Beijing Continues to Defy Neoliberal Notions

by WILLIAM R. HAWKINS May 7, 2016

According to an article published May 1 in Qiushi, the magazine of the Central Committee of the Communist Party of China (CPC), President Xi Jinping has attacked those who disseminate Western capitalist values during their lectures at Communist Party schools. Ye Qing, an official in Hubei Province, told the Global Times newspaper (also published by the CPC), "Before Xi took office, some Party school teachers were pessimistic about society and they tended to exaggerate social problems. Some tried to make themselves conspicuous by advocating the Western democratic system." Critics of the Party's theories and policies are now banned from speaking in Party schools.

Zhang Xixian, a professor at the Party School of the CPC Central Committee, told Global Times that Xi's speech reflected the central committee's determination to strictly rule the Party, and Party schools should be the frontline of the campaign. "Party schools serve as both government think tanks and institutions to cultivate officials. Distinct from university research and studies, Party schools engage in academics to help run the country, which is why it is crucial to emphasize Party leadership," Zhang said, adding, "Some Party school teachers, who worship Western political systems, believing that only Western systems can help with the nation's construction, could be suspended from teaching for one to two years."           

These revelations of official thinking in Beijing add further proof to what is already an overwhelming case against a notion popular in Washington since the end of the Cold War; that history has ended and the world is progressing inevitably towards a universal harmony based on capitalism and democracy. This hope dominated thinking in the 1990s, but was shaken by the September 11, 2001terrorist attacks. President Barack Obama, however, came into office determined to return policy to the post-9/11 mode. Even the rise of Islamic State is viewed as an isolated case. Yet, as China continues to build island bases menacing disputed sea lanes, Russia intervenes militarily in Syria and Ukraine, Iran continues to pursue regional expansion and North Korea rattles its nuclear sword, it is clear that the world remains a dangerous place, no more favorable to neoliberal theory today than in the past. And that is without considering other conflicts that the media has not focused on, such as those that have ravaged large tracts of Africa, and those that will likely flare up in the near future.           

The most influential proponents of the neoliberal view are not the "peace" activists marching in the streets. The lobbyists who have the real money and access to policy makers come from the business community who do not want their "globalist" pursuit of profits to be constrained by higher concerns about national security, the economic base or social cohesion.

Delusions about China have been the most pronounced and damaging aspects of the neoliberal-business campaign for over a decade. In October, 2004, Fortune magazine published a special issue devoted to China, whose rise was called "one of the mega-stories of our time." The theme was how American firms could profit by helping China grow. Yet, there was not a single article about the strategic consequences that might follow if a Communist regime accomplished the goals to which the magazine did devote articles; goals such as creating "the world's next great car company"; "overtake the U.S. in science"; or find a Chinese Bill Gates.

The first article focused on Huawei Technologies, the computer giant founded in 1988 by Ren Zhengfei, the former deputy director of the People's Liberation Army (PLA) information-technology unit. The company was a spin-off of a military telecommunications project, and was built on contracts to create the PLA's communication networks. In 2005, the Rand Corporation described Huawei as one of a new model of corporations, "whereby the military, other state actors, and their numbered research institutes help fund and staff commercially oriented firms that are designated 'national champions,' receive lines of credit from state banks, supplement their R&D funding with directed money, and actively seek to build global market share. The military, for its part, benefits as a favored customer and research partner." Huawei has raised security concerns in many countries, including India as well as America. In 2011, the multi-agency Committee on Foreign Investment in the U.S. blocked Huawei from buying 3Com, a firm that made security software for the Pentagon. The attempted Chinese takeover was brokered by Mitt Romney's Bain Capital.           

Fortune's then Asia editor Clay Chandler (now the principal at The Barrenrock Group, a Hong Kong -­ based consultancy he founded in 2014) tried to defend Chinese policy. "The charge that China is mercantilistic, focused solely on exports, doesn't wash. Yes, China has a $59 billion trade surplus with the U.S. last year....for most other trade partners, China buys more than it sells." What he does not mention is that what China mainly imports is raw material used to produce manufactured goods for export. The aim is an overall trade surplus. This is the definition of mercantilism, the most successful modern trade strategy. Last year, China's trade surplus in goods with the U.S. was $365 billion, a six-fold increase since Chandler's attempted defense of Beijing.               

