China's Economic Role: Imperialism or Semi-Periphery?

• China is the world's largest economy by purchasing power parity
• The rapid expansion of China's economy reshapes the global geopolitical landscape
• Western media and some Marxist intellectuals view China as a new imperialist power.

Imperialism or Semi-Periphery?

• China has an exploitative relationship with South Asia, Africa, and raw material exporters
• China transfers more surplus value to core capitalist countries than it receives from the periphery
• China is described as a semi-peripheral country in the capitalist system.
• The key question is whether China will advance into the core of the capitalist world system
• Structural barriers make it unlikely China will reach core status in the foreseeable future.
• If China became a core country, the extraction of labor/energy would burden the world and threaten stability.

China's Demand for Commodities

• China's demand for energy and raw materials has surged with its economic growth
• In 2016-17, China consumed large percentages of global commodity supplies:
  • 59% of cement
  • 47% of aluminum
  • 56% of nickel
  • 50% of coal
  • 50% of steel
  • 27% of gold
  • 14% of oil
  • 31% of rice
  • 47% of pork
  • 23% of corn
  • 33% of cotton
• Much of China's commodity demand is met by developing countries in Asia, Africa, and Latin America
• Western media portrays China as an imperialist country exploiting developing countries.
• Articles have criticized China's investments in Africa for causing exploitation and ecological damage.
• Some suggest Chinese imperialism may be worse than Western due to its authoritarian political system.
• China's One Belt, One Road Initiative is accused of supporting corrupt dictators, creating debt traps, and promoting cultural invasions.
• Some believe the Belt and Road Initiative may turn developing countries into China's client states.
• It is argued China seeks control over Africa's resources, people, and development potential.

Lenin's Concept of Imperialism

• Marxist scholars debate imperialism based on Lenin's early 20th-century concept.
• Lenin stated capitalism evolved to monopoly capitalism by the late 19th century
• Monopoly capitalists accumulated capital, saturated domestic markets, and invested in colonies for cheap resources
• Competition for capital export led to territorial partitions by major imperialist powers.
• Lenin defined five basic features of imperialism:
  • Concentration of production and capital creating monopolies.
  • Merging of banking capital with industrial capital to form finance capital.
  • Export of capital gaining importance over export of commodities.
  • Formation of international monopolist capitalist associations.
  • Territorial division of the world among the biggest capitalist powers.
• World conditions have dramatically changed since Lenin's theory
• Some of Lenin's features remain relevant
• The territorial division concept no longer applies due to national liberation movements/decolonization.
• Later Marxist theories define imperialism as economic exploitation causing unequal wealth/power distribution.
• Theorists view China as a capitalist imperialist country due to its monopoly capital and capital exports.
• Argument says state/private monopoly capital exists in China
• The four largest state-owned banks control the economy
• China has large overseas assets, is a major capital exporter, and exploits workers/resources globally.
• China's large holdings of U.S. debt and land grabs in Africa/Latin America raise concerns about China's imperialistic power.
• Chinese leftist activists debate whether China has become imperialist
• Fred Engst (Yang Heping) argues state-owned capital has become the world's largest industrial/financial capital combination.
• Yang believes China's resource demand has intensified imperial rivalry with the U.S.

Imperialism, Superprofits, & Lenin

• Lenin saw imperialism as a stage of capitalist development based on monopoly capital.
• Monopoly capital meant large firms with enough power to gain superprofits above normal rates of return.
• Lenin cited examples of superprofits from monopolist businesses, such as Standard Oil Company paying dividends between 36-48% between 1900-1907.
• Lenin said imperialism must be defined with consideration to both “purely economic concepts...but also the historical phase of this stage of capitalism in relation to capitalism in general.”
• Lenin argued export of capital allowed imperialist countries to exploit labor in colonies.
• Superprofits from colonies could buy off the upper stratum of the working class.
• Imperialism meant partitioning the world and exploiting countries besides China for high monopoly profits.
• Lenin estimated imperialism was based on exploiting the majority of the world by handful of "exceptionally rich and powerful states".
• Imperialism must mean a small minority exploiting the great majority.

