The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

The New Silk Road

Feb 18, 2020

The following article is a translation of one that appeared in Lutte de Classe (Class Struggle), issue #206, the magazine of Lutte Ouvrière (Workers Struggle), the revolutionary communist workers organization active in France.

China’s initiative, which it has called “the New Silk Road,” referring to the past splendor of the Chinese Empire, has generated a lot of coverage. Supporters of the initiative view it as a true Marshall Plan, which would benefit not only China, but also the poor and less poor countries situated along these routes, “an attempt to create a Chinese-style globalization”; while its detractors see it as a form of neocolonialism or a new imperialism. The new Silk Road, like the trade war with the United States, pose once again the question of the relations between China and the rest of the world. Some people see China as an ally of the poor countries, helping in their development, while others consider it to be a growing imperial power, today the second greatest world power, tomorrow the first.

The reality is more complex. China, which was until the 18th century the leading global power, found itself in the 19th and early 20th centuries diminished, oppressed, invaded, and even broken into pieces under the blows of the West’s and Japan’s imperialist colonial policies. In 1949, nationalist leaders who called themselves communist, in the Chinese Communist Party (CCP), leaned on a powerful peasant revolt to successfully establish a strong centralized state, capable of confronting the economic and military assaults of imperialism. For a century, the country had not had such a state. But this state, due to its origins and perspectives, remained an instrument for the bourgeois development of the country. State control laid the economic foundations for the development which has taken place over the past 30 years, sheltered from the pressure of imperialism, on the backs of the peasantry and the working class. These foundations, the state itself, the big state enterprises extracting raw materials, producing energy, constructing dams, roads, and buildings, remain at the heart of the Chinese economy. Nevertheless, even while maintaining its dictatorial form and communist name, over time the state authorized and then promoted the accumulation of private capital. And it was the state apparatus itself which served as the intermediary between the imperialist bourgeoisie and China, allowing the country to reconnect with the global market without once again being carved up by imperialism. It is on this basis that the investments of private Western and Japanese companies have accelerated the development of Chinese capitalism since the end of the 1980s, giving it its particular characteristics.

The state thus has a double role. It defends the interests of the Chinese bourgeoisie—of which the Central Committee of the CCP contains an important cross-section—including by protecting the interests of some of its members against imperialism. But the state is also the means for China’s reintegration into the global economy, the door through which imperialism can enter, in some ways the base on which imperialism supports itself in China. A base which keeps a certain independence, but a base for imperialism all the same. The Chinese state set up free zones, creating legislation tailored to Western companies and their subcontractors, opening up the internal market to them. Incidentally, this shows that, in this world dominated by imperialism, the best that the underdeveloped countries can do for themselves, the best that the nationalist petty-bourgeoisie can do, is to create a state to defend its national interests. But, in the absence of a change in the global balance of forces, countries like Cuba, Vietnam, and China can only reintegrate into the imperialist economy. So long as the big imperialist bourgeoisie is not overthrown, it will end up swallowing everything. In China, it does this in collaboration with the resurgent national bourgeoisie. It is the state of this national bourgeoisie which has played the role of an intermediary between Western and Japanese capital on the one hand, and the Chinese workforce and market on the other. China’s powerful and centralized state has prevented it from being trampled over like it was in the 19th and 20th centuries. But although it certainly recovers a part of the surplus value produced within its borders—the number of Chinese billionaires is proof of this—most of this is accumulated elsewhere, in the coffers of Western and Japanese corporations. China remains an underdeveloped country. Its state apparatus has never had the perspective of challenging the domination of U.S. imperialism. However, its size and population allow it to play its own game, and even to compete with other capitalist powers. But this takes place within the general framework established by imperialism, to which the profits ultimately fall.

A Headlong Rush toward the Future

In the 1990s and 2000s, China developed primarily as the “workshop of the world.” The imperialist countries localized some of their production of goods in this country with its low-wage and seemingly inexhaustible workforce. One of the consequences was that the pace of China’s development ended up following the convulsions of the global economy, particularly those of the top world power, the United States. After the crisis of 2008, when the global economy was far from reaching its previous rates of growth, the Chinese state limited the damage by injecting hundreds of billions of dollars—the media spoke of 500 billion dollars—into gigantic investments. This had a big impact in the real estate sector and allowed a certain number of bureaucrats to amass even greater fortunes. These investments flowed through not only the Chinese economy but also a large section of the global economy, on the hunt for markets and profits. The ghost cities mentioned by the media several years ago are a by-product of this period. It hardly mattered whether these investments were useful—production was needed to make up for the decline in exports to the West and to guarantee the profits and positions of the ruling elites. To avoid internal protest, the big state firms limited layoffs since those layoffs could have had unpredictable political consequences for the regime.

