[Marxism] The class nature of the Chinese state

Marvin Gandall marvgandall at videotron.ca
Fri Oct 26 04:20:26 MDT 2007

The trend is more important than the snapshot. So too in discussing China's
rise as an economic power, and its standing in relation to the US, Europe,
and Japan.

I believe I posted both of the articles below to the list earlier this year.
I thought it would be helpful, in light of the current discussion, to repost
them again.

Even by measures other than purchasing power parity, China is currently
estimated to be the world's third largest national economy behind Japan and
the United States. Less than a decade ago, it was seventh, behind Germany,
Britain, France, and Italy, all of whom it has since surpassed.

The US is still by far the world's leading economy and manufacturer (unless
you questionably choose to use the more loosely structured and politically
heterogeous EU as the unit of comparison) but China's output has been
growing much more rapidly than either, and it is expected to pull even and
overtake the US within the next decade or so. The US presently accounts for
roughly a quarter of the world's manuufacturing output. In 1995, China was
responsible for less than 5% and now accounts for 12% of it.

It's important to note that these figures disguise that a lot of Chinese
output, particularly for export, has been produced by Western and Asian
firms who have repatriated a share of their profits overseas. Here, too,
however, as China moves up the so-called value chain, newer Chinese
manufacturers in auto, steel, telecommunications, biotechnology, computers,
home appliances, etc. are emerging and claiming a larger share of domestic
production, either through joint ventures or as competitors of the foreign
multinationals resident in China. They are beginning at the same time to
expand into overseas markets, along with Chinese banks and energy companies.

China's significance as a low-wage workshop, which has attracted most of the
attention on the list, is only one aspect of its strategic importance to
world capitalism. With the world's largest stash of foreign exchange
reserves, it is also, as everyone knows, an important lender - particularly
to the US, whose huge current account deficit it has helped finance. And, as
aggregate living standards improve, it has become coveted as a potentially
limitless consumer market by manufacturers, financiers, retailers, and
commodity producers around the globe. What is keeping central bankers awake
these nights is not so much the fear of a US recession, but a parallel
pullback in the overheated Chinese economy which is being counted on to pick
up the slack.


China's GDP Poised To Top Germany's
As Power Shift Speeds Up
By MARCUS WALKER in Berlin and ANDREW BATSON in Beijing
Wall Street Journal
July 16, 2007

Chinese statistics due this week are likely to show that the country is on
track to leapfrog Germany as the third-biggest national economy this year,
sooner than expected -- yet another sign of just how quickly the global
economic balance of power is shifting.

Overtaking Germany in absolute terms may not be seen as an important triumph
to China's leaders, whose priority is raising incomes and living standards
that remain far below those of the developed world. And it might not be
surprising that a country with 1.3 billion people produces more in a year
than Germany's 82 million inhabitants. But passing that milestone could add
to increasing anxieties in wealthy nations about China's rise.

Recent estimates put the size of China's gross domestic product last year at
$2.8 trillion, breathing down the neck of Germany's $2.9 trillion national
output for the period. Only the U.S. ($13.2 trillion) and Japan ($4.4
trillion) have bigger economies, according to International Monetary Fund
data. GDP measures the total value of goods and services produced in a

Chinese government data for the second quarter, due out on Thursday, are
expected to show that Chinese output grew by around 11% in this year's first
half, a rate that economists think China will maintain this year. Even
optimistic predictions for German growth, at close to 3%, are no match for

As recently as 1999, China was only the world's seventh-biggest economy. It
has since leapt past Italy, France and the United Kingdom. If it manages to
maintain its current rate of growth, it could surpass Japan in around a

China's imminent overtaking of Germany is only one instance of a broader
global shift. As populous countries such as China and India become major
forces in the world economy, established powers such as Europe, Japan and
the U.S. are becoming relatively less important. Many economists already
argue that global growth is becoming less dependent on the U.S. economy,
which has slowed in the past year without greatly affecting others.

Declining relative economic weight is also expected to bring declining
political influence, a particular problem for European countries that partly
drives the quest for closer political integration in the European Union.
With a collective $14.5 trillion economy, bigger than the U.S., the
27-nation EU wields influence over trade agreements and economic regulation,
and is trying to build a common foreign policy.

By another measure, known as purchasing-power parity, China is already the
world's second-biggest economy. If exchange rates are adjusted to equalize
the cost of goods in different countries, then China's total output was
worth $10 trillion last year, according to estimates by the IMF. That
eclipses Japan's $4.2 trillion and Germany's $2.6 trillion, and is hot on
the heels of the U.S.'s $13 trillion economy on this measure.
Purchasing-power parity tends to make developing economies appear bigger
than comparisons using current exchange rates, because a dollar can often
buy more goods in poor countries than in rich ones.

