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The social and geopolitical origins of China’s rise

I read with pleasure the recent book “The China boom: Why China will not rule the world” by Ho-fung Hung. You should not be put off by the silly subtitle (probably added by the publisher to contrast Hung’s book to Martin Jacques’s). The book is much better than its subtitle implies. It gives a historical overview of how China’s economy functioned under Ming and Qing, goes over the well-known themes of how and why capitalists failed to create a coherent class in China (unlike in Europe), and how the paternalistic Qing slowed down that process by often supporting workers in disputes with owners, the very opposite of what capitalist-controlled European states did at the time. I wrote about these themes in my reviews of Arrighi, Jacques, and Pomeranz, so I will not go back to them.

There two other interesting things that I find in Hung’s book.

The first is: what is origin of China’s success? It is the mixture of the Asian export-driven policies (with open US markets) combined with Maoist centralization of capital through surplus exploitation of peasantry. For the reasons of paternalism and weakness, the Qing were never able to centralize capital needed for development. The post-Qing (republican) regime also failed in it but, in an era of chaos, let local gentry, merchants and the military be transformed into a number of regional  “military-predatory elites” vying with each other for power. China under the Republican regime was like Libya today. If you believe that Libya will soon begin to develop, then you can as well see in those multiple “militaro-predatory” elites of the early Republic a proto-capitalist formation, as some like Pseudoerasmus do. (I had a Twitter discussion on this issue with him.)

China’s rise differs in another way from the general East Asian experience. The flying-geese pattern (Akamatsu) whereby the most developed country gradually abandons less value-added productions to the next in line, and so forth, was upended by China, which started low but gradually took over the top-of-the-line products while not giving up the low-value added. Rather than flying in a orderly flock, China thus, both through its size and fast innovation, changed the model by becoming the hub through which many East Asian products are now exported to the US and Europe. The entire second part of the book is devoted to the interdependence between the US and China (trade surplus and investments in dollar-denominated T-bills) and while it may be, especially now, of significant interest for many I will not review it here.

For me, the second interesting part is what Hung regards as the class base of China’s current regime of political capitalism. This is a topic I deal with in Chapter 3 of my “Capitalism, Alone”. I wish I had read Hung before I completed the chapter because he introduces several interesting elements. Hung, like many others (including me), sees the dominant class to be “politico-capitalist” or in his formulation “politico-entrepreneurial” (p. 91). The “ruling bloc” combines people from the political sphere who benefit from political and economic power of SOEs, and capitalists, mostly from the Southern maritime provinces, who benefit from China’s “export machine”. Following Michael Pettis, an American professor at Peking University, Hung argues that three fundamental Chinese policies of (i) wage (and consumption) suppression, (ii) cheap yuan, and (iii) financial repression have their origin in this class structure.  Wage suppression and depreciated currency are obviously good for Chinese exporters (the new entrepreneurial class). Financial repression, combined with huge trade surpluses generated by the “export machine”, allow the political part of the ruling class to use SOEs for projection of its power domestically, and increasingly, internationally.

There is an additional twist that lovers of history’s convoluted implications would appreciate. Hung argues that the wave of privatizations that increased unemployment by thousands and reduced workers rights in the early- to mid- 1990s was possible only thanks to the repressive post-Tiananmen regime. The pro-democracy students and pro-Maoist workers who decried inequalities in 1989  “succeeded” in unifying different political factions of CCP, afraid of losing power, and made it possible for CCP to launch, after Deng’s “Southern turn”, the most far-reaching privatization and liberalization policies. In Hung’s view such policies would have met with much stronger societal resistance had they been implemented in the more permissive pre-Tiananmen climate.

Hung also explains why wage repression and urban-rural differences in China are, and can be, greater than they were in South Korea and Taiwan at the same level of development. The answer is also somewhat counter-intuitive but no less logical. South Korea and Taiwan had to be more careful and to spread the wealth to the countryside lest they create revolutionary conditions in villages or allow disgruntled rurals to move into cities. They had to be more careful because of proximity of China and the appeal of left-wing, pro-Communist, policies. But China does not have to “fear” the left-wing appeal of any nearby egalitarian power, and can thus pursue much more inegalitarian policies.

