 With over 20 million inhabitants each, Shanghai and Beijing are among the “hypercities” of the Global South, including Delhi, São Paulo, Dhaka, Cairo, and Mexico City, far surpassing the “megacities” of the Global North like London, Paris, or New York1. Walking the streets in China’s cities, you will however, quickly notice one marked difference – the absence of large slums or pervasive homelessness that is so common to most of the rest of the world. Why did mass urbanization not create large slums in China?When reform and opening up began in the late 1970s, 83 percent of China’s population lived in the countryside. By 2021, the proportion of the rural population had fallen to 36 percent. During this period of mass urbanization, over 600 million people migrated from rural areas to cities. Today, there are 296 million internal “migrant workers” (农民工, nóngmín gōng), comprising over 70 percent of the country’s total workforce2. Migrant workers became the economic engine of China’s rapid growth, which created the world’s largest middle class of 400 million people.  This historic migration came with many challenges, including the emergence of “urban villages” that had poor living conditions and inadequate infrastructure. Although basic amenities – such as running water, electricity, gas, and communications – were provided, sanitation, public services, fire safety, and other such amenities resembled that of rural villages. Due to lower rents and the lack of other affordable housing, urban villages are largely inhabited by migrant workers. With the acceleration of urbanization in the 2000s, the Chinese government began to promote large-scale transformation of the old areas of the cities, focusing on renovation of historically deteriorated neighborhoods and the removal of dangerous housing. Between 2008 and 2012, 12.6 million households in urban villages were rebuilt nationwide3. At the same time, efforts were made to construct public rental or low-rent housing. For instance, in Shanghai today, families of three or more people with a monthly income of less than 4,200 yuan per person can apply for low-rent housing, with the monthly rent being just a few hundred yuan (or five percent of monthly household income). In 2022, the central government announced the construction of 6.5 million units of low-cost rental housing in 40 cities, representing 26 percent of the total new housing supply in the 14th Five-Year Plan (2021-2025)4.  Indeed the explosion of rural-to-urban migration in recent decades is not a phenomenon unique to China. While understanding that there are different definitions of “slums” used by countries and international organizations, they all point to the same tendency: since the 1970s, slum growth outpaced urbanization rates across the Global South. China’s efforts to upgrade existing precarious housing or build new affordable housing does not, however, explain why China did not develop slums like in so many other countries. Urbanization in China, therefore, must be understood within the context of socialist construction. What is the “hukou” system and what does it have to do with socialism? One unique characteristic of China’s urbanization process is that, although policies encouraged migration to cities for industrial and service jobs, rural residents never lost their access to land in the countryside. In the 1950s, the Communist Party of China (CPC) led a nationwide land reform process, abolishing private land ownership and transforming it into collective ownership. During the economic reform period, beginning in 1978, a “Household Responsibility System” (家庭联产承包责任制 jiātíng lián chǎn chéngbāo zérèn zhì) was created, which reallocated rural agricultural land into the hands of individual households. Though agricultural production was deeply impacted, collective land ownership remained and land was never privatized.  Today, China has one of the highest homeownership rates in the world, surpassing 90 percent, and this includes the millions of migrant workers who rent homes in other cities. This means that when encountering economic troubles, such as unemployment, urban migrant workers can return to their hometowns, where they own a home, can engage in agricultural production, and search for work locally. This structural buffer plays a critical role in absorbing the impacts of major economic and social crises. For example, during the 2008 global financial crisis, China’s export-oriented economy, especially of manufactured goods, was severely hit, causing about 30 million migrant workers to lose their jobs. Similarly, during the Covid-19 pandemic, when service and manufacturing jobs were seriously impacted, many migrant workers returned to their homes and land in the countryside. Beyond land reform, a system was created to manage the mass migration of people from the countryside to the cities, to ensure that the movement of people aligned with the national planning needs of such a populous country. Though China has had some form of migration restriction for over 2,000 years, in the late 1950s, the country established a new “household registration system” (户口 or hùkǒu) to regulate rural-to-urban migration. Every Chinese person has an assigned urban or rural hukou status that grants them access to social welfare benefits (subsidized public housing, education, health care, pension, and unemployment insurance, etc.) in their hometown, but which are restricted in the cities they move to for work. While reformation of the hukou system is ongoing, the lack of urban hukou status forces many migrant parents to spend long periods away from their families and they must leave their children in their grandparents’ care in their hometowns, referred to as “left-behind children” (留守儿童 liúshǒu értóng). Though the number has been decreasing over the years, there are still an estimated seven million children in this situation. Today, 65.22 percent of China’s population lives in cities, but only 45.4 percent have urban hukou. Although this system deterred the creation of large urban slums, it also reinforced serious inequities of social welfare between urban and rural areas, and between residents within a city based on their hukou status.  