China’s Success Proves the Power of Marxism instead of Capitalism


Communist Revolution against Capitalism Is But a Specific Rule of Marxism

The general rule of Marxist political economy is: Production relations shall meet the requirement of the development of advanced production force.

From that general rule, Marx found that capitalism did not meet the requirement of the development of the advanced production force because production is for the society but means of production are owned privately by capitalists. Capitalists pursue profit. They plan their production to maximize their profits in disregard of the needs of the society, which always resulting in excessive production and capacities that cause economic crises. That certainly proves that capitalism fails to meet the requirements of the development of advanced productive force.

From the above general rule, Marx concluded that in order to meet the requirement of the development of advance productive force, communists as proletariat’s vanguards shall lead people to conduct a communist revolution to replace private ownership of means of production with public ownership and free economy with planned economy. As the new system of public ownership and planned economy meets the requirement of the development of advanced productive force. The economy will take off. There will be abundant supply of all kinds of industrial products to meet people’s demand. Everybody will be benefited including the capitalists that have been deprived of their enterprises by Marx’ communist revolution; therefore, Marx says that the proletariat will emancipate the entire human race.

There is the basic rules of Marxist philosophy of dialectic materialism, which are the basis of the above general rule of Marxist political economy. One of the basic rule is that practice is the only criterion to check truth. Soviet Union, socialist camp and China’s practices prove that Marxist specific rule of political economy on public ownership and planned economy is not truth. Monolithic public ownership and planned economy have been proved inefficient and unable to compete with capitalist system. Obviously, private ownership still to some extent meet the requirement of the development of advanced productive force.

Proletariat by definition has no means of production. Why they do not have means of production? In a rich free capitalist society, a worker’s income may enable the worker to have some savings to start the worker’s own small business if the worker has the ability to do so. One cannot do so as one does not have the ability to make money as an entrepreneur.

Proletariat may have a leader with military gift to lead them to win communist revolution in some countries. Still they, even their leaders, have no entrepreneur’s skill to make money so that their countries lag behind capitalist ones in economic growth and creation of wealth.

The monolithic public ownership make those who have skill to make money unable to and even dare not give play to their skill.

Managers of state-owned enterprises are unable to or dare not give play to their skill to make money due to the restriction state plan.

China Follows Marxist General Rules to Prosper

China has a tradition of respecting and giving play to people’s talent but unfortunately for a long time in Chinese history, that was restricted to the political talent of scholars. The failures of Marxist public ownership and planned economy in socialist countries and the initial success of township and town enterprises soon after the beginning of China’s reform made CCP leaders realize they should give play to people’s skill to make money by allowing them to set up their private enterprises.

Market economy will make adjustment of private enterprises as those unable to produce the goods the society’s needs or in excess of such needs will suffer losses and finally close down if they fail to improve. The government will guide private enterprises to produce the goods people need. Since the beginning of China’s reform, China has followed the Marxist general rule on production relations meeting the requirement of the development of productive force. It has also applied the general rule of Marxist philosophy to see what they have done is good as checked by practice.

Guided by the general rule of Marxist political economy, Chinese leaders always adjust their policies to meet the requirement of the development of advanced productive force. They saw utilization of China’s vast cheap labor resources, attraction of foreign capital and introduction of foreign technology were required by the development of advanced productive force in China. They opened up to draw in foreign capital and technology to utilize China’s vast cheap labor resources through the establishment of Sino-foreign joint ventures. They also opened up Chinese market to foreign enterprises to force Chinese enterprises to improve so as to be able to survive in their competition with foreign enterprises and Sino-foreign joint ventures.

Due to the application of the above mentioned Marxist rules instead of the Marxist specific rule of communist revolution, Chinese economy has taken off for decades. That has made Chinese leaders understand that they have to follow Marxist rules to constantly carry out reform to make its production relations meet the requirements of the development of advanced productive force and check their reform policies by practice. That is why China regards Marxism as its guarding ideology and itself as a socialist country.

