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The world's largest war economy

2022-10-25 | China
The world's largest war economy

The CCP congress has meant much more and was by far more important and dangerous than what the press in Europe and the United States has wanted to trasmit to us, namely, the idea that the new stage of the Chinese party-state regime marks the passage to a personal dictatorship. It is an image that is certainly useful to the war propaganda of the United States, yet it masks the seriousness of the evolution of the organization of the entire Chinese ruling class to prepare for a war with the US bloc starting at least from 2027.

The context of the Congress: The U.S. trade and technology war hurts Chinese capital

China's economy slows down

Chinese capital accumulation comes to this congress with ever growing contradictions: a provincial deficit of more than one trillion dollars, a real estate sector in agony, a heavy industry on the verge of default, a clear trend towards reduction of foreign investment and a decline in industrial orders unimaginable only a year and a half ago.

Most alarming of all: the fact that production chains are increasingly affected by the technological and trade war of the United States. Worse still, the international blockade forced by the threat of US sanctions against any supplier or manufacturer that sells certain components or services is now being extended to all critical technologies. Obviously, as is the case with semiconductors and chips, it is the capital invested in the technology of Washington's main allies in Asia - Taiwan, South Korea and Japan - that suffers first. And that is not mentioning the EU. But, for the moment, the aggressiveness of the Biden administration is reduced to impotence.

And although in the medium term the effect will for the moment be counterproductive for the bottom line of US capital itself, which inevitably suffers shortages of critical parts in the automotive and other sectors, it is understood in Washington that this is a strategic battle on which the ability to sustain US hegemony over the coming decades depends.

Contrary to what the war propaganda of the US sells abroad, this endeavor should not be understood from an exclusively military perspective. It does not appear that the current blockade of the semiconductor industry will stop or condition Beijing's arms development. The state-led overcapitalization efforts allow the endogenous technology industry to supply the military with 7nm chips in more than sufficient quantity.

The U.S. press is much more honest than the rest of the world in this regard: it is simply a matter of cutting off the feet of Chinese industrial development at all costs in order to maintain U.S. industry's ability to create global monopolies. And...Biden's policy of encirclement and isolation seems to be succeeding.

Such a strategy can only increase war tensions and the risk of a direct armed conflict between powers. If China sees its development capabilities and imperialist role in the world market diminish definitively, it has every incentive to start a war before it is too late, that is, before the damage caused makes a victory impossible later on.

The political response of the Chinese ruling class

Xi surrounded by new Politburo members

Xi followed by new Politburo members

It is not surprising therefore that there are tensions within the Chinese ruling class in the face of growing US pressure. We know they exist because since last May the CCP, the party-state into which the Chinese ruling class is organized, has been working to quell and suppress rumors and gossip within its own ranks, fearful that allowing its leaders public or semi-public room for maneuver would precipitate an unwanted internal rift.

Xi tried to set the tone for the preparations with an article warning of the critical nature of the moment: "If we do not have a historical perspective and long-term planning, we will lead ourselves to ruin," he asserted. As some Chinese analysts recalled, Xi insisted that the imperialist competition with the US is "a long marathon" and disavowed positions that could accelerate the course of conflict... for which Xi and his faction do not believe China is yet ready.

His opening speech, meticulously crafted down to the last millimeter with the bureaucratic jargon characteristic of the party-state, signaled, also in what was left out, the great change that the congress was coming to recognize:

  1. The so-called "period of important strategic opportunity" is closed, or, in other words, the phase opened in the 1990s in which the development of Chinese capital could take place freely without causing major confrontations or awakening the horizon of imperialist war has come to an end.

    Our country has entered a period in which strategic opportunity coexists with risks and challenges, and uncertainties and unforeseen factors are on the rise.

  2. What can be expected now, according to Xi, is for the US and its allies - whom he did not name directly - will turn to a strategy dedicated to "blackmailing, containing, blocking and exerting maximum pressure on China" until "dangerous tempests" arise.

But if the opening report provided the diagnosis, it also laid the groundwork for the strategy to be adopted. The shift in emphasis from market development and reforms to security, as Xi remarked in his report, set the tone: putting the machinery of Chinese capital into high gear and heading toward the war economy.

As Liu Yuanchun, president of the Shanghai University of Finance and Economics, commented to the South China Morning Post, the war in Ukraine had given "profound" inspiration to the Chinese economy. Christopher K. Johnson, president of the China Strategies Group and former CIA China policy analyst at the New York Times remarked that the speech directed the ruling class to "strengthen the system because the likelihood of conflict is increasing."

In the logic of Chinese state capitalism, the reinforcement of the trend toward War Economy basically means two things:

  1. The strengthening of "internal circulation", i.e. the capacity of domestic demand (=consumption + public spending) to sustain accumulation in the face of the growing risk of encountering closed markets abroad. It is not a question, far from it, of abandoning the export sector, but of organizing state intervention to cushion the foreseeable "shocks" that will come from abroad. It is what in 2020 was already referred to as dual circulation. As we commented then:

    The distinction between economic vanguard (exports) and rearguard (domestic market) is strengthened, with the concept of dual circulation: two mercantile circuits between which the state would mediate to ensure a balanced growth. It would be a matter of maximizing exports by developing a flexible internal economy capable of supplying through credit and demand policies the stoppages and abrupt changes that the imperialist conflict might produce in foreign demand. The aim is thus to avoid commercial or technological blockades, disruptions in supply routes and armed conflicts that would destabilize the internal productive fabric and feed situations of instability.