How does the Chinese government deal with homelessness? In the early 2000s, the issues of residential status, rights of migrant workers, and treatment of urban homeless people became a national matter. In 2003, the State Council – the highest executive organ of state power – issued the “Measures for the Rescue and Management of Itinerant and Homeless in Urban Areas”5. The new regulation created urban relief stations providing food rations and temporary shelters, abolished the mandatory detention system of people without hukou status or housing, and placed the responsibility on the local authorities for finding housing for homeless people in their hometowns. Under these measures, cities like Shanghai have set up relief stations for homeless people. When public security – the local police – and urban management officials encounter homeless people, they must assist them in accessing nearby relief stations. All costs are covered by the city’s fiscal budget. For example, the relief management station in Putuo District (with the fourth lowest per capita GDP of Shanghai’s 16 districts and a resident population of 1.24 million), provided shelter and relief to an average of 24.3 homeless people a month from June 2022 to April 2023, which could include repeated cases6. Relief stations provide homeless people with food and basic accommodations, help those who are seriously ill access healthcare, assist them to return to the locations of their household registration by contacting their relatives or the local government, and arrange free transportation home when needed.  Upon returning home, the local county-level government is responsible to help the homeless people, including contacting relatives for care and finding local employment. For a very small number of people who are elderly, have disabilities, or do not have relatives nor the ability to work, the local township people’s government, or the Party-run street office, will provide national support for them in accordance with the “method of providing for extremely impoverished persons”, which is stipulated in the 2014 “Interim Measures for Social Assistance”. The content of the support includes providing basic living conditions, giving care to impoverished individuals who cannot take care of themselves, providing treatment for diseases, and handling funeral affairs, etc. This series of relief management measures ensure that administrative law enforcement personnel in the city do not simply expel homeless people from the city, but must guarantee that they receive proper assistance, in terms of housing, work, and support systems. What are the current challenges of urbanization, migration, and inequality? While creating relief centers is an important advancement, it is clear that shelters are not a structural solution and they alone cannot meet the needs of a metropolis like Shanghai of 25 million people, let alone the country’s 921 million urban residents. The government has been implementing many structural reforms to address inequality, and to make the cities and the countryside more liveable. In his report to the 20th National Congress of the CPC, President Xi Jinping said: “We have identified the principal contradiction facing Chinese society as that between unbalanced and inadequate development and the people’s ever-growing needs for a better life, and we have made it clear that closing this gap should be the focus of all our initiatives.”7 The unbalanced and inadequate development points to the gap between the countryside and cities, between underdeveloped and industrialized regions, and between the rich and poor. On a broader scale, the anti-poverty campaigns – highlighted by the eradication of extreme poverty in 2020 – and the rural revitalization strategy have helped alleviate the pressure of migrant workers moving to the cities. The government has invested substantial funds and resources, using diversified ways to alleviate poverty beyond income-transfer schemes, including developing rural industry, education, health care, and infrastructure8. These measures fundamentally improved the living and employment environment in rural areas and created more opportunities so that people have the option to stay and work in the countryside. For example, every year, more migrants are returning from cities back to their hometowns, which increased from 2.4 million (2015) to 8.5 million people (2019). Over the last decade, China has implemented reforms to balance the easing of hukou residency requirements and to improve the social welfare of migrant workers, while ensuring that urbanization and population distribution responds to the country’s needs. Since 2010, major cities have gradually relaxed the household registration restrictions for school admission, allowing children of migrant workers to attend public schools like children with local hukou. Furthermore, according to the 2019 Urbanization Plan, cities with populations below three million people are required to remove all hukou restrictions, while bigger cities (under five million) can begin to relax restrictions. The 14th Five-Year Plan (2021-2025) and the country’s economic strategy until 2035 focus on redistributing income through tax reform, reducing the gap between the rich and poor, and removing the barriers that prevent millions of migrant workers from enjoying the full benefits of urban life. In 2021, the government invested US$5.3 billion to relax the hukou residency rules, and to also boost urban migrants’ spending power as part of the country’s “dual circulation” policy9.  These efforts to tackle the “three mountains” of the high cost of housing, education, and health care faced by all Chinese people, including migrants, is at the center of the government’s vision and policy reforms towards “common prosperity” for all its citizens and the building of a modern socialist society.
