote to the party’s admitted power.

    • Antonio Says:

      ‘’ Yes, power is at the hands of the CCP. However, anyone can be a member of the CCP in China (the same was true in the USSR) and thus dispute elections with realistic chances of winning. ’’
      Yes, this seems reasonable and democratic, but … But the only positive thing about the elections to the Communist Party in China is that today the Chinese working class (and any other country) cannot achieve more than that socialism. It is the real socialism possible in 2020 because of the power relationship. Little power in the workers and almost all the power of the business and political classes. The little current Chinese socialism is seen in the following argument. If any Chinese, even a poor peasant such as Xi Jinping, can become president of the country, what may be lacking? What is the criticism ?. Well, it lacks that any Chinese citizen does not have the command, dominion and control over the means of production. Only the CCP-Chinese Communist Party-has that command. And so it happened in real socialism of the 20th century. Yes, it is true that there is individual competition in China to reach the Party and lead it, but that Party and that political class has no competition in their power over the means of production. The CCP thus acts as a dictatorship, dictatorship of a political class over the working class. “All power to the Soviets,” said V. Lenin at the beginning of the USSR, although later “he” forgot “to make it a reality. That workers power is what is lacking in China. Workers’ democracy is lacking, cooperative and common property is lacking. The cooperative state is missing. Taking as reference the ideal model of socialism (because in small territories socialism comes before in large territories (countries). This was the case in primitive communism, throughout the Paleolithic, from 2.5 million years to 10,000 years ac) Today’s western business cooperatives (for example, in Spain they have a turnover of 10% of GDP and it is a growing turnover), in them the presence of a party, or of many parties, is not necessary to present eligible people to the direction of the Cooperative. Any partner and all partners can be leaders. Most importantly, all partners are also individual company owners. That is the missing socialist cooperative property in China. That’s today’s China still photo. A still photo of little socialism and no cooperative property. And what is the current Chinese government movement? Where is it going? It is even worse: for several decades now, the CCP has not walked towards communist property, but has been walking (it is a regression, retrocession and reactionary movement that has already happened in the countries of real socialism) towards capitalist property. The CCP cannot (nor does it want to) avoid the phenomenon of the cycle of class struggles, which is a cycle with advances and setbacks. The setbacks in class struggles come from 2 main factors: 1º The lack of ownership of the means of production by the working class and 2º For a socialism ‘in a single country’
      Regards.
       

      • vk Says:

        That is a common post-war social-democrat misconception. You don’t have to have completely independent trade unions competing among themselves in an market-type anarchic configuration in order to have the working class in power of the means of production.

        The place of the trade unions in a socialist State is, perhaps, the oldest debate among the communists themselves since the October Revolution. In fact, it arose immediately after the Revolution was victorious.

        On one side, there was Trotsky, who defended that the trade unions should be militarized (i.e. converted into militias) and put under direct control of the proletarian State (dictatorship of the proletariat).

        On the other side, there was Lenin, who defended that the trade unions should be kept independent of the newly founded proletarian State.

        Lenin won the argument for one simple reason: the State that was born in the aftermath of the October Revolution wasn’t a proletarian State, but had many elements of the Empire, which had to be reabsorbed given the immediate necessities created by the Civil War. There were a lot of old officers from the Tsarist Army – some of them in command of battalions. If the trade unions were put to the mercy of the new State, it could open an internal flank for a counter-revolution – in addition to the already existing external flank presented by the White Army.

        The problem is that, after the deification of Lenin and Trotsky in the West, this purely practical issue in 1920s USSR was elevated to a theoretical problem. Western Marxists became obsessed with the trade union (Soviets, in Trotskyist terminology) = socialism.

        The “socialism must be pluripartidary” is also another social-democrat generalization. It was probably born from an extrapolation of the degeneration of the USSR, which in theoretical form exist in the West in Trotskyism. To this, I only make one question: how’s Western Marxism doing in their home countries? Are they nearer or more distant to a socialist mode of production than China? How are the socialist parties doing in the liberal democracies? You see, this question is more complex than it seems.