After the crisis of 2008, Chinese investment also kept alive the giant state enterprises, some of which became known as “zombie companies.” As long as production capacities exist, either they require an outlet or must eventually be eliminated. And yet, according to the World Bank, unused production capacity has been particularly high since 2008, reaching around 10% of China’s Gross National Product, after Western and Japanese companies cut contracts. To make up for the global economic slowdown, the Chinese authorities talked about developing the interior market. They said they wanted to convert tens of millions of Chinese proletarians and peasants into consumers of the products of their own workshops and factories. Today, these speeches have been cast aside—consumption requires wages to match it. But the relatively low wages of Chinese workers are one of the essential conditions for the development of the Chinese economy. This is incidentally what keeps China as primarily an underdeveloped country, in which production is largely oriented toward exports, integrated into the world market as a subcontractor. This is what causes all of the developed countries to have a negative balance of trade with China. But it is also what guarantees comfortable profits to private and semi-private Chinese companies, and even greater ones to the Western and Japanese companies that subcontract their production to China or integrate Chinese products into their own, taking the largest part of the surplus value extracted from Chinese workers. Thus the pressure on wages remains strong. Besides this, retirement, healthcare, and education are only very partially socialized in China. All workers who can must therefore save a part of their earnings, which deprives the domestic market of even more outlets, although it does leave significant sums in the hands of the state by means of the banks where these savings are deposited. The government borrowed from these savings after 2008, mobilizing them to save the Chinese companies. Today it mobilizes them in what the Chinese leaders in 2013 called One Belt, One Road (OBR), before they changed the name to Belt and Road Initiative (BRI). What we know in France as the “New Silk Road” is in reality a new wave of investments which are very expedient for Chinese companies, this time essentially in the form of loans to be repaid by the countries in which these projects are built.

The way the Chinese government describes it, the Belt and Road Initiative consists of promoting the construction or acquisition of infrastructure which would guarantee the flow of Chinese products to Europe and would secure the supply of raw materials, mostly coming from Africa. There are two main routes: the maritime routes through the Indian Ocean and reaching the Mediterranean Sea through the Suez Canal, and the overland routes passing through Russia to Europe by train or truck. For the moment, it therefore consists of investment in railroads, ports, and roads. According to the governor of the People’s Bank of China, the Chinese entities in charge of financing the BRI have already taken on 440 billion dollars in debt to expend on these projects since 2014. The Chinese government has made it understood that the total level of investment in Asia which it has judged necessary from now until 2049—the symbolic date at which China is supposed to become the leading global power—is between four trillion and 26 trillion dollars. The 3,000 Chinese projects which make up the BRI account for a large share of this, between 900 billion and four trillion dollars.

Beyond the very political theme of the “Silk Road,” the projects are in fact of a diverse and very opportunist nature. Some of them are simply a question of selling goods and services, such as the mass surveillance technologies for which 63 countries are clients, including Italy. What has drawn the attention of Western Europe has been the desire of Chinese companies to buy up or purchase shares in Western ports and airports which are considered strategic for the flow of goods. The French newspaper Les Échos reported that a Chinese company purchased various degrees of ownership in shipping container terminals in the ports of Rotterdam, Zeebrugge, and Antwerp, in addition to Piraeus in Greece, and that another bought shares in 13 European container terminals, including Antwerp, Dunkirk, Le Havre, and Marseille. But the largest sums of money have been devoted to the construction of infrastructure. The arrangement is as follows: China lends to governments like those of Pakistan, Sri Lanka, Malaysia, Venezuela, and Kenya … what’s needed to finance China’s large-scale projects in their countries. In return, 100% of the construction contracts often go to Chinese companies, with a Chinese workforce.

As opposed to the traditional international lenders, Chinese establishments, which do not look too closely at the borrowers’ capacity to repay, quickly advance loans to establishments. And so, many poor countries view China as an alternative to the Western countries. It charges them higher interest rates. But the populations will repay this debt, not government leaders. Djibouti’s public debt has grown from 50% to 90% of its GDP, 77% of which is in Chinese hands. Pakistan has called on the IMF to pay its debts, and India has even offered one billion dollars to the Maldives to help it pay back its debt to China. In Kenya, the recent loan of 3.2 billion dollars for the construction of the Mombasa–Nairobi Standard Gauge Railway makes it almost impossible to repay the total of seven billion borrowed from the Export-Import Bank of China. In Sri Lanka, the construction of the Hambantota Port was financed with Chinese loans. The Sri Lankan government, unable to meet the terms of repayment, resigned itself to ceding the port and almost 15,000 acres of adjoining land to a Chinese company for 99 years, setting off a wave of protests in the country. The Hambantota Airport, built under the same conditions, became a prestigious but enormous liability, costing far more than it brought in. In Malaysia, the government renegotiated a contract with China for a railway line across the peninsula. In Myanmar (Burma) and Vietnam, identical railroad projects, each one costing tens of billions of dollars, are under discussion, in competition with similar projects proposed by Japan. The China-Pakistan Economic Corridor, built for about 50 billion dollars, bears close resemblance to development aid contingent on an immediate return on investment, providing work to Chinese companies. No Pakistani firm can swing a hammer in what has become a zone reserved for Chinese companies. The Gwadar Port itself was built by Chinese companies and managed by another Chinese company. Its extension, also built by Chinese companies, includes electric and fiber-optic connections, and highways linking China and Gwadar, an electric power plant, and special economic zones.

