On September 1, 2019, Wendy Wu writes on South China Morning News:
- World’s most populous nation offers economic opportunities that cannot be matched anywhere else, analysts say
- Missing out on future growth ‘would weaken the competitiveness of US industry’ and harm its domestic interests, business leader says
US President Donald Trump’s “order” for American firms to leave China amid rising trade war tensions will do little to help to resolve the long-running dispute and nothing for the companies’ balance sheets, analysts and business leaders say.
Jake Parker, senior vice-president of the US-China Business Council, said companies that did choose to exit the world’s second-largest economy would be depriving themselves and the US of a huge commercial opportunity.
“China will contribute a significant proportion of global growth in the decades ahead. Missing out on that would weaken the competitiveness of US industry and harm the United States’ interests at home,” he said.
“The jobs in the United States that support that growth would also be negatively affected.”
People queue to sign up for membership of US retail giant Costco, which opened its first store in China last week. Photo: ReutersShare:
Trump seemed unaware of such potential problems when he tweeted recently of how “Our County has lost, stupidly, Trillions of Dollars with China over many years”.
The US “would be better off without them”, he said, before “ordering” American companies to “immediately start looking for an alternative to China.”
Parker, however, said that as well as benefiting from the financial opportunities China provided, US firms had been “consistent catalysts for progress” in the country and had made a significant contribution to its economic development.
“It is important to keep in mind that US business has been a positive example for progress in China and that China is a much more open society than it was 30 years ago,” he said.
Donald Trump said on Twitter that the US would be better off without China. Photo: Reuters
Trump’s latest Twitter tirade – which he later clarified made reference to an obscure federal law known as the International Emergency Economic Powers Act – came after Beijing announced plans to reinstate a 25 per cent tariff on cars and car parts imported from the US, and impose retaliatory tariffs of between 5 and 10 per cent on US$75 billion worth of other American products.
China’s move was in turn a response to the White House’s announcement that it would increase the tariff rate on US$300 billion worth of Chinese imports to 15 from 10 per cent in two batches – the first on Sunday and the second on December 15.
The tit-for-tat actions came after the latest round of negotiations in Shanghai in late July failed to break the stalemate in the trade war.
While studies have suggested that the dispute has pushed some foreign companies to consider moving out of China, the prevailing attitude is that the world’s most populous nation is still an important place to be.
Lu Xiang, a research fellow specialising in US issues at the Chinese Academy of Social Sciences, said that while Trump might have the arcane authority to order American firms to pull out of China, doing so would be damaging not only for the companies concerned but also for the global supply chain.
General Motors, which last year sold more cars in China than it did in the United States, was a prime example, he said.
“If General Motors exits China, can it find another market big enough to replace its nearly 4 million unit sales? Is President Trump able to create a huge market for GM?”
Even if the giant carmaker left China, it would soon be replaced, Lu said.
“It won’t hurt China’s economy. The situation is very simple: the car market in China is fully competitive, so the market share of an exiting producer would be quickly picked up by another, but its [GM’s] losses would never be recovered,” he said.
General Motors sold more cars in China last year than it did in the US. Photo: ReutersShare:
Despite the disruption caused by the trade war, Joerg Wuttke, president of the EU Chamber of Commerce in China, said that only a handful of foreign firms had chosen to leave China, and several of those had done so for reasons unrelated to the dispute between the world’s two largest economies.
“I don’t really pay attention to the companies moving out,” he said.
As for Trump’s order to exit China, Wuttke said: “The problem is that you have to know where to move to. Where is it? Does it have enough ports, enough electricity and enough trained workers?”
Also, the industrial structures that had been created in China would make relocation impossible for many firms, he said.
“Very few businesses can easily move out. Maybe toys or shirts, but if you look at China’s strength – it’s clusters: it’s a chemical cluster in Jiangsu, it’s an electronic cluster in Guangdong. You cannot move out a cluster, ever. A cluster does not move, it just fades away,” he said.
Wang Yiwei, a professor of international relations at Renmin University in Beijing, agreed that it would be hard for American companies to turn their backs on the economic benefits China had to offer.