      • Antonio Says:

        Unions ?. I have not spoken anything about them.
        Party pluralism in socialism? I haven’t said anything either.
        Basically I have exposed Cooperative Ownership of the means of production as a necessary next step in the coming and desirable socialism. If workers have that property (much better and operational in a cooperatively owned State) the issues of unions and plural parties are quite minor and not problematic.
        Yes, true, the western socialist and communist parties are as far from Socialism as the CCP is. This similar distance comes from the same problem common to all socialism: the socialist mode of production (it also happened with capitalism, etc.) advances (from 1917) and falls back to its complete territorial domain. And now all world socialism has been in decline since the 1980s. The cooperative ownership of workers over the State would help to prevent future socialism from retreating further.
        Regards
         

  7. stevenjohnson Says:

    “China is targeting a 2020 budget deficit of at least 3.6% of GDP, above last year’s 2.8%, and increased funding for local-government borrowing by two-thirds. And for the first time, the central government will issue bonds to be used to help local government spending and firms in difficulty.” I think the proper socialist policy is to liquidate bankrupt capitalist firms while integrating the successful ones more tightly into a national plan for renovation of physical capital and social infrastructure (which always needs renewing every where, something close to a sane definition of economic growth.) This policy is very much like the Fed’s adoption of MMT to create funny money profits for businesses, captured via financial asset inflation. Any remarks about this policy decreasing rural poverty make no sense in the US and I don’t know why it would be different for China.

    “The mainstream economics view is that China should become a full ‘market’ economy like those of the G7. Relying on cheap labour to sell manufacturing goods to the West is over. Rising labour costs show that China’s state-driven and led economic model cannot succeed in developing modern technology or delivering consumer goods to the people… But so far, this option has been rejected by the majority in the current leadership.” I do not understand how rising real wages isn’t a problem of world capitalism. I can understand how limiting production to what’s profitable means reversing the trend to higher real wages, but that’s not the objection here. But it seems to me the correct understanding of the state re-financing of the current system without bankruptcy is that it is the choice of the first alternative, orthodox capitalist economics.

    As ever, the Keynesian approach skips over the question of when investment generates profits, starting a growth phase in the business cycle. Nonetheless, much of China’s industrial plant appears to be configured for foreign trade, while the world economy is declining. It is indeed hard to see how there can be much future for this. In the sense of failing to provide for the Chinese people, much of the investment has been wasted. But the idea this is the result of planning is a non sequitur. It’s the repudiation of planning that leaves the population as a whole unable to influence the material basis of social life. The notion that copying US or UK bourgeois democracy will cure this makes no sense at all.

    “The idea that China is heading for a crash because of under consumption and over investment is not convincing. It’s true that according to the Institute of International Finance (IFF), China’s total debt hit 317 per cent of gross domestic product (GDP) in the first quarter of 2020. But most of the domestic debt is owed by one state entity to another; from local government to state banks, from state banks to central government. When that is all netted off, the debt owed by households (54% of GDP) and private corporations is not so high, while central government debt is low by global standards. Moreover, external dollar debt to GDP is very low (15%) and indeed the rest of the world owes China way more, 6% of global debt. China is a huge creditor to the world and has massive dollar and euro reserves, 50% larger than its dollar debt.”

    If I understand correctly, many of the these state banks are vehicles for the diversion of public funds to private firms, and thus the “netting” process is misleading, misplacing debts incurred by private firms in the wrong category. Even more, the apparent assumption that the central government is the only player, that it has a firm grip on the provinces, strikes me as wrong. The SEZs/SARs are very much like the neo-colonialist version of the infamous territorial concessions a hundred years ago. It cannot be assumed the central government won’t lose control and a new form of the warlordism can’t return. And in particular, the idea that the large investment the central government has made in dollar and euro reserves are not being depreciated by the massive creation of new money by the Fed, the world’s de facto central banker seems uncertain. I could even imagine Trump issuing a discriminatory default, in the guise of sequestration for national security. If I understand incorrectly, then this is saying the Chinese can or maybe should resort to straightforward Keynesian policies? I’m not quite sure of the point.

