When American’s Talk About China:
The Backwardness of Xenophobia and Global Capitalism
It’s common knowledge that China is growing. Its booming economy is on display in nearly every issue of every major news magazine; it headlines in newspapers daily; it’s featured incessantly on TV and Radio programs; and all of this carries over to water cooler conversations across America.
The last time I talked with someone about China they did most of the talking. It was similar to every other “conversation” I’ve had about China. It consisted mostly of my acquaintance reciting a familiar diatribe that begins with awed statements about the nation’s phenomenal economic growth, its massive demand for industrial resources, and cities with exploding populations. Then it quickly moved toward astonished exclamations about how everything is made in China, from our clothing to our electronics. Finally it concluded with a vague and foreboding assessment of Chinese power. Usually when Americans talk about China’s economy, each person recites parts of this diatribe eliciting the correct response from the other:
“China’s become the shop-floor of the global economy.”
“Right, and their economy is growing by double digits!”
“Yes, and they make everything now. Do you know how much oil and steel they’re consuming?”
“Lot’s, and soon they’ll all want cars and TVs.”
“Oh!, they’ll want a lot more than that.”
And on it goes.
CNOOC’s (Chinese National Offshore Oil Corporation) bid to acquire Unocal Corporation, and Haier’s attempted purchase of Maytag has given these conversations a new and even more fervent anti-Chinese flavor. The possibility that Chinese corporations might be in a position to swallow up major American companies has been played in the press and interpreted by much of the public as a sign of a weakening, or vulnerable US economy. The Chinese computer manufacturer, Lenovo, which recently bought IBM’s computer division (the only recent high profile Chinese partial-takeover of major US industrial assets that has actually been successful) has further stoked fears of American weakness and Chinese ascendancy. In the face of this, US politicians and business leaders have led a chorus of protectionist hymns backed by a popular chant with xenophobic overtones.
Americans’ conversations about China have become so scripted that they almost appear ritualistic. It’s the concluding part of these conversations, always revolving around murky notions of American decline and Chinese dominance, which give these exchanges their xenophobic character. Are American fears about a rising China warranted? And where have these fears come from anyway?
The Chinese economy may be booming, but it’s starting from a relatively underdeveloped position. Mind blowing statistics and statements about industrial expansion, urbanization, rising incomes, and corporate consolidation are overblown. The absurdity of popular American fears about an ascendant China are underscored by the United States’ status as an economic and military hyper-power, not only without a contemporary equal, but without historic precedent.
China’s economy is be big, but it’s nothing compared to the United States in terms of overall size, diversity of industry, workforce characteristics, technological leadership, and most importantly, position within the global system.
China’s gross domestic product of $7.2 trillion (derived in terms of purchasing power parity) makes it the second largest economy in the world, and with an average growth rate of about 8.5% over the last ten years, it would appear that China does indeed rival the United States in raw terms. But the US, with a GDP of $11.7 trillion, and a not-too-shabby growth rate of 4% will keep it ahead of China in absolute terms for quite some time. Not that all this comparison of aggregate size even matters: China’s economy might be big, but its population is so incredibly huge that when taken into account its GDP shrivels down to mere $5600 per capita. China’s demographics look nothing like the United States’ where GDP per capita hovers around $40,000, and even many of the “poor” live well above the average Chinese standard of living. Regardless of grand totals the fact remains that the United States, with a population measuring only 4% of the world’s total, accounts for 21% of global economic production, consumes more than this share in resources, and produces more than this share in consumer and industrial waste.
All this talk of aggregates also misses the character of each nation’s economy. When Americans talk in astonished and worried tones about Chinese expansion they completely overlook which economic sectors China is expanding into. Yes, there’s a building boom, China is consuming lots of petroleum, steel, and other basic goods, but this activity is not consummate with the United States’. The US already has a national transportation infrastructure, built up cities, massive investment in capital, machinery, industrialized agriculture, all of the characteristics that lead economist to deem the US a “modernized” society. China is playing catch-up in these fields. China is “modernizing.” And this is to say nothing of service-oriented business and the information economy. China is a growing industrial economy, but to compare this with the US entirely misses each nation’s position in the global system.
The United States is an information economy at its core. Industrial production and manufacturing are no longer the foundations of the American economy. The US is a command and control, and consumption economy. It is (like Europe and Japan) a center of global finance, scientific and technological research, management, and retail. Industrial expansion in China is possible for two reasons: Firstly, the United States, Europe, and Japan are de-industrializing, whilst the demand for industrial and manufactured products continues to grow as consumerism remains the dominant lifestyle-ideology in these nations. Second, much of the capital that is building up industrial and manufacturing operations in China is American, European, and Japanese capital, or it is the junior partner to this capital based in Hong Kong, South Korea, and Singapore. The Chinese state is investing huge sums also, but the dynamism of this country’s economic growth is not a homegrown phenomenon.