AuthorDongsheng This article was produced by DongSheng. Archives July 2023
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7/12/2023 Can China and the United States Establish Mutual Respect to Lessen Tensions? By: Vijay PrashadRead Now On June 3, 2023, naval vessels from the United States and Canada conducted a joint military exercise in the South China Sea. A Chinese warship (LY 132) overtook the U.S. guided-missile destroyer (USS Chung-Hoon) and speeded across its path. The U.S. Indo-Pacific Command released a statement saying that the Chinese ship “executed maneuvers in an unsafe manner.” The spokesperson from China’s Ministry of Foreign Affairs, Wang Wenbin, responded that the United States “made provocations first and China responded,” and that the “actions taken by the Chinese military are completely justified, lawful, safe, and professional.” This incident is one of many in these waters, where the United States conducts what it calls Freedom of Navigation (FON) exercises. These FON actions are given legitimacy by Article 87(1)(a) of the 1982 United Nations Convention on the Laws of the Sea. China is a signatory to the Convention, but the United States has refused to ratify it. U.S. warships use the FON argument without legal rights or any United Nations Security Council authorization. The U.S. Freedom of Navigation Program was set up in 1979, before the Convention and separate from it. Hours after this encounter in the South China Sea, U.S. Defense Secretary Lloyd Austin spoke at the Shangri-La Dialogue in Singapore. The Shangri-La Dialogue, which has taken place annually at the Shangri-La Hotel since 2002, brings together military chiefs from around Asia with guests from countries such as the United States. At a press gaggle, Austin was asked about the recent incident. He called upon the Chinese government “to reign in that kind of conduct because I think accidents can happen that could cause things to spiral out of control.” That the incident took place because a U.S. and Canadian military exercise took place adjacent to Chinese territorial waters did not evoke any comment from Austin. He emphasized the role of the United States to ensure that any country can “sail the seas and fly the skies in international space.” Austin’s pretense of innocence was challenged by his Chinese counterpart, Defense Minister Li Shangfu. “Why did all these incidents happen in areas near China,” Li asked, “not in areas near other countries?” “The best way to prevent this from happening is that military vessels and aircraft not come close to our waters and airspace… Watch out for your own territorial waters and airspace, then there will not be any problems.” Li contested the idea that the U.S. navy and air force are merely conducting FON exercises. “They are not here for innocent passage,” he said. “They are here for provocation.” Tighten the NetWhen Austin was not talking to the press, he was busy in Singapore strengthening U.S. military alliances whose purpose is to tighten the net around China. He held two important meetings, the first a U.S.-Japan-Australia trilateral meeting and the second a meeting that included their counterpart from the Philippines. After the trilateral meeting, the ministers released a sharp statement that used words (“destabilizing” and “coercive”) that raised the temperature against China. Bringing in the Philippines to this dialogue, the U.S. egged on new military cooperation among Canberra, Manila, and Tokyo. This builds on the Japan- Philippines military agreement signed in Tokyo in February 2023, which has Japan pledging funds to the Philippines and the latter allowing the Japanese military to conduct drills in its islands and waters. It also draws on the Australia-Japan military alliance signed in October 2022, which—while it does not mention China—is focused on the “free and open Indo-Pacific,” a U.S. military phrase that is often used in the context of the FON exercises in and near Chinese waters. Over the course of the past two decades, the United States has built a series of military alliances against China. The earliest of these alliances is the Quad, set up in 2008 and then revived after a renewed interest from India, in November 2017. The four powers in the Quad are Australia, India, Japan, and the United States. In 2018, the United States military renamed its Pacific Command (set up in 1947) to Indo-Pacific Command and developed an Indo-Pacific Strategy, whose main focus was on China. One of the reasons to rename the process was to draw India into the structure being built by the United States, emphasizing the India-China tensions around the Line of Actual Control. The document shows how the U.S. has attempted to inflame all conflicts in the region—some small, others large—and put itself forward as the defender of all Asian powers against the “bullying of neighbors.” Finding solutions to these disagreements is not on the agenda. The emphasis of the Indo-Pacific Strategy is for the U.S. to force China to subordinate itself to a new global alliance against it. Mutual RespectDuring the press gaggle in Singapore, Austin suggested that the Chinese government “should be interested in freedom of navigation as well because without that, I mean, it would affect them.” China is a major commercial power, he said, and “if there are no laws, if there are no rules, things will break down for them very quickly as well.” China’s Defense Minister Li was very clear that his government was open to a dialogue with the United States, and he worried as well about the “breakdown” of communications between the major powers. However, Li put forward an important precondition for the dialogue. “Mutual respect,” he said, “should be the foundation of our communications.” Up to now, there is little evidence—even less in Singapore despite Austin’s jovial attitude—of respect from the United States for the sovereignty of China. The language from Washington gets more and more acrid, even when it pretends to be sweet. AuthorVijay Prashad is an Indian historian, editor, and journalist. He is a writing fellow and chief correspondent at Globetrotter. He is an editor of LeftWord Books and the director of Tricontinental: Institute for Social Research. He is a senior non-resident fellow at Chongyang Institute for Financial Studies, Renmin University of China. He has written more than 20 books, including The Darker Nations and The Poorer Nations. His latest books are Struggle Makes Us Human: Learning from Movements for Socialism and (with Noam Chomsky) The Withdrawal: Iraq, Libya, Afghanistan, and the Fragility of U.S. Power. This article was produced by Globetrotter. Archives July 2023 7/9/2023 Addressing allegations of “Chinese spy base” in Cuba.By: Manolo De Los Santos & Kate GonzalesRead Now On June 8, the U.S. media added to its long