China – The Emerging Global Giant Part 2 (of a 2 Part Series)

In October 2019, China celebrated the 70th anniversary of the founding of the People’s Republic of China. It has been a great and terrible time for China, as history has been for most countries. But China is a nation on a scale that dwarfs other countries – and, therefore, both its greatness and tragedy dwarf those of other countries.

The story begins a century before the PRC’s founding. In the mid-19th century, British merchants approached China, as they approached most of the rest of the world. When they arrived in the 1840s, China was the largest economy in the world. Industrialization had only just begun, so the machinery did not yet define the size of an economy. Rather, it was defined by land and labor, and in these areas, China towered over most of the world. Meanwhile, Britain’s industrial revolution was accelerating, and it was searching for raw materials to fuel its industry and markets in which to sell its products. It was inevitable that British industrialism and mercantilism and Chinese pre-industrialism and mercantilism would meet, and meet violently.

The British wanted to sell more than just industrial products to China; they wanted to sell opium. The British were coming to dominate India, which had vast amounts of opium. The drug was banned by the Qing Dynasty that ruled China, so the British smuggled opium into China, first covertly and then by force of arms. The opium destroyed many lives in China, as it did in all countries, while the British made vast amounts of money from the trade. As they discovered China, they discovered potential markets for many goods and labor to produce them. They demanded that areas like Hong Kong be ceded to British rule to protect their economic interests. The Qing Dynasty, weakened by the British, had no choice but to concede. Over time the British were joined by the French, Germans, Japanese and Americans, among others.

By the 1890s and early 1900s, China was the place for foreigners to go, hoping to make their fortune and find exotic adventure.

Foreigners operated along the coast, and the coast was tied to foreigners. They sold items to China, and in China, they manufactured items for sale in their home countries. The coast remained Chinese, but economically it faced outward to the world, not inward to the rest of China. The coast was where concessions were under the control of foreigners and many Chinese who lived there prospered from this relationship. But over time, this generated complex systems of conflict. Chinese factions fought over relationships with foreigners. Foreigners conspired with each other. The central government was deeply divided and fought internally. Interior regions fought to secure some of the coastal wealth. It is hard to capture the complexity of the violence and the suffering it imposed. Coastal dwellers became wealthy. The peasants of the interior became, if anything, poorer.

The Chinese had cheap labor, which meant that manufacturing in China gave foreign companies a price advantage in their own markets. The Chinese were also hungry for foreign-manufactured products that they could sell in China or use to manufacture more complex products. Those Chinese who participated in this trade prospered enormously and therefore gained political power. But they depended on their foreign business relationships for trade. They had to subordinate themselves to the foreigners economically and politically to maintain that power. To do so, they had to reach out to the West to maintain an internal balance of power that focused on fighting each other rather than threatening their business interests on the coast.

This resulted in a multi-sided civil war, defined not by great issues, but numerous complex local issues, almost incomprehensible to any but those who lived as part of them. And caught in the middle was the vast number of Chinese who simply wanted to live, or live a little better, and found themselves surrounded by ruthless violence. This was not new to China. Such conflicts had been present long before the foreigners came, and when they exploded, dynasties fell. And so too did the hapless Qing Dynasty, giving way to the Republic of China under Sun Yat-sen, a Honolulu-educated Christian who represented to many Chinese the foreign influence that was tearing their country apart.

The Communist Party of China emerged from this situation. On the surface, it was a Marxist party, focusing on class struggle and the creation of a communist paradise. But that Marxism was intertwined with nationalism. The class struggle had to be against foreign interests and their Chinese partners. Therefore, class interest and national interest intersected. From the beginning, the CPC could not define itself except as a party committed to freeing China from foreign imperialism. Indeed, when Mao Zedong tried to stage a worker’s uprising, it failed. The workers had interests in common with the foreigners – they were wealthier than their cousins in the interior. Mao led the legendary Long March to the interior to raise a peasant army to resist the foreigners’ Chinese allies and expel the foreigners altogether. This appealed to the peasant class, they were enemies of foreigners and the Chinese coast, and that was good enough.

Japan’s World War II defeat in China was followed by the defeat of the United States, who advised Chiang Kai-shek, a leader who sought to maintain the system founded a century before. Mao understood that China could never be secure while the concessions operated in any way. When China was engaged in global trade, parts of it became wealthy, other parts sank into worse poverty, and worst of all, China was divided and weak. Without internal strength and cohesion, China would always be exploited. Mao slammed the door shut on most trade and imposed the party’s will over internal decisions, rooting out alternative centers of power as best he could with the Great Leap Forward and the Cultural Revolution, designed to ensure that the bureaucracy would not usurp his power. He made China secure and united but terribly poor. China’s paradox was that it could be wealthy through trade but remain divided or be united by isolationism and remain poor. Mao pursued the latter path, into a kind of logic that ultimately looked more like madness.

