China's growth slows to weakest pace since the beginning of global financial crisis

[Le Socialiste]

China’s growth slowed for a sixth quarter to the weakest pace since the global financial crisis, putting pressure on Premier Wen Jiabao to boost stimulus to secure a second-half economic rebound.

Gross domestic product expanded 7.6 percent last quarter from a year earlier, the National Bureau of Statistics said today in Beijing. The pace, a three-year low, compares with an 8.1 percent gain in the previous period and the 7.7 percent median forecast of economists. Industrial production increased at a slower pace in June while retail sales growth decelerated.

Today’s data painted a mixed picture from a pickup in fixed-asset investment that could signal the economy is stabilizing to the warning sign that electricity output failed to increase in June from a year earlier. Singapore reported an unexpected economic contraction as China’s slowdown undermines a global recovery already threatened by Europe’s debt crisis and limited U.S. job growth.

http://www.bloomberg.com/news/2012-07-13/china-s-growth-slows-to-three-year-low-of-7-6-.html


The International Monetary Fund’s latest World Economic Outlook on Monday downgraded China’s growth this year by 0.2 percentage points to 8 percent, because the escalating debt crisis and political instability in Europe could hit China’s exports. Moreover, the IMF warned that Beijing’s stimulus packages since 2008 had encouraged a property bubble, creating the risk of an economic crash. “There are tail risks of a hard landing in China, where investment spending could slow more sharply given overcapacity,” it stated.

China’s own economic statistics show that growth slowed to 7.6 percent in the June quarter—the lowest rate since the height of the global financial crisis in early 2009.

http://www.wsws.org/articles/2012/jul2012/chin-j20.shtml

[islandmilitia]

China’s growth slowed for a sixth quarter to the weakest pace since the global financial crisis, putting pressure on Premier Wen Jiabao to boost stimulus to secure a second-half economic rebound.

The second part of this sentence says it all really, in terms of bourgeois pundits failing to see the mode of production as an integrated totality, and not being able to project their memories back beyond the immediate context. The Chinese government can't simply renew a stimulus because the main reason these signs of downturn are only taking place now is because of the first massive stimulus package that was launched back in 2008-9, in response to falling demand for exports - the effect of that stimulus package, focused around fixed-asset investments, was to sustain growth, but it also resulted in the accumulation of local and national government debt (which is, in any case, a long-term contradiction within the Chinese economy) along with more bad loans in the banking sector, as well as the exacerbation of the housing bubble. So, there is really no room for a new stimulus package. This is the end of the road for the Chinese accumulation model. There is no way out.

Falls in Chinese growth as part of a global economic crisis. A militant and confident working class, combined with a potential for peasant insurgency and new unrest in the ethnic minority areas. A hazardous upcoming leadership transition, in a state based around systemic corruption, with no convincing ideological discourses. Bring it on.

[A Marxist Historian]

http://www.bloomberg.com/news/2012-07-13/china-s-growth-slows-to-three-year-low-of-7-6-.html

http://www.wsws.org/articles/2012/jul2012/chin-j20.shtml

According to Mayor Bloomberg;), the Chinese growth rate has dropped all the way down to -- 7.6% a year?

Doesn't exactly sound like the sky is falling yet.

Which is not to say that the Chinese economy is a miracle economy immune to all economic crisis and inevitably destined to take over the world, as some particularly freaked-out bourgeois economists fear.

But, in the current extreme world capitalist economic crisis we are going through, the Chinese economy, directed ultimately by the Chinese Communist Party not the invisible hand of Adam Smith, with the Chinese bourgeoise mounting in wealth and strength but not in command, continues to look pretty good by comparison with capitalist economies.

-M.H.-

[Positivist]

According to Mayor Bloomberg;), the Chinese growth rate has dropped all the way down to -- 7.6% a year?

Doesn't exactly sound like the sky is falling yet.

Which is not to say that the Chinese economy is a miracle economy immune to all economic crisis and inevitably destined to take over the world, as some particularly freaked-out bourgeois economists fear.

But, in the current extreme world capitalist economic crisis we are going through, the Chinese economy, directed ultimately by the Chinese Communist Party not the invisible hand of Adam Smith, with the Chinese bourgeoise mounting in wealth and strength but not in command, continues to look pretty good by comparison with capitalist economies.

-M.H.-

Isn't China a state-capitalist economy, and at that, not even a socially oriented one?

[eric922]

Isn't China a state-capitalist economy, and at that, not even a socially oriented one?
I'm not sure how accurate the comparison is, but I remember seeing a thread on here comparing China's economic polices to classical fascism. I'm no expert on China or classical fascism so I have no clue if that is an accurate comparison or not.