Moreover, China’s leading Party CCP puts the people first and regards satisfying people’s wish for better life as the target of its struggle. That is certainly a socialist instead of capitalist way.

Summing up decades of China practice in applying Marxist general rules, China has developed its revised and updated Marxism called Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. As Marxist specific rule on monolithic public ownership and planned economy has been proved inefficient by practice and as under government guide private enterprises can play their role in developing economy, provide jobs and products that China needs, Xi Jinping thought advocate unswervingly encourage, support and guide non-public ownership. China’s new Marxism Xi Jinping thought to some extent has the characteristics of capitalism including capital accumulation, competitive markets, prices mostly determined by market demand, private property and the recognition of property rights, voluntary exchange, wage labor, etc.

However, as a whole Xi Jinping thought is Marxism and China is a socialist instead of capitalist country. As it does not oppose private economy capitalist in nature, it has no conflict with Western capitalist countries. That is why China upholds its relations of no conflict, no confrontation, mutual respect and win-win cooperation with the US, the leading capitalist nation.

Article by Chan Kai Yee


Trump’s Trade War Attacks, Xi’s Golden Opportunities


As mentioned above the concessions Trump asked China for: the reduction of trade deficit, equal treatment between foreign and Chinese enterprises, protection of intellectual property and decision of Chinese currency’s exchange rate by the market were the major content of Chinese President Xi Jinping’s predecessor Hu Jintao’s further reforms and opening-up.

Hu had realized that China could no longer achieve economic growth with its old approaches of heavy investment in production capacity and increase in exports. First, the international market for China’s labor-intensive industries and products with low technology is saturated so that the heavy investment only caused overcapacity. Second, as CCP had raised workers’ living standards, their wages have been much increased to cause great reduction in the profit margins of China’s labor-intensive industries. China has to switch from export- and investment-geared economic growth to innovation-, creation- and consumption-led economic growth. The above-mentioned further reform and opening-up are indispensable for such a transformation.

China has to upgrade the technology of its labor-intensive enterprises. It has attained that goal in some enterprises but the workers unable to learn the technology have to be laid off to be replaced by employees with better education and skill.

Most of enterprises in labor-intensive industries are unable to upgrade their technology so that they have to move to areas with lower labor costs. In so doing, they have to lay off their Chinese workers and employ local workers with lower wages in the areas they have moved to so as to reduce their labor costs. There will be quite serious unemployment in China as a result.

The further reform, therefore, encountered serious opposition from the vested interests in those industries. The resulting unemployment problem also greatly worries the reformists.

Moreover, in order to urge enterprises, scientists, engineers and skillful workers to conduct innovation and creation, China has to treat state-owned, private and foreign enterprises equally to enable competition to force its enterprises to improve. China’s reformists with Hu and Xi as their leaders know well protectionism can only protect backward enterprises and cause them to lose the incentives for innovation and creation. However, that also encounters opposition from vested interests. Hu was unable to make progress in his further reform and opening up. Xi has also been unable to make fast enough progress of the reform and opening-up he has inherited from Hu due to the opposition and unemployment problem.

Under such circumstances, Trump’s trade war forces labor-intensive enterprises to upgrade or move to areas with lower labor costs. The misery of unemployment will be caused by Trump instead of Xi’s reform and opening-up

The introduction of competition with foreign enterprises and protection of intellectual property to satisfy Trump’s and other Western countries’ demand are what China had promised when it joined the WTO. Since China enjoys such treatment in Western countries, it certainly shall reciprocate. Otherwise, China will encounter protectionist obstacles there. Chinese intellectuals are clever and hardworking. The pressure of competition will force them while the protection of intellectual property will encourage them to innovate and create.

Trump’s trade war provides Chinese President Xi Jinping with the golden opportunity to speed up his further reform and opening-up. Xi certainly will delay the deal to end the trade war in order to keep the pressure until he has succeeded in moving abroad or upgrading China’s labor-intensive industrial enterprises and making Chinese enterprises accustomed to competition and have the urge for innovation and creation.

