7-06-05, 9:24 am
Recent Chinese attempts to buy American multinationals have been stirring up 'nationalist' worries in the United States. Economist Paul Krugman, a New York Times columnist, has just published an article that was reproduced in the Brazilian newspaper 'Folha de Sao Paulo' on June 28th, the title of which suggests that 'the Chinese are more dangerous than the Japanese.' It approaches the Chinese offers to buy the American Unocal, in the energy business, and Maytag, a washing machine producer.
The values offered by China National Offshore Oil Corporation (US$ 20 Billion for Unocal) and by Haier, a Chinese household appliances industry (US$ 1.28 Billion for Maytag) are way higher than the offers made by their competitors, Chevron-Texaco and Ripplewood, respectively. Recognizing, in an unprecedented way, the rights and interests of employees in the economic negotiations, the Chinese also promise to maintain, on both insolvent companies, the employees’ positions, which are jeopardized should the merge with Texaco or the selling to Ripplewood take place. But obstacles of a political nature, especially in the case of Unocal, might hinder the deal proposed by China, according to the conclusion made by the 'democrat' Paul Krugman: 'If it were up to me, I’d block the Chinese bid for Unocal.' All we can do is wait for the development of the facts that, after all, bear interesting lessons on modern political economy, on the effects of the hegemonic power’s increasing parasitism and of the unequal development of nations.
In the past, Japan
'Fifteen years ago,' remembers Krugman, 'when Japanese companies were busily buying up chunks of corporate America, I was one of those urging Americans not to panic'. Today, in his opinion, the Chinese challenge 'seems much more serious than the Japanese’s,' including because the intended acquisitions are directed to strategic sectors of the economy, not only seeking to conquer prestige. 'The Chinese seem shrewder than that,' he says.
Anyway, the fact is that Chinese emergence to the condition of an economic power, as well as the expansion of Japanese imperialism, reflected on the acquisitions of American companies by both the Asian giants, have a common origin in two entwined phenomena: Uncle Sam’s parasitism, translated into commercial deficit, and the growth of GDPs at unequal rates or the unequal development of national economies.
The imperialist expansion of Japanese capitalism during the last decades of the past century cannot be well understood if not in its close connection with American parasitism. The enormous commercial deficit of the USA with Japan by the time allowed the surplus value and profits resulting from the work of Japanese workers in their country and acquired by capitalists after being marketed abroad. Those profits added to the Japanese export capital in several modalities, including the investments in acquisitions mentioned by Paul Krugman.
Japan was then the main beneficiary of the American external deficit, which also has a lot to do with the rise of Germany. Whoever takes the trouble of researching the news of those times will not take long to find the 'nationalist' outcries resulting from the expansion of Japanese companies, although there was no reason to panic, according to the New York Times columnist.
It is China’s turn
Time has passed and the Japanese danger does not seem to make much sense nowadays. The country has sunk in a quagmire of stagnation or low growth rates. Japan’s GDP performance since the 1990s suggests that the country has lost the strength of the past. But while Japanese economy faced difficulties (along with the European) and the irrational exuberance of the USA was a success in the media, on the other hand in real life the spectacle of unequal growth made a new economic power in the world’s geography stand out a country also placed in Asia: China. It was not by chance that, during the last years, China has become the main beneficiary of the United States’ commercial deficit, with which it has accumulated a surplus greater than 160 billion dollars in 2004. Those are the values corresponding to the profits made by Chinese companies in the biggest and most spendthrift market in the world.
Thanks in part to the positive balance (shared with the Asian neighbors and other partners) and to direct foreign investments in its economy (attracted by its unequal and nonstop growth), China has accumulated expressive current account surpluses. That balance could be defined as national reserves, which in this case can be transformed in internal investments and constitute the grounds for future expansion by Chinese companies abroad. It is important to highlight that it is not an imperialist economic expansion.
At least for now, China is not a capitalist nation, therefore it would not be correct to characterize its investments abroad (entirely) as exporting of capital. The resources saved in the current account are not taken by capitalist businessmen, but by the Chinese State, which is led by the Communist Party, which maintains under control the exchange policy and proclaims itself socialist. That makes the difference. And explains the fact that the profits obtained with external trading plus the foreign exchange savings resulting from foreign investments in China have not yet turned into capital exports, differing from the Japanese experience. Those profits have been basically and mainly destined to international reserves.
American decadence
The Chinese already count reserves (over 600 billion dollars) that are 'so great' that, according to Krugman, 'a speculative attack on the dollar looks far more likely than a speculative attack on the yuan'. Maybe the American economist is not exaggerating. Dollar today is an admittedly fragile currency, the relative value of which can only be sustained at the expense of an increasing current account deficit that has reached 6.4% of the GDP in this year’s first quarter and necessarily turns into a (gigantic) external deficit.
