Currently, China has found itself in a situation of trade war with almost the whole world. Not only large states, but also small countries are ready to impose customs restrictions on Chinese goods. Some Middle Eastern economists see a way out of the situation in reducing the export orientation of the economy. This makes sense, as domestic consumption has a very large potential. And since, by reducing exports, the PRC will reduce its dependence on it.
Selling land as a powerful asset to improve the personal well-being of ordinary Chinese
The Chinese government is considering an initiative to allow the privatization of land and the subsequent sale of rural land by those agrarians who would prefer to live and work in the city and for whom the land is of no use. Historically, in communist China, most of the land plots are in collective or state ownership – and modified collective farms still exist. There is little private land – it is land privatized by citizens under Deng Xiaoping.
During the reign of this reformer, land privatization in the usual sense was not carried out in China. Instead, as part of the economic reforms initiated in the 1970s, a system of land leases was introduced. The land remained in state ownership, but peasants and enterprises were granted the right to long-term leases, which enabled them to use land resources more efficiently.
Are citizens living in the paradigm of free people beneficial to Heaven?
Let’s say one Chinese person is talented in repairing equipment, wants to open his workshop and sell the land he does not need to another fellow villager who is talented as a farmer and who, having acquired additional allotments, will be able to earn more due to scaling. Thus, each of them will be more successful in their field, provide for their family and old age, and will be minimally dependent on the state apparatus. But if yesterday’s agrarian, who decided to become a proletarian, sells his shares, he risks if city life fails and he has to return to the village as a landless marginal.
It seems that the solution to why the Chinese authorities hold back such initiatives as the possibility of privatizing and then selling their land to ordinary people is that the Communist Party is afraid of its capitalized citizens. It is not profitable for the country to mass produce citizens who live in the paradigm of free people.
The Communist Party chose a different tactic for economic development – subsidizing enterprises and global economic expansion. Many enterprises received carte blanche for cheap loans and favorable tax conditions in order to increase production volumes as quickly as possible and capture as many markets as possible.
So, for example, now the volume of car production has increased to 40 million per year against a domestic demand of 22 million, which is surprisingly small for a country with such a population. However, such low demand correlates with the party line, which considers the mass purchase of motor vehicles wasteful.
The industrial gigantomania of the Celestial Empire continues
This year’s plans to produce solar cells with a capacity of up to 720 gigawatts against a domestic demand of 220 gigawatts are indicative. Visible direct aggressive expansion into all kinds of world markets.
The flip side of such an industrial boom is a critically low share of consumption in GNP, which is a direct consequence of the exploitation of cheap labor and disproportionately huge government expenditures on subsidies and soft loans for producers.
Economic models of the USA and China: capitalism vs communism of the modern kind
It is interesting to compare the current models of economic development of the two superpowers. Thus, in China, industrial gigantomania is mainly aimed at global economic expansion, without caring at the same time about the welfare of its citizens. In America, however, the industrial “furnace” works at full capacity, providing a food surplus in supermarkets, an excess selection of cars in car dealerships, etc., and at the same time decently paying the labor of ordinary Americans. What ultimately makes the country so big and powerful. That is, the two superpowers are betting on two diametrically different models of economic success.
For now, one can get lost in conjecture, whether Xi Jinping decided to ignore the logic of the economic development of civilized countries and world trends, or whether he went all-in. But there is a trend, if not deglobalization of the world, then its clustering into groups of countries with which cooperation seems promising.
It is obvious that in the cluster with China there will be no Europe and the USA, which will withdraw their production from the territory of the Celestial Empire. Instead, the PRC will support collaboration with India, Indonesia, and Vietnam to fill gaps in the technological chains of its production.
If earlier one of China’s competitive advantages was the fact that developed countries opened their low-cost production facilities on its territory, now China is trying to put the world leaders on the shoulders of heavy engineering and electronics production. Yes, IA “FACT” already wrote about how the Chinese technology giant Huawei challenged the American Nvidia by developing its own AI chip.
Why dumping is evil for the civilized world
Usually, unfair competition and dumping is a sufficient reason for the countries suffering from it to increase customs duties on Chinese goods. Here are some recent examples. In 2022, the USA decided to stimulate a domestic start-up in the production of cheap solar panels – a huge plant worth 1.5 billion dollars, with the help of soft loans and taxation. The initiative turned out to be relevant also in connection with the climate legislation adopted by Biden and the need to get off the needle of petroleum products. Since the domestic production of shale oil still does not cover the domestic needs of the country. And at the same time, the PRC doubled its domestic production of solar panels and collapsed the prices of these products in the USA. Unfair Chinese competition and dumping forced the Americans to suspend their own production.
A similar story happened with a huge steel plant, which suspended its production and had to lay off 2,000 employees due to Chinese dumping of iron ore and steel. In Europe, due to the expansion of cheap cars “made in China”, 10,000 employees of the automotive industry lost their jobs.
Anti-dumping showdowns in Europe and the USA
These examples are very indicative and demonstrate the regularity of the fact that the governments of the USA, EU and Great Britain, as well as India, Vietnam, Argentina raise customs duties to protect domestic producers from unfair competition.
All that glitters is not gold. If earlier the cheapness of Chinese goods seemed attractive, today there is an understanding that it is drowning the civilized world. That is, China itself unleashed a trade war with the whole world. And this is when the US is actively investing in renewable energy, the EU plans to launch its own semiconductor production. And, probably, it will be a particular pain for China that the production of “apples” – and the most expensive models of iPhones – is transferred from the territory of the Celestial Empire to India, which already produces every seventh smartphone in the world.
China’s economic problems are intensifying. Despite this, megalomaniacal projects continue to unfold, in particular, the construction of a railway in debt. But such an economic strategy is doomed to failure, investors understand this and leave the market. China does its best to hide the number of investors leaving its territory.
Many experts are united in the opinion that the new policy of a big industrial leap in the short term will provide China with an active presence at the level of world markets. But it is likely that very soon the economic “anthill” will face the problem of non-repayment of large construction projects, in which large state subsidies have been invested.
Thus, Xi’s government generously gifts its manufacturers with subsidies from the state budget, and cheap labor additionally lowers the cost of production. In essence, the Chinese state juggernaut appropriated the assets of ordinary Chinese to maintain its status as the world’s economic hegemon.
Tatyana Morarash