Article by Chan Kai Yee


China Firm in Exploiting Foreign Markets, Resources despite US Attacks


Reuters says in its report “China says firmly opposes U.S. suppression of Huawei” on Tuesday 18 August, “China said on Tuesday it firmly opposes U.S. suppression of Huawei Technologies Co, after the Trump administration announced it would further tighten restrictions on the company.”

US tech war attacks focus mostly on Chinese companies with better technologies than US ones. The attacks really hit China’s weak points and do make Chinese companies suffer. Why does China respond only with words? On the contrary instead of counterattacks, China provides preferential treatment to US companies especially those with better technologies than Chinese ones such as Tesla in order to make good use of foreign resources.

In Xi Jinping’s article on China’s current Marxist political economy on August 16, Xi says China shall firmly adhere to its basic national policy of opening up. It shall thus make good use of both domestic and foreign markets and resources. Trump is stupid to refuse to make good use of Chinese resources. He has thus caused losses to both China and his own country. Chinese leaders will be as stupid as Trump if they respond out of the emotion of retaliation instead of China’s national interests.

Comment by Chan Kai Yee on Reuters’ report, full text of which can be viewed at https://www.reuters.com/article/us-usa-huawei-tech/china-says-firmly-opposes-u-s-suppression-of-huawei-idUSKCN25E0SU


Chinese President Xi says need to bring down trade barriers


John Ruwitch, Winni Zhou

November 5, 2019 / 10:02 AM / Updated an hour ago

SHANGHAI (Reuters) – Global trade barriers must be removed, and countries should uphold basic multilateral trade principles while standing firm against protectionism, Chinese President Xi Jinping said on Tuesday.

Chinese President Xi Jinping speaks at the opening ceremony of the second China International Import Expo (CIIE) in Shanghai, China November 5, 2019. REUTERS/Aly Song

Speaking at the opening of the Nov. 5-10 China International Import Expo, or CIIE, an annual import show in Shanghai, Xi said more must be done to boost international cooperation and remove barriers to innovation.

He reiterated broad pledges to continue to open China’s economy and markets, and strengthen protection of intellectual property rights.

The remarks come as U.S. and Chinese negotiators work to finalise a text of a “phase one” agreement for U.S. President Donald Trump and Xi to sign this month to ease the nearly 16-month trade war that has dented the global economy.

There is no single country that can resolve by itself the difficulties facing the development of the world’s economy,” Xi said in a speech.

We need to join hands with each other instead of letting go of each other’s hands. We need to tear down walls, not to erect walls. We need to stand firm against protectionism and unilateralism. We need to continually bring down trade barriers, optimise global value and supply chains and jointly foster market demand,” he said.

China launched the import expo last year as the China-U.S. trade war was heating up.

Critics say the week-long Chinese buying spree once a year does little to address structural concerns, including weak intellectual property protection, entry barriers and the lack of a level playing field for foreign businesses in China.

French President Emmanuel Macron, attending the expo, called on China to “consolidate” the opening up of its market.

Much has been done in recent years with two revisions of the negative lists for foreign investment … important tariff reductions have been granted. We call for their consolidation and deepening,” Macron said in remarks that followed Xi’s.

We need a greater openness of China and its domestic market,” he said, citing the agri-food sector.

All French, German and European companies expect a lot of China’s promises here.”

WE WILL DELIVER’

Foreign governments and business groups have become sceptical of Chinese reform promises and have long warned that China would invite retaliation if it didn’t match the openness of its trading partners.

On Tuesday, Xi listed a handful of measures that he said China had taken since last year’s CIIE to open its markets, and took direct aim at criticism.

This shows that we do honour our commitments,” he said. “And we will deliver on what we have promised.”

China would continue to push its strategy of innovation-driven growth, and foster new engines of growth, Xi said.

China will throw open its arms, and provide more market opportunities, investment opportunities and growth opportunities for countries in the world, so we can share the growth together.”

Last year, more than 3,600 companies attended CIIE, agreeing to some $57.8 billion in deals.