Some world economic institutions are having trouble adjusting to China's
unexpectedly fast rise. The Group of Eight leading nations, initially
conceived as a talking shop for leaders of the world's biggest capitalist
economies, looks increasingly like an exclusive club of developed countries.
It doesn't include China even though China's economy is larger than that of
five G-8 members. Russia was the last country to gain full membership. To
preserve its relevance, the G-8 now invites nations with major emerging
economies such as China to attend parts of its meetings.

China has also complained about its representation at the International
Monetary Fund. While recent changes have given the country more clout, it
wasn't able to stop an IMF resolution on monitoring exchange rates that
seemed directed at the Chinese yuan.

One organization that has expanded to include many emerging economies, the
Paris-based Organization for Economic Cooperation and Development, limits
its membership to democracies and so doesn't accept China as a member. The
group has nonetheless stepped up China-focused research and exchanges.

*    *    *

US to lose role as top manufacturer
By Peter Marsh
Financial Times
May 23 2007

China will gradually take over the role of the US as the world's largest
manufacturer but will do this only by 2020, with the US's position in the
global league table of manufacturers remaining surprisingly strong,
according to an authoritative economic study.

Global Insight, a Washington-based economics consultancy, forecasts that the
US will keep its share of global manufacturing output above 20 per cent at
least until 2024 goes against the widespread feeling, at least in the US,
that the country is losing ground rapidly.

"If you told most people in the US that the country was still the biggest
manufacturer and is likely to remain so for some time, they would say you
were lying," said Jim Womack, chairman of the US-based Lean Enterprise
Institute, a research group. "There's a lot of negative feeling in the US
[about manufacturing] and this leaves people thinking the country is doing
worse than it really is."

According Global Insight's forecasts, the US share of global manufacturing
output will fall to 22.2 per cent by 2020 from 25.5 per cent last year. By
2020, China's share would overtake that of the US for the first time. It
will rise to 22.4 per cent, from 12.1 per cent in 2006.

As a result of rapid economic growth, China has quickly climbed the league
table of global manufacturers.

In 1995, the country accounted for just 4.6 per cent of world output of
manufactured goods, compared to 24 per cent in that year for the US.

In 2006, Japan was the second biggest manufacturer in the world with a share
of 13.9 per cent. However, this share is likely to fall steeply by 2024 at
which point Japan's share will be just 8.6 per cent, the study says.

Western Europe, like the US, will maintain a fairly high share of total
output, according to the projections.

Its share of the global total - which was 31.2 per cent in 1995 and 26.1 per
cent last year - is expected to fall to 19 per cent in 2024, a drop that is
less dramatic than might be expected.

Prem Premakumar, senior economist at Global Insight, said that manufacturing
growth in China was likely to slow in the coming years as the economy

Also, manufacturers in the historically high-cost regions such as the US and
western Europe were likely to become more competitive, either by adopting
new manufacturing ideas and coming up with innovative products, or by being
more aggressive on wage costs.

Auggie Tantillo, director of the American Manufacturing Trade Action
Coalition, an industry group, said most people in the US would find the
Global Insight data surprising, on account of concerns triggered by job
losses in manufacturing in the US and the country's rising trade deficit -
mainly linked to a deficit on manufactured goods.

"I am not sure the figures truly measure the degree to which manufacturing
output from China has been growing - and how cheap much of the production
from China really is," says Mr Tantillo.

He said the growth in the US's trade deficit - which reached $764bn (£387bn;
?568bn) last year, of which $233bn was the deficit with China - was a "cause
for significant concern" because it showed US-based manufacturers were
unable to meet domestic demand by such a large amount.

On the other hand, Anand Sharma, chief executive of TBM Consulting, a US
manufacturing consultant, said the Global Insight data reflected the
progress many US companies had made in many "niche" fields of manufacturing
such as specialist machinery and components - as opposed to commodities such
as textiles.

"People tend to focus on the factories closing at one end of town and forget
to look at the expansion plans elsewhere," he said.

An example of a US manufacturer that has been quietly expanding in recent
years - while maintaining most of its production in the US - is Sealy, a
North Carolina based company which is the world's biggest maker of
mattresses. In recent years it increased its sales steadily to about $1.6bn
a year, while keeping its US workforce fairly constant at 4,200.

Jim Hirshorn, vice-president for finance and research and development at
Sealy, said the company continued to find it economic to have 20 of its 21
global plants in the US because labour costs were a relatively small part of
production costs, while a stream of innovative products kept the company

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