[ckaihatsu]

According to Mayor Bloomberg;), the Chinese growth rate has dropped all the way down to -- 7.6% a year?

Doesn't exactly sound like the sky is falling yet.


Different nations' growth rates can't just be compared side-by-side, because countries have varying *birth* rates.

I was kind of surprised to see China's *below* that of the U.S. -- usually lower birth rates are associated with more-developed economies.

(So GDP growth *should* stay at or above a nation's growth rate in births, otherwise the economic growth becomes a relatively smaller pie shared by more people. This ignores the class division and socioeconomic factors, of course.)


http://en.wikipedia.org/wiki/List_of_sovereign_states_and_dependent_territories _by_birth_rate

[islandmilitia]

According to Mayor Bloomberg;), the Chinese growth rate has dropped all the way down to -- 7.6% a year?

Doesn't exactly sound like the sky is falling yet.

Which is not to say that the Chinese economy is a miracle economy immune to all economic crisis and inevitably destined to take over the world, as some particularly freaked-out bourgeois economists fear.

But, in the current extreme world capitalist economic crisis we are going through, the Chinese economy, directed ultimately by the Chinese Communist Party not the invisible hand of Adam Smith, with the Chinese bourgeoise mounting in wealth and strength but not in command, continues to look pretty good by comparison with capitalist economies.

-M.H.-

The CPC does not "direct" the Chinese economy, and nor does Adam Smith for that matter, the Chinese economy is determined by the world economy of which it is a part. That is true of all economies to some extent because it is impossible to identify or even conceptualize a capitalist economy that is isolated from other capitalist societies for any extended period of time, but it is especially true of the Chinese economy because the entire Chinese accumulation model for the last twenty if not thirty years has been based around export production and foreign direct investment. The nature of that growth model has been entirely predicated on low wage rates and poor working conditions, in order to attract foreign investment, and the result has been that China now has incredibly low levels of consumption as a proportion of GDP, compared to other major economies, and even other underdeveloped countries like India. The Chinese economy has been left vulnerable to external falls in demand without having sufficient domestic space to reconfigure the economy towards greater reliance on domestic consumption, and it is precisely falls in external demand that you have been seeing over the course of the economic crisis up to the present, due to the collapse of the housing market in the United States and the other manifestations of the crisis in the West. It was against those background conditions that the government launched its bailout over 2008-9, which was focused around massive domestic investment, and is now running out of steam, whilst having intensified a whole set of contradictions, as I explained above.

That China continues to experience positive and relatively high growth rates compared to countries like the US is indicative not of the Chinese economy being a different mode of production, but of the fact that crises develop in uneven and complex ways - you see exactly the same phenomenon in Latin America and Africa because the economies of those regions have been boosted by Chinese demand for their raw materials, including over the past few years where the Chinese bailout has utilized the raw materials of those regions in order to construct housing and transport infrastructure, for example. Now that the bailout is effectively coming to a close, and now that there is no major source of demand within China for the raw materials of the periphery, you are seeing the first signs of the crisis spreading throughout the regions that were hitherto relatively unaffected, because of how much other countries have depended on Chinese demand (see this (http://www.bbc.co.uk/news/business-18964557), for example, as well as this (http://www.guardian.co.uk/commentisfree/2012/jul/15/africa-industrial-policy-washington-orthodoxy) analytical argument from Ha-Joon Chang). The slowing of growth in the periphery due to falling demand in China is also further evidence of how the world economy is an integrated unit from which no single national economy can escape, especially during a capitalist crisis.

[A Marxist Historian]

The CPC does not "direct" the Chinese economy, and nor does Adam Smith for that matter, the Chinese economy is determined by the world economy of which it is a part. That is true of all economies to some extent because it is impossible to identify or even conceptualize a capitalist economy that is isolated from other capitalist societies for any extended period of time, but it is especially true of the Chinese economy because the entire Chinese accumulation model for the last twenty if not thirty years has been based around export production and foreign direct investment. The nature of that growth model has been entirely predicated on low wage rates and poor working conditions, in order to attract foreign investment, and the result has been that China now has incredibly low levels of consumption as a proportion of GDP, compared to other major economies, and even other underdeveloped countries like India. The Chinese economy has been left vulnerable to external falls in demand without having sufficient domestic space to reconfigure the economy towards greater reliance on domestic consumption, and it is precisely falls in external demand that you have been seeing over the course of the economic crisis up to the present, due to the collapse of the housing market in the United States and the other manifestations of the crisis in the West. It was against those background conditions that the government launched its bailout over 2008-9, which was focused around massive domestic investment, and is now running out of steam, whilst having intensified a whole set of contradictions, as I explained above.

