China’s economic rise destabilises world capitalism

The danger of imperialist war is compounded by the deepening economic crisis of world capitalism. After three decades of globalised production, the advanced capitalist countries, the US in particular, have discovered that the economic crisis that they sought to avoid by diverting manufacturing to cheap labour countries has returned home on a much larger scale.

China’s foreign currency reserves surpassed the $1 trillion mark last year, while the US trade deficit with China reached a new record of $230 billion. The American and Chinese ruling elites have no progressive means for resolving these massive economic imbalances. Beijing needs to keep foreign capital flowing in and exports expanding, in order to create 24 million jobs a year to maintain social stability. The US economy requires the supply of $2 billion a day from the rest of the world, especially from Asian central banks, to finance its massive trade deficits.

If this process continues indefinitely, the financial system must collapse at some point with incalculable consequences for the world economy. The solution offered by the Democrats in the US Congress to “correct” these imbalances is to promote protectionist legislation against China, which will only heighten political tensions and threaten financial stability.

A new book China Shakes the World: The Rise of A Hungry Nation by James Kynge, a veteran China correspondent for the British-based Financial Times, provides some insights into the global impact of China’s enormous economic contradictions. His study found that China resembles, to some extent, the US in the late nineteenth century, in terms of its infrastructure development.

In the 1990s, after discovering that the US interstate highway system had saved American companies $1 trillion over the past four decades, Beijing bureaucratic planners copied the US system across China. When this plan is finished by 2030, China will have 830,000 kilometres of expressways—a little longer than the existing the US system. China is also building railways that duplicate much of the American railroad boom at the turn of twentieth century, including a rail line to Tibet—the “roof of the world”. The scale of China’s electricity power construction is also unprecedented. Every year since 2004, China has been building enough power plants to supply a major European country such as Italy or Spain.

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