“Socialist” China and Its Many Illusions

Growth that depends in large part on US cooperation goes away when you no longer fulfil the prerequisites of US cooperation.

By Stephen Gowans

August 9, 2023

An article in today’s Wall Street Journal, “U.S. to Ban Some Investments in China,” and relatedly, China’s recent economic tribulations, prompted the following thoughts on what was not too long ago presented by Sinophiles as the world’s paragon economic model.

The take-off Sinophiles celebrate as the outcome of China’s so-called ‘unique’ economic paradigm, began soon after Beijing decided to transition from its role as communist competitor of the United States to capitalist economic partner of its former enemy.

Deng Xiaoping’s “If you can’t beat them, join them” project, opened the gate to US, European, and Japanese investment, which drove the country’s development.

China was—and remains—an investors’ dream. It offered a vast pool of educated, disciplined, low-wage workers, a stable political environment, a government eager to cater to foreign investors, and a huge market—all the ingredients that investors needed to pull in huge returns.

What made the model unique was China’s history, size, and demography, as well as its Communist Party, which had the legitimacy and Washington’s backing to mold China’s vast population—at that time the largest in the world—to its will of catering to foreign investment. The model couldn’t be transferred to other places, because other places lacked the combination of education, political stability, infrastructure, size, proximity to sea routes, and willingness to collaborate with the United States, that made China the world’s premier investment opportunity.

Times have changed.

Having used Western investment to vault to the first ranks of the global capitalist economy, Beijing has embarked on a second transition, this time from US economic partner to US economic competitor. Chimerica, the integration of China into the US economy, with the US as the union’s finance, R&D, and marketing arm, and China as its manufacturing base, has yielded to China 2025, Beijing’s plan to dominate the industries of the future, provoking Washington’s counter-measures to stop it.

As China challenges US supremacy, its once torrid growth has slowed. Direct U.S. investment into China has hit a 20-year low. U.S. venture-capital investment has hit a 10-year low. Without US commitment to building China as the factory floor of the US, EU, and Japan, China’s economic prospects are no longer as sanguine as they once were.

People’s China, contrary to a myth perpetrated by Sinophiles and apostles of multipolarity, didn’t develop in a world of its own making, insulated and kept separate from capitalism, neo-liberalism, US leadership, and the US economy. It developed precisely because it willingly became a part of all these things.

Now that it’s trying to extricate itself from its former submission to US economic leadership in order to vie with US capital for economic supremacy, foreign and venture capital investment is drying up and China’s torrid growth has disappeared in a puff of political reality, viz., growth that depends in large part on US cooperation goes away when you no longer fulfil the prerequisites of US cooperation.

China’s economic model is not so different from the state-led capitalist development of Germany’s Second and Third Reichs or Meiji-restoration Japan that we should regard it as unique; we certainly shouldn’t regard it as socialist.

Nor, given that China’s rulers have adopted a state-led capitalist development model, guided moreover by a nationalist ambition to restore China to the great civilization it once was, should we harbor illusions about the political project of the Chinese Communist Party. It is not the worldwide proletarian revolution, nor even, it would seem, the proletarian revolution in China, but the vaulting of China to supremacy in the world capitalist market—the same ambition of every other capitalist power with heft.

We should not, therefore, regard the political primacy of the communist party in China as investing the country’s rivalry with the US and EU with a character any different from Germany’s earlier rivalry with Britain for supremacy in Europe or Japan’s erstwhile rivalry with the United States for pre-eminence in the Pacific and East Asia.

China is not a paragon, a model for other countries to emulate. It is just one more capitalist power vying for markets, raw materials, investment opportunities, strategic territory, and the power to shape the global economy to its advantage.