storybook of tales to scare people away from normal relations with Cuba. The Wall Street Journal published an article on that day claiming that China has plans to set up a “spy base” in Cuba, to “eavesdrop” on the United States and “identify potential strike targets.” WSJ has already published two more pieces since rapidly ramping up its narrative against the Cuban state and fermenting more paranoia as the news spreads across mainstream news outlets in the United States. Meanwhile, Cuban officials held a press conference on June 8 to completely deny the allegations. Cuba’s Vice Foreign Minister Carlos de Cossío stated that “All these are fallacies promoted with the deceitful intention of justifying the unprecedented tightening of the blockade, destabilization, and aggression against Cuba and of deceiving public opinion in the United States and the world.” Even John Kirby, National Security Council spokesman who was the former press secretary for the Pentagon, has denied the WSJ report, calling it “inaccurate.” This is just one new addition to the long legacy of lies that the United States has been spinning in an attempt to further alienate the Cuban people. One just has to remember the “Havana syndrome” that mysteriously affected diplomats in Cuba; it was first blamed on foreign powers as an attack but was later revealed to have no basis. Or maybe the claims about 20,000 Cuban soldiers supposedly based in Venezuela to maintain the government there, when in reality, the vast majority of Cubans present in Venezuela were medical workers. Or perhaps the idea that Cuban doctors sent across the world are enslaved, when it is simply their understanding that their duty to humanity is to provide health care to those who need it. All of these lies have been told just in the past few years alone. These falsified stories all swirl into fomenting the atmosphere of paranoia and suspicion that prevents normal U.S.-Cuba relations. In the wake of the Havana syndrome myth, Trump was able to interrupt the path Obama set toward normalization, setting 243 additional and comprehensive sanctions, and further preventing the island from meeting its basic needs. The United States continues to live out its Cold War fantasies through these lies, at the cost of the Cuban people’s lives and well-being. And yet, it maintains its hypocrisy. Cossío was careful to point out that Cuba would never allow a foreign military base on their island, as it is a signatory of the Declaration of Latin America and the Caribbean as a Zone of Peace. Cuba is also currently sponsoring and hosting peace talks between Colombia and the National Liberation Army (ELN). As of today, they have agreed to a cease-fire, ending decades of violence in the country. Cuba already suffers from the illegal U.S. occupation of Guantanamo, to further rub salt in the wound. The United States has its infamous military base there, which is known for the inhumane treatment and torture it deals out to its prisoners. While it accuses China of military expansion, the United States has hundreds of military bases all over the globe. Cuba has demonstrated that it desires nothing but peace in the region, and normal relations with its neighbor, the United States. But the United States refuses to accept this proposal. Instead, it maintains the most comprehensive sanctions in history against the small island. Instead, it falsely places Cuba on the state sponsors of terrorism list, even though it is in fact a sponsor of peace. Instead, the U.S. government and its media apparatuses choose to fabricate myths and legends, painting Cuba as the evil monster under the bed. It chooses to scare the U.S. people away from the possibility that normal relations and ending the blockade against Cuba could be good for people from both countries. AuthorManolo De Los Santos is the co-executive director of the People’s Forum and is a researcher at Tricontinental: Institute for Social Research. He co-edited, most recently, Viviremos: Venezuela vs. Hybrid War (LeftWord Books/1804 Books, 2020) and Comrade of the Revolution: Selected Speeches of Fidel Castro (LeftWord Books/1804 Books, 2021). He is a co-coordinator of the People’s Summit for Democracy. This article was produced by Globetrotter. Archives July 2023 Recognising how important it is for Today’s Left to understand China, BEN CHACKO recommends a highly readable and well-researched book of essays  CHINA looms large in today’s world. Its economy is predicted to exceed the US’s in size within the decade; by purchasing power parity, it is already larger. It is racing ahead too in diplomacy and trade: it has now replaced the US as the country with the most diplomatic missions overseas, and is the biggest trading partner of a majority of countries globally. This very success — China’s status as the United States’ only acknowledged “peer competitor”— could be the reason China is now routinely depicted as a menace. Britain’s BBC dutifully takes up scares over weather balloons and breathless reports on Chinese aircraft or ships’ “aggressive” conduct in encounters with US counterparts — which for some reason always take place just off the Chinese, not the American coast. Projects like the Belt & Road Initiative, which overtook the World Bank as the biggest development finance lender in 2019, are seen as evidence of a sinister new imperialism. Understanding China could hardly be more important for today’s left. The “China threat” is a key justification for a major plank of British state policy: huge increases in arms spending and the first “east of Suez” military deployments in many decades. This could mean World War III: a serving US general predicts that happening the year after next. Armageddon could result from current China policy in other ways: sanctions and economic “decoupling” are cutting us off from the world leader in renewable technology and undermining scientific co-operation on global warming or pandemics. Socialists need to know how we respond to these challenges. Carlos Martinez’s new book The East is Still Red is an excellent guide. Whether China is socialist, as its ruling Communist Party argues, is a divisive topic but with an eye on history Martinez draws out the consistencies in the country’s course since 1949. Chapter 1, No Great Wall, looks at how the “reform and opening up” period begun by Deng Xiaoping from 1978 built on achievements of the Mao years, without underrating the huge policy differences that did occur, or whitewashing either era. Later, in Will China Suffer the Same Fate as the Soviet Union, Martinez contrasts the two and points both to underlying strengths in China’s model and the lessons its party leadership has learned from the Soviet collapse. Many are familiar with impressive headline figures such as China lifting 800 million people out of poverty — but Western accounts tend to imply this is the undirected result of introducing “the market,” though capitalist market economies such as India or Brazil cannot point to similar achievements. Martinez delves into the details and looks at the targets, the plans, the actual measures taken to deliver the greatest improvement in human welfare in recorded history. For a Western left audience, key chapters are those on how China is making progress towards “ecological civilisation” — and why a “plague on both your houses” position dubbed Neither Washington Nor Beijing is untenable in a context where the US is unambiguously the aggressor in the new cold war while China’s rise is widely welcomed in the global South. Later, he adopts Noam Chomsky’s famous phrase “manufacturing consent” while looking at the media’s coverage of China and how issues are distorted to build support for our own ruling class’s hostility to it: essential reading here is a demolition of the wild claims made about alleged abuses in Xinjiang and their less than objective origins. Developed from articles written on different aspects of China and its revolution — many originally published in the Morning Star — this is a highly readable narrative that doesn’t presuppose detailed knowledge of Chinese history or politics. The thematic character means many chapters work well on their own, and will make it a handy reference point for anyone wanting to brush up on specifics like the anti-poverty campaigns or China and climate change. It’s extensively referenced, and welcome in quoting more Chinese than foreign sources on the country. Highly recommended. AuthorMorning Star This article was produced by Morning Star. Archives July 2023  The difficulty the U.S. faces in its current attempts to damage China’s economy was analysed in detail in the article “The U.S. is trying to persuade China to commit suicide”. Reduced to essentials, the U.S. problem is that it possesses no external economic levers powerful enough to derail China’s economy. The U.S. has attempted tariffs, technology sanctions, political provocations over Taiwan, the actual or threatened banning of companies such as Huawei and Tik Tok etc. But, as always, “the proof of the pudding is in the eating.” Taking the latest period, during the three years following the beginning of the Covid pandemic, China’s economy has grown two and a half times as fast as the U.S. and six times as fast as the E.U.. Therefore, as the previous article put it, in the economy the U.S. cannot “murder” China—even although it can create short term problems. Furthermore, unlike with Gorbachev, whose illusions in the U.S. led to a centralised political collapse of the CPSU, the disintegration of the USSR, and an historical national catastrophe for Russia, the policies of Xi Jinping and the CPC are centrally protecting China and socialism. As the U.S. cannot pursue a course of “murder”, therefore it is forced to attempt an indirect route to get China to commit “suicide”—that is, to try to persuade China to adopt policies which will damage it. Given that economic development underlies China’s success, one of the most central of all U.S. goals is to attempt to persuade China to adopt self-damaging economic policies. Enormous resources are therefore poured into spreading factually false propaganda regarding China’s economy. This also has the secondary goal of internationally attempting to persuade others not to learn from China’s economic success—because an understanding of the reality that China’s socialist economy is more efficient and successful than capitalism would be a devastating ideological blow to the U.S.. A crucial part of this false propaganda is to try to get accepted as “truth” claims about China’s economy which are entirely false—as basing policies on “facts” which are untrue would naturally lead to wrong policies. One of the most important of these false claims is that China’s socialist economy is “inefficient” compared to capitalism—or, more specifically, that investment in socialist China is inefficient in creating economic growth compared to capitalist America or in general compared to capitalist countries. Naturally, socialism’s goal is not abstract economic efficiency, it is people’s well-being. But an inefficient economy, in the long term, would be incapable of maintaining the maximum well-being of the people. Therefore, how efficient an economy is constitutes an important issue in economic development. Claims that capitalism is more economically efficient than capitalism, usually put in the form of U.S. claims of the “inefficiency of socialism”, consequently has at least two purposes. First, most immediately, to attempt to persuade China that as its investment is allegedly “inefficient” it should be reduced. As discussed in the earlier article, “The U.S. is trying to persuade China to commit suicide”, a key U.S. goal to get China to reduce its level of investment in GDP. This is because that same policy was successfully used earlier by the U.S. to derail its competitor economies of Germany, Japan and the Asian Tigers. Second, more generally and ideologically, this claim that China’s investment is inefficient, and capitalism’s is efficient, is an attempt to undermine and discredit socialism and promote capitalism. In summary, such propaganda is an attempt to spread two interrelated falsifications.
As will be systematically factually shown below, the exact reverse of these claims are true. Socialist China’s investment is much more efficient in creating growth than in capitalist countries such as the U.S.. As will be shown, this efficiency of China is integrally linked to the socialist character of its economy. As usual the method will be used to use the wise Chinese dictum to “seek truth from facts”. The first section of the article will establish the facts showing the greater efficiency of China’s investment. The second section will demonstrate that the reasons for this lie in the socialist character of China’s economy. Section 1—the high international efficiency of China’s capital investment |
 | Slowdown in U.S. growth But if U.S. inflation soared during the period of its pandemic era stimulus packages U.S. economic growth was very slow. Recent publication of U.S. economic data for the whole of 2022, which means that three years of pandemic, 2020-2022, are covered shows that U.S. GDP grew by a total of only 5.3 percent during this period—an annual average 1.7 percent. |
This compares to China’s total growth in the same period of 13.3 percent, or China’s annual average 4.3 percent. During the pandemic China’s economy therefore grew two and a half time as fast as the U.S. This data is shown in Figure 2. The U.S. stimulus packages were therefore accompanied both by extremely high inflation and low growth i.e., stagflation.