That China continues to experience positive and relatively high growth rates compared to countries like the US is indicative not of the Chinese economy being a different mode of production, but of the fact that crises develop in uneven and complex ways - you see exactly the same phenomenon in Latin America and Africa because the economies of those regions have been boosted by Chinese demand for their raw materials, including over the past few years where the Chinese bailout has utilized the raw materials of those regions in order to construct housing and transport infrastructure, for example. Now that the bailout is effectively coming to a close, and now that there is no major source of demand within China for the raw materials of the periphery, you are seeing the first signs of the crisis spreading throughout the regions that were hitherto relatively unaffected, because of how much other countries have depended on Chinese demand (see this (http://www.bbc.co.uk/news/business-18964557), for example, as well as this (http://www.guardian.co.uk/commentisfree/2012/jul/15/africa-industrial-policy-washington-orthodoxy) analytical argument from Ha-Joon Chang). The slowing of growth in the periphery due to falling demand in China is also further evidence of how the world economy is an integrated unit from which no single national economy can escape, especially during a capitalist crisis.

Indeed, all capitalist economies are directed by the market in particular and the world market in general, that was exactly my point about Adam Smith's invisible hand. But the Chinese economy is not, ultimately, capitalist.

If it were, and if it were really totally foreign investment and export driven as islandmil imagines, then it would have been hit, if anything, harder by the recent world economic crisis than other countries. Which is exactly what all the state caps were predicting in 2008. They were dead wrong, a small piece of experimental evidence that the "state cap" analysis is wrong.

From the standpoint of an American consumer shopping at Wal-Mart, the Chinese economy surely must be capitalist, as everything he buys there is made in China, for a profit.

From the standpoint of the Chinese, it's not. The export sector is indeed mostly private capitalist, but the state sector is not, the "commanding heights" of the economy are in the hands of the state, and the state is directed by the CCP not the Chinese bourgeoisie, a class that does not run the Chinese state and has a relationship with it sometimes almost as uneasy as that of the Chinese working class. The CCP state is exactly as described by Trotsky with respect to the USSR, a Bonapartist affair balancing between classes, subordinate to world imperialism but ultimately dependent on the Chinese working class and peasantry for its legitimacy, so ultimately an extremely corrupt and deformed workers state.

So the Chinese response to the world economic crisis was to--shift investment to the state sector. And tolerate a pretty dramatic rise in wages, under the impact of class struggle, and make other concessions to the working class and peasantry. Almost inconceivable in any capitalist country in the middle of a world economic crisis like this one.

Other Third World countries did benefit temporarily from the huge worldwide economic collapse in the imperialist centers, Europe and Japan and the USA. After all, stuff has to be produced somewhere. But that is all very fragile and crisis ridden, especially in India, where you have a (relatively) small bourgeoisie getting much richer while the popular masses sink further into extreme misery and much of the countryside is wracked by peasant and minority nationality revolts. Almost the opposite of what has gone on in China, where you have had a remarkable increase in the popular standard of living right in the middle of all this.

I don't know where you got that stuff about the Chinese working class standard of living being less than the Indian. The exact reverse is true. Perhaps your stats include the upper classes, whose income levels in India are approaching Western levels. In India, half of all children suffer malnutrition! Last stats I saw, the average income level of the average worker or peasant in China these days is twice that in India.

In China, the fundamental crisis is political not economic. Both the working class and the bourgeoisie is rising in power and the peasantry is getting very uppity. The bureaucracy is visibly scared of being ground to pieces in between and coming unstuck, as the recent Politburo purge demonstrates, and therefore is trying to crack down, not too successfully.

Exactly the dynamics one would expect in a deformed workers state starting to come unstuck, and not at all what one sees in a capitalist country.

Economic crisis in the export sector could indeed set off a political explosion, but it would just serve as a trigger. The superior economic performance of China to capitalist countries is a repetition, despite all the differences, of the widely acknowledged economic superiority of the USSR under Stalin to capitalist countries during the Great Depression.

-M.H.-

[islandmilitia]

And tolerate a pretty dramatic rise in wages, under the impact of class struggle, and make other concessions to the working class and peasantry. Almost inconceivable in any capitalist country in the middle of a world economic crisis like this one.


I don't know where you got that stuff about the Chinese working class standard of living being less than the Indian.