Applying Lenin's Superprofits Concept to China

• Using international balance of payment accounting, China is a large capital exporter
• China has accumulated enormous overseas assets, but these need to be analyzed.
• From 2004-2018, China's foreign assets increased from $929 billion to $7.32 trillion
• China's foreign investment increased from $693 billion to $5.19 trillion
• China had a net investment position of $2.13 trillion at the end of 2018
• China has accumulated trillions in overseas assets and is a large net creditor in the global capital market.
• China is now exporting massive amounts of capital.
• China's overseas assets differ greatly than the structure of foreign assets in China.
• In 2018, reserve assets made up 43% of China's overseas assets
• Direct investment was 26%
• Portfolio investment was 7%
• Other investment (currency & deposits, loans) was 24%
• In comparison, 53% of foreign investment in China was foreign direct investment in 2018
• Foreign portfolio investment was 21%
• Other investment was 26%
• While foreign investment in China is mostly direct investment to exploit cheap Chinese labor and natural resources, reserve assets are the largest component of China's overseas assets.
• China's reserve assets largely reflect China's historical trade surpluses and are invested on low-return but liquid instruments
• Assets represent claims on future goods/services from developed capitalist countries
• Claims may not be realized because developed countries lack the production capacity
• If China used its reserves for raw materials, it would drive up prices and suffer capital loss
• China needs trillions in reserves to insure against capital flight or financial crisis.
• The U.S. point of view holds China's accumulation of mostly dollar-denominated assets, has allowed it to purchase trillions of dollars' worth of Chinese goods by printing money
• China's reserve assets are China's informal tribute to U.S. imperialism by paying for the latter's seigniorage privilege.
• While China's overseas assets are greater than its liabilities by $2.13 trillion investment income received in 2018, investment income paid was smaller by $61 billion
• From 2010-2018, returns on China's overseas assets averaged 3%
• Returns on foreign investment in China ranged from 5-6%
• A 3% return on China's overseas investment is not deemed superprofits
• Foreign capitalists in China make twice as much profit as Chinese capital can make in the rest of the world
• Before WWI, net property income from abroad was 8.6% of British gross national product and total property income was 9.6%.
• Lenin considered exceptional exports of capital due to such superprofits in the era of imperialism
• Comparatively, China's total investment income in 2018 was 1.6% of China's gross domestic product
• China's net investment income from abroad is negative.
• China's total stock of direct investment abroad was $1.81 trillion in 2017:
  • $1.14 trillion invested in Asia (63%)
  • $43 billion invested in Africa (2.4%)
  • $111 billion invested in Europe (6.1%)
  • $387 billion invested in Latin America and the Caribbean (21%)
  • $87 billion invested in North America (4.8%)
  • $42 billion invested in Australia and New Zealand (2.3%).
• Within Asia, $1.04 trillion was invested in Hong Kong, Macao, and Singapore.
• The territories and Singapore are ethnic-Chinese
• $9 billion was invested in Japan and South Korea.
• Within Latin America/Caribbean, $372 billion was invested in the Cayman Islands and British Virgin Islands
• China's investments in Hong Kong, Macao, Singapore, and British Virgin Islands (totaling $1.41 trillion/78% of China's direct investment abroad) are not purposed to be exploiting natural resources or labor
• Investment may be “round trip investment” to be recycled back to China as "foreign investment" and receive treatments.
• Chinese investment may have to do with money laundering and capital flight.
• Xi Jinping's family was reported to have real estate and shell companies in Hong Kong
• China's investment in these tax havens is more similar to wealth transfers in the third world than imperialist plunder
• Much of China's investment in Europe, North America, Japan, South Korea, Australia, and New Zealand may be of a similar nature
• Capital flight transfers resources from China to the core of the capitalist world system.
• $158 billion (8.7% of China's total stock of direct investment abroad/2.2% of China's total overseas assets) in Africa, Latin America, and most of Asia is considered exploitive
• Considered a small fraction of China's total overseas investment and negligible wealth accumulated.
• Chinese capitalists may be blamed for imperialistic behaviors in developing countries, Chinese capitalism is nonimperialist.

