Thursday, November 5, 2009

The thing about China

Browsing through last month's 'Epoch Times' (delivered direct from Kalgoorlie this week) there's an interesting article on page 16 entitled 'China's economic Achilles' heel'.

That 'heel' says the author, He Qinglian, is composed of a number of contradictions. First that China could never have been both a cheap source of labour for the global capitalists as well as a huge consumer market. "Among the 1.3 billion Chinese people, approximately 800 million have, accordingly, no buying power".

The other great attractions for the world's large transnational corporations, those that settled their manufacturing operations in the Special Economic Zones in China, has been the appeal of cheap land, low environmental costs for their operations as well as the ready availability of cheap energy.

However, the quantity of cheap land is withering fast as land costs escalate and, in terms of the low environmental costs, China's outspoken deputy minister of China's environmental protection agency declared that the Chinese economic miracle will end soon. In 2004 Pan Yue said this was "because the environment can no longer keep pace."[1]

In the energy sector China's crude oil consumption in the last few years "is going up by 5.77 per cent per year. During the same period, China's domestic oil supplies have only been increasing 1.67 per cent per year. In 1993, China...became a net importer of oil." [2] In January this year it was reported that "China is aiming to increase its coal production by about 30 per cent by 2015 to meet its energy a move likely to fuel concerns over global warming." [3]

The only sustained bargaining chip that China appears to still have going for it is the continued availability of cheap labour. But there are many more individuals willing to work for low wages elsewhere when global employment opportunities are few and far between.

Whichever way one looks at the problems in China's economy they look very much like those of the world economy in general:
“The biggest problem in China’s economy is that the growth is unstable, imbalanced, uncoordinated and unsustainable.” Wen Jiabao, China’s premier in 2007. [4]

[1] The Last Empire: China's Pollution Problem Goes Global
Can the world survive China's headlong rush to emulate the American way of life?
Jacques Leslie. December 10 , 2007.

[2] 'China's economic Achilles' heel' by He Qinglian. Epoch Times, October 9-22, 2009. Page 16.

[3] China to increase coal output by 30pc
9/01/2009 1:00:00 AM

[4] The China Puzzle by Bob Dinetz
Published: May 13, 2009


Jazzbumpa said...

FWIW - and this is anecdotal, but an acquaintance of mine who opened a branch of his testing lab business in China told me a few years ago that energy costs for his Chinese operation were much higher than at his U.S. facility.

Another thing is that some portion of that 800 Million with no buying power are essentially slave labor.

And - at least a couple of years ago, when I was still working, to Chinese suppliers, product tandards were suggestions, not requirements, and lying on certifications was commonplace.

Cheap labor will only take you so far.


Jazzbumpa said...

That s/b product STANDARDS.


Myrtle Blackwood said...

Thanks for that JzB.

"Those profits you made and the wonderful life you made are the sweat, and tears and overtime work of Chinese people."….

Princess starts work at 7:30 in the morning and works until 10. Little Bear works the nightshift and gets home at seven. "We really work day and night to get the wage of less than $3 dollars per day," she says.

Wal-Mart's 'China Price'
By Joshua Holland, AlterNet. Posted November 7, 2005.

TheTrucker said...

Malthus was, of course right, even though the tap dancing neoconomists pretend otherwise. It all centers on economic rent. As population increases then so too does rent and as technological innovation increases the rent subsides.

When you get to the point where the technological innovation can no longer keep pace with the population growth then the first thing you do (if you are China) is to do what you can to limit the population problem while remaining Luddite (Mao). Then you find that it won't work very well and you allow the technology.

But sooner or later the technology bumps up against the environment and you have to find some new technology or have another round of population control. This seems to be where China is.

The only current answer to this problem seems to be nuclear power or birth/death control. Burning coal does not seem to be a good way to go.

An interesting comment about wastes:

"A common misconception is that nuclear waste poses an unusually dangerous hazard in society. I agree that it is certainly unusual. I disagree that it is unusually hazardous. Indeed a former Chairman of the United States Atomic Energy Commission, the honorable Dixy Lee Ray declared that it was the biggest non problem they had. I sometimes say that it is the only major waste problem in society for which we have a good technical solution. Normally waste is diluted but still released to the environment - and now there are arguments and evidence that low dose linearity is usual rather than unusual in society (Crawford and Wilson 1995) dilution does not completely avoid the problem. Nuclear waste can be kept concentrated and kept out of the environment. This is an advantage - NOT a disadvantage."

The paper referenced above is referenced from a wikipedia article about thorium reactors and seems to question some of the thorium hype.

gordon said...

The key phrase is "Special Economic Zone". Also the willingness of the Chinese Govt. to repress dissent, which is a huge incentive to many investors.

Myrtle Blackwood said...

Trucker, how did you get onto the subject of 'safe' nuclear waste??

Go to:
Let the Facts Speak:

This link only covers 1986 and 1987.

If nuclear waste can be kept out of the environment then why hasn't that been done??

There's an interesting article on the Chinese SEZs:

Kung Kai-sing, James

"An open economic policy is seen as one possible avenue for reforming the backward state of the Chinese economy with the
proviso that capitalist development in the SEZs is essentially designed for the
future development of socialism."
"...some consider that allowing
foreign capital into the zones will lead to the development of capitalist relations of production which are considered detrimental to socialist development in China."

I am skeptical as to whether it is actually possible to limit a form of economic development (either socialism or capitalism) to special areas only. How can the transactions ultimately be caged in geographically?

Anonymous said...


Capital's development in China, others, is limited by
a global conjuncture determined by overaccumulation on one hand and financial dependence on the other.
See, e.g., Monopoly-Finance Capital and the Paradox of Accumulation
China and the Dynamics of Transnational Accumulation..." [PDF]

social resistance develops, organizes.


Daro said...

Thanks, I was getting tired of the "China will outblitz Japan" field of reporting. Maybe in aggregate terms but for how long? How can China outdo Japan by copying the very model that Japan itself has already exhausted?

Daro said...

@Brenda Rosser:
The nuclear waste produced by a reactor over 3 years would fit into the back of a taxi.

-James Lovelock

The world needs to go nuclear now.

Myrtle Blackwood said...

Thanks for the links. Very interesting. Again the topic of China's exports deriving mostly from foreign corporations comes up. So who/what exactly has accumulated all of these 'savings' and who/what has invested them in US treasuries??

It's not international trade. Don't be fooled.

60% of Chinese Exports to the US are from foreign-owned companies

Is it true that foreigners finance American debt?