I'll take the issue of demand first, because that's where you're most straightforwardly wrong. In the first place, I did not say that the living standards of the Chinese working class are lower than workers in India, that is certainly not the case, what I did say is that the role of (household) consumption as a component of China's GDP is extremely low compared to other countries - and that is true, it is one of the features of the Chinese economy that is repeatedly emphasized by analysts on the left and the right, because it is closely bound up with China's growth model and represents one of the key underlying weaknesses of the Chinese economy in the context of the world economic crisis. Having done a quick google search, this (http://www.thehindubusinessline.com/features/investment-world/article2077037.ece) article emphasizes low consumption as a feature of Chinese GDP through a contrast with India, pointing out that whereas total consumption (encompassing household and government consumption) comprises around 69 percent of Indian GDP, compared to only 48 percent for China in 2009. When discussing the imbalances in the Chinese economy and China's ability to move away from an export-orientated growth model, it is obviously the weight of consumption in GDP that is of the most importance, rather than, say, how many workers in China possess a TV or a mobile phone compared to India. In the second place, you are also completely wrong to say that the Chinese government responded to the crisis through a massive increase in the consumption of workers and peasants, even if that were sufficient to show that China is non-capitalist. The long-term decline of consumption as a component of Chinese GDP (not the same as a decline in living standards) has continued through the crisis alongside a decline in export earnings and a massive increase in investment. So, according to Table 1 in this (http://monthlyreview.org/2012/02/01/the-global-stagnation-and-china) article from Monthly Review, based on the Chinese government's own statistics, household consumption comprised 35.1 percent of GDP in 2008, already a low level compared to other countries, and by 2010, during the bailout period, had declined to 33.8 percent. That does not equal a government-sponsored surge in wages.

All that being said, it is worth pointing out that alongside a general decline in consumption, there have, over the past ten years, been increases in incomes within particular sectors, often as a result of strike action, or as a result of specific government decisions. Rather than those rises doing anything to rebalance the Chinese economy and avoid crisis, they have actually accentuated other contradictions, underlining the absence of any easy solution for China in the current crisis. For example, there have been wage increases in the export sector due to the rising confidence of the working class, but when faced with those increases, the response of many firms has been to move their factories away from the traditional export zones (like Guangdong) to interior provinces, and ultimately to relocate to other Asian countries where the working class does not threaten international capital, such as India and Indonesia. In fact, just last week, as discussed in this (http://www.globaltimes.cn/NEWS/tabid/99/ID/721988/Adidas-to-shut-down-factory-in-China.aspx) article, Adidas announced that it is closing its last self-owned factory in China, and cited rising costs as the key motivating factor. In much the same way, when the Chinese government abolished rural taxes as a response to peasant protest back in 2005, the consequence was a fall in the number of migrants from rural provinces to the industrial cities, which also undermined the incentives of the multinational corporations who had hitherto prized China's abundance of migrant labour. What this suggests is that even if, in the current period, the Chinese state were to massively increase incomes, this would, whilst raising the level of consumption in the Chinese economy, also accentuate the flight of multinationals, with all the attendant political and social consequences. There is no way that the Chinese state can reconcile all the intense contradictions of the Chinese economy.

I'll deal with some more points later.

[islandmilitia]

Other Third World countries did benefit temporarily from the huge worldwide economic collapse in the imperialist centers, Europe and Japan and the USA. After all, stuff has to be produced somewhere...

Before I deal with the big issue of the nature of Chinese society, I'll deal with the issue of other countries first. Firstly, to clarify, it is not really the case that other countries in Latin America and Africa have benefited from the crisis in the imperialist heartlands because of stuff having to be produced somewhere. That is a confused formulation. The growth rates of these countries (and we are here talking mainly of primary commodity and raw material producers, like Brazil, Angola and Australia, not India, because India is not a producer of any of the key commodities required by China) have been sustained for a long period of time because of demand from China, in light of China's consistent demand for fossil fuels, food, rare earth metals and all the other imports required to sustain China's own growth rates. This demand has continued into the present because of the bailout from the Chinese government, which focused on investment, especially in the form of infrastructure and other kinds of projects which require the purchase of raw materials. In simple terms, you need steel to build a huge railway network and loads of new bridges. So we should see China's role as a sustainer of growth in the periphery as a relatively long-term phenomenon, and one that speaks to the integration of the world economy. Secondly, the resulting growth in countries like Brazil has continued up to the present and in quantitative terms has been strong. Angola being a primary case in point, with growth in excess of 7 percent last year. If we can agree that, say, Angola is a capitalist society, then the fact that China has sustained higher growth than the US is no longer evidence that China is somehow post-capitalist. The fact that in other countries this growth has been to the benefit of the ruling class is not dissimilar from China because in China the long-term growth of inequality since 1978 has continued in the most recent period. In fact, within the past two years there has been a radicalization of protest as a consequence of heightening inequality, as exemplified by the Wukan occupation. China is not exceptional in having sustained growth to the present, and nor has this growth been to the advantage of the working class.