Let me finish with a small detail,

The book that was clearly written before the last US presidential election (although it was published in 2017), mentions, as a curiosity, on page 1, one “Donald Trump’s…entertaining [sic] bid for presidency in 2012”. The joke is on Hung.

https://glineq.blogspot.com/2019/05/the-social-and-geopolitical-origins-of.html

China’s new abnormal: European patrols in disputed Southeast Asian waters

Richard Heydarian writes that Germany’s entry into the fray leaves China once again surrounded by Western naval powers, an echo of the dark days of the Opium Wars

Richard Heydarian
Published: 11:00pm, 15 Jun, 2019


Reflecting on the consequences of China’s rapidly growing military capabilities and footprint in adjacent waters, the grand strategist Edward Luttwak argued that the formation of an informal counter-alliance was almost inevitable.

We will witness, Luttwak predicted in his 2012 book, The Rise of China vs. the Logic of Strategy , “a general realignment of forces against [China], as former allies retreat into a watchful neutrality, former neutrals become adversaries, and adversaries old and new coalesce in formal or informal alliances against the excessively risen power”.

The likely entry of Germany, Europe’s industrial powerhouse, into the East Asian maritime disputes potently reflects this burgeoning strategic dynamic.

China is no longer just facing resistance from the United States, but also transatlantic allies with growing strategic interests in the Indo-Pacific. Echoing the dark days of Opium Wars, China is once again surrounded by Western naval powers.

Germany, however, will be only the latest European power to enter the fray. In the past two years, Britain and France, both with postcolonial territorial possessions in the Indo-Pacific, have stepped up their naval presence in China’s adjacent waters.

In April, Paris enraged Beijing by deploying the French frigate Vendemiaire to the Taiwan Strait.

In response, Beijing disinvited the French delegation from taking part in the international naval parade marking the 70th anniversary of the founding of China’s People’s Liberation Army Navy.

Beijing made “stern representations” to Paris for the alleged “illegal” passage of the French warship through Chinese-claimed waters.

The Chinese defence ministry went so far as to warn France that the PLA Navy, which shadowed the French frigate, “will stay alert to firmly safeguard China’s sovereignty and security”.

The French maintained that the manoeuvre was lawful and a legitimate part of broader efforts to preserve freedom of navigation in the area amid rising maritime tensions.

Berlin’s decision to deploy warships to the South China Sea and Taiwan Strait is likely to only add insult to injury. China, however, will have to once again grapple with European powers’ growing military presence in its adjacent waters.

Just months earlier, the British provoked China’s ire by conducting the first-ever days-long joint naval exercises with the United States in the South China Sea.

The British navy claimed that the exercises were “contributing to promoting regional security and prosperity”.
Just weeks earlier, the British conducted joint trilateral anti-submarine warfare exercises, along with the US Navy and the Japanese Maritime Self Defense Force, close to the Chinese-occupied Paracel Islands.

To Beijing’s further chagrin, London also announced its plans to deploy the Queen Elizabeth aircraft carrier, accompanied by two squadrons of F-35B Lightning II joint strike fighters, to the South China Sea in the coming years.

In addition, the French and British both have stepped up their own versions of “freedom of navigation” operations in the area, while deepening defence ties with other US allies, particularly Japan, India and Australia.

The upshot is a de facto squad of like-minded Indo-Pacific powers, which are deepening their military interoperability, intelligence sharing and strategic coordination amid shared concerns over China’s expanding footprint in adjacent waters.

According to a June 5 report by Politico magazine, now even Germany is set to enter the theatre, lending its liminal, yet formidable, naval prowess to the ad hoc coalition checking China’s maritime assertiveness in the Western Pacific.

In a major break from its broadly low-key position on regional disputes, Berlin may soon deploy warships to the Taiwan Strait amid rising tensions between Beijing, Taipei and Washington.

This development is remarkable for three reasons. First, it stands in stark contrast to the country’s post-war aloofness to overseas military operations and flashpoints.

After all, Germany stubbornly shunned Western coalition military operations against the Gadhafi regime in 2011 and, a few years later, against Islamic State elements in Iraq and Syria.

In post-war Afghanistan, Germany only deployed a minimal peacekeeping presence under severe operational restrictions, leaving the Americans and Britons to do much of the fighting against Taliban forces.