“China is not only the world’s factory but also the world’s market,” he said. “No one can stay away from it. It is just wishful thinking to order US companies to leave China. It goes against market rules and against logic.”
China’s sheer size meant nowhere else in the world could compete, Wang said.
“China has 400 million middle-class consumers – more than the entire US population – 170 million workers with a higher education and 856 million internet users,” he said. “These numbers can’t be matched by countries like India or Vietnam.”
Parker said that the only way for the US and China to resolve their trade differences was to return to the negotiating table.
Beijing and Washington should work together to “find a compromise that removes tariffs and sets the relationship on a more stable, predictable and constructive trajectory”, he said.
Gary Reber Comments:
The bottom line here is the wealthy capital asset ownership class who are responsible for massive investments in building Communist China’s manufacturing sector to replace manufacturing in the United States as a means to gain profits and create more capital wealth, do not want a disruption in their supply chain parts and finished products manufacturing they have invested in. The gutting of American manufacturing has not benefited American workers as over 8-million jobs have been destroyed and countless other subjected to downward or stagnant wage pressure, as the controlling owners of American corporations have significantly lessened our manufacturing capabilities.
As a nation, we need to reverse course and decouple from an already strong dependency on manufacturing in Communist China, whether it is American corporations, who are required to be majority owned by the Chinese, or Chinese firms, often subsidized by the Community Party-controlled government.
The article argues that Communist China has a huge middle class, which represents 31 percent or over 420 million people. But what are the earnings of the Chinese middle class? According to official data, a middle class household in Communist China earns between RMB 25,000 (US $3,640) and RMB 250,000 (US $36,400) in a year. The average annual household income in Communist China in 2019, converted to dollars, is $10,220, compared with $84,300 in the United States (the median United States income is $47,300). The typical salary can range from an average of 10,000 to 15,000 RMB per month. This converts to roughly $1,500 to $2,200 USD per month. The Chinese government defines incomes ranging from 60,000 to 500,000 yuan per year ($7,250 to $62,500) as middle class. McKinsey & Company uses a range of 75,000 to 280,000 yuan ($11,500 to $43,000) per year. Factory workers in rural areas make between 1,879 and 2,088 yuan a month, or roughly $255 to $283, while the average manufacturing employee in urban Communist China makes twice as much. While this may seem like a low salaries when compared to the United States, the cost of living in Communist China is overall dramatically lower. The richest 10 percent own 62 percent of the total national wealth, while the richest 5 percent own more than 50 percent. Notably, the top 1 percent in Communist China possess more than one-third of the national net wealth. The market for expensive American and European vehicles rests with this upper-income class of Chinese consumers.
See how people in Communist China afford their typical 80 square meter (approximately 860 square feet) outrageously expensive homes at https://www.forbes.com/sites/wadeshepard/2016/03/30/how-people-in-china-afford-their-outrageously-expensive-homes/#7d31852fa3ce
The real reason that American car companies are moving production to Communist China, such as General Motors, Ford, and Tesla, is to produce at significantly less cost, and export back to the United States and other Western markets as well as sell to the upper Chinese classes. But American car companies are not the only car companies moving to Communist China. Germany’s Volkswagen is building a 75-acre factory through a joint-venture with SAIC Motors. the Shanghai-based company that is Communist China’s biggest State-owned automaker. The factory features a technologically-advanced automated assembly-line with a conveyor belt made of plastic instead of the typical steel or wood –– a system designed to save costs of reconfiguring on the fly in order to manufacture electric cars whose shapes and layouts, as well as components, are likely to change more frequently and radically than previously. Communist China is welcoming this new investment and knows that the future is in advanced technology innovation and invention. Through further government-funded research-and-development and subsidies, Communist China wants to centralize the world’s electric-car manufacturing, aided by the biggest United States and European multinational corporations. Do we want to be left in the dust?
Communist China really owes its economic growth to American corporations, who have been a consistent catalysts for technological development with the investments made by America’s controlling owners. And Communist China has extended significant financial opportunities, but with conditions, such as Chinese majority owned joint ventures, slave-wage labor, favorable tax exemptions, fewer regulations and State subsidies.