De-industrialization in the United States is part of the global economic shift. New information technologies have made a fundamental redistribution of management, production, and consumption activities across the planet possible. Rather than weakening the position of the United States as the predominant center of capital accumulation, the globalizing economy has reinforced its privilege while building up other centers.
The shift of manufacturing to China and other parts of the global south is concomitant with the expansion of the service sector in the north. Increasingly even sophisticated manufactured goods come from the south and are consumed in the north. The leading edge of this global economy – the most profitable sectors - is not found in industrial infrastructure or manufacturing capacity. It is found in product research and design, product marketing, finance, retail, and management activities. The world’s shop floor, its smelters, assembly lines, factories, and certain service centers may be shifting south, but the command and control, and the ownership of these operations remains in the banks and corporate offices of New York, London and Tokyo, Paris and San Francisco, Berlin and Amsterdam, Toronto, Sydney, Los Angeles and Rome.
Lenovo’s high profile purchase of IBM’s computer manufacturing division underscores this point well. IBM didn’t sell off its computing division because of any weakness, and China’s Lenovo corporation didn’t buy it because they’re gaining ground on the US’s tech sector. As CNET’s John Spooner and Michael Kanellos note, “the deal will let IBM continue its shift from selling so-called commodity products to selling services, software and high-end computers. Although the company helped make PCs a global phenomenon, IBM makes little profit from PCs and often loses money.” This is only one small example of a global restructuring that relocates manufacturing (even very advanced operations) to the global south so that US corporations can concentrate their capital on the new core accumulative activities, services and information, and reap larger profits with cheaper labor abroad.
The accumulation of industrial and manufacturing activities in China does not signal a shift of capital and power away from the United States. The US-China trade imbalance is certainly real, as is mass purchasing of US securities by East Asian states, but in terms of economic development and the power that comes with it, China is far from being a rising superpower capable of challenging the United States - not that such a check would be a bad thing. In fact it would probably serve to block illegal and immoral US offensives in places like Iraq, and quell belligerent voices in the US government when dealing with nations like North Korea and Iran. But China is no rising superpower, not in the positive sense it could be, or even remotely in the ominous sense many Americans fear it to be. It is a rising shopfloor. The center of power hasn’t shifted at all. It remains firmly planted in corporate America.
A cursory overview of industrial and manufacturing operations in the mainland reveals that while goods might increasingly be made in China, the ownership of these firms, and the profits they generate are anything but Chinese. Profit and control over global manufacturing and industry is accumulating in the coffers and boardrooms of the world’s most powerful transnational corporations. These corporations, or their immediate subcontractors, account for much of the foreign direct investment (FDI) in places like China. Last year FDI into China totaled $64 billion. Much of this was invested by American corporations like Motorola, General Motors, Dell Computer, Hewlett-Packard, and Kodak. And much of what goes in as investment in facilities, machinery, and infrastructure is pumped out in the form of ultra cheap merchandise for American consumers, and profits for American, European, and Japanese capitalists. The oft-noted fact that almost everything is now made in China is not a sign of rising Chinese power. Rather, it’s quite the opposite. Taken for face value, it’s a relationship of servitude. Chinese laborers – many of them super-exploited young women – are slaving away on assembly lines in special economic zones to the benefit of the northern consumer’s voracious appetite for cheap wares, and the transnational corporation’s bottom line.
This is the reality of Chinese industry. It’s concentrated along the country’s eastern coastline, especially in the Guangdong province. Much of it is located in special economic zones free of heavy state taxation or the control of Chinese officials. These massive factories are either the result of direct investments by transnational corporations, or else they are the outfits of contractors and subcontractors to these corporations. Many are based in China, and many others are based in Hong Kong and other semi-peripheral states within the global supply chain. The work in these factories is tedious, dangerous, and boring, it produces commodities that are bound for the shelves of Wal-Marts in the first world, and most of the profit is piling up outside of China.
Another development, which belies the notion that China is a rising economic superpower, is the massive buy-in of American and European banks and finance firms into China’s banking system. US and European banks are hungry for a share of the emerging consumer market in China, but they’re also keen on owning shares in China’s major financial institutions, especially those which fund and own large industrial and manufacturing concerns in the mainland. While the American press has been playing up CNOOC and Maier’s bids for two well known, but relatively unimportant US companies, there has been a frenzy of activity by Citigroup, Bank of America, Bank of Montreal, UBS, Royal Bank of Scotland, and Deutsche Bank, among others, to acquire equity in China’s largest banks.