    “And now the IMF has published new data that confirm that analysis. China has public capital stock near 160% of GDP, way more than anywhere else. But note that this public sector stock has been falling faster than even the neo-liberal Western economies. The capitalist mode of production may not be dominant in China, but it is growing fast.” The decreases in public property in the means of production is not an accident, but a consequence of years of economic policy. But I think shrinking the public stock even more during a crisis of world capitalism requires a decrease in worker consumption. It requires an even more virulent, shameless assault, similar to the one carried out by Yeltsin. So far as I can tell, nothing suggests the current political leadership has set its face against this.

    “So far, in the light of the disastrous failure of ‘liberal democratic’ market economies in handling the pandemic, with death rates 100 times higher than in China and now deep in a slump not seen since the 1930s, that market model does not seem attractive to the Communist dictatorship or the Chinese people. Instead Xi and Li seem to want to continue and expand the existing model of development: a state-directed and controlled economy that curbs the capitalist sector and resists imperialist intervention.” The existing model is, subsidizing the capitalist sector via the state sector, and integrating into world finance as an equal. Further, the invoking “Communist dictatorship” without analyzing the material base is not useful. Especially when you simply write “dictatorship,” you are saying what the Chinese people want is irrelevant. What Jack Ma wants is far more relevant than the “people,” I think.

    “…and by Communist apparatchiks who control the big companies and plan the economy (often inefficiently as there is no accountability to China’s working people).” The magic of bourgeois democracy to increase production without the tyranny of central planning is I suspect rather overrated, being something that could be done in every bourgeois democratic country. I think the effort to decree socialism by bourgeois democratic means while leaving capitalism rather untouched is what gives us a Venezuela. To put it another way, economic development of the sort the Chinese leadership has pursued for decades is likely approaching the point where the political system can no longer achieve the proper organization of the the economy on capitalist lines, counter-revolution.

    “Indeed, China looks to expand its technological prowess and its influence globally through the Belt and Road investment initiative and its huge lending programmes to the likes of African and other states. And it will be able to do so because its economic model does not rest on the falling profitability of its admittedly sizeable capitalist sector. An IIF report found that China is now the world’s largest creditor to low income countries.”

    The state is using its funds to try to develop markets, investment opportunities, cheaper and/or more secure supplies of raw materials because it want to shore up its capitalist sector. That is, it is trying to develop a modern imperialist sector. It does not do planning for use. Precisely because private capital markets do no dominate China this is not imperialist yet. But foreign policy is continuous with domestic policy: The leadership wants an empire. Even if you take them at their word, they want a world where it’s safe for sovereign nations to go to war, as that is what “sovereign” means. This is not progressive.

    As to the desire for Taiwan to either conquer the mainland or at least to stay independent, for the most rabid form of capitalism in China, the Hong Kong neocolonial variant to do the same, well, those ideals are not progressive either, in my opinion.

    I know my sort is unwelcome but this is all so wrong I couldn’t quell my indignation. If you’ve bothered to read before deleting, please think about it. I don’t think you want to be a counter-revolutionary.

  8. Steve RF Says:

    Thanks for the post, with some interesting data I’ve not come across before (linked in the Baldwin piece).

    However, Michael writes that the ‘killer figure’ is the 3x public to private capital stock. This figure is from 2011. Though he rightly notes the IMF analysis which sees a big drop in public assets, this is only against GDP. China’s public assets have continuously grown over time, at a fairly healthy rate.