The expo comes at a rocky time for the Chinese economy with domestic demand stubbornly weak, despite more than a year of growth boosting measures.

China will better leverage the fundamental role of consumption, actively construct a more proactive domestic market to help provide support for Chinese economic development and expand the global economic growth,” Xi said.

Imports dropped 8.5% in September after a decline of 5.6% in August.

China’s third-quarter economic growth slowed more than expected to its weakest pace in almost three decades, with gross domestic product (GDP) rising just 6.0% year-on-year.

Additional reporting by Ben Blanchard in Beijing and David Stanway and Marine Pennetier in Shanghai; Editing by Shri Navaratnam

Source: Reuters “Chinese President Xi says need to bring down trade barriers”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


China’s Xi Exploits Trade War for Further Reform, Opening-up


Socialism with Chinese Characteristics Consolidated
The preceding three posts titled “Xi Jinping Typhoon”, “Xi Jinping’s Education on Democracy” and “Xi Jinping’s Rectification of CCP” all described what Xi has done to have consolidated and been consolidating China’s socialism with Chinese characteristics. Jiang Zemin and Wu Bangguo’s establishment of the rule of law, Hu Jintao’s Scientific Outlook on Development for CCP to “put the people first” and Xi Jinping’s abolishment of the re-education through labor system, mass line democracy and rectification of CCP are all China’s major political reforms. Those reforms have improved CCP’s governance of China and made CCP and its leaders very popular in China. CCP owes its successes to Chinese people’s vigorous support.

Western politicians and media simply fail to understand or turn blind eyes to such political reforms so that they have time and again criticized China’s “lack of political reform” and urge it to conduct a “democratic reform” to establish messy Western multi-party democracy in China. Chinese people, however, will not do so as they are fully confident about their own wonderful political system of socialist democracy with Chinese characteristics.

China’s is a successful democracy where people are free to make suggestions and criticism and CCP welcomes their suggestions and criticism. China’s organs of letters and calls always listen to people suggestions and criticism after Xi’s reform of those organs.

The following simple facts prove which democracy is better: In China, new advanced infrastructures are being built daily but in spite of the huge wealth in the country, the US lacks funds to fix or rebuild thousands of its bridges in poor conditions.

Certainly, in order to achieve further economic growth, in addition to the above political reforms, China has to conduct further economic reform and opening up

Futher Economic Reform, Opening up Indispensable
Xi’s predecessor Hu Jintao has already realized the need of further reform to switch from export- and investment-geared economic growth to innovation-, creation- and consumption-geared economic growth. He had become especially aware of that after his premier Wen Jiabao’s injection of 4 trillion yuan to counter the recession caused by US subprime mortgage crisis in 2008. The injection had given rise to serious problems, including excessive production capacity, surplus of products without sufficient market, rocketing property prices, etc. though it had stopped the economic downturn caused by the crisis.

It has proved that their old tricks of seeking export- and investment-geared economic growth no longer worked. If China kept on adopting such old tricks, it would have to face dire consequences, but for quite a long time since China refused to adopt the old tricks, China’s economic growth rate has kept on dropping.

Xi’s Reform Efforts
Xi carries on Hu’s further reform and has made some progress but far from enough as the reform is a hard and even bitter transformation. Lots of export-oriented enterprises have either to move abroad to lower their labor cost or switch to products with higher technology through innovation and creation.

For those enterprises, Xi has put forth the Belt and Road initiative to build infrastructures in underdeveloped countries to facilitate transfer of export-oriented industries to countries with cheaper labor and the Made in China 2025 Plan to encourage and subsidize innovation and creation.

Xi has already begun to carry out the initiative and plan but it takes time to attain the goals. If Xi has already attained the above-mentioned goals, Trump’s trade war cannot hurt China. Now the trade war may give rise to quite serious hardship as the transformation needs more time. Quite a few enterprises focusing on export to the US may close down and lots of their employees may be unemployed.