The delusion has continued. In January 2011, after a year that saw rival military exercises in Asia by China, Russia, Japan and the U.S. triggered by confrontations on the Korean peninsula, President Obama told a roundtable of American and Chinese business leaders, "There has been no sector of our societies that have been stronger proponents of U.S.-China relations than the business sector. And so I'm very pleased that we have some of America's top businesses here. Many of them have a longstanding relationship with China." Yet, the neoliberal idea seems to be fading in the last days of the Obama administration. Defense Secretary Ash Carter personally participated in the latest demonstration against Chinese pretensions in the South China Sea by sailing with the Stennis carrier strike group through the disputed waters.           

But neoliberalism is not completely dead, as there are still transnational business groups determined to head off any confrontation with China to keep alive their hopes of profiting from Beijing's rise. Case in point, the Club for Growth's vigorous, if ultimately unsuccessful, attempt to defeat Donald Trump in the Republican presidential primaries.  Trump has targeted the outsourcing of American jobs and industry to China, and has threatened to impose countervailing duties on imports in retaliation for Beijing's use of currency manipulation to rig markets. The Club for Growth represents the outsourcers who benefit from Beijing's mercantilist policies because they have essentially become Chinese firms even if their top executives still prefer to live in America. It spent tens of millions on negative ads as part of the "Never Trump" movement. In Orwellian fashion, the Club tried to paint the economic nationalist GOP contender as a "liberal" when it is the rejection of nationalism (an inherently conservative sentiment) that is at the core of the neoliberal creed.           

In June, 2015, the Club argued that Trump should not be allowed to take part in the GOP debates because he was not a serious candidate. What it really wanted to avoid was giving Trump a platform to advance his plans to "make America great again." The Club is more interested in making China great. The Club supported Sen. Rand Paul partly because he has "opposed tariffs on Chinese imports" as well as any aid for American workers displaced by those imports. The group also praised him for supporting sequestration, a measure imposing huge cuts on the U.S. defense budget.

When China announced in August last year that is was again devaluing its currency, the Club denounced critics as "China Bashers" and defended Beijing, arguing

By devaluing their currency, China's exports are now at a competitive advantage to American products.  That's true, but is it unfair?  Chinese products will compete more easily with some products made by some American companies, potentially harming those companies.  But what about the American companies that use Chinese raw materials or equipment in making their final products?  They would benefit from cheaper imports.  What about American consumers who would benefit from paying less for the Chinese product?          

What is not mentioned is that Beijing's currency manipulation benefits companies that have shifted production (and jobs) to China from America. Shifting the supply chain to China has been particularly bad for smaller American manufacturers--- and for the independence of the American industrial base. There is nothing done in China that cannot be done in America. The argument that moving factories overseas helps Americans as consumers is to approach the issue from the wrong direction. No one has ever consumed their way to riches. Consumption is what one does with money earned from working. Jobs must come first. Yet, the Club praises imports, while opposing aid to U.S. exporters, domestic industry, displaced workers and farmers. The American electorate, however, places concern over domestic economic growth and job creation first, and those who voted in the Republican primaries did so accordingly.           

Chinese views of a President Trump vary. Jia Qingguo, dean of the School of International Studies at Peking University, believes "To defeat the ruling Democratic party, Republicans will criticize current US policies, including those related to China, demanding the White House to be tougher on Beijing. If it wins, Republicans will be pressured to take a hard stance against China, striking a blow to the China-US relationship." Zhao Minghao, a research fellow at the Charhar Institute, is more hopeful, writing "It's hard to say whether China-bashing represents Trump's real attitude. There is a possibility that Trump will change if he is elected as president. The China-US relationship cannot be easily shaken no matter who will become president." And Jin Canrong, deputy dean of School of International Studies, Renmin University of China, believes the balance of power has already shifted in China's favor. He has argued, "As its national strength booms, China has become more capable to shape the trajectory of the Sino-US relationship. The change of US leadership won't bring any major structural changes to the bilateral relationship." So much for the neoliberal delusion.

William R. Hawkins is a consultant specializing in international economic and national security issues. He is a former economics professor and Republican Congressional staff member.

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