U.S. short-term contractionary policies As is well known, to attempt to combat the inflationary wave, the U.S. Federal Reserve, and other Western central banks, have had to, and will continue for some time, to increase interest rates and tighten monetary policies with inevitable contractionary economic effects. |  |
Indeed, as Figure 3 shows, U.S. money supply has actually been falling since its peak in March 2022—a highly unusual and contractionary monetary situation. This is the exact opposite of what would be required to lessen economic slowdown. This helps ensure that the U.S. economy will remain locked in slow growth in 2023.
 | Medium-/long-term slowdown of the U.S. economy An immediate consequence of these sharply contractionary policies being carried out by the U.S. economic authorities in 2022-23 is that the medium-term term effects of the U.S./EU stimulus packages must be judged a complete strategic failure. |
Any short-term benefits during the pandemic were cancelled out, or more than cancelled out, by the contractionary policies and resulting low short-term growth required to get inflation back under control—an inflation which, as will be seen, was itself created by U.S. economic policy. This helps produce the stagnationary aspects of the situation.
For this reason, not only will the U.S./EU’s 2023 growth decelerate, but Western economies medium/ long-term growth—in particular, that of the U.S. —will slow, as even the IMF, whose predictions are normally somewhat biased in favor of the U.S., admits. Figure 4 shows that the IMF projects that annual average U.S. GDP growth, taking a long-term average to remove the effect of business cycle fluctuations, will fall from an already low 1.9 percent in 2021 to 1.6 percent in 2027. Over the same period the IMF projects EU annual growth will fall from 1.4 percent to 1.2 percent.
This complete strategic failure of the U.S./E.U. stimulus packages launched against the COVID economic downturn makes clear why it is important that China studies and draws the lessons from this extremely negative experience—as these lessons are linked to fundamental issues of economic policy and therefore also affect China.
For this reason, not only will the U.S./EU’s 2023 growth decelerate, but Western economies medium/ long-term growth—in particular, that of the U.S. —will slow, as even the IMF, whose predictions are normally somewhat biased in favor of the U.S., admits. Figure 4 shows that the IMF projects that annual average U.S. GDP growth, taking a long-term average to remove the effect of business cycle fluctuations, will fall from an already low 1.9 percent in 2021 to 1.6 percent in 2027. Over the same period the IMF projects EU annual growth will fall from 1.4 percent to 1.2 percent.
This complete strategic failure of the U.S./E.U. stimulus packages launched against the COVID economic downturn makes clear why it is important that China studies and draws the lessons from this extremely negative experience—as these lessons are linked to fundamental issues of economic policy and therefore also affect China.
What happened during the U.S. stimulus packages? Turning from the results of the U.S. stimulus packages to the processes which occurred during them, and produced these negative results, by far the largest change was in U.S. government behavior. Figure 5 shows U.S. government receipts and expenditure. |  |
As may be seen during the pandemic there was no very dramatic change in U.S. government receipts—they were 27.5 percent of GDP in the 4th quarter of 2019 on the eve of the pandemic, never fell below that level during it, and rose moderately to peak at 30.7 percent of GDP in the 2nd quarter of 2022, a rise of 3.2 percent of GDP. The extraordinarily dramatic change was the enormous surge in government expenditure during the pandemic. Between the 4th quarter of 2019 and the 2nd quarter of 2020 U.S. government expenditure rose from 34.4 percent to 54.9 percent of GDP—an extraordinary increase of more than 20 percent of GDP during six months. This 54.9 percent of GDP of government spending was unparalleled in U.S. peacetime history.
 | The vast surge in U.S. government expenditure, with merely a moderate rise in receipts, of course produced a huge excess of expenditure over income and consequently a vast increase in the budget deficit and state borrowing. As Figure 6 shows U.S. government quarterly borrowing soared to an unprecedented peacetime level of 26.2 percent of GDP in the 2nd quarter of 2020. |
A huge increase in U.S. transfer payments and subsidies
Turning to examine the uses this huge increase in U.S. government expenditure was put to, Figure 7 shows the structure and purposes of this. Making a comparison of the 2nd quarter of 2020, the peak of U.S. government spending, to the 4th quarter of 2019, the last before the pandemic struck, shows:
|  |
- There was no increase in government investment—it was 3.5 percent of GDP at the beginning of the period and 3.5 percent at the end.
- Government final consumption rose only modestly from 14.1 percent to 16.1 percent of GDP—an increase of 2.0 percent of GDP.
- Government subsidies, above all to transportation and related uses, rose from 0.4 percent to 5.0 percent of GDP in the 2nd quarter of 2020—an increase of 4.6 percent of GDP.