I do not understand how the elite wealthy capital asset ownership class, who control all manufacturing in the United States, continues to abandon the American people by investing in the development of slave-wage labor countries and moving American supply-chain parts and finished products manufacturing to Communist China and other slave-wage labor countries, without feeling guilty of gutting our manufacturing capabilities and destroying 8 million jobs since 1975? To me these are treasonous actions that certainly do not respect United States citizenship and the pledge of allegiance to the United States of America. And the blame for our continued downward performing economy, with 40 million Americans in poverty and millions more on the edge, should be squarely put on the “hoggish” actions of the American elite wealthy capital asset ownership class.
A commentary in the Communist Party mouthpiece People’s Daily on September 2 said Beijing needed to stand up to the United States and not give in to pressure. Communist China, as with the United States, if they reformed their economic system, would be able to develop each respective country using the most advanced technologies, with their people universally, as individuals, owning the means of production, and engage in fair trade independent of one another.
But Communist China is determined to conquer the world’s economies with its “Made In China” initiative, attracting “hoggish” capital owners to move their manufacturing from their homelands to Communist China in order to gain more profitability using slave-wage labor, and unprotected workers and environmental conditions. It’s about time we get tough with a totalitarian Chinese Communist Party/People’s Republic of China-controlled human right violator, not least of which because the Chinese abuse their own people who regularly disappear, and block personal freedoms. The ruling communists are oligarch just like the America elite wealthy capital asset ownership class. In socialist China, State-owned companies dominate the economy and State banks ensure that virtually all investment is centered around achieving national planning targets. To achieve this, the Communist leadership has put a heavy reliance on State-owned enterprises to advance national interests abroad. These enterprises receive subsidized loans from government-dominated financial enterprises, giving them a competitive advantage in international trade.
Communist China’s position to reinstate trade talks requires that the United States rescind ALL tariffs on Chinese-manufactured goods and products imported into the United States. This means back to the old days of unfetted “free trade” and no tariffs. And the capital wealthy class are right in sync with the Chinese totalitarian dictatorship, supporting these same demands.
As well, there is no fair dealing with Communist China who just cannot and refuses to play fair. The Chinese Communist Party government cannot be trusted and strong responses such a tariffs are absolutely necessary and perhaps further, totally decoupling and terminating all trade with Communist China. In any case, the controlling owners of American corporations have been directed to remove productive capital assets in Communist China with this directive incentivized with harsh, increased tariffs, which will go into effect sooner than previously announced.
The Communist State-run Xinhua News Agency and the People’s Daily, the Communist Party’s mouthpiece has been commenting on the trade disputes. A front page commentary from the Communist Party’s propaganda department headlined “No Power Can Stop The Chinese People From Achieving Their Dream.” “The trade war will not cripple China, it will only strengthen us as we endure it.”
We should be asking ourselves do we even have a dream for the American people? Communist China does. And that is to dominate the world’s economies, making them all dependent on their manufacturing prowess.
Before I proceed, to be clear, a tariff may be described as a sales or consumption tax the consumer pays, but tariffs are also a discretionary and an optional tax.
If you choose not to purchase goods and products manufactured in Communist China and other slave-wage labor and abuse worker and environmental destructive countries and instead buy comparable goods and products made in other nations adhering to fair trade practices or the United States, then you do not pay the tariff. Communist China loses the sale. Imposing high tariffs, such as the 25 percent tariff on all $540 billion+ in Chinese exports to the United States, would cripple Communist China’s Western-supported economy. AND create the opportunity to re-develop our own manufacturing prowess in the short and long term, while encouraging and protecting our own manufacturers and American jobs.
Our trade policies need to be about economic patriotism, putting America and Americans first. Their purpose should be to make our nation economically independent of others, and to bring our citizens to rely upon each other rather than foreign entities to the greatest extent possible.
In addition to strong tariffs, our tax laws should be reformed so that an American corporation could not continue to invest in a foreign country without paying a strong tax or a surcharge, on an annual basis, if they move operations abroad or are already operating abroad or contracting for manufacturing abroad.
