China set to ramp up foreign investments

China’s Outbound Foreign Direct Investment (1980-2008) in US$Bn

As recently as ten years ago, China’s investments abroad amounted to around $2 billion a year. Last year Chinese foreign investment was $59 billion, still way below the US at $300 billion but a study by the Asia society reported in the major financial papers last week claims China will devote as much as $2 trillion to foreign investment over the next decade.

China has mountains of cash and is looking for somewhere to park it. After all, capitalists are not misers as Marx pointed out. Capitalists throw money in to circulation expecting it to return to their pockets in larger sums than left, and the Chinese have a lot of money, over $2 trillion in foreign exchange reserves.

Many countries will welcome what will be a boost to their economies but there is a danger that the anti-Chinese sentiment in Washington will prevent much of that money from coming here. No one likes a moneylender and the Chinese are heavily involved in the global debt markets. They have about $1.6 trillion in US treasury bonds that keep interest rates low and finances the massive US debt, as David Barboza points out in the New York Times.

There are other concerns among the US capitalist class. One is the Chinese government’s role in the economy. The US capitalist class considers this unfair as many of the companies that do the investing are state owned and have access to cheap money. The Chinese bureaucracy is not stupid, they are familiar with Marxist economics for one thing; that is an advantage. While the Chinese presence in some parts of the world, notably Africa, has caused some serious tension and even violent responses from local communities, the developing countries that need the cash infusion are happy for it.

But for rivals like the US, capitalist class and China is rapidly becoming a serious rival to the world’s number one economic and military power, the experience is a bit humiliating. Top dogs hate being knocked off their perch. If anything, the Chinese bureaucracy’s success at business does show that state planning and a more centralized economy has its advantages, but the bourgeois doesn’t like competition. “It is amazing that a group of former Communists have applied ‘modified free market’ strategy far better than the American blueblood capitalists,” says Professor Shlomo Maital Director of TIM-Technion Institute of Management. He adds, “For only $1.5 b., Lenovo bought IBM’s Think Pad and leveraged it into near-market leadership in laptops. The transition from Think Pad to Lenovo branding was flawless and powerful.”; very impressive.

Because the Chinese state is involved at the level it is, the fear among US politicians is that national security might be at risk as the Chinese acquire US companies; this shows that while we live in a world economy, the nation state is still an obstacle and contradiction that cannot be entirely resolved.  The capitalist class of each nation can only rely on the military and power of that nation to defend its interests in the last analysis.  Despite all the talk, home industries are protected and, Doha failed.  They are also worried that the Chinese may buy firms and shut them down, moving production back home. These fears are quite natural in a world economy, a free market economy in which separate nation states compete for market dominance and control of ever diminishing natural resources. After all, a national government’s role is to look after the interests of the capitalist class as a whole,

So this situation exists, this delicate dance between two global powerhouses, one with money and lots of Labor power and the other with technology know how and a skilled workforce, albeit it many of them unemployed. One a consumer with 5% of the world’s population  consuming 25% of the world’s energy and borrowing from the other in order to do so.

It sort of fascinates me reading this stuff because we are witnessing, or have witnessed over the last period, historic changes in world relations, the fall of Stalinism, the rise of China, and to a lesser extent, Russia and Brazil, and the decline of the US on the world stage. No matter what China says, it is in competition with the US and will challenge its supremacy leading to increased tensions between these giants for spheres of influence.

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On the other hand, while China has more and more millionaires it still has significant poverty, a huge migrant workforce of close to two hundred million workers and constant unrest and protests over land appropriation as well as strikes in the factories housing hundreds of thousands of new urbanized proletarians. As we mentioned earlier, the frequency and success of strikes has caused Chinese wages to rise, undercutting the advantage ability of the country to attract foreign investment. There will be some explosions in China in the years ahead.

As I write, here in the US state of California there are rallies demonstrations and occupations planned at the State capital all next week to protest the attacks on education and the public sector as the US bourgeois, bogged down in wars it can’t win, mired in debt with a political system that doesn’t function and losing many of its stooges throughout the Arab world to the uprisings there, puts its own workers and huge sections of the middle class on rations.

Orville Schell, the director of the Center on US-China Relations at the Asia Center cautions the strategists of capital in the US, “China is looking for places to park its money, and it could be to our advantage. If we don’t find a way to be open to China, it’s undeniable the money will go elsewhere.”

We are living in interesting times