- Transfer payments to persons enormously increased from 14.4 percent to 28.1 percent of GDP—an increase of 13.7 percent of GDP. Payments to individuals accounted for the vast majority of the increase in government spending and were overwhelmingly used for consumption.
In terms of the structure of the economy and the stimulus packages which were launched, this increase in U.S. government spending was therefore overwhelmingly consumer oriented—10 percent of the increase in government expenditure went into final government spending, 23 percent into subsidies, and 67 percent into transfer payments to individuals. There was no increase in government investment. This is therefore the type of exclusively or overwhelmingly consumer-oriented stimulus program some supporters of the U.S. model advocate for China.
 | U.S. money supply The huge increase in consumer-focused government transfer payments was in turn accompanied by extremely rapid expansion of the U.S. money supply. Figure 8 shows that in the year to February 2021 the U.S. broad money supply rose by 26.9 percent—by far the most rapid increase in U.S. peacetime history. |
Even more extraordinarily, between February and September 2020 U.S. broad money supply rose by 20.2 percent in only a seven-month period—an annualized rate of 37 percent. These rates of monetary emission vastly exceeded, for example, the increase in U.S. money supply accompanying the Quantitative Easing to attempt to deal with the international financial crisis after 2007—the peak annual expansion of the U.S. money supply in that period was under 10 percent. In summary, the U.S. stimulus packages saw an unprecedented increase in the U.S. budget deficit and in U.S. money supply.
What occurred in the U.S. economy during its stimulus packages? Turning to the impact of these consumer-focused stimulus programs on the U.S. economy, Figure 9 shows the key changes in structure of U.S. GDP during the pandemic—that is, the changes from 2019, prior to the pandemic, to 2022. U.S. consumption rose relatively strongly by $3,551 billion. |  |
U.S. gross fixed investment also rose, by a much smaller $838 billion, but this was insufficient to even offset the capital depreciation of $848 billion in the same period. Therefore, U.S. net fixed investment, taking into account depreciation, fell by $10 billion at the same time as a surge in consumption was taking place. The U.S. capital stock at the end of this period was therefore marginally smaller than at the beginning—as the change was very small, it may be said fundamentally that during this period while U.S. consumption rose significantly there was no increase in U.S. net capital investment/U.S. capital stock.
 | Analyzing this in terms of the changes of the structure of U.S. GDP during the stimulus packages, the share of total consumption in U.S. GDP rose by 0.9 percent while the share of net fixed investment fell by 0.8 percent—as shown in Figure 10. |
This data confirms again that the nature of the U.S. stimulus programs was almost exclusively oriented to consumption and produced a further shift of the U.S. economy into consumption, while the share of net fixed investment was reduced—it was therefore almost a pure consumer stimulus.
The final outcome of the U.S. stimulus packages
To summarize, the combination of the changes in U.S. government spending with macroeconomic changes the changes in the U.S. economy during the pandemic were clear and the following:
|  |
- Strategically the stimulus program was a complete failure—in the short term the inflationary wave forced the introduction of contractionary measures sharply slowing the U.S. economy in 2023, while in the medium/long term annual average the U.S. economic growth actually declined.
At the end of these stimulus packages the U.S. economy was therefore in a worse strategic situation, with lower growth and higher inflation, than at the beginning. Given such a policy failure, with such negative results, what was the explanation of this? Was it possible to foresee it in advance? And what were the lessons?
Part 2. Confusion of Supply and Demand: Why the U.S. Stimulus Packages Failed
The reason for this complete strategic failure of the U.S. stimulus packages was twofold. Ultimately, of course, this failure was determined by the power of different social forces within the U.S., but in more immediate terms it was due to:
- Confusions in U.S. economic thinking.
- The point in the business cycle at which this consumer-based stimulus was launched.
Confusions in U.S. economic thinking
Considering first the confusions in U.S. economic thinking these were dealt with in detail in 引发世界经济危机的罪魁祸首是美国，而非乌克兰战争. Therefore, here only an update to the new U.S. data and a summary is given.
The most important confusion in popular, more precisely “vulgar,” writing in Western economics is a fundamental and damaging confusion between the economy’s demand side and its supply side. This was used to create a false rationale for the U.S. stimulus packages, with their damaging consequences, and it unfortunately also sometimes appears in sections of China’s media. It is therefore important to clarify this.
This confusion between the economy’s demand and supply sides necessarily fails to understand the different roles played by consumption and investment in the economy, and therefore to an erroneous view that consumption can substitute for investment in terms of economic growth. To be precise:
The most important confusion in popular, more precisely “vulgar,” writing in Western economics is a fundamental and damaging confusion between the economy’s demand side and its supply side. This was used to create a false rationale for the U.S. stimulus packages, with their damaging consequences, and it unfortunately also sometimes appears in sections of China’s media. It is therefore important to clarify this.