    Technological sovereignty and resource sufficiency become key points to strengthen the export sector in the face of trade warfare and technological blockades. Developing its own semiconductor and chip industry, and joining the technology blockade game with the United States are becoming priority objectives. The goal of global leadership in new technologies such as AI takes a back seat. The change points to a perspective not only of self-sufficiency as highlighted by the press, but of true technological rupture and industrial standards.

    China in 5 and 15 years, 3/10/2020

    The recentralization of economic power is accompanied, as could not be otherwise, by a general recentralization of state power around the party structures and their verticality. The political game between levels and sectors is already seen as a potential danger for the challenges -class struggle at home and imperialist war abroad- which they expect to face in the coming years.

    The famous enthronement or consecration of Xi Jingpin, so widely discussed these days in the European and U.S. press because of its propagandistic utility, is nothing more than the reflection in the structures of the Party-state of the same centralizing logic intrinsically linked to the War Economy.

  2. The accelerated development of the army so that it is capable of winning a war against the US. It should not be forgotten that one of Xi's main assets vis-à-vis his peers is to have bet since his first mandate on the modernization of the army and its equipment, which is now seen as professional.

    In his report it was clear that now comes more military spending. All this is based on the assumption that the US encirclement will materialize, sooner or later, in localized wars that the Chinese army must be able to "stop or win". And that it must be ready to do so by 2027... at the latest.

    The army must be prepared to fight, and all its work must be carried out with combat readiness as a criterion and focus on making it capable of fighting and winning.

    We will make proper and solid preparations for military combat in all strategic directions, promote coordinated preparations in both conventional and new areas of security, develop the new model of combat forces and logistical security, deploy military training in the mode of actual combat, strengthen the use of military forces, and, through the networked information transmission system, accelerate the development of military intelligence and improve the ability to conduct joint operations as well as operations on all fronts. All this would be done in order to create favorable situations, control crises and stop or win wars, and to do so effectively.

Organizational response of the Chinese ruling class

Military delegates at the CCP Congress

Military Music Band of the CCP Congress

The government apparatus of the Chinese state consists of a team of vice-premiers, coordinated by the prime minister. But an implicit prerequisite of the position of vice premier is membership in the Politburo. And traditionally, prime ministers are members of the Standing Committee of the Politburo, from which those over 68 years of age are usually excluded.

Therefore, the selection of the members of the Politburo and its Standing Committee was the most significant action of the Congress. Depending on who was chosen and on what criteria, Xi would demonstrate the degree of urgency and speed he expected from the implementation of the new orientation underway and the horizon he gives to his own mandate.

The result points to a forceful short term yet long term gamble: Four new young leaders, coming to the Standing Committee from the ranks of management of the scientific-technological and military apparatus were summoned to give an immediate boost to technological import substitution and rearmament... and yet are too young to be nominated as Xi's successors.

But there is more. Party-state power is an obscurantist zero-sum game. While the European and US press put the spotlight on the sad spectacle of the departure of an elderly - and not at all influential - Hu Jintao, Xi's presumed favorite successor, Hu Chunhua - known as little Hu - was excluded from the supreme circle of power. Once again the meaning is political. The exclusion of Hu Chunhua, architect of the poverty alleviation policy that was once Xi's flagship, confirms that after Xi's third term, a fourth will come. And it is already decided. The Chinese ruling class is not going to change the team at the helm. "A storm is brewing" and you don't change the helmsman in the middle of the tidal wave.

In case there were any doubts, the new Military Committee defies the unwritten rules with a new 72-year-old vice president, He Weidong, who happens to be not only the father of the arms modernization strategy, but the general in command of the Fujian forces, the ones charged with guarding the border with Taiwan.... or invading it. And in case it might seem a mere coincidence, the chairman of the Committee will be Liu Zhenli, the only member of the Central Committee with battle experience.

The Chinese leadership thus expresses two of the urgencies pointed out by Xi: to secure the first line of defense against the US in Taiwan - in the event of a declaration of independence - and to count on commanders of proven combativity and capacity for action.

In other words, both among the political and military officials, the changes confirm that the coming years will be marked by an accelerated buildup of forces for war. War economy and militarism at home; development of arms and combativeness abroad with special attention to Taiwan, the Indo-Pacific and Africa.


Maneuvers of the Chinese army in Xinjiang

Maneuvers of the Chinese army in Xinjiang

  • The Congress of the CCP, the Party-state that organizes the Chinese ruling class, has oriented the country to a horizon of armed imperialist conflict, very possibly of existential dimensions, with the US and its allies.
  • Over the next few years China will accelerate its transformation into a war economy marked by militarism, i.e., all major economic and social decisions will be subordinated to the needs imposed by the prospect of war.
  • To ensure the internal cohesion of the ruling class in years of growing tensions and violent contradictions at all levels, the Party-state reinforces the centralization of its collective power over society and its own internal organization around Xi Jinping.
  • Xi has not only explicitly received a third term, but also, implicitly, a fourth. With the horizon of a major war set for 2027 by their hierarchs and strategists, the new teams will lead China throughout the current decade.