If we do not reverse course, we will lose America. We need to stop investing in Communist China and other third world countries, using their slave-wage labor for manufacturing our supply chain parts and finished products and completely terminate off-shoring manufacturing there. Continuing to invest and move production to Communist China and other slave-wage labor, non-regulated countries, is not the way to strengthen our own economy. American corporations should be investing in Americans and begin building the most advanced technological automation- and “machine”-based manufacturing capabilities that are broadly owned by employees and other citizens, recognizing that tectonic shifts in the technologies of production will increasingly eliminate the necessity for masses of human workers –– replacing workers with “machines” of all descriptions and in all sectors of the economy. We have the ingenuity to innovate and invent this future economy that can support general affluence for EVERY citizen, which after capital formation cost pays for itself (within a reasonable capital cost recovery period), the new productive capital assets will go on producing income indefinitely with proper maintenance and with restoration in the technical sense through research and development.
As a democratic nation we have always been adverse to State-owned socialism and totalitarian communism, yet American capitalists have invested trillions in the build-up of Communist China’s manufacturing sector and as a result gutted our own manufacturing capabilities, leaving millions of American workers jobless and without opportunity to earn to achieve an affluent life for themselves and their families. Rather than broaden personal ownership of the productive capital assets resulting from investments in manufacturing capabilities in the United States, the only Americans benefiting from investment in Communist China and other slave-wage labor foreign countries, are the already wealthy capital asset ownership class––a tiny few who have concentrated ownership among themselves, representing less than 10 percent of the United States population. These individuals essentially operate as “hoggists,” seeking to own productive power that they cannot or won’t use for consumption. Thus, they are beggaring their neighbor — the equivalency of mass murder — the impact of concentrated capital ownership.
The resulting impact of our current approaches has been plutocratic government and concentration of capital ownership, which denies every citizen his or her pursuit of economic happiness (property). Market-sourced income (through concentrated capital ownership) has concentrated in individuals and families who will not recycle it back through the market as payment for consumer products and services. They already have most of what they want and need, so they invest their excess in new productive power, making them richer and richer through greater capital ownership –– the means used by the wealthy to become more wealthy. This is the source of the distributional bottleneck that makes the private property, market economy ever more dysfunctional. The symptoms of dysfunction are capital ownership concentration and inadequate consumer demand, the effects of which translate into poverty and economic insecurity for the 99 percent majority of people who depend entirely on wages from their labor or government welfare and cannot survive more than a week or two without a paycheck. The production side of the economy is under-nourished and hobbled as a result.
This should be a wake-up call for American corporations to develop internal supply capabilities and wean themselves more quickly from Communist China and other slave-wage labor foreign countries. We must begin the process of de-incentivizing American companies from investing in such countries to produce cheaper and more profitably at the expense of the American people’s economic independence, and return to investing in American-made manufacturing capabilities, with “Made In The USA” a mark of superior quality.
To begin the process of restoring, developing and enhancing our own manufacturing capabilities, if its from Communist China or any other slave-wage labor advantaged country, simply do not buy it. No doubt, in the short-term, American consumers will suffer, as prices will rise due to the tariffs on a wide spectrum of supply chain parts and finished products manufactured in Communist China and elsewhere, who we have become dependent on. Instead, we need to support predominantly “Made In The USA” products and other fair trade products, as much as possible, that were not produced with slave-wage laborers and countries who violate human rights and lack in environmental regulations regarding manufacturing. We need to resume manufacturing products in the USA using innovations and inventions that protect and enhance the environment.
It is important to remember that the future is what we make it. The challenge is great but then Americans have always had tough challenges.
Also remember that Communist China’s founding leader, Mao Zedong (also known as Chairman Mao), was responsible for an estimated 35-45 million deaths in the 20th century during the Great Leap Forward socialist experiment, and even after he died, political dissent was suppressed repeatedly, most notably at Tiananmen Square, and continues to be suppressed today. Yet none of that has deterred the American corporate ownership oligarchy to seek to profit from investing in Communist China.