This confusion between the economy’s demand and supply sides necessarily fails to understand the different roles played by consumption and investment in the economy, and therefore to an erroneous view that consumption can substitute for investment in terms of economic growth. To be precise:
- Considering first investment, this constitutes part of both the economy’s demand and supply sides. Investment goods and services appear in the economy’s demand side by being purchased (buying of machines, factories etc.) but they are also an input into production together with other factors such as labor—i.e., investment is part not only of the economy’s demand side but also part of its supply side. An increase in expenditure on investment is therefore not only an increase in demand but also an increase in supply—for example, if there is a purchase of a billion yuan of investment goods (machines etc.) there is also automatically a billion yuan increase in overall supply in the economy.
- In contrast to investment, consumption is only a category on the economy’s demand side, it does not appear in the economy’s supply side. This is necessarily the case because, by definition, consumption is not an input into production—if anything is an input into production it is not consumption. Therefore, for example, if there is a billion yuan increase in consumption there is a billion yuan increase in the demand side of the economy, but not any automatic increase in the economy’s supply side. An increase in consumption increases the demand side of the economy but, unlike with investment, it does not automatically increase supply.
Confusion over this fundamental theoretical issue, as will be seen, significantly explains the strategic failure of the U.S. stimulus packages.
A technical note
To put this issue technically then, for example, in the most common form of “Western economics,” the growth accounting deriving from Solow, inputs into production are capital, labor, and total factor productivity (TFP). Other forms of Western growth accounting make a more detailed breakdown of these factors—an example is the KLEMS (capital, labor, energy, materials, services) framework developed by Jorgenson and applied by the European Commission. In Marxist economics supply side categories are living labor, capital, and socially necessary (or non-socially necessary) labor time.
It is unnecessary here to discuss the differences between these concepts in “Western” and Marxist economic as both agree that investment (capital) is an input into production and therefore part of the economy’s supply side, but neither includes consumption as an input into production—and therefore in both consumption is only part of the economy’s demand side but not of its supply side. Put in technical language, consumption is not an input into the production function—but for non-economists it is sufficient to understand that consumption is not part of the economy’s supply side.
As a result of investment being part of both the economy’s demand side and its supply side, but consumption being only part of the economy’s demand side, if there is an increase in investment demand, that is there is an increase in real expenditure on investment, there is also a direct increase in the economy’s supply side. However, if consumption is increased there is an increase in demand but not any direct increase in supply.
Under certain circumstances, analyzed below, an increase in demand caused by increasing consumption expenditure, may indirectly lead to an increase in production—but this is not at all automatic and also under other circumstances, because consumption is not an input into production, an increase in consumption demand may not lead even indirectly lead to an increase in production. In some circumstances an increase in consumption expenditure may simply create inflation, suck in imports, or both without an increase in production. But in all cases, any increase in output can only occur if there is an increase in the economy’s supply side (that is in labor, capital etc.). Consumption itself provides no input into production and no increase in productive capacity.
It is unnecessary here to discuss the differences between these concepts in “Western” and Marxist economic as both agree that investment (capital) is an input into production and therefore part of the economy’s supply side, but neither includes consumption as an input into production—and therefore in both consumption is only part of the economy’s demand side but not of its supply side. Put in technical language, consumption is not an input into the production function—but for non-economists it is sufficient to understand that consumption is not part of the economy’s supply side.
As a result of investment being part of both the economy’s demand side and its supply side, but consumption being only part of the economy’s demand side, if there is an increase in investment demand, that is there is an increase in real expenditure on investment, there is also a direct increase in the economy’s supply side. However, if consumption is increased there is an increase in demand but not any direct increase in supply.
Under certain circumstances, analyzed below, an increase in demand caused by increasing consumption expenditure, may indirectly lead to an increase in production—but this is not at all automatic and also under other circumstances, because consumption is not an input into production, an increase in consumption demand may not lead even indirectly lead to an increase in production. In some circumstances an increase in consumption expenditure may simply create inflation, suck in imports, or both without an increase in production. But in all cases, any increase in output can only occur if there is an increase in the economy’s supply side (that is in labor, capital etc.). Consumption itself provides no input into production and no increase in productive capacity.
The confusions in vulgar Western economic thinking
Both Marxist and serious Western economics understand this difference between the economy’s supply side and its demand side. But unfortunately, in popular, or “vulgar” Western economics, the two are confused by statements such as: “With consumption accounting for 67 percent of GDP growth.” This implies, because the economy is divided into consumption and investment, that consumption contributed 67 percent of GDP growth and, by implication, investment contributed 33 percent. But this statement is false. The correct statement is that “67 percent of economic growth was consumed and 33 percent was invested.” But because consumption is not an input into supply, consumption always contributes precisely zero percent to any increase into production. Consumption, consequently, always produces precisely zero percent of GDP—it may be the case that 67 percent of GDP is consumed, but consumption creates zero percent of that GDP production. As John Papola rightly put it: “The systematic failure…to distinguish between consuming and producing value is the single most damaging fallacy in [Western] popular economic thinking.”
This confusion over demand and supply sides of the economy, and therefore over the role of consumption and investment, then follows directly from statements such as “With consumption accounting for 67 percent of GDP growth.” If both consumption and investment are an input into production this suggests then one can replace the other. For example, if consumption and investment are both inputs into production, and therefