91������̳

Au Loong-Yu is a long-time Hong Kong labour rights and political activist who now lives in exile. In the first part of this interview with 91������̳’s Federico Fuentes, he discusses China’s rise and tensions with the United States.

The second part deals with China’s economic woes and the significance of the White Paper movement. An earlier interview looked at China’s position in the world and implications for peace and solidarity activism.

* * *

What key factors explain China’s economic rise over the past few decades?

China’s rise has been spectacular. For the past 20-30 years, China’s average annual GDP [gross domestic product] growth has been about 10% or slightly less. This has meant China has managed to double its GDP every eight years.

In my opinion, there are three important factors that, although inadequate in terms of providing a full explanation, are indispensable — and yet often overlooked — to explain this rapid rise.

The first factor is China’s investment rate that, as a share of its GDP, is the highest in the world. China’s ability to maintain such a high investment rate for such a long time is unprecedented. For the past 20 to 30 years, China’s investment rate has stayed above 40%, peaking at 45‒46% in 2014‒15.

To fully understand this factor we must look at what happened in Mao [Zedong]’s era. During the first three decades of the Chinese Communist Party’s (CCP) regime, China’s investment rate was also very high: from 1958‒80, the investment rate was almost 30% each year (excluding the period after the famine in the early 1960s).

By the time Mao died in 1976 the country was exhausted, but China had laid the foundation of its modern economy. It had a level of infrastructure and manufacturing that was more diversified and self-sufficient than most countries with a similar level of development. It also had a labour force with a relatively high literacy level. Without these, China’s later rise would have been improbable.

But to sustain even higher investment rates required more capital, something China could not obtain solely from domestic resources. This was the context for Deng [Xiaoping]’s historic compromise with the United States and Britain, which enabled China to start attracting foreign capital and integrate into global capitalism.

At first, Western capital was hesitant to invest on a mass scale, especially after the in Tiananmen Square in 1989. That is why during the first stage of “reform and opening up”, the extra capital came from Hong Kong and Taiwan, two former colonies of Britain and Japan, respectively.

This brings us to the second factor, China’s colonial legacy. Taiwan and Hong Kong enabled China’s rise by contributing industrial and service capital (creating jobs for rural migrant Chinese workers) and by training up the first generation of entrepreneurs and managers (which were especially rare in Mao’s China).

Hong Kong was important in other ways. During the Cold War, Beijing obtained one third of its foreign currency through trade with Hong Kong, despite being tightly contained by the West. From there, Hong Kong went on to play the unique role of financial hub for “greater China”, helping Chinese corporations raise huge amounts of capital and laying the foundation for their global ambitions.

The importance of these colonial legacies is evidenced by the fact Deng wanted to keep “foreign forces” in Hong Kong through his promise of “One country, two systems” (hence Hong Kong’s autonomy). Deng offered a similar compromise to Taiwan, which the latter declined.

The third factor is the party-state, which was capable of bringing together the other two factors and making them possible in the first place. Unlike what happened in Russia with the fall of the Soviet Union, when Deng reintroduced capitalism, he held onto the existing party-state. This enabled his regime to be much more ruthless in crushing any challenge from below.

Beijing apologists praise China as a model “development state”, but ignore the price Chinese people have paid in pursuit of such high investment rates. Guaranteeing such a high investment rate requires suppressing consumption and wages. That means having to suppress workers to ensure they cannot organise or go on strike.

It is important to add that alongside official propaganda about the “China dream”, used to justify the CCP’s ruthless pursuit of economic growth, the bureaucracy has always pursued its own dream of self-enrichment. Accountable to no one except party bosses, bureaucrats have used all kinds of modernisation programs to plunder the nation’s wealth through corruption and kick-backs or founding companies.

This is not completely new. But whereas Mao’s bureaucracy could only appropriate social surplus in the form of use value, the post-Mao bureaucracy has combined the coercion of the state and the power of money to achieve its own enrichment in the form of exchange value. Through this process, the bureaucracy has consolidated itself into a new surplus-appropriating ruling class — one that views its own endless reproduction as its top priority.

As a result of Deng’s historic compromise, the US began offshoring manufacturing to China. What impact did this have on China’s rise? And how can we explain current US-China tensions given this process of economic integration?

A decade after Hong Kong and Taiwanese companies started investing in and shifting manufacturing to China, Western and Japanese capital began to do the same. This process of offshoring was accompanied in China by the privatisation of many medium- and small-sized state companies and the sacking of more than 30 million workers.

The end result was that capitalists in the West and Japan as well as the Chinese regime benefited greatly from offshoring and the super-exploitation of 250 million powerless Chinese workers recruited from the countryside. At the same time, deindustrialisation in the West and Japan and privatisation and mass sackings in China made it a lose-lose situation for working people on both sides. That was the essence of the deal struck between Deng and [US president George HW] Bush.

It is important to understand, however, that this deal began to come to an end when Xi Jinping came to power in 2012. By that point, both sides were sensing that the honeymoon period was over, particularly as the US had not expected China to rise so quickly and — being the empire it is — could never allow a rising China to challenge its global status.

Xi’s ascension, and his subsequent Belt and Road Initiative, can in many ways be understood as a response to the US’ “Pivot to Asia” under then-Secretary of State Hilary Clinton in 2009. This was followed by the trade wars started by [former US president Donald] Trump.

But it is also important to say that China shares responsibility for rising tensions. Xi, basing himself on the assessment that “The East is rising, the West is declining,” decided it was time to challenge US hegemony. Hence his slogan on foreign policy became “dare to struggle”.

The first step Xi took in that direction was his decision to militarise the South China Sea in 2015. At that point, China’s actions could no longer be defined as defensive. In militarising the South China Sea, China was not fighting the US empire; it was, first and foremost, taking away the rights of surrounding countries over their economic maritime zones.

How has this shift in orientation under Xi impacted on China’s rise?

Xi’s assessment not only led him to confront the US head on but to also crush Hong Kong. Of course, from the point of view of the autocracy, that the Hong Kong people would dare defy Beijing’s law on extradition was intolerable and had to be punished.

The problem is that, even from the viewpoint of the collective interest of the regime, Xi went too far. Xi not only annihilated the opposition, but in practice destroyed the very institutions that underpin Hong Kong as China’s financial hub. By killing Hong Kong’s autonomy, Xi is killing this goose that lays golden eggs for Beijing.

Something similar is happening with regard to Taiwan. The truth is that the CCP has successfully integrated Taiwan economically into its orbit. But its hawkish approach towards Taiwan is increasingly counter-productive.

Here again, Xi’s premature showdown with the US has only worsened China’s position, as the response from Washington has been to block China from importing high-end products, especially cutting edge technology.

In all this, it is important to remember that the US empire is clearly not the “good cop” — but neither is China. The US empire is steadily declining, but China’s rise has not reached a point where Beijing can impose its will on the West. Despite this, Xi has sought to strike out, creating enemies in the process. Xi’s leadership has not only been a disaster for Chinese people but is now even a liability for the regime.

[Extracted from a much longer interview first published at .]