Once Mao was dead, Deng Xiaoping made the great bet – that this time, China could open the doors to trade, become wealthy but remain united and avoid becoming dependent on foreigners. On the 70th anniversary of the founding of China, Deng’s bet is being called. The Chinese have once again become dependent on foreigners and foreign investment in the coastal regions’ factories. It is not the concession of the 19th century, nor is it the autonomy Mao wanted. As the United States presses its demands on China and China pretends to be impervious, the power of the foreigner is felt again. So too are the divisions. The tension between the wealthy coast and the poorer interior has reemerged. It has not yet resulted in conflict, and the government seeks urgently to relieve any tension.

The Opium Wars opened China. Mao tried to enclose China, and Deng reopened it. We are now, 70 years after the founding of the PRC, facing the question of whether a nation so constituted can long endure, or more precisely, endure without internal conflict. It is an old question in China and repeats itself in different ways. But in the end, it seems to terminate either in conflict or in ruthless suppression. Xi Jinping has signaled that he wishes to suppress conflict with minimal ruthlessness. The question is whether there is such a choice in China. The idea is that 5G and its brethren will allow China to leap over the question. Perhaps, but 5G will be sold to foreigners, and the customer has power. And in China, that power has always been dangerous.

The US  Postwar Game – Plan

By the end of 1945, America had become the dominant global power. And the Rockefeller brothers were in charge. All of its rivals were destroyed. Now, it set about conquering the world, either through the use of diplomacy, or other means such as economic and financial blackmail, through the use of military force.

The U.S. Empire knows no limits. Its aim is political and military domination of the world. Under the US system of global capitalism, the demand for energy and other vital resources is unlimited. The stark truth is that the U.S. really has no intentions of helping to build strong states in the Middle East or elsewhere states. However, it is important to recognize that this goal is not new.

America’s “Road Map to Empire” was not formulated by the Bush administration.  It is just that the post-war rhetoric of human rights and social and economic development has diminished, to be replaced by the primary concern with global supremacy through military force. The imperial project was outlined in the immediate wake of the 2nd World War. It was part of the “Truman Doctrine” formulated in 1948 by George Kennan (one of the architects who had authored the Rockefeller Foundations “War and Peace Study Group” in 1939), Director of Policy and Planning at the U.S. State Department:

“We must be very careful when we speak of exercising “leadership” in Asia. We are deceiving ourselves and others when we pretend to have answers to the problems, which agitate many of these Asiatic peoples. We have 50 percent of the world’s wealth but only 6.3 percent of its population…. In this situation we cannot fail to be the object of envy and resentment. Our real task in the coming period is to devise a pattern of relationships which will allow us to maintain this position of disparity. We should cease to talk about the raising of living standards, human rights and democratization. The day is not far off when we are going to have to deal in straight power. “ 

While it would have been impossible for the U.S. to continue to monopolize a full half of the world’s wealth after Europe, Japan, China and the USSR inevitably got up upon their feet after WWII, the U.S. has nonetheless done an amazing job of controlling an unjustifiable and disproportionate amount of the world’s resources.

Thus, currently, the U.S. has about 5% of the world’s population, and consumes about 25% of its resources. An article in Scientific American, explains that,“ with less than 5 percent of world population, the U.S. uses one-third of the world’s paper, a quarter of the world’s oil, 23 percent of the coal, 27 percent of the aluminum, and 19 percent of the copper . . . .   Our per capita use of energy, metals, minerals, forest products, fish, grains, meat, and even fresh water dwarfs that of people living in the developing world.’”

The only way the U.S. has been able to achieve this impressive, though morally reprehensible, feat has been to undermine, many times fatally, the ability of independent states to exist, defend themselves and to protect their own resources from foreign plunder. This is why the U.S. has teamed up with the world’s most deplorable forces in destroying independent states around the globe.

This would seem to be an insane course of action for the U.S. to take, and indeed it is, but there is method to the madness. The U.S. appears to be intentionally spreading chaos throughout strategic portions of the world; leaving virtually no independent state standing to protect their resources, especially oil, from Western exploitation. And, this goal is being achieved with resounding success, while also achieving the subsidiary goal of enriching the behemoth industrial-military complex.

Indeed, the very nature of U.S. foreign policy is destruction. Given this, it is at best foolish and naive for people of any political stripe,  to put any stock in the notion that the U.S. is acting in the defense of human rights, democracy or any such lofty goals in intervening militarily abroad.