Unequal Exchange and Global Exploitation

• Lenin considered the export of capital to be important in the imperialist era
• By the mid-twentieth century, Marxist theorists knew imperial exploitation of underdeveloped countries took the form of unequal exchange
• Underdeveloped countries export commodities embodying more labor than commodities exported by developed countries.
• Global outsourcing by transnational corporations based on wage differentials is a special form of unequal exchange
• Given the globalized capitalist division of labor and complex trade and capital flows, it is hard to identify any country as a 100% exploiter or exploited
• Countries may engage in both.
• Identifying a country's position in the capitalist world system requires considering whether on the whole, the country receives more surplus value than it transfers
• A country that receives more surplus value qualifies as an exploiter country in the capitalist world system
• A country that transfers more surplus value is either a peripheral or semi-peripheral member of the capitalist world system
• The labor terms of trade is defined as the units of foreign labor that can be exchanged for one unit of domestic labor through trade of exported/imported goods of equal market value.
• The U.S. is a typical imperialist country
• In the 1990s, one unit of U.S. labor could be exchanged for over four units of foreign labor
• In the early 2000s, it improved to five units
• After the 2008–09 financial crisis, it declined, but still was four units as of 2016–17
• China was a typical peripheral country in the 1990s
• A labor trade of 0.05 made on unit of foreign labor equal to twenty units of Chinese labor.
• By 2016–17, it improved to 0.5, two units of Chinese labor could be exchanged for one unit of foreign labor
• China is still exploited by imperialist countries in the capitalist world system, although the degree has declined recently.
• Net labor gain received by the United States is calculated as the total labor embodied in the imported goods and services minus the total labor embodied in exported goods and services
• U.S. benefits from its “seigniorage privilege”
• Other countries must hold dollars
• The U.S. can print money to purchase resources
• The labor embodied in U.S. trade deficits should be treated as essentially unilateral transfers.
• The net labor loss suffered by China is calculated as the total labor embodied in China's exported goods and services minus the total labor embodied in its imported goods and services.
• China's net labor loss has largely paralleled the U.S. net labor gain since 1990.
• In 1990, the U.S. net labor gain was thirty-four million worker-years and China's net labor loss was thirty-nine million worker-years.
• In 1997, the U.S. net labor gain was fifty-two million worker-years
• China's net labor loss was fifty-seven million worker-years.
• In 2005, the U.S. net labor gain peaked at eighty-four million worker-years.
• In 2007, China's net labor loss peaked at ninety-four million worker-years.
• By 2014, China's net labor loss fell to fifty-eight million worker-years
• the U.S. net labor gain fell to fifty-six million worker-years.
• In 2017, the U.S. net labor gain was sixty-three million worker-years
• China's net labor gain fell to forty-seven million worker-years.
• In the neoliberal era, Chinese capitalism transfers surplus value to imperialist countries
• China's peak net labor loss was 48% of China's industrial labor force in 2007
• Without unequal exchange, 94 million workers could be withdrawn without reducing material consumption and the extra workers could double China's output.

China's Position in the Capitalist World System.

• Without unequal exchange, massive amounts of material goods supplied to the United States would have to be produced domestically
• 60 million U.S. workers would have to be withdrawn from service sectors and transferred to material production sectors
• This would result in a reduction of services output without raising levels of material consumption
• It depends on economic relations between China and both the imperialist and peripheral parts of the world system.
• China clearly had unfavorable labor terms of trade against not only the United States and other high-income countries, in the early 1990s
• But also every group of low- and middle-income countries.
• China has since improved against every country group
• While it still takes five units of Chinese labor to exchange for one unit of U.S. labor and four units of Chinese labor to exchange for one unit of labor from other high-income countries, by 2015–17
• China had exploitative positions in South Asia and sub-Saharan Africa.
• One unit of Chinese labor can now be exchanged for about two units of labor from sub-Saharan Africa or four units of labor from South Asia