Since the crushing of the Tiananmen Square protests in 1989, the American corporate ownership oligarchy has used Communist China as a giant sweatshop, exploiting and extracting profits from its massive working class while using the threat of “offshoring” manufacturing to drive down wages within the United States and internationally. Such manufacturing now spans high-value-added industry sectors, such as semiconductor design and production, cell phones, high-end machine tools, medical devices, optics, etc., which has placed Communist China companies, including State-owned enterprises and State subsided enterprises, in direct competition with United States-based technology companies, threatening their control of the pool of profits sweated out of the international working class, who are not the owners of the technologies and manufactories.
Ellen Brown writes in “Neoliberalism Has Met Its Match in China,” that the Chinese government owns 80 percent of banks, which make favorable loans to businesses, and subsidizes worker costs. The United States views China subsidizing its economy as an unfair trade advantage, while China sees long-term, planned growth as smarter than short-term profits for shareholders.
“The Chinese model of state-controlled capitalism (some call it a form of socialism) has lifted 800 million people out of poverty and built a middle class of over 420 million people, growing from four percent in 2002, to 31 percent. The top twelve Chinese companies on the Fortune 500 are all state-owned and state-subsidized including oil, solar energy, telecommunications, engineering, construction companies, banks, and the auto industry. China has the second-largest GDP, and the largest economy based on Purchasing Power Parity GDP, according to the CIA, IMF and World Bank,” writes Brown.
As a recent Fortune article attests, China is Communist. 82 of the Chinese firms in the Global 500 are “SOEs” or State-Owned-Enterprises — which receive generous subsidies from the State that advantage them over the West’s private sector.
Some argue that fighting Communist China is a recipe for losing everything. After all, the country already produces millions more engineers than we are (yet Chinese communist leaders denounce our values but send their children to our universities and colleges); has more Initial Public Offerings (IPOs) reflecting more technology startups; builds whole new cities and is the manufacturing center of the world. Communist China has become more feared than loved. Terror must be continued and the aura of invincibility maintained in order to persuade more client States, especially in Africa, to come under the strong Chinese umbrella. Unfortunately, the rise of Communist China to the second largest economy in the world has been built on government debt and “ghost” investments, particularly from American and other Western wealthy capitalists, that waste precious resources and pollute the Earth. Like every other pyramid scheme, the Chinese economy must either keep expanding or collapse … and it is reaching the point of maximum feasible expansion. As a result of the United Sates imposing tariffs, their economy now is struggling. Imposing trade barriers is the ONLY way to fight Communist China.
The reason the American people are producing less and less is because the controlling owners of American corporations have either moved their manufacturing capabilities to Communist China and other slave-wage labor countries who can produce goods and products with better prices because of lower, much lower, labor costs OR contracted for their needed manufacturing of supply chain parts and finished products to assemble in the United States. Think of how many, many years production of our products have been manufactured overseas (at least 40 years), which benefits the wealthy capital asset ownership class and is bad for workers because American workers are effectively in competition with slave-wage workers. If it’s not Communist China it’s another third world country. The impact has been to gut our manufacturing capabilities and consent to sharing our technological know-how, with the result being millions of American workers losing good-paying jobs so that these endless greedy controlling owners can make more profit.
Yes, the problem should squarely be blamed on “hoggist” capitalists. Communist China, as a primary pillar of their economic reform program, which began in 1979, created the environment to encourage foreign manufacturing investment. Because of that, the United States companies came in droves to take advantage of an opportunity to manufacture at a low cost and increase profits. Did they come to help Communist China grow? Of course not! They came purely for the profits. It was Communist China, an authoritarian-controlled State, that created the opportunity for the controlling owners of American corporations and other Western companies, as a strategy for Communist China’s growth. Both the leaders and the wealthy class that comprise the Communist Party of China and their authoritarian collectivism and the wealthy American monopoly capitalists have benefited from American investment in Communist China.