 China’s BRI

In 2012, the Obama White House changed tack, and announced a “pivot to China” policy. It began to militarize the South China Sea, and linked military deals with many of China’s neighbors.  The aim was to build up a powerful naval force that could blockade China’s flow of goods on the seas. The bulk of China’s trade with the world was by sea. There are two key maritime choke points that the US Navy could close, and deny access to ships carrying goods to or from China. These two choke points are the Straits of Hormuz in the Persian Gulf carrying oil and gas to China; the other is the Straits of Malacca, outside Singapore, carrying raw materials to China, and shipping finished goods to the rest of the world.

 To avoid these maritime choke points, China developed two economic corridors that would bypass these choke points. Beginning in the late 2000s, China began to develop the China-Pakistan Economic Corridor (CPEC), from Gwadar in Pakistan to China’s western region; and the China-Myanmar Economic Corridor (CMEC), from a port on Burma’s coast to China’s western regions. In addition, China was making remarkable progress in building transportation corridors linking the Central Asian nations to China, through pipelines carrying oil and gas. But, this was not enough.

And so, in 2013,responding to Washington’s “pivot to China” policy, Chinese President Xi Jinping announced a new policy called the New Silk Road – later changed to the Belt and Road Initiative, or the BRI.

This policy was, in turn, taken from the ideas and blue prints developed by Lyndon LaRouche who had announced the new paradigm of re-industrializing the world, by creating transportation corridors linking China to Europe, via the Middle East. LaRouche’s  concept was called the “Eurasian Landbridge”. This concept was first announced by LaRouche in October 1989, in Berlin, on the eve of the collapse of the Soviet Union.

 Were this concept to be fully implemented, it would deal a devastating blow to the US, and as well as the major maritime powers of the world, such as Britain and Japan. It would reduce their grip on the global flow of goods, and power would shift to the “rimland” countries, as against the “maritime powers”.

 As Britain dominated global trade through its control of the maritime routes via its navy, so too did the US, especially from 1945 onward. And this shift to trading overland via the BRI was not in America’s interest, and thus, it set about sabotaging the BRI, through various means. Although some progress was made in building various road, rail and pipeline connectivity between the period between 1992 and 2012 in Eurasia, what was lacking was  a coordinated approach, including financing.

Not long after the Chinese President announced the launch of the BRI, New York began to put a plan in motion that would cripple China’s financial strength. It was financial warfare. Just as Moscow has many senior figures within its government, so does Beijing. Many of China’s top technocrats, civil servants, bankers and economists studied at prestigious universities in America, as well as most of their children. This group constituted the “pro-West” faction within the top-tier of Chinese politics and finance. And they listened to advice from Wall Street banks, etc. This advice was that it was time to pump up the Chinese stock markets, through “suggestions” from key policy-makers in Beijing.

In March 2015, China announced the formation of the Asian Investment Bank-the AIB- a Chinese version of the World Bank. Many nations joined as founding members, including Britain- defying American pressure not to join. In retaliation, the Rockefeller Empire put into motion an act of financial warfare against China. And it used many US-educated, pro-Wall Street people who were in high positions in government agencies to facilitate a stock market crash that caused losses of $4 trillion, and from which China-its people and companies – have not recovered from.

China’s Stock Market Crash in 2015

The Chinese stock market crash also reflected the underlying structural problems of the economy. Beginning in the early 1990s China has achieved two decades of remarkable double-digit growth. But it is increasingly clear that this export and investment-led growth is not sustainable without substantial restructuring and rebalancing of the economy. Then came the 2008 great recession, causing global demand to fall precipitously and China could no longer keep its growth going through exports. And its own citizens weren’t consuming enough to create the demand necessary to keep the growth engine revving either. The Chinese government’s answer was to mount a massive stimulation package, using monetary policy, state-owned banks, local governments, and other tools under its control to push internal investment. The result was a massive buildup in factories, highways, airports, real estate, and much more. Some of these investments were wise. Many weren’t. China has become famous for its profusion of empty stadiums, skyscrapers, and ghost cities. The result is a lot of overcapacities and many state-owned enterprises and local governments are ridden with enormous bad debt. This is part of why the Chinese government encouraged the stock market boom. As said by an analyst, “The Chinese government basically comes up with this plan. They see they have these heavily indebted companies that need to raise money to clean up their balance sheets. They realize there are these huge savings in China that can be put into the stock market. So they begin talking up the stock market and they make it easier to use margin debt. And margin debt exploded.”

