At its 19th Congress last month, the Chinese Communist Party confirmed President Xi Jinping’s status as its most powerful ruler since Mao by formally writing his name into the party constitution. His crackdowns on corruption and dissent have helped him to consolidate power by removing rivals. "Xi Jinping Thought" [1] means that any challenge to the President will now be seen as a threat to Chinese Communist Party rule; while a seven-man leadership committee unveiled in October 2017 included no obvious heir, paving the way for Xi to govern well beyond the next five years.

Xi has been front and centre of China's push to cement its position as a superpower and has vigorously pursued what he has called a "great rejuvenation of the Chinese nation" with his “China Dream” [2] vision. In his speech to the Party cadres at the Congress Xi announced that, “socialism with Chinese characteristics has crossed the threshold into a new era.” And he outlined two grand objectives: from 2020-2035, China will become a “fully modern” economy and society; this to be followed by a further 15 years to 2050, when China’s quest for national wealth and power will come to fruition as it assumes great power status.

In 2050, just over a century after the foundation of the People’s Republic of China in 1949, Xi plans for China to have become “a global leader of composite national strength and international influence”. This is not entirely new. In a speech from November 2014, Xi spoke of China’s role in the world. He outlined a new type of great power relations, a new international system whose underlying rules will be increasingly shaped by China; and a more activist and assertive Chinese diplomacy. What all this really means is that China is openly declaring a direct challenge to US financial/economic and political domination of the planet.

The Challenge

China is already a global player. In partnership with governments around the world, especially in Africa and South America, China has been investing enormous sums of money in developing local infrastructure, roads, railways, power stations, etc. in exchange for access to the raw materials that it needs to drive its economy. This year, China has announced One Belt One Road [3]. A trillion dollar initiative composed of six separate projects across Asia and Europe intended to develop infrastructure to facilitate and enable trade from the Pacific to the Atlantic. The advantage to China is to use up spare capacity, create new markets and secure access to raw materials, in particular, gas and oil. As China’s wealth and technical capacity increase, it is turning its economy towards directly competing with Europe and the US in high tech manufacturing.

Dollar Hegemony

A key thing holding China back is the US’ stranglehold on world finance. The dollar has been the world’s reserve currency since the end of WWII and this gives it an enormous advantage, especially since the dollar’s link to gold was abandoned in 1971. Effectively, the US can get the rest of the world to fund its deficits and thus pay for the US’ huge military expenditure (currently $600 billion a year). [4] To counter this, China and its partner nations have been creating financial institutions such as the New Development Bank5 (a rival to the IMF) and setting up oil markets denominated in the renminbi and backed by gold.

Over time, China expects an increasing amount of trade, especially in oil, to be conducted outside of the dollar, dealing a major blow to US dominance. This will not happen overnight but China, as Xi Ping has made clear at this Congress, is playing the long game. Of the foreign reserves held by the world’s governments, just 1.1 per cent are in renminbi, compared with 64 per cent for the dollar. It’s aim is to change that. A year ago, China announced that the renminbi had become the fifth currency used by the International Monetary Fund to calculate special drawing rights. But in fact its share of international payments has slipped from 2.8 per cent in 2015 to 1.9 per cent today. So there is still a long way to go before the Chinese currency can seriously challenge the dollar, and the international financial mechanisms that are attached to it, although the next financial crash may help it on its way.

The US Response

The way the US is responding to China’s challenge is primarily through military means in which it has an unassailable lead. The US has six strategic command centres covering six continents which can basically impose a stranglehold on any trade route if they so chose. The US has 800 military bases around the world and a navy bigger than all other countries combined. [6] China’s economic activities in various countries of the world are now becoming the focus of the US military machine. Whether in Africa where the US has bases in 49 out of 54 African countries [7]; or along strategic points of the planned land and maritime New Silk Roads, such as Poland, Ukraine and Syria; and Greece, Albania and Montenegro, the US hopes to disrupt or prevent China’s plans for trade expansion. While China uses a strategy of building up relationships with its economic partners and fostering infrastructure and trade development to overcome the US; the US relies heavily on military power, deception, and covert activity but the fact that financialisation and the dollar dominate the capitalist global economy is the ultimate guarantor of its dominance.

Bankrupt Capitalism Leads to War

However the capitalist system today is on life support. The crisis that erupted in 1971-3 which led to the abandonment of the post-1945 settlement at Bretton Woods has never gone away despite all the technological and financial changes it has provoked. They have tried everything to kickstart another round of profitable accumulation, from Keynesianism to neo-liberalism, ending up with the deregulated speculation that ended in tears ten years ago. Since then capitalism has been propped up by states printing money (so-called quantitative easing). Despite this we have had a decade of virtual stagnation since that collapse. Why have capitalist efforts to get out of its economic mess been so ineffective? Basically the capitalist world needs a major devaluation of capital if it is to restore profit rates and begin a new cycle of accumulation.

Devaluation on a scale required to create a new round of accumulation would have to involve the massive destruction of capital values. At the level of concentration and centralization of modern capitalism mere moral depreciation is not enough. In the nineteenth century a few bankruptcies could allow the more successful capitalisms to take over the bankrupt firms at knock down prices and a new cycle of accumulation could begin again. In capitalism’s imperialist phase the solution has usually been the devastating destruction of a world war. Today with all other options exhausted the prospect of global imperialist conflict is moving closer. Some are alarmed at the war of words over North Korea’s nuclear capability. Others will watch the moveable feast that is the war across the Middle East and Central Asia. However harrowing and horrendous these conflicts are they are really sideshows to the main event. The current USA-China rivalry has plenty of scope yet for development but the tensions it provokes will be the real axis around which any future conflict will take place.

Ergosum

3 November 2017

A much more detailed piece on this will appear in the next issue of Revolutionary Perspectives (Series 4 Number 11) in January 2018.

Footnotes

1 foreignaffairs.com

2 bbc.co.uk

3 en.wikipedia.org

4 en.wikipedia.org

5 en.wikipedia.org

6 businessinsider.com

7 US Africa Command recognizes 54 countries on the continent, but refuses to say in which ones (or even in how many) it now conducts operations. An investigation by TomDispatch has found recent US military involvement with no fewer than 49 African nations.