One of the biggest deals to date is Bank of America’s $3 billion dollar investment in the China Construction Bank, one of China’s four big state-owned institutions. Three billion dollars gives Bank of America a 9% stake in CCB. The deal also allows Bank of America to purchase 10.9% more of China Construction Bank. Chinese law bars any single foreign firm from owning more than 20% of a Chinese bank or corporation, and foreign groups from owning more than 25%. Citigroup is hard at work on reaching the 25% ownership mark with its stake in the Pudong Development Bank. With almost 5% equity already, Citigroup plans to reach 24.9% by 2008. In August the Royal Bank of Scotland (RBS) signed a deal with the Bank of China for $3.1 billion giving RBS a seat on the Bank’s board of directors in addition to its 10% ownership. Other deals abound.
All of this brings us back to the strange conversations that Americans are having about China. There’s little doubt that China’s economy is expanding at a phenomenal speed, and that its entrance into the world market for manufactured goods and industrial products has made it a leading exporter of everything from textiles to electronics. The growth of a Chinese middle class is not even in dispute. There may soon be some quarter billion members of the consumer class in China. But all this talk of aggregate numbers entirely misses the point. China’s entrance into the global economy is not so much a story of a rising power capable of challenging or checking US hegemony, rather, it is about the incorporation of the last enormous workforce, territory, and market into the global capitalist economy. US, European, and Japanese corporations and financial interest are investing in, and building up the factories and resource industries of China not in the hopes of building up an autonomous and dynamic Chinese economy and society, but rather, in the hopes of making enormous profits, much of this at the expense of the Chinese worker. These two goals are not mutually beneficial.
When Americans talk about China, with overtones of xenophobia and suspicion they’re missing the real story. China is not rising, it is not building up, militarily, politically, or economically to challenge US power. Rather, China is being drawn further and further into the global flows of financial control, and commodity production, all of which is firmly based in the global cities of New York, London, and Tokyo.
The growth of a Chinese elite is very real, but the nationalistic fears that pervade American conversations about China are extremely misguided. China, as a nation is not undermining the United States. What is threatening the privileged position of workers in the United States is the consolidation of a new system of global production and consumption. Those who stand to benefit the most from this system are the elites based in the US, Europe, and Japan. Those who stand to lose the most remain the masses of laborers, peasants, and people in the global south, including the majority of China. Joining these traditional losers in the new globalized economy are many US citizens whose jobs are quickly being transferred to the new shop floors of China and beyond. They are fast becoming redundant to the system.
That many Americans would adopt a language and understanding of China’s role in the world that portrays China as a rising power and a threat to general American prosperity is disconcerting. However, when one scans the major media, print and broadcast, the message remains – China is growing, and this is bad news for the average American. We are told that it will mean a declining standard of living, and the rise of a rival military and political power across the Pacific. If this is not really happening, if China is not rising in this sense, then why do we talk as though it is? Who’s really responsible for perpetuating this rather xenophobic perspective? And who does it benefit when most Americans cannot identify with and sympathize with most Chinese citizens?
The decline of the American worker is in no way the fault of Chinese workers, or the Chinese state. The deindustrialization and emptying out of the American city, the stagnation of wages and rollback of benefits for most workers, and mass unemployment are all the result of competition and purposive planning by elites based mostly in the United States. China’s economic growth is related to this plan, but it by no means implies that China is overcoming the US.
Finally, that the prospects of a rising China worry the average American is reason to worry about the worldview many Americans have. What could possibly be threatening or bad about a world community capable of checking the (presently unilateral and belligerent) decisions of the American state? Americans need to seriously ask themselves whether they identify with the foreign policies of their federal government, policies that have promoted increasingly exploitative and bellicose forays into the global South for more than sixty years now, and have most recently led the nation into a quagmirish occupation of Iraq.
History teaches us that there is nothing is more destabilizing and dangerous than a uni-polar world in which one state believes it can do as it pleases while ignoring the protests of other states. The advent of American hyperpower has led us, collectively, into a more dangerous world. That Americans seem instinctively suspicious of a state of the world in which other nations might have the ability to block or resist US military aggression symbolizes a deeper hegemonic ideology that needs to be challenged. A Chinese society capable of fostering a multi-polar world in which power must be exercised through consensus should be a welcome development for both the average American and the Chinese worker. Unfortunately, China is not rising in this sense, American power remains paramount, and the majority of each society, but especially the American side, seems incapable of identifying with the needs and dreams of the other.
“IBM sells PC group to Lenovo” By John G. Spooner and Michael Kanellos. CNET.com. December 8, 2004.
Morrison, Wayne M. “China’s Economic Conditions.” Congressional Research Service: Foreign Affairs, Defense, and Trade Division. July 2005.