In a sense, the stock market boom was caused by government’s strategy to solve the debt problem of zombie state-owned enterprises and the government’s facilitation of margin trading by relaxing the previous restrictions. This coincided with the timing when the Chinese property market went down, and people who were putting their money in property began looking elsewhere for better returns   As the Economist puts it, “The government got all of the corporations in China that were going broke to go public. Then, they got the average Chinese citizen to invest.” and “Officials are seen to have promised the population a bull market, only to lure them into a bear trap” 

Before reaching the ceiling on June 12, 2015, China’s stock market had ballooned about 150 percent in a year. The Chinese stock market crash began with the popping of the stock market bubble starting on June 15, 2015 and ending on August 25. The Bank of China pumped in some $500 billion to stabilize the market, which seemed to have calmed down with the index hovering around 2900 points (compared to 5178 peaks reached on June 12). The total loss amounted to some $3.6 trillion. Add to that an additional $500 billion pumped in by the government, the total losses came to more than $4 trillion, most of it lost by the public and business entities.

The Causes

The source of any stock market crash may vary over specific circumstances, but one general reason remains generically the same: What goes up must come down. Thus we need to understand what caused the bubble in China’s stock market to form. Many companies with meager earnings (or even losses) were seeing a meteoric rise in their shares. Meanwhile, the country’s broader economy was going the other way, with economic growth slowing down significantly (the economic growth rate has fallen from double-digit figure in previous years to 7%, dubbed the “New Normal”. But the Chinese economic growth has been declining in the past few years and was not expected to go back to the brisk growth in the near future. Therefore, the 2014-2015 run-up was clearly a bubble without support from the real economy.

A big reason for the stock market rally was that a lot of ordinary Chinese people began investing in the stock market for the first time.. “A majority of the new investors in China’s market don’t have a high school education (6% are illiterate). There are now more retail investors in the Chinese stock market (90 million) then there are members of China’s Communist Party (88 million). Worse yet, many of these novice investors were making highly leveraged purchases with borrowed money.

This practice, known as “trading on margin”, used to be prohibited in China. But then the Chinese government, listening to the advisers linked to Wall Street, lifted the prohibition. Many of these borrowed money to gamble on the stock market. The borrowed money flooded into the Chinese stock market between June 2014 and June 2015, helping to push stock prices up 150 percent.  So, margin trading―and margin debt―skyrocketed, and a perfect storm was forming.

The surge in stock prices alarmed Chinese authorities. The government (again, on advisement from these Wall Street linked advisers) cracked down on vehicles designed to skirt the margin trading rules, and   announced a new limit on the total amount of margin lending stock brokers. This announcement acted as the last straw and triggered the market to fall on the following Monday. When the market nose-dived, investors faced margin calls on their stocks and many were forced to sell off shares in droves, precipitating the crash further. Now the bubble has popped.

New York had won a great battle- which was to cause China such a severe financial loss that it would hamper the funding of the BRI, especially through the AIB.

 Now we move onto the next phase of the financial war, conducted by New York, against China. And this would take place when Trump would be elected the next US President.

The Trump Plan

 Trump was selected by the Rockefeller family to be the next US President. Trump was mandated by the Rockefellers’ to implement the “FORTRESS AMERICA” plan, and also to form a secret alliance with Putin, in regard to China and Iran. Part of the “FORTRESS AMERICA” plan was to boost domestic production, and to rely less on imports. To that end, Trump would target those countries that the US has a negative trade balance with.

While campaigning for the White House, Trump lays out plans to counter unfair trade practices from China at a rally in Pennsylvania. He also previews his eventual moves to apply tariffs, citing human rights violations of Muslim minority groups in Xinjiang Province, says China’s entrance into the World Trade Organization enabled the “greatest jobs theft in history.” In March 31, 2017, Trump, now president, signs two executive orders. One calls for tighter tariff enforcement in anti-subsidy and anti-dumping trade cases. China responds with plans for retaliatory tariffs on about $50

 Trump’s tariffs policy aims to encourage consumers to buy American products by making imported goods more expensive. Starting in 2018, he ratcheted up tariffs, which are a tax on imports, while encouraging U.S. companies hurt by them to move production — and jobs — back home.

 Who are Trump’s Targets?

Mainly China, which accounts for the bulk of the deficit. But Trump also pulled the U.S. out of a proposed trade deal with Japan and 10 other Asia-Pacific countries, calling it unfair for U.S. workers, and started talking directly with Japan instead. He has threatened 25% tariffs on millions of imported cars and car parts from Europe and Japan, and insisted on renegotiating (and renaming) the 1994 pact with Canada and Mexico known as Nafta. Trump has also threatened to impose tariffs as retaliation against France for its new digital tax on technology companies. The U.S. trade deficit increased to a 10-year high of $621 billion in 2018, although the trend may have reversed in 2019 as imports fell dramatically. Meanwhile, American farmers lost markets and income as China and other trading partners raised tariffs in retaliation.