Heightened Competition

Despite all this, the new Silk Road cannot be reduced to simple economic considerations. It is also a matter of the political relations between China and the states of Southeast Asia, and more generally of China’s place on the international chessboard. While the United States plays the card of protectionism and withdrawal, China, like all governments in the weaker position, calls for multilateralism, economic openness, non-discrimination, and free competition. Within the framework of its troubled relations with the United States, China is trying to draw politically closer to a certain number of its neighbors, and the billions of dollars spent on Silk Road are part of this attempt.

Its detractors—or its competitors—cast this as a threat to the sovereignty of the other states, as debt-trap diplomacy, or even as imperialism. The same article from Les Échos (December 26, 2019) conveys the uneasiness of some milieus about Chinese influence in European ports, noting that Greece has taken political positions in favor of China on several occasions since a Chinese company became the owner of the Port of Piraeus. Greece is reproached for having vetoed a European Union statement in the United Nations Human Rights Council in June 2017 criticizing China for human rights violations. Extending this line of reason to the growing weight of China in the ports of Belgium and the Netherlands, the journalist asks what would happen if the Chinese decided to redirect container traffic (representing one billion dollars per day flowing between China and Europe) from one port to the other, concluding: “This rise of Chinese power threatens to make the member states of the European Union more dependent on Beijing.” Some are even calling Greece a new colony of China. It is not surprising that, in this world where the capitalist sharks are constantly at one another’s throats, the emergence of a new competitor elicits such reactions.

The relations of force have also changed in Africa. In less than 20 years, China has become Africa’s main economic partner. The economic value of trade between Africa and China reached 190 billion dollars in 2016 and is greater today than that of Africa’s trade with India, France, and the United States combined. Kenya, Ethiopia, Egypt, Djibouti, and Morocco are participating in the new Silk Road. They are angling for Chinese investment in industrial parks, ports, airports, and highways, hoping that Chinese industries will relocate to Africa to take advantage of the lower labor costs there than in China. The African governments can also try to play off China against their traditional imperialist backers. U.S. imperialism has counter-attacked by denouncing the “debt trap” in which China has placed many African countries, with China alone holding about 20% of African state debt. China is accused of using debt—and it would not be the first to do so—as a means to influence the policies of governments with which they have entered into agreements.

In fact, China’s investment in poor countries does not necessarily displease imperialism. That the Chinese billions might finance certain projects and guarantee a certain level of short-term stability, even at the expense of a few lost markets for Western corporations, does not mean these that countries would fall under Chinese influence. The Chinese billions will not pull the poor countries out of underdevelopment. The governments of these countries will make their populations pay to reimburse their debts. And it would take a lot more than a few billion dollars to make the imperialist powers lose their foothold in Africa.

Does China’s influence over these countries make it an imperialist country? Certainly the relationship is not equal between China, which invests between 100 billion and 150 billion dollars in infrastructure beyond its borders every year, and the poor countries where it builds this infrastructure. But equal relations do not exist anywhere in the capitalist world. Although the Chinese state might use its financial weight to boost its influence as a great power, this does not make the country an imperialist power in the sense that Lenin used the term. Outside of the coastal zone that extends from Hong Kong to Beijing, it mostly remains an under-developed country whose economy is more or less integrated into the lower levels of global economy, as a supplier and subcontractor, whose major attraction is still its low wages. If what is meant by imperialism is the highest stage of capitalism, the fruit of the most developed capitalism, then it is not precise to qualify China in such a way. This does not mean that it does not have relationships of domination over countries poorer than itself. Its size and centralized state allow it to concentrate a great deal of capital and to be much more powerful than a number of countries, despite its relative level of underdevelopment.

But Chinese authorities’ current problem with the development of the Silk Road is trying to figure out how to attract other investors to finance these projects besides Chinese financial institutions, since these have only limited capacities. They are trying particularly hard to interest European capital, with one of their arguments, apart from the return on investment, being the interest for many industries in the improvement of the conditions of transport for goods between China and Europe, which would lower the cost of transportation and accelerate it.