    The latest figures show the private capital stock overtaking the state capital stock in 2015-6, and rising quite a bit ahead since (same data source, IMF ICSD database, last published August 2019 —https://www.imf.org/external/np/fad/publicinvestment/data/data080219.xlsx

    Why is this important? Two points. First is that our impression of China, at least if we follow the financial press, is an economy which is becoming ever more statist under Xi. On paper, this is simply wrong. China’s private sector has become bigger in terms of capital stock than its state sector under the Xi administration.

    Second, an analysis which ended on my above point would be obviously incomplete, because the boundary between private and state firms has been demolished by the Chinese state. No private firm can hope to escape the grip of the authorities. This exposes the boundary between public and private as the bourgeois fetishisation it is — Marx warned us of the ‘alienation of the state’ by debt 200 years ago, as well as warning of the fiction of genuinely private capital not backed up by state power. It also challenges Michael’s view of the state sector as a ‘non-capitalist sector’.

    On the other hand, the Chinese economy is dependent on state banks subject to forced investment decisions by the state to subsidise favoured industries. State banks are only able to keep the taps flowing due to the healthy backing of the renminbi by forex (US dollar) reserves from the genuinely profitable export sector. When these dry up and money has to be printed which is not backed by the global reserve currency, there will be huge capital flight to escape devaluation, and China will be in real trouble (see Victor Shih’s recent analyses). The Communist Party is then propped up by participation in ruthless global capitalist competition and dollar earnings. So it’s a ‘weird beast’ indeed.

    • stevenjohnson Says:

      The capitalist sector in China has been in trouble before. The question is whether there will be a radical restructuring of the public property permitting a private market in capital to reduce production to what is profitable, lowering real wages and cutting spending that doesn’t benefit capital. I think you should call that counterrevolution. The dollar is the reserve currency, but it is being undermined by the titanic flow of credit from the Fed. The US financial hegemony is backed by blood, military force, not by gold or economic production. Its imperialism will no more collapse than capitalism. It must be replaced. Barring socialist revolution, it will be replaced only by another imperialism, a victor in the re-division of the world. The level of violence may in principle be low…but historical precedent of general imperialist war says, no.

  9. Li Xuan Says:

    Hi, michael, thanks for sharing your invaluable insights!
    But as a Chinese, I do want to push back against some mischaracterizations regarding chinese government policies toward Xinjiang and Hongkong, which are common in most western population.
    First, the Uyghur Muslims sent to the “reeducation camp” was only a small part of the Uyghur population living in Xinjiang, most of them were indoctrined in the most extreme faction of islam called Wahhabism, which was innitially promoted by saudi arabia and subsequently adopted by secesionist World Uyghur Congress, as a tool to divide Xinjiang and undermine BRI(Belt and road initiative), for more detailed information, you may read these reporting.
    https://thewallwillfall.org/2019/12/18/us-interference-in-china-is-nothing-to-do-with-humanitarianism-bruno-guigue/
    https://thegrayzone.com/2020/03/05/world-uyghur-congress-us-far-right-regime-change-network-fall-china/#more-21707
    https://thegrayzone.com/2019/12/21/china-detaining-millions-uyghurs-problems-claims-us-ngo-researcher/

    As for Hongkong, the law, which are going to be created soon, is not a militery rule in any meanful sense, a close analogy would be a Hongkong version of “Patriot act”(created by US to leagally spy other people). And it would not in any profound way alter the current semi democratic election process in Hongkong. For a more nuanced story regarding the Hongkong problem, I recommend these reporting.
    https://asiatimes.com/2019/10/behind-hong-kongs-black-terror/
    https://thegrayzone.com/2019/08/17/hong-kong-protest-washington-nativism-violence/
    https://consortiumnews.com/2019/11/26/the-nature-of-the-hong-kong-protests/

    • stevenjohnson Says:

      Uighurs are not the only peoples in Xinjiang either. It is also highly unlikely that the numbers of Uighurs in custody at some point hasn’t been highly inflated, quoted endlessly from one source without any critical examination whatsoever. Even worse, the assumption they are locked away forever is false. The few efforts a white propaganda revealed a purported document trying to smear Xi personally for complaining about releases. There can be powerful reasons to object to mass incarceration policies but assuming them to be life sentences is preposterous. Even more absurdly, one of the notable complaints is that the re-education camps are actually trying to teach the prisoners Chinese, pu tong hua, but this is portrayed solely as cultural genocide, instead of teaching a real job skill!