What’s Special about China?

China’s admission into the World Trade Organization in 2001, under rules that granted it concessions as a developing country, greatly accelerated its integration with global markets and supply chains. Studies have shown that Chinese exports led to lower prices for U.S. consumers — and helped lift many millions of Chinese out of poverty. The country’s ascent also resulted in the loss of millions of U.S. factory jobs. China’s power — especially its technological prowess — is now at a point where it risks eroding American military and economic advantages. China insists it plays by global trade rules, and it sees the U.S. as seeking to contain its rise. It is accelerating the development of its own high-technology industry to be less dependent on the U.S.

Trump first hit steel and aluminum imports from several countries on national security grounds, arguing that a weakened U.S. industry would be less able to build weaponry in a crisis. Tariffs on goods specifically from China started in July 2018. China responded in kind. Before that year ended a truce was called and a deal seemed to be in the offing. But in May 2019, Trump started raising tariffs on a scale not seen in decades, provoking further retaliation. Trump and Chinese President Xi Jinping agreed to restart talks. Then Trump, claiming China had failed to keep a promise to buy more from American farmers, threatened a 10% tariff on all remaining imports from China, including clothes, shoes and electronics. Some took effect on Sept. 1. Others were to be introduced Dec. 15,

The dispute has seen the US and China impose tariffs on hundreds of billions of dollars’ worth of one another’s goods. Trump has long accused China of unfair trading practices and intellectual property theft. In China, there is a perception that America is trying to curb its rise as a global economic power.

New York Targets China’s Pig Population

As part of the pressure applied to China, the weaponized African Swine Fever was unleashed on China’s pig population. Starting in 2018, the disease spread rapidly all across pig farms in China. An epidemic of African Swine Fever swept through China’s hog farms, and the effects are rippling across the globe, because China is a superpower of pork. Half of the world’s pigs live in China — or at least they did before the epidemic began a year ago. By the end of 2019, China’s production of pork could be cut in half. That’s roughly 300 million to 350 million pigs lost in China, which is almost a quarter of the world’s pork supply. Up to now, Chinese consumers still are finding enough pork to buy, because many farmers slaughtered their herds early, out of fear of infection. In the past 6 months or so, however, supplies have started to run short, and pork prices are now rising sharply in China.

In fact, people around the world are now starting to feel the effects.

With fewer pigs, China is importing less soy meal to feed them. That alone has been enough to push down global prices for soybeans, which means less money for farmers in Brazil and the U.S. The growing Chinese pork shortage is good news, though, for pork producers in the rest of the world: China is now starting to import more pork, driving up prices.

China’s unsuccessful efforts to stop the disease may have hastened the spread a devastating disease spreading from China could bedevil Beijing and global agriculture for years to come. The pig disease — a highly contagious and untreatable outbreak that is not fatal to humans but can be spread by us — has now extended swiftly out of China. It has moved across nine other Asian countries, particularly Vietnam, which is the world’s fifth-largest pork producer and has lost much of its herd this autumn. Before reaching China, the disease had been slowly infecting occasional farms in Russia and elsewhere in Eastern Europe.

Powered by pork, China’s overall food prices last month were one-fifth higher than they were a year ago, after seven years of little change. Large purchases of pork by China are driving up live hog prices in the United States, Europe and around the globe, pushing up costs for everything from German sausages to Vietnamese pork meatballs.

Beef and lamb prices have risen as families worldwide seek alternatives, so much so that overall meat prices in international commodity markets have increased nearly 20 percent in the past year. Brazil is now ramping up beef and chicken production to meet demand, partly by burning forests in the Amazon to clear land for agriculture.

China used to have 440 million pigs — almost half the world’s population — but its herd has shrunk by half or more, according to Rabobank, a Dutch bank with a heavy agricultural focus. Pork prices in China have more than doubled.

The problem has become so pressing that Beijing accepted a partial trade deal with the United States in September 2019, in part to resume imports of American food. Pig prices have climbed so high that one livestock company, Guangxi Yangxiang, printed red banners to recruit potential farmers that read, “Raise 10 sows and drive a BMW next year.”

Prior to the September 2019, a month earlier, The US labelled China as a “currency manipulator”, a serious charge, as per the WTO rules. China denied the charge, and suspended all agricultural meats. It was at this point that New York decided to unleash the Coronavirus in China.

 The story continues in our next article, titled “China- The Virus Crisis”.

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