Finally, from a military point of view, China is still dwarfed by the United States and its allies, unable to challenge the global relations of force and the imperialist division of the world. It has only one military base beyond its borders, in Djibouti, and it has had this for only a short while. Nevertheless, the new Silk Road projects, the increase of Chinese interests abroad, and a diaspora of 125 million Chinese, will doubtlessly allow the Chinese state to deploy troops abroad in the not-too-distant future. But we have not yet reached that point.

The Imperialist Policy of Containment

Certain people explain Trump’s trade war as a late reaction on the part of the United States, which did not anticipate China’s development and the growing role that it plays in the global economy. Nothing could be farther from the truth. The policy of containment toward China existed well before Trump. And containment, even using Trump’s methods, does not mean that the U.S. is opposed to such a development, but only that it wants to control and channel it, since it makes substantial profits there and would like to keep doing so. China is not an underdeveloped country like the rest. Due to its centralized state inherited from the nationalist revolution of 1949, imperialism has to compromise and yield to some of its demands. From the 1990s until today, Western auto companies that want to sell cars in China have had to form joint ventures with Chinese firms, even if this meant conceding to them a part of Western auto companies’ know-how and surplus value and thereby creating new competitors, some of which are in a position today to overtake the Western corporations (although China has announced that it wants to lift the restrictions on foreign auto companies in China by 2022). The same plan for development can be observed in aircraft manufacturing, with a slight lag in timing.

Overall, for the global bourgeoisie, China’s development has opened up new markets, new sources of profits, and a young and poorly-paid working class to exploit. In the 1990s, the United States’ policy therefore consisted of integrating China into international institutions, of making it follow U.S. norms in order to better channel it. This was the goal of the years of negotiations that led to China’s entry into the World Trade Organization (WTO) in 2001. The Bush administration theorized the strategy of “containment,” a double strategy consisting of rapproachment, engagement, and containment. Obama, for his part, took this up with his “pivot to Asia” strategy. It recognized China as a relatively powerful state, even while reinforcing U.S. influence in the region through partnerships with its traditional allies: Japan, Vietnam, India, etc. Again, this did not mean that it was preventing China’s development, but that it was trying to control it as much as possible. One illustration of this policy was the Trans-Pacific Partnership (TPP), which was supposed to create a single free trade zone including the United States, Japan, Vietnam, Canada, and Chile … but excluding China. This agreement still exists today, but without the United States after Trump withdrew. Another aspect of containment is the military reinforcement of Japan, which has been underway for decades under U.S. auspices. The development of China and the cohesion of its state make it a serious competitor, whose regional ambitions can be seen in the construction of military bases in the South China Sea. U.S. policy consists on the one hand of commercial cooperation and economic integration, and on the other, of a desire to show dominance with its military might and trade warfare. The imperialist containment of China, which is in reality the path by which China has become fully reintegrated into the capitalist world, is a variable combination of these two policies.

There are fifty-five countries which have not joined the new Silk Road bodies where its projects and finances are negotiated. Among these are the main imperialist countries and the second-rank imperialisms (Japan, the United States, Canada, Mexico, Brazil, Argentina, India, the member states of the European Union with the exception of Greece, Italy, and Portugal…). Apart from political reasons, these countries reserve their markets and investments for their own bourgeoisies. However, even within the imperialist countries, a number of bosses are salivating over the sums which China is offering. French President Emmanuel Macron, during his visit to China last November, said that the European Union was not opposed to the Silk Road, “on the condition that the circulation takes place in two directions,” meaning that China should open its markets more.

The imperialist companies, which are often purchasers from Chinese firms, would profit from a future Silk Road. They would have the advantage that neither they nor their governments would be the ones paying for it, but the Chinese state. Apart from the economic gains that they may get from it, and besides the improvements in the transportation of Chinese goods which they require, they have every interest that China, which has long been integrated into the world economy, should not descend into chaos. By financially supporting their economy, the Chinese leaders are in reality supporting the entire capitalist system. And it is not only a matter of the profits of the world’s corporations, of which a significant portion are linked to the Chinese state, but also of political stability.

A true recession would not be without social consequences. The Chinese working class is the largest one on the planet. Despite the police dictatorship, it knew how to fight for its wages, at least on a local level, several years ago. Massive layoffs stemming from the lack of profitable activity would open up a period of political uncertainty for the regime.

Worker militants in China must give the struggle against the Chinese bourgeoisie an internationalist character, drawing lessons from the past, affirming that, even at the level of a country like China, there are no long-term perspectives without the overthrow of imperialism. China, by reintegrating itself into the global capitalist system, has to endure its crises. For the moment, it is dealing with them by reaching into its funds and going into debt by exporting its capital. This is a policy which the Chinese state is making the Chinese proletariat pay for through exploitation, as well as the proletariat of the countries targeted for Chinese investment through debt. In this way, it is exporting the reasons for revolt.