      Make no mistake: When Xi talks of the China Dream, it means nothing good for Uighurs or Takjiks or Turkmen or Mongols or Hui or anyone but Han. But make no mistake, the switch from Communist ideals (however ill observed) to bourgeois democratic ideals is the very antithesis of the Communist dictatorship. Except if you are relying on grossly ideological misconceptions about bourgeois democracy.

      • Li X Says:

        Hi steven, thanks for your reply.
        I have a different opinion regarding “china dream”. The china dream is a bourgeois(consume as much as chinese want) dream, of course, but it’s definitely not confined to han nationality, china communist party respects minority cultural tradition to a certain extent, as long as they do not intend to divide the state.

        For a more comprehensive understanding about China, I would recommend this interview with Pepe Escobar(https://www.youtube.com/watch?v=JDp5hfrlWxM). Pepe is a veteran Brazilian journalist covering asia since 1994. He is one of the few western experts who tries genuinely to learn China rather than other so called Chinese experts who only read some english books writen by westerners. His sympathy toward China is a great antidote against the current hostility coming from western media and government.

      • stevenjohnson Says:

        Almost everyone who believed in the American Dream insisted it was for everyone in the US. Perhaps this has made me unduly skeptical….

        thanks for the link but I don’t have YouTube premium and I watch my spending on such things.

  10. johnure Says:

    Since when have the determinants of China’s state-directed investments not included global competition, be it in arms, the space race, the technology race, the need to grab a share of the mineral resources of the world, a share of major commercial markets, and so on.The imperative to accumulate is as strong on state capital in China as it is upon the semi-private sector. What once propelled China’s growth was its ability to push many of the costs of reproduction back onto a pre-capitalist mode of production, but that source has run out of steam. There is no longer a significant world outside of the capitalist system, so all costs to the system have to be borne by the system itself. China is inevitably displaying the same imperialist aims and objectives as its rival capitalisms in one form or another, and its difficult to understand why Roberts constantly avoids this problem. What Lenin once referred to as social imperialism, for example, is classically on display in China, using revenues from its regional hegemony to create the semblance of welfare provisions for citizens, but unlike Britain at the turn of the twentieth century which had surpluses from its Empire (essentially India) to subsidise its nascent welfare state, China is being forced more and more to find the resources internally. In fact all capitalist states face this dilemma. Yes, the state capitalist model has some advantages over other capitalist models insofar as the state has direct control over many of the mechanisms of internal capital accumulation, but even China has recognised that in many cases markets do this more efficiently from the perspective of capital itself, especially in the banking sector. It’s also true that there is a degree of autonomy within the political sphere and within the CCP there are those who would prefer to move towards a more civil society with a degree of democracy, but under Xi that degree has been for the moment much reduced. Hong Kong will probably prove to be the litmus test because the degree of civil discontent is already at boiling point.

  11. Neil Halliday Says:

    Ellen Brown says the Chinese public banking model is superior to the West’s private banking model.

    https://ellenbrown.com/2019/06/14/the-american-dream-is-alive-and-well-in-china/

    I agree. In fact China only has to understand MMT – ie the currency-issuing government cannot ‘run out of money’ – and they will be technological leaders in a decade. (“Planning” has got to be better than “invisible hand”, in an ecologically challenging global environment). Which will be a good thing so long as China remains in the UN, and becomes so successful Taiwan will VOTE to become one state with China.

  12. Charles A. Says:

    Your counterposing of investments for profit versus state investments does not correspond to reality. State enterprises go after profit, struggle against each other (for example, province versus province) for the most lucrative projects, and get in bed with domestic and foreign capitalists and share in the profits. There is no overall plan of investment allocation — it was formally dropped in 2005, years after it had become a sham. https://youtu.be/ePoUoWUzKBQ from 16:45 to 35:34.