The people and trade groups arguing against imposing tariffs and returning to “free trade” are protecting the profit interests of the wealthy capital ownership class who control the corporations who have moved their manufacturing or have contracted with Communist China firms for parts and finished products. They do not want to stop our dependence on Communist China and instead continue as they have over past decades. I hope the American people, the vast majority who are propertyless (in the capital ownership sense), realize that this path will eventually completely gut our manufacturing capabilities and make us totally dependent on a totalitarian Communist Party-dictated government who, by their own admission, seeks to dominate the economies of the world and make all countries and peoples dependent on them.
One has got to question if people who support going back to unfettered “free trade” and no tariffs really understand the long-term consequences for our children and grandchildren. With or without D. Trump as President, if we do not decouple from dependency on manufactured supply chain and finished products produced in Communist China and other third world slave-wage labor countries, we will continue on the path of economic decline. We will have no manufacturing and slide into third world country status with the masses of Americans living in poverty, dependent on the controlling-ownership power of oligarchs for their subsistence. Already, half of Americans are living in or near poverty and have been cheated out of opportunities to share in prosperity by being denied access to and the means to acquire ownership of wealth-creating, income-producing capital assets.
No one can say that the task of decoupling our dependency on Communist China will be easy or painless, as moving extensive supply chains, built up over decades to meet compliance standards and deliver quality products, is incredibly complicated and expensive, but it is the only way to reclaim our manufacturing prowess. This is all about economic survival in an age of tectonic shifts in the technologies of production, in which robotics, artificial intelligence (AI), and other advances in technology will continue to destroy jobs and result in most citizens becoming more dependent economically on the monopoly wealthy capital ownership class or as Marx put it, on a “dictatorship of the proletariat.” We can make a different future and set the standard for economic democracy, in which EVERY citizen is a capital owner, and show the world how to self-develop and realize inclusive prosperity, inclusive opportunity, and inclusive economic justice for their citizens.
Our end game needs to be our decoupling from dependency on supply chain parts and finished products manufactured in authoritarian, State-controlled Communist China and other slave-wage labor third world countries, especially with respect to the manufacturing investments made by the controlling owners of American corporations, and imported to the United States. And instead embark on a “Marshall Plan” effort to democratize and broaden individual capital ownership using “pure,” interest-free capital credit investments that self-liquidate and that are tied to creating new American citizen owners, with the long-term objective of empowering EVERY child, woman and man to become an owner of new wealth-creating, income-producing capital assets. In this way, we can embrace the deployment of the most technologically advanced and environmentally sustainable automation and “machine” production, which does not require mass worker input, but provides a new source of income earnings for EVERY citizen.
We have the potential today, as we had in 1941, to build new manufactories and renew the ones put out of business by our buying non-American goods and products. But that potential is constantly weakening without a strong manufacturing “infrastructure.” To strengthen our position, we only have to stop buying slave-wage labor goods and products from Communist China and other third world countries whose owners practice the same un-fair manufacturing. Manufactories are not true infrastructure, which also needs repair, renewal and expansion, but either way you evaluate it, we can create new money, and finance new investments broadly owned, backed by the physical assets created, to support any and all needs Americans have. If an investment in rebuilding, renewing or building anew is viable and will pay for itself over a relatively short span of years out of its own earnings, then is is feasible no matter who ends up owning it.
The Western advanced economies should form a global coalition aimed at stopping Communist China’s unfair practices, such as State-owned enterprises and State subsidies, as well as technology transfer requirements, and put a stop to overseas investment by the Chinese.
We must not let up on tariffs, and actually strengthen tariffs on ALL goods and products imported into the United States from Communist China and ALL other slave-wage labor, lower cost production countries. This is necessary to de-incentivize further American investment in those countries with the intent to manufacture supply chain parts and finished products, instead of investment in manufacturing in the United States.
Otherwise, Americans will be disabled from building a future economy that can support general affluence for EVERY citizen and instead will continue to empower Communist China to achieve its goal of solidifying itself as the world’s manufacturing center and its deployment of the Belt and Road Initiative to make countries dependent on it.
For an in-depth overview of solutions, see my article “Economic Democracy And Binary Economics: Solutions For A Troubled Nation and Economy” at http://www.foreconomicjustice.org/?p=11.