The wiser observers of the international economy have already noticed that that deficit is not eternally sustainable, which means that sooner or later a correction of the American commercial unbalance will impose itself, demanding an even greater dollar depreciation and not only in relation to the yuan, as suggested by the United States’ pressures for changes in the Chinese exchange policy. If this should happen tomorrow or the day after does not make any difference the fact is that the dollar standard has become a decomposing monetary standard, bringing to light the decadence of Uncle Sam’s economic lead on the globe.
It is important to understand that the American deficit’s effects (ultimately noxious to the empire and favorable to the interests of rival economic powers) do not project themselves only in a medium or long term horizon. They permeate and to a certain extent condition, also in a short term, the movements (or flows) of foreign capitals, which have been sensitive to interest rates’ fluctuations in the center of the empire for a long time now. The acquisitions of American assets made by Chinese, Japanese and Europeans (including the current bids for the multinationals Unocal and Maytag) are obviously associated to the need of financing the balance of payments and the recycling (by the nations with surpluses) of the profits made by means of the American commercial deficit.
The recovery of the external investments’ flows to the USA might revert the plunge of the dollar (as recent oscillations on the euro-dollar values seem to indicate), but in exchange it will increase the deficit and the external passive, for it means growth in the acquisitions of American assets by foreigners. It is valid to reiterate that the negative external balance means, on the other end, the making of profits by foreign companies, profits that are reinvested in the acquisition of American (either real or not) assets. In a way, it is fair to say that this is a 'functional deficit' in international economic relations, especially for the nations that derive benefit from it. It would be silly to suppose, however, that its consequences are equally beneficial to everyone who takes place on the game or even that the dollar standard could be indefinitely maintained at the expense of the American passive.
Chinese expansion
The reserves accumulated by China constitute powerful grounds for the Chinese investments’ expansion abroad. The reserves under the control of modern Central Banks are not comparable to the accumulation of before. They naturally become external investments, aside from the share destined to buy gold and precious metals.
Hundreds of billions of dollars accumulated by the Chinese by means of current accounts surpluses already are invested abroad. The largest share was destined to buy public bonds issued by the Bush administration, which is the reason why it is common to hear that the Chinese money is financing the empire’s fiscal deficits, spurred by the imperialist wars against Iraq and Afghanistan. But the offensive to acquire Unocal and Maytag suggests that China is determined to change the direction of its investments abroad, as noticed by Paul Krugman. Let’s see what the controversial American economist said in the aforementioned article:
'Until now, the Chinese have mainly invested in U.S. government bonds. But bonds yield neither a high rate of return nor control over how the money is spent. The only reason for China to acquire lots of U.S. bonds is for protection against currency speculators () So it was predictable that, sooner or later, the Chinese would stop buying so many dollar bonds. Either they would stop buying American I.O.U.’s altogether, causing a plunge in the dollar, or they would stop being satisfied with the role of passive financiers, and demand the power that comes with ownership. And we should be relieved that at least for now the Chinese aren’t dumping their dollars; they’re using them to buy American companies.'
'Yet,' he continues, 'there are two reasons that Chinese investment in America seems different from Japanese investment 15 years ago. One difference is that, judging from early indications, the Chinese won’t squander their money as badly as the Japanese did,' since they focus on undeniably valuable productive enterprises. 'The more important difference from Japan’s investment,' adds him, 'is that China, unlike Japan, really does seem to be emerging as America’s strategic rival and a competitor for scarce resources.'
Krugman might not be exaggerating on China’s importance, although the world uses to take many turns and if yesterday the Japanese rise seemed irresistible to many, the passing of time has considerably changed the perceptions on that matter. Anyway, the 'nationalist' worry with China’s rise is not justifiable, except maybe in the United States. Lenin used to say, bearing in mind the lessons from World War I, that nationalism in a rich country is synonymous to imperialism.
China’s growth (which the USA and its lackeys will do anything to sabotage) is not a threat to nations that are economically dependent and mercilessly plundered by the capitalist powers. Much to the contrary. Chinese prosperity has relieved the situation of the poorest and also comes in benefit of Brazil, the Mercosur and most Latin American countries. Generously, China has forgiven the external debts of African and Asian nations without demanding in return a neoliberal policy (as institutional creditors of the so-called first world have done) after all, China does not have neoliberalism as a guideline. China maintains excellent relations with Cuba and Venezuela, as well as with Brazil (despite the narrow and reactionary vision of our dominant classes), Argentina and the Mercosur.
China’s strengthening brings the perspective of a relevant counterweight to the United States’ unilateralism without having the same capitalist, neoliberal and imperialist sense that the 'euro zone' or Japan have. That is why it must be immediately welcomed by the revolutionary and progressive forces of Brazil, Latin America and the rest of the world.
From Solidarity Network