  13. vk Says:

    This very symbolic and interesting article just came out on the CCP’s extra-official newspaper (The Global Times).

    It is an “answer” to Francis Fukuyama’s recent article for the The American Interest (May 18th) , but it could well be applied to many Western leftists too:

    “Western elite view of China’s governance wrong”

    https://www.globaltimes.cn/content/1189351.shtml

    My guess is the Western left disregards China as socialist for the simple fact that most of their sources come from HK, or some westernized “China expert” who studied in the Ivy League or Oxbridge, who probably came from Taiwan, HK or even some bourgeois Mainland family.

    But once you read the sources in Chinese (most are not translated into English) and visit the “real” China (beyond the tier 1 cities), you’ll see why the CCP is so strong and so popular.

  14. stevenjohnson Says:

    It seems Pepe Escobar in Asia Times shares the analysis above.

    “In a nutshell: no GDP target for 2020; a budget deficit of at least 3.6% of GDP; one trillion yuan in special treasury bonds; corporate fees/taxes cut by 2.5 trillion yuan; a defense budget rise of a modest 6.6%; and governments at all levels committed to ‘tighten their belts.’

    The focus, as predicted, is to get China’s domestic economy, post-Covid-19, on track for solid growth in 2021.”

    Cutting spending while operating at a deficit may simply be the Chinese government copycatting the inanities of Western governments. But it seems to me to direct what spending there is directly to supporting private firms, while requiring cuts in social spending. The details matter, but the special treasury bonds sound like guaranteed hard money repayments, basically “special” because they promise continued privatization of state-owned enterprises. Certainly reducing effective demand in the economy by speeding the elimination of the state sector shows a complete rejection of Keynesian economics, even if they are playing with MMT funny money bailouts of the capitalists.

    The problem is the enormous institutional obstacle of a workers’ state (deformed or degenerated if you will.) That’s why Xi has been supported in the increased concentration of power, in hopes he can decree a true restoration of the untrammeled rule of capital.

    My opinion of course. Forgive the outburst on this topic. Hope to do better at staying away in the future.

    • mandm Says:

      However “distorted or degenerate” you believe the Chinese leaders to be, there is an obstacle in the way of the “restoration”(?) of “the untrammeled rule of capital” in China. That obstacle is the historical limitations of fully developed capitalism, as seen in the (unravelling) of the very private (G7) imperial club (invited in by the US and its petro and militarized dollar). I don’t think we have to worry about China (except that it might be bombed), but we must worry about the lethal capitalist pandemic ravaging our own country.

  15. Rodolfo Crespo Says:

    Professor Michael Roberts
    Please, I would like to know your opinion about whether in contemporary capitalism there is more value or not with respect to, for example, the 60s of the 20th century.
    If you have worked on the subject in any of your works.
    Forgive me that I speak Spanish.
    a greeting

  16. Nadim Mahjoub Says:

    “Imperialist mode of production”? Honestly, this is the first time I read that we can call imperialism a mode of production.
    I have an issue with the use of “often inefficient.” Given of what China has achieved in 40 years, albeit by an authoritarian one-party regime, I’m not convinced that the CPC and the economic system have been “often inefficient.” China is not in equal terms with the West especially when it comes to productivity and quality, but there is also a lot of ineffiency and waste in the capitalist West itself.

    • Nadim Mahjoub Says:

      And there is another side to “inefficiency.”
      “Economists, such as the Englishman William Hutt, who went against the Keynesian consensus and pointed out that there were some things – fire extinguishers, for example – that were valuable precisely because they were never used. Having large stocks of PPE, underemployed nurses, or a lot of spare capacity in ICUs, falls into the same category. Idle resources are what you need in a crisis, so some degree of inefficiency isn’t necessarily a bad idea.”
      https://www.theguardian.com/commentisfree/2020/may/31/coronavirus-economy-change-pandemic

    • Nadim Mahjoub Says:

      And one should ask. How inefficient was China’s economy in the last two major crises: the 2008/09 crisis and the pandemic?