Trade War Facilitates Xi’s Reform
As the hardship is caused by Trump’s trade war attacks, due to patriotism, Chinese people will stand the hardship courageously. Trade war will only facilitate Xi’s reform and opening-up and make Chinese people rally around Xi in fighting back.

On the other hand, Xi may make Trump happy by further opening up China,

On the surface, further opening-up may facilitate foreign enterprises’ entries into the Chinese market at the expense of Chinese ones. However, Xi knows well that protectionism can only protect backward enterprises. Foreign enterprises may bring into China products of more advanced technology than Chinese ones and thus stimulate Chinese enterprises to improve in order to win competition.

China’s achievements after its entry into the WTO have proved Chinese people’s talents and ability to compete with strong foreign competitors. Only economic liberalization can give full play to Chinese people’s potential and enable China to have a wonderful future and realize China Dream.

Moreover, China has abundant financial resources and gives priority to funding and subsidizing the research and development of science and technology. It has attracted lots of talent including talent from abroad with generous remuneration packages and made great efforts to implement its Made in China 2025 plan. Xi’s first priority is to realize his China Dream of national rejuvenation. How can he attain his goal if China cannot become the best in the world in science and technology?

Restration of Socialist Camp
The above is Xi’s domestic moves. Internationally, Xi as a communist will make efforts to restore the socialist camp. Due to the changes of times, the socialism in Xi’s camp will certainly be different from that of the socialism of the collapsed socialist camp of the Soviet Union. It will be the socialism adapted to the changes of times and the different national situation in various countries. Anyway, it certainly is not the socialism with monolithic public ownership. Like Xi’s socialism, countries in the camp will focus on lifting people from poverty, economic growth and improvement of people’s living standards. That will be discussed later.

Article by Chan Kai Yee


China further eases foreign investment curbs on manufacturing


June 30, 2019 / 11:29 AM / Updated 13 minutes ago

BEIJING (Reuters) – China’s state planning agency has reduced the number of sectors subject to foreign investment restrictions, as Beijing moved to fulfill its promise to open major industries.

The National Development and Reform Commission (NDRC) on Saturday further eased foreign investment curbs on sectors including petroleum and gas exploration and widened access to agriculture, mining and manufacturing.

NDRC published on its website the new, shorter so-called negative list that sets out industries where foreign investment is limited or prohibited.

The number of items on the negative list was cut to 40 from 48 in the previous version, which was published in June last year. The new list takes effect on July 30.

The long-anticipated announcement comes after Presidents Donald Trump and Xi Jinping met in Japan, rekindling hope of a deal after negotiations broke down last month.

Reporting by Yilei Sun and Norihiko Shirouzu; Writing by Yawen Chen in Beijing; Editing by Sam Holmes

Source: Reuters “China further eases foreign investment curbs on manufacturing”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


Survey Proves China’s Success in Trade War United Front with Germany


SCMP says in its report “German firms find US less reliable than China as trading partner after getting caught between Trump and a hard place to do business” yesterday, “China ranked higher than US and Britain as trading partners in a survey of 2,000 German companies by Commerzbank”

According to the survey, “China was ranked third in an assessment based on political and economic conditions affecting trade, with a score of 30, led by Germany itself way out ahead on 65, and France on 39. The US, in fourth place, was a long way behind on 17 points, followed by Italy (11), Russia (10), Great Britain (8), Brazil (5) and Turkey (3), according to the results of the survey issued on Wednesday.”

China’s further opening-up with its new law on foreign investment succeeds in attracting German companies. US President Trump’s protectionism, on the contrary, will make things difficult for German companies to do business with the US.

Comment by Chan Kai Yee on SCMP’s report, full text of which can be viewed at https://www.scmp.com/business/banking-finance/article/3012302/caught-between-trump-and-hard-place-do-business-german.


Trump’s Trade War Attacks, Xi Jinping’s Golden Opportunities


As mentioned in my previous posts the concessions Trump asked China for: the reduction of trade deficit, equal treatment between foreign and Chinese enterprises, protection of intellectual property and decision of Chinese currency’s exchange rate by the market were the major content of Chinese President Xi Jinping’s predecessor Hu Jintao’s further reform and opening-up.

Hu had realized that China could no longer achieve economic growth with its old approaches of heavy investment to increase exports. First, the international market for China’s labor-intensive industries and products with low technology is saturated. Second, as CCP has raised workers’ living standards, their wages have been much increased to cause great reduction in the profit margins of China’s labor-intensive industries. China has to switch from export- and investment-geared economic growth to innovation-, creation- and consumption-led economic growth. The above-mentioned further reform and opening-up are indispensable for such a transformation.

China has to upgrade the technology of its labor-intensive enterprises. It has attained that goal in some enterprises but the workers unable to learn the technology have to be laid off to be replaced by employees with better education and skill.

Most of enterprises in labor-intensive industries are unable to upgrade their technology so that they have to move to areas with lower labor costs. They have to lay off their Chinese workers and employ local workers withe lower wages in the areas they have moved to so as to reduce their labor costs. There will be quite serious unemployment as a result.

The further reform, therefore, encountered serious opposition from the vested interests in those industries. The resulting unemployment problem also greatly worries the reformists.

Moreover, in order to urge enterprises, scientists, engineers and skillful workers to conduct innovation and creation, China has to treat state-owned, private and foreign enterprises equally to enable competition to force enterprises to improve. Xi knows that protectionism can only protect backward enterprises and cause them to lose the incentives for innovation and creation. However, that also encounters opposition from vested interests. Hu was unable to make progress in his further reform and opening up. Xi has also been unable to make progress fast enough due to the opposition and unemployment problem.

Under such circumstances, Trump’s trade war forces labor-intensive enterprises to upgrade or move to areas with lower labor costs. The misery of unemployment will be caused by Trump instead of the reform and opening-up

The introduction of competition with foreign enterprises and protection of intellectual property to satisfy Trump’s and other Western countries’ demand are what China has promised when its joined the WTO. Since China enjoys such treatment in Western countries, it certainly shall reciprocate. Chinese intellectuals are clever and hardworking. The pressure of competition will force them while the protection of intellectual property will encourage them to innovate and create.

Trump’s trade war provides Chinese President Xi Jinping with golden opportunity to speed up his further reform and opening-up. Xi certainly will delay the deal to end the trade war in order to keep the pressure until he has succeeded in moving abroad or upgrading labor-intensive industries, making Chinese enterprises accustomed to competition and have the urge for innovation and creation.

Article by Chan Kai Yee


European leaders press for fairer trade relationship with China


Richard Lough, Jean-Baptiste Vey March 26, 2019

PARIS (Reuters) – Europe’s top leaders told President Xi Jinping on Tuesday they wanted a fairer trading relationship with China, signaling an openness to engage with Beijing’s “Belt and Road” infrastructure project if it meant more access to the Chinese market.

The Europe Union, the world’s largest trading zone, has become increasingly frustrated by what it sees as the slow pace of economic opening in China, even after years of granting China almost unfettered access to EU markets for trade and investment.

As he seeks to forge a common European front to challenge China’s rise, French President Emmanuel Macron invited German Chancellor Angela Merkel and European Commission President Jean-Claude Juncker to talks with Xi in Paris.

“We, as Europeans, want to play an active part (in the Belt and Road project),” Merkel said after the talks. “That must lead to a certain reciprocity, and we are still wrangling over that a bit.”

Juncker, who will host an EU-China summit in Brussels next month, reinforced EU calls for better trade reciprocity so that “European businesses could have the same degree of access to the Chinese market as Chinese businesses have in Europe.”

The Belt and Road Initiative, championed by Xi, aims to link China by sea and land with Southeast and Central Asia, the Middle East, Europe and Africa, through an infrastructure network along the lines of the old Silk Road.

France says any Silk Road-style cooperation must work in both directions. Even as he presided over the signing of trade deals with China worth tens of billions of dollars this week, including an Airbus deal to sell 300 aircraft to China’s state buying agency, Macron pushed back against Beijing’s rights record and ambitions.