The export sector is indeed mostly private capitalist, but the state sector is not, the "commanding heights" of the economy are in the hands of the state, and the state is directed by the CCP not the Chinese bourgeoisie...

This speaks to a very confused conception of mode of production. Based on the above you seem to be saying that there are multiple modes of production in China, especially a capitalist mode of production in the export sector, and a socialist or non-capitalist mode of production in the state sector. This has nothing to do with Marx's understanding of modes of production. What characterizes one mode of production from another is the existence of different laws of motion, different regulators of production and distribution, and for that reason the only context in which we could speak of a society embodying multiple modes of production is if there were a conflict between multiple laws and logics. In China there are different forms of legal ownership but the whole of Chinese society is regulated according to a single set of laws of motion, which is the law of value, or the laws of motion of capitalist societies. The state sector is part of these laws rather than being external to them. Not only is it the case that large numbers of SOEs were privatized or opened up to joint-stock ownership in the 1990s (under the policy of "grasping the large and letting go of the small") even those commanding-heights enterprises which have remained under state ownership (e.g. metallurgy) are now integrated into a development model that is itself orientated towards the world market. These remaining state-owned enterprises have provided the infrastructure for foreign investment and are largely subordinated to that purpose. They are now dependent on commercial loans and market prices, rather than having their revenues and profits determined through state-determined prices, as under Maoism. Their hiring practices are also based around contracts rather than life-time employment. As such, they cannot be said to represent a non-capitalist or anti-capitalist mode of production.

The CPC ruling elite, moreover, is not separate from the Chinese bourgeoisie. There is a sector of the Chinese bourgeoisie which does not belong to the CPC, just as there is a section of the CPC that does not draw wealth from exploitation of labour, but there is generally an overlap between the two, as private capitalists have, since 2001, been allowed into the CPC, and through the privatization of SOEs in the 1990s, party cadres were themselves able to assert control over substantial sectors of economic wealth. Moreover, even when party leaders do not themselves formally have ownership over vast sectors of the Chinese economy within China, for reasons of political propriety, they are still part of a bourgeoisie through their ownership of assets in Hong Kong as well as through family connections and networks. Bo Xilai and Gu Kailai's immediate relatives, for example, are almost all wealthy businesspeople (source (http://www.nytimes.com/2012/04/24/world/asia/bo-xilais-relatives-wealth-is-under-scrutiny.html?pagewanted=all)). The Chinese state is not in a conflictual relationship with the bourgeoisie, rather, these two categories intersect, and the state defends bourgeois interests, like all other capitalist states.

To conclude with some summary points:

The Chinese accumulation model has been based around export production and foreign investment, and for that reason has depended on the sustained repression of wages, resulting in consumption being a remarkably low component of GDP, and requiring the violent suppression of mass struggles.
This weakness in consumption has undermined the possibility of a reconfiguration of the Chinese economy in the context of the current crisis, and yet sectoral increases in wages in the past have also accentuated contradictions by driving away foreign investors.
The bailout since 2008 has been based around investment in infrastructure and housing, and for that reason has accentuated the growth of asset bubbles as well as problems of local government debt, representing another intensifying contradiction.
The current slowing of Chinese growth is having implications in other countries, especially in the periphery, whose own growth rates have depended on demand in China for their primary commodity and raw material exports.
China has since 1978 experienced a restoration of capitalism because the entire economy, including the sector that is formally state owned, is subject to the law of value, through its integration in the world economy. The difference in formal ownership between private, joint-stock and state-owned sectors obscures the fundamental dominance of the same basic laws of motion.
There has, through the same process of restoration, been an emergent convergence between the Chinese bourgeoisie and the state, such that the Chinese state can now be regarded as a capitalist state.
The Chinese working class is militant, brave, inspiring and knows that the state no longer represents its interests. China deserves socialism more than any other society in history. Obfuscations about China not being capitalist and about the state having to legitimize itself in the eyes of the working class deprive the Chinese working class of the ideological weapons it needs to carry out its historic mission.