While the Chinese regime's program of financing and conducting large-scale infrastructure programs in Asia and Africa has been cited by Western observers as an attempt by the regime's leadership to boost its geopolitical clout and strategic partnerships, a look at China’s history and domestic situation suggest a different primary motivation: class war.
The legitimacy, or acceptance, of the Chinese Communist Party’s (CCP) political hegemony rests on its ability to continually deliver high growth and low unemployment. Since the 1990s and its integration into the world economy, this was accomplished by a devaluation of the yuan that vastly and rapidly increased exports, and by investment from abroad, both by non-Chinese firms looking to take advantage of the lack of labor laws and regulations to boost profits by offshoring operations to China, and by foreign capital seeking returns in an expanding Chinese economy.
This ability was threatened by the events of 2007–08, when many of China’s main western importers sharply reduced their demand. Faced with such a large drop in demand, the CCP launched a dizzying domestic spending spree. As with many such government efforts, the value of these infrastructure projects was secondary to their ability to maintain low unemployment and meet central committee GDP targets. Hence the widely documented proliferation of so-called ghost cities and manic subway construction.1
This was a temporary solution to the drop in global demand for Chinese goods, and as import demand from the West remained sluggish in the aftermath of 2008, another solution, one that nonetheless kept economic power in the hands of the regime's elites, was needed.
This is nothing new. Since the initial liberalizing reforms of Deng Xiaoping in the late 1970s and early 1980s, the regime has nonetheless retained a sizable amount of control of the nation's industries and wages, and so even as the Chinese growth miracle has continued the share of GDP consumed by Chinese households remains below 40 percent as of 2018, among the lowest of any industrial state.2 As the regime rakes in profits from its industrial operations, the nations economic growth continues to enrich the regime more than it does ordinary households.3
This multifaceted and multidecade war on Chinese households has so far been successful. However, as China’s debt rises, the new foreign outlays of the Belt and Road Initiative (BRI) threaten to compound its existing domestic boondoggles. As many of the developing countries who received large loans from China and the Asian Infrastructure Bank are currently nearing default due to covid-19’s crippling of global exports, there remains the question of whether the collateral pledged to back these loans will prove high quality.4 While the details of many of the agreements are unknown to the wider public, China’s domestic example should again prompt skepticism, as their financiers have a history of signing off on bad debts, as do regional Party leaders, whose directives to not necessitate efficient expenditure so long as GDP numbers will be sufficiently bolstered.
This should lead us to call the BRI what it is: yet more class war on the part of Chinese regime's elites and their collaborators against the Chinese people. It's there to meet the strategic needs of the regime, but has done little to improve the lives of ordinary Chinese.
- 1D. Fong, "China's Ghost Towns Haunt Its Economy," Wall Street Journal, June 15, 2018, https://www.wsj.com/articles/chinas-ghost-towns-haunt-its-economy-1529076819.
- 2For a detailed explanation of the methods used by the CCP to obtain these ends see M.C. Klein and M. Pettis, Trade Wars Are Class Wars: How Rising Inequality Distorts the Global Economy and Threatens International Peace (New Haven, CT: Yale University Press, 2020). Specifically, see pages 101–15, where the authors detail the negative impacts of the yuan’s devaluation on the Chinese working class, the systematic expropriation and proletarianization of the population, the CCP’s decidedly regressive tax structure, as well as the restrictions on movement and investment opportunities imposed by the CCP on the Chinese people, all of which decrease the share of national income to labor. In addition, organized labor is outlawed by the CCP, forced prison labor abundant, and the newly proletarianized workforce kept insecure by threat of immediate deportation to their province of origin, as well as denial of social welfare benefits.
- 3World Bank, "Current account balance (% of GDP) - China," accessed Jan. 26, 2021, https://data.worldbank.org/indicator/BN.CAB.XOKA.GD.ZS?locations=CN.
- 4N. Crawford and D. Gordon, "China Confronts Major Risk of Debt Crisis on the Belt and Road Due to Pandemic," The Diplomat, Apr. 11, 2020, https://thediplomat.com/2020/04/china-confronts-major-risk-of-debt-crisis-on-the-belt-and-road-due-to-pandemic/.