Second, unlike France and Britain, Germany has no direct territorial and maritime interests in the Indo-Pacific.

As a senior member of the German Budestag’s Committee on Foreign Affairs told the author, Russia remains the country’s “primary geopolitical concern”.

Under the so-called Ostpolitik doctrine, Berlin’s eastward strategic orientation is largely focused on the post-Soviet space and Europe’s borders with Russia.

Finally, among European powers, Germany is the most economically interdependent with China.

The depth of bilateral economic relations explains regular joint cabinet meetings between Berlin and Beijing as well as German companies’ commitment to hold their investment ground in China amid the Sino-American trade wars.

Last year, bilateral trade stood at a whopping US$225.7 billion, with China standing as a major importer of German technology and machinery. Nonetheless, Germany has taken an increasingly vocal stance on East Asian disputes in recent years.

In 2015, during her high-profile visit to Beijing, German Chancellor Angela Merkel openly declared that the “territorial dispute in the South China Sea” was a “serious conflict”.

She even went so far as to express how she was “always a bit surprised why in this case multinational courts should not be an option for a solution”, even if China vehemently opposed the Philippines’ decision to take the regional disagreement to an arbitral tribunal at The Hague.

Merkel also clarified that Germany had an interest in making sure the sea trade routes stayed “free and safe”, because they were “important for [us] all.”

And in a classic exercise of diplomatic faux pas, she handed the Chinese leadership an early 18th century map, which portrayed both the South China Sea and Taiwan as outside Beijing’s jurisdiction.

Berlin’s decision to deploy warships to the South China Sea and Taiwan Strait is likely to only add insult to injury. China, however, will have to once again grapple with European powers’ growing military presence in its adjacent waters.

https://www.scmp.com/news/china/diplomacy/article/3014264/chinas-new-abnormal-european-patrols-disputed-southeast-asian

Filipenko wrote:A kao pustice ih da imaju Severni tok 2

Zuper wrote:Ako je on to rekao.

Zuper wrote:
Zivite u proslosti, Kina da hoce moze da prestigne Amere u mornarici vrlo brzo ali nije im cilj da pale one budale u Vasingtonu iako oni polako dolaze na pomorski paritet.
Vi niste svesni koliki idnustrijski potencijal ima Kina danas...

Since 2014, China has launched more warships, submarines, support ships and major amphibious vessels than the entire number of ships now serving in the United Kingdom’s fleet, according to an analysis from the London-based International Institute for Strategic Studies published in May last year. Between 2015 and 2017, China launched almost 400,000 tonnes of naval vessels, about twice the output of U.S. shipyards in that period, the IISS said.

https://www.reuters.com/investigates/special-report/china-army-navy/

Gargantua wrote:And in a classic exercise of diplomatic faux pas, she handed the Chinese leadership an early 18th century map, which portrayed both the South China Sea and Taiwan as outside Beijing’s jurisdiction.

On March 28, German Chancellor Angela Merkel hosted visiting Chinese President Xi Jinping at a dinner where they exchanged gifts. Merkel presented to Xi a 1735 map of China made by prolific French cartographer Jean-Baptiste Bourguignon d’Anville and printed by a German publishing house. According to an antique-maps website, d’Anville’s map was based on earlier geographical surveys done by Jesuit missionaries in China and represented the "summation of European knowledge on China in the 18th-century." The map showed, according to its original Latin caption, the so-called "China Proper" — that is, the Chinese heartland mostly populated by ethnic Han people, without Tibet, Xinjiang, Mongolia, or Manchuria. The islands of Taiwan and Hainan — the latter clearly part of modern China, the former very much disputed — are shown with a different color border.

Historical maps are sensitive business in China.Historical maps are sensitive business in China. Every schoolchild in China learns that Tibet, Xinjiang, Taiwan, and the Diaoyu Islands have been "inalienable parts of China since ancient times." The d’Anville map, at least visually, is a rejection of that narrative. Unsurprisingly, China’s official media outlets don’t seem to have appreciated Merkel’s gift. The People’s Daily, which has given meticulous accounts of Xi’s European tour, elided any coverage of the offending map. More curiously, when news of the map’s presentation reached the Chinese heartland, it had somehow morphed into a completely different one. A map published in many Chinese-language media reports about Merkel’s gift-giving shows the Chinese empire at its territorial zenith, including Tibet, Xinjiang, Mongolia, and large swaths of Siberia. This larger map was the handiwork of British mapmaker John Dower, published in 1844 by Henry Teesdale & Co. in London, and was certainly not the gift from Merkel to Xi. But this mistake was not noted or explained in Chinese reports.

