- (november 2012)
China is a colony of the USA.
When talking about China-USA relations, most commentators begin by pointing
out that the USA owes China a trillion dollars (not quite, but let's keep it
simple). While this is technically true (China has been purchasing the debt
of the USA year after year), it would help to restate it as "The USA funds
China's GDP". The USA has been the main contributor to China's growth after
the end of the Cold War just like it was the main contributor to Western
Europe's growth and to Japan's growth after World War II. In all three cases
(Western Europe, Japan, China), growth would have been much slower if the
USA had not absorbed a sizeable percentage of the exports of those countries.
The products in question were mostly low-tech products that the USA was
happy to import instead of producing.
Countries like Germany and Japan eventually managed to develop high-tech
economies and become relatively independent of the USA. However, notice
that they entered a prolonged period of stagnation or low growth and
that, even today, the slightest (economic) cold in the USA inevitably
translates into a major (economic) flue in Western Europe and Japan.
The dependence is still there, albeit less pronounced, and, on the other hand,
those economies have stopped growing the way they used to.
China is in the first stage of that evolution: it exports low-tech products
to the USA (the kind of products that the USA is happy not to make anymore)
and it grows rapidly thanks mainly to those exports. It has not entered the
high-tech stage yet. When a country reaches the high-tech stage, its currency
also matures (or, better, the USA does not tolerate anymore that the currency
is kept artificially low), and the country has to stand a lot more on its own.
There is literally no country in the world except for Russia (and small
communist countries like Cuba and North Korea) that stands on its own,
that can do without the USA. Russia has historically been separated
from the economy of the USA, and still is. Every other major country in the
world depends heavily on the USA: it "borrows" know-how from the USA,
it obtains capitals from the USA, it exports its products to the USA.
The entire world (and especially China) depends on the innovation, on
the capital and the market of the USA.
Therefore, when one looks at the money that the USA owes China, one is really
looking at the "favor" that the USA is doing China. That money is the very
money that keeps the Chinese economy going. The USA does this for multiple
reasons (last but not least, to fund its own growth), but that's another story.
So far, China has been a beneficiary of the generosity of the USA, not the
other way around.
Whether China's growth continues or not depends in part on its own decisions
(check how Western Europe self-destroyed with its reckless policies), but
also on what the USA decides to do with China. The viceversa is not true.
If the economy of the USA collapses, China's economy will suffer tremendously.
If the Chinese economy collapses, the only people who will notice in the USA
are the ones who invested in Chinese business and in the Chinese stock market
(it will certainly take a toll on the Dow Jones index).
The bottom line is that the Chinese economy depends on the economy of the USA
a lot more than the economy of the USA depends on China.
The most likely outcome of the next few years is that China will not be able
to keep prices low and this will slow its exports (there are countless countries
around the world that will be able to keep their prices lower). On one hand
its currency will be forced to fluctuate (just like the USA did to Japan in
1985, an event that marked the beginning of the long Japanese stagnation), and
on the other hand labor will demand higher wages, not to mention the fact
that China's demand will keep pushing the prices of commodities up.
For example, wages in China have already increased to the point that Mexico
is becoming very appealing for companies based in the USA: in 2000 the Mexican
manufacturing worker was five times more expensive than its Chinese counterpart,
but in 2012 the Mexican is only 30% more expensive; and that's not counting
the cost of shipping goods from China and Mexico to the USA (a cost that
is clearly lower in the latter case) nor the time that it takes to ship those
goods (months versus days). It used to be that China could offer better
infrastructure and a better educated workforce, but now the infrastructure
of countries like Brazil and Chile is as good as the Chinese one, and Mexico
graduates more engineers than Germany.
Economists routinely explain that China needs to create a consumer economy.
Good luck with that: Japan is still struggling now with that goal, and China's
population is infinitely poorer than Japan's.
That is another problem that China has and the USA does not have. The biggest
social problems that the USA has and that could erupt in armed revolts are
the Tea Party and the Occupy Movement. Neither is likely to cause much harm
to the nation. China, instead, is facing all sorts of subterranean discontent:
widespread poverty in the majority of the country (outside of the main cities
and even in the suburbs of the big cities), ethnic tensions that never went
away (and not only in Tibet and in the Muslim far west), resentment against
political corruption, and a pro-democracy movement that keeps quietly
expanding. If any of these elements turns violent, the world will learn overnight
how fragile the Chinese economy is.
It is not clear how much it matters today that most countries control the
circulation of content but this certainly still matters for ecommerce and
in general for interconnecting businesses: the USA is the one that invented,
deployed, spread and still controls the evolution of a worldwide infrastructure
called Internet without which you're cut off from globalization.
Incidentally, the job of running the Chinese economy (and the Chinese state
in general) is often in the hands of managers and politicians who were trained
in the USA. If they were trained in China, it is likely that they had at least
one teacher who was from the USA.
Yes: just like in many other allies and de facto colonies of the USA around
In 2010 nearly 130,000 Chinese students were enrolled in schools in the USA,
a 30% increase from the year before (note that 2010 was the peak of the
Great Recession for the USA). It is just a matter of time before the very
top of the Chinese hierarchy will include someone with a PhD from the USA.
Then there is the widely reported rearmament program, that feeds the
fear that soon the world will be bipolar, with the USA and China confronting
each other militarily like the Soviet Union and the USA used to do during the
Cold War. This is far-fetched to say the least. China does not have a single
soldier in the Americas, nor in Europe. In fact, nowhere in its own continent
outside of its borders. The USA, on the other hand, has soldiers deployed in
Mongolia, Kyrgizstan, Afghanistan, Pakistan, Thailand, the Philippines,
a nuclear treaty with
China's arch-enemy India, and formal military alliances with Taiwan, Japan
and South Korea.
It may soon have a base in Uzbekistan (this article) and even Myanmar and Vietnam are rapidly establishing
closer ties with the USA. The USA absolutely dominates the Pacific Ocean: not
only are some islands integral part of the USA (Hawaii), not only are some
islands colonies of the USA (Guam, Eastern Samoa) but most of the others
(notably the Marshall Islands, the Federated States of Micronesia, Palau)
have tight military connections with the USA, and the two regional powers
(Australia and New Zealand) rank among the closest allies of the USA anywhere.
China is literally surrounded. It's not only that
the Chinese cannot expand in any direction: they can't even escape.
If they are an enemy of the USA, they are in some serious predicament.
So much so that China has actually been a very reliable ally of the USA,
perhaps more so than a Western country like France. China has veto right at
the United Nations but it has rarely used it against the USA. In most
international matters China has reluctantly done what the USA wanted,
even tacitly approving the intervention in Afghanistan, Iraq and Libya,
and playing a key role in threatening North Korea and Iran.
China even tolerates that the USA protects and arms Taiwan, which is
technically a runaway province of China. The reason is very simple: the
USA has given advanced weapons to Taiwan that would probably cause
devastating damage to mainland China if mainland China ever tried to
invade Taiwan. Japan could become a nuclear power within weeks, if it wanted to.
And both are highly developed countries with technology that mainland China
can only dream of: in the event of warfare against Taiwan or Japan, the
technological gap would be critical and humiliating.
Viewed from China, the situation is tragic: the USA is encircling
China, is signing treaties with all its neighbors, it maintains a huge naval
presence in front of China's coasts, it spies China from the sky, it is even
arming a runaway province, and all of
this despite the fact that China has been very friendly to the USA.
How would the USA feel if China deployed troops in Canada and Mexico,
signed military treaties with countries all around the USA, sent warships
around the coasts of the USA, and even armed some right-wing separatists of
At the same time, China relies on that "encirclement" for the growth of its
economy. China's economic boom would be impossible in a turbulent world.
China was the main beneficiary of the "pax americana" that the USA military
has maintained in the very seas that, commercially, are dominated by Chinese trade.
China imports materials from Africa and Latin America, and exports goods
everywhere. All of its imported energy has to go through the Malacca Strait
(hence its projects to create land routes via Pakistan and Myanmar).
This would be extremely dangerous and expensive if the USA did
not protect those trade routes from Asia to other continents. Remove the navy
of the USA, and global trade would shrink to what it was before the end of
the Cold War: the USA trading with Western Europe and its Far Eastern
"colonies" (South Korea, Taiwan, Japan).
We keep hearing that China is the new emerging superpower. What power exactly
does this new superpower have? Militarily, virtually none. It can't even scare
Vietnam when they yell at each other over some tiny islands. Whenever it
behaves like the regional bully, that attitude backfires badly because
it sends the neighboring countries into even closer orbits of the USA. The
presence of the USA has never been so widespread in the seas that matter to
the Chinese, and one reason is that the other countries increasingly want
the USA to be there. Whenever China flexes its muscles, it causes its
neighbors to welcome more warships from the USA.
Economically, that power is dubious: it can't pressure anyone, but just about
every major economy in the world can pressure China.
Culturally, this cradle of ancient civilization is simply absorbing more and
more of Western culture, science and philosophy.
Even the Chinese languages (Mandarin and Cantonese) are threatened to some
extent by the emergence of English as the real second language of the country.
If China didn't have such a huge population, it would even make sense for it
to just federate with the USA. By being such a giant (of population) in a
different continent, it generates fears that are, so far, totally unfounded.
TM, ®, Copyright © 2012 Piero Scaruffi All rights reserved.
Back to the world news | Top of this page
- (july 2012)
Democracy or Confucius.
The scandal that severed the lightning career of Bo Xilai has been interpreted
as a prelude to a change of leadership that should be coming to China before
the end of the year, with the retirement of Hu Jingtao and the appointment of
his anointed successor Xi Jinping (and probably the parallel replacemente of
prime minister Wen Jiabao with Li Keqiang). Bo Xilai was a hardline populist,
an ideological heir to Mao Zedong. China now seems split in three main
currents of thought: the current leadership that tolerates the wealth gap
between the very rich (and very few) and the masses in the name of continued
economic growth; the populists like Bo Xilai who would like to redistribute
wealth; and the democratics like journalist Zhang Musheng (the only one who
has a bit of name recognition within China).
For a long time the West has been engaged in a battle to spread democracy
worldwide. It was a strange battle since the Western colonial powers were
the ones that had prevented democracy in most of the world, but, after
World War II, the USA became the real leader of the West and the West forgot
its anti-democratic past and enthusiastically embraced democracy; so
enthusiastically that it became a mission to save the world (from tyranny).
With hindsight one can see that the main reason to embrace this mission was
not idealogical but merely pragmatic: the enemy was the Soviet Union, and they
were not at all democratic; hence it made sense to promote an alternative
system as a way to curb the expansion of the Soviet Union; so much so that the
West did not hesitate to support fascist dictators in Latin America, Asia and
Africa as long as that helped the cause of the democratic West against the
communist Soviet Union. With hindsight it was not democracy that prevailed over
tyranny but simply the USA that prevailed over the Soviet Union, and the reasons
can be much more complex than a simple desire for democracy. It is debatable
which of the two systems was less loved by its subjects, since the USA and
Western Europe lived through at least one decade of massive popular unrest
(from the mid 1960s to the mid 1970s). What certainly won was the capitalist
economy, and to some extent the appeal of the USA (that remained throughout
the 20th century the main destination for emigrants worldwide). Whether
democracy was a factor that helped the West or not is actually not so clear.
Japan and South Korea (not to mention Singapore and Taiwan) were run by
undemocratic regimes throughout the golden years of their economic boom.
And one can go back to Hitler and Mussolini who, no matter how demented and
genocidal, turned around the collapsing economies of their countries.
Therefore the coupling of democracy and economic prosperity is dubious at
Then there is the moral issue. Advocates of democracy proudly defend democracy
as the aspiration of all people.
They ignore the fact that both Hitler and Mussolini won fair
elections, and that (in the age of daily polls) popular will routinely forces
governments to do the wrong thing.
If the majority of people in my country wanted to burn you alive (for whatever
reason), would that be a good reason to burn you alive? You would probably
object. This is not a hypothetical question since most ethnic persecutions have
been backed by the majority. Hence the will of the majority is not necessarily
"good". Democracy per se does not necessarily lead to a more moral world
than tyranny. Japan, South Korea, Taiwan and Singapore created some of the most
moral societies in the world when they were run by undemocratic regimes.
Then there is a simple logical issue: does it really make sense to give every
person the same right to vote? Why was nuclear power decided in a national
referendum in Italy instead of having just the experts vote on it? Would you
hold an election and accept the will of the majority if you were on a ship that
is sinking? or would you look for the most experienced sailors around and
do what they tell you to do? I suspect that all of us would take tyranny in
any emergency situation, hoping that the tyrant as long as the tyrant became
the tyrant because of his or her competence, and not because of mere brutality.
Democracy fails to prove itself the best system. It just happens to be the one
promoted by the current world power (the USA) and its allies (Western Europe),
i.e. by the countries that control 60% of the world's economy.
There are alternatives, and the West is too quick to dismiss them and demonize
them. A classic alternative is the benign enlightened tyrant, best represented
today by Vladimir Putin in Russia (the "I know better" model). This is a tyrant
who allows for very little criticism but does not resort to truly brutal
methods and his record justifies his power. He is "almost" democratic, in the
sense that most people would probably vote for him in a democratic election
just because he has delivered a better society than the one he inherited even
if most people may disagree with his methods.
The succession rule in this system is, usually, that the ruler appoints his
successor (as Yeltsin did when he appointed Putin).
Then there is the religious model. If you believe that the most important thing
in the universe is God, then you should just live according to the scriptures.
Today this is the model endorsed by Islamic movements like Iran, the Taliban
and the most extreme members of the Muslim Brotherhood (basically,
using shari'a law and having religious authorities interpret it and impose it).
I always felt that all theocracies were hypocritical because i find it difficult
to believe that anyone in power truly believes the silly stories contained
in religious scriptures. Therefore i have always felt that theocracies are just
excuses to install a tyranny by people who are a lot less religious than their
subjects; but of course i could be wrong.
The succession rule in this system is that the religious elite appoints one
of them as supreme leader (this successor too is usually handpicked by the
departing supreme leader).
Finally there is the Confucian model (which has occasionally popped up also
outside of China). In this model the ruler is divinely appointed (i.e. he is the
son of the previous ruler) but his mandate is ultimately legitimized by how
well he performs. In other words, people have the obligation to obey the ruler,
but the ruler in turn has the obligation to rule them well. This model
inevitably rewards the smartest people in society: the ruler has a vested
interest in granting power to the smartest people he can find.
Hence the traditional meritocracy used by China to create its bureaucracy.
China became communist in 1949, but, after Mao's death, it has fundamentally
remained a Confucian system in which technocrats move up the ladder of power.
Sure they must also be loyal to the Communist Party (that's the prerequisite
for being considered at all) but they are also judged by the Communist Party
according to how well they performed in their government tasks. The
succession rule here is much more complicated: it depends on a network of
powerful men, and on the merits of each candidate. In fact, modern China has
gone out of its way to ban the cult of personality that plagued the Mao years.
Each leader of China is more faceless than its predecessor (Deng Xiaoping, who
started the modernizing reforms and wielded immense power behind the scenes,
never held the titles of president or prime minister of China). In fact they
could claim that they are not tyrants at all: their power depends on the
consensus of the party, and most of the orders don't come from them but from
the various echelons of the party.