“The European Union is based on respect for individual freedoms and fundamental rights,” Macron, said on Monday, referring to Beijing’s alleged mistreatment of Muslim Uighurs.

“That’s why France brings this issue up in its dialogue with China to express concerns that are ours and those of Europe on the question of respecting fundamental rights in China.”

Europe’s quest to hold a common line on China’s advances became more difficult after Italy on Saturday became the first major Western country to endorse the Belt and Road initiative.

The rapprochement between Rome and Beijing has alarmed Italy’s European allies, who consider it a strategic error to let Chinese companies acquire EU infrastructure such as ports.

In a sign the European Union wants to tighten conditions on access for Chinese businesses, it is about to introduce a system to screen foreign investments, particularly those affecting strategic infrastructure or technology. It has also urged leaders to back its plan to limit access to EU public tenders.

Sat beside Xi, Macron said competition and cooperation were natural but that Europe and China should strengthen multilateralism through deeper cooperation.

“We must.. accelerate work underway between China and the European Union on modernizing the WTO to better respond to issues around transparency, overcapacity, state subsidies and dispute settlement,” Macron said on Tuesday.

“What’s at stake is demonstrating that cooperation yields more than confrontation.”

Seeking to reassure his European counterparts, Xi said both sides should “increase the positive energy”.

“Cooperation is greater than competition,” Xi said. “We shouldn’t be always worried about watching our back with suspicion while moving forward.”

Additional reporting by Leigh Thomas; Editing by William Maclean and Angus MacSwan

Source: Reuters “European leaders press for fairer trade relationship with China”

Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.


Will US Regret in Helping China’s Further Rise with Trade War?


There is the Chinese saying: “It is going to rain; Mother is going to remarry; there is nothing one can do to stop that.”

To entertain my readers, I would rather rephrase the saying as follows: “It is going to rain; China is going to rise; there is nothing the US can do to stop that.”

It is a sad world full of undesirable events, even wars to kill people. Even if the US had not launched its prolonged wars in Iraq and Afghanistan leading to the death of hundreds of thousands people there, there would still have been terrorist attacks and even accidents causing death and injuries.

We need some fun in our life. As what the US has been doing to stop China’s rise is ridiculous, I want to make fun of that in order to entertain my readers.

I said yesterday in my post “US Regrets Helping China’s Rise by Getting It into WTO” that the US believed Gordon Chang’ prediction of China’s collapse when China had jointed WTO so that the US got China into WTO. However, it now regrets that because China’s accession to WTO, on the contrary, has helped China’s rise.

As I said in the beginning, the US cannot stop China’s rise. That is because China relies on itself instead of the US to rise. In fact, what the US and other Western countries have done has only helped instead of enabled China’s rise. Without such help, China would still have risen but only a little slower.

Now, what the West, especially the US, is doing facilitates China’s rise again.

Western Pressures Facilitates Removal of Opposition to Further Opening-up
US current administration must be cleverer: It is conducting a trade war to force China to make concessions of opening its market wider, reducing US trade deficit with China, stopping “forced transfer” of technology, protecting intellectual property and preventing devaluation of Chinese currency.

China no longer needs the protective measures it has kept since it began to open up as Chinese enterprises have grown strong enough. In fact, such measures protect local industries from competition with outsiders. They reduce instead enhance Chinese enterprises’ incentive to improve themselves in order to win competition.

Protectionism only protects backward enterprises.

China’s labor costs have risen to the level that it is no longer able to maintain its labor-intensive products competitive on world market. There are two measures to resolve that problem:

1. Improve technology to reduce number of workers employed in production in order to reduce labor costs. That will cause enterprises to lay off some workers; and

2. Move labor-intensive industries to countries with lower labor costs. It will also result in unemployment of some workers.

Local governments certainly oppose such measures as both may give rise to the problem of unemployment.

Moreover, as moving factories abroad incurs some costs in moving equipment and training local workers, enterprises affected also oppose that.