Huawei says U.S. ban hurting more than expected, to wipe $30 billion off revenue
Sijia Jiang


HONG KONG (Reuters) - China’s Huawei Technologies Co Ltd has taken a harder-than-expected hit from a U.S. ban, the company’s founder and CEO Ren Zhengfei said, and slashed revenue expectations for the year.

Ren’s downbeat assessment that the ban will hit revenue by $30 billion, the first time Huawei has quantified the impact of the U.S. action, comes as a surprise after weeks of defiant comments from company executives who maintained Huawei was technologically self-sufficient.

The United States has put Huawei on an export blacklist citing national security issues, barring U.S. suppliers from selling to the world’s largest telecommunications equipment maker and No.2 maker of smartphones, without special approval.

The firm has denied its products pose a security threat.

The ban has forced companies, including Alphabet Inc’s Google and British chip designer ARM to limit or cease their relationships with the Chinese company.

Huawei had not expected that U.S. determination to “crack” the company would be “so strong and so pervasive”, Ren said, speaking at the company’s Shenzhen headquarters on Monday.

Two U.S. tech experts, George Gilder and Nicholas Negroponte, also joined the session.

“We did not expect they would attack us on so many aspects,” Ren said, adding he expects a revival in business in 2021.

“We cannot get components supply, cannot participate in many international organizations, cannot work closely with many universities, cannot use anything with U.S. components, and cannot even establish connection with networks that use such components.”

Huawei, which turned in a revenue of 721.2 billion yuan ($104 billion) last year, expects revenue of around $100 billion this year and the next, Ren said. This compares to an initial target for a growth in 2019 to between $125 billion and $130 billion depending on foreign exchange fluctuations.

TRADE WAR

The Trump administration slapped sanctions on Huawei at a time when U.S.-China trade talks hit rough waters, prompting assertions from China’s leaders about the country’s progress in achieving self-sufficiency in the key semiconductor business.

Huawei has also said it could roll out its Hongmeng operating system (OS), which is being tested, within nine months if needed, as its phones face being cut off from updates of Google’s Android OS in the wake of the ban.

But industry insiders have remained skeptical that Chinese chip makers can quickly meet the challenge of supplying Huawei’s needs and those of other domestic technology firms.

Negroponte, founder of the Massachusetts Institute of Technology Media Lab, said the U.S. ban was a mistake.

“Our president has already said publicly that he would reconsider Huawei if we can make a trade deal. So clearly that is not about national security,” he said.

“It is about something else,” Negroponte added.

Huawei’s smartphone sales have, however, been hit by the uncertainty. Ren said the firm’s international smartphone shipments plunged 40%. While he did not give the time period, a spokesman clarified the CEO was referring to the past month.

Bloomberg reported on Sunday that Huawei was preparing for a 40-60% drop in international smartphone shipments.

The CEO, however, said Huawei will not cut research and development spending despite the expected hit from the ban to the company’s finances and would not have large-scale layoffs.


https://www.reuters.com/article/us-huawei-tech-usa-revenue/huawei-says-u-s-ban-hurting-more-than-expected-to-wipe-30-billion-off-revenue-idUSKCN1TI0KL

President Trump says he will allow U.S. companies to resume selling high-tech equipment to Huawei, after he and his Chinese counterpart, Xi Jinping, agreed to restart trade talks.

Apple Moves Mac Pro Production to China

The $6,000 desktop computer had been the company’s only major device assembled in the U.S.


Apple Inc. is manufacturing its new Mac Pro computer in China, according to people familiar with its plans, shifting abroad production of what had been its only major device assembled in the U.S. as trade tensions escalate between the Trump administration and Beijing.

The tech giant has tapped Taiwanese contractor Quanta Computer Inc. to manufacture the $6,000 desktop computer and is ramping up production at a factory near Shanghai, the people said.