The advantages of these three systems are many. To start with, they can think
long term, whereas Western governments are under pressure to deliver
short-term results in order to get reelected, even when the short-term results
will cause long-term problems. The USA, for example, cannot enact five-year
plans like China for the simple reason that a presidential term lasts four
year (and usually the fourth year is spent campaigning for reelection).
Secondly, these regimes don't have to live with political gridlock:
democratic countries tend to be split 50-50 between supporters of
right-wing and left-wing policies, and are therefore paralyzed by endless
political bickering that prevents governments from taking urgent action.
These regimes are also much more likely to take unpopular but necessary
measures, whereas the primary goal of politicians in democratic countries is
to get reelected, a goal that obviously requires to be popular, not unpopular.
All three systems (Russian-style autocracy, Islamic theocracy and Chinese
Confucianism) have become more popular during the Great Recession that mainly
affected the democratic countries. They have also been fueled by resentment
towards the old colonial powers (that are rapidly shrinking in power) and by
nationalist spirit (it is a lot easier to claim that my system is better than
yours than to try and change my system, especially when i can get jailed or
killed for doing that).
The Arab Spring is basically mediating between Western-style democracy and
Islamic theocracy, the latter having the major drawback that it would impose
a traditional lifestyle on a young generation raised on Hollywood values
and Facebook interaction.
Russians are less enamored of Putin's persona than they used to be when the
economy was booming, and are probably worried of what will come after him.
There is, instead, no significant threat to the power of the Chinese rulers.
However, one can see two fundamental weak points in the Confucian model:
1. It is all based on delivering the goods;
2. It is all based on serving the people of the nation.
Both these points have dangerous consequences. The consequence of 1. is that
nobody really knows how the Chinese people will react when the first recession
comes, and i personally think it's coming sooner than they expect
(see The great illusion?).
That recession will suddenly delegitimize the regime: if you are not even
making me wealthy, why should i accept your tyranny?
It might not even take a full-fledged recession: the current wealth gap is
increasingly perceived by ordinary people (especially in the big cities and in
rural areas) as a failure by the state to do its job properly. That would be
enough to break the Confucian contract between Communist Party and society.
Bo Xilai, a very authoritarian man, was much more popular than any democratic
leader like Zhang Musheng because Bo was perceived as on the way to restoring
the Confucian contract between government and people. "Democracy" per se
is an empty word in China. It is not an ideal. A fair and just government is
The consequence of 2. is that the Chinese leadership is so intent to
please its own people that it neglects the effect of its actions on other
nations: China is inevitably getting more isolated at the time when it is
trying to expand its influence over the world
(see The evil empire). I say "inevitably" because it has to support brutal dictators
in order to sustain its economic growth. The West does (or at least did) the
same but rarely so blatantly. Sarkozy was willing to risk a spike in oil prices
(that would have hurt France too) when he bombed Qaddafi out of power. China
cannot run that risk: the price to pay for its leadership would be much higher
(again, a loss of legitimacy, which is worse than losing elections).
For one reason or another, the Confucian model is creating within the Chinese
regime a paralysis that is not all that different from the political
gridlock of Western democracies. There are ideologues who hold positions based
on the interest of the country. There are opportunists who want to profit from
the economic boom. There are ambitious career politicians who want more power.
There are provincial leaders who basically run their own rich kingdoms.
The Communist Party has become a vast and confused network of conflicting
interests. While many in China feel that change is inevitable, any real change
would expose those conflicts and create an explosive situation. So
understands "change" as replacing the spectacularly unexciting Hu Jingtao
with the even more faceless Xi Jinping. This is reminiscent of when the Soviet
Union picked irrelevant men as Breznev's successors in order to avoid change,
and ended up self-destroying.
See also: The great illusion?).
TM, ®, Copyright © 2012 Piero Scaruffi All rights reserved.
Back to the world news | Top of this page
- Articles about China before 2012