  17. fernando moyano Says:

    Hello Michael. I want to ask you about this sentence from your last note:

    “But the question for me is whether the capitalist sector in China’s economy is dominant. Does China follow the same law of value as other capitalist economies? China seems to be more than just an autocratic, undemocratic, ‘political’ version of capitalism compared to the ‘liberal democratic’ version of the West (as argued by Milanovic). Its economy is not dominated by the market, by investment decisions based on profitability; or by capitalist companies and bosses; or by foreign investors. Its economy is still dominated by state control, state investment, state banks and by Communist apparatchiks who control the big companies and plan the economy (often inefficiently as there is no accountability to China’s working people).”

    Is this not contradictory to your general explanation of the dynamics of capitalism? I am referring to the accumulation of capital and the decreasing trend of the rate of profit, as explained in your note, understanding that Chinese society is capitalist. Would that affirmation deny the capitalist condition of today’s economic-social formation in China? I ask you because that fragment of yours has entered into a controversy on the blog of the Argentine Marxist Rolando Astarita.

    • michael roberts Says:

      Hi Fernando. The issue here is that I do not think China is a capitalist economy (yet), mainly because of the para you quote. But China does have a large capitalist sector and like other capitalist economies we can measure the health of its capitalist sector by looking at its profitability. The difference is that although there is falling profitability in China’s capitalist sector (particularly recently), unlike the major capitalist economies, that may not engender a crisis of investment and production because the main direction and control of investment is not in the hands of the capitalist sector and the market. China showed in 2008-9 that the world economic slump was succesfully avoided in China and the current COVID-19 crisis is also likely to have less effect on the Chinese economy than it has and will in the major capitalist economies – because China has a state-directed economy not dominated (although present) by the profitability of capital and the law of value. However, the forces within the bureaucracy, particularly those running the finance sector, are clamouring for further moves to the market and opening up to capitalist companies. So we shall see.

      I have not read Rolando’s comments section. Rolando and I have good communications but I expect, like most Marxist economists, he considers China a capitalist economy. Also, I note that he recently dropped Marx’s law of profitability as the cause of crises under capitalism – a position he used to hold. Now he rejects that in favour of ‘crises of overproduction’. I think I have dealt with this alternative theory in various blog posts and also in my books Marx 200 and the Lon Depression and World in Crisis.

      • fernando moyano Says:

        Thank you Michael. I want to ask you if it seems appropriate for you to share this answer of yours in the comments of Rolando Audita’s blog where this discussion was raised. It seems important to me to share your perspective of the problem but I should not do it if you do not agree, Rolando is a very erudite analyst but he is not a person who easily accepts different opinions from his.

        El mié., 3 jun. 2020 5:53, Michael Roberts Blog escribió:

        > michael roberts commented: “Hi Fernando. The issue here is that I do not > think China is a capitalist economy (yet), mainly because of the para you > quote. But China does have a large capitalist sector and like other > capitalist economies we can measure the health of its capitalist sec” >

      • michael roberts Says:

        Fernano, Well it’s a bit tricky doing this third hand. You can certainly quote me on the nature of China as outlined in my blog and my comments to you. But I dont think you should refer to my quote about Rolando himself because i have not read what he is saying or any comments. I shall try and do that if I have time.

      • fernando moyano Says:

        Ok Michael, it’s the best. Thank you

        El mié., 3 jun. 2020 a las 9:00, Michael Roberts Blog () escribió:

        > michael roberts commented: “Fernano, Well it’s a bit tricky doing this > third hand. You can certainly quote me on the nature of China as outlined > in my blog and my comments to you. But I dont think you should refer to my > quote about Rolando himself because i have not read what he i” >

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