Therefore vest interests in enterprises and local governments affected strongly oppose further opining up. However, US tariff hikes force them to adopt the above-mentioned measures. Removal of their opposition also facilitates China’s investment abroad, especially investment in and even takeover of foreign high-tech enterprises. Trump’s trade war and EU’s demand for further opening-up helps China overcome the opposition.

West Restriction to China’s acquisition of Foreign High Technology
The US has already imposed some strict restriction to Chinese investment and other Western countries have also been planning to do so. China has to further open up so as to enjoy other countries’ opening up to its investment there. US and Western pressure helps Chinese leaders overcome the opposition to further opening up.

In the past, China obtained lots of quite advanced technology through transfer of technology to its joint ventures with foreigners, but none of the technology is the best in the world as foreign companies are not willing to transfer their best technology for fear of losing their competitive edge. China has grown rich and is able to pay for the best technology or takeover of foreign companies that own the best technology. It also has surplus capital to invest in other countries.

The US strictly restricts China’s takeover and investment in high technology for fear that China’s further rise may make China a rival world hegemon or even surpass the US as the only hegemon in the world. Other developed countries that have some of the most advanced technology also fear China’s rise as they do not know what China will do when it becomes another hegemon.

Trade War Helps China Obtain High Technology
As mentioned above, China is no longer able to obtain the best technology through joint ventures. It has to buy technology from or take over foreign enterprises of high technology.

US trade officials want China to allow foreign enterprises set up enterprises or joint ventures without the requirement for technological transfer.

That is really stupid. A wholly owned foreign enterprise in China has to employ Chinese staff and workers as foreign ones are too expensive to employ in China. Chinese employees there will soon learn the technology of the foreign enterprise.

That is why international lawyers help foreign parties get Chinese joint venture partners and their employees to sign non-disclosure agreements to keep the technology they leant confidential. For joint ventures the agreements aim at preventing competitors not the joint venture partners from learning the secret as the technology has already been transferred or licensed to the Chinese partners.

A wholly foreign owned enterprise, however, can only sign non-disclosure contracts with its technical personnel, but a real expert may get employed in the enterprise as a common worker and learn the technology when he has only seen it with his professional eyes.

China can selectively provide preferential treatment for foreign enterprises to attract them to set up wholly owned high-tech enterprises in China. That will enable China to learn their high technology.

The US Helps China Protect Its Intellectual Property
China is now able to develop lots of its own intellectual property so that it has great need for protection of intellectual property. How can it expect other countries’ protection of its intellectual property if it cannot protect others’; therefore, US trade war demand for protection of intellectual property provides China precisely what China wants for reciprocal protection.

The US Helps China Reduce Financial Dominance of US Dollar
In the past, China might have the desire to reduce the exchange rate of its currency in order to stipulate its exports to earn foreign exchange it needs for import of foreign advanced technology, but there are no such needs now. China has already been able to earn trade surplus and accumulated world largest foreign exchange reserve. However, due to the financial dominance of US dollar, most of China’s foreign reserve has to be kept in US dollar. It is unable to get enough return as the US keeps interest rate very low to support its economy. There is also the risk of devaluation of US dollar due to the decline of US economy and US excessive issue of money for its excessive spending.

China needs to maintain the exchange rate of its currency stable and even make it rise a little to facilitate turning its currency into an international currency in order to reduce US financial monopoly. US President Trump’s trade war demand for China not to reduce the exchange rate of its currency is precisely what China wants.

From the above, we see what the West, especially the US, is pressurizing China to do will benefit China. Will the US regret what it is doing now later?

We know the US will be benefited by what it may get from China in forcing China to conduct further reform and opening-up, but China will also be benefited. If what the US wants is to stop China’s rise, it will regret even though it has been benefited. However, such regret is stupid, just as it was stupid to regret having China join WTO. China’s rise has enabled China to provide lots of cheap goods for US consumers. That has enabled them to make ends meet in spite of the hardship they encounter due to America’s declining economy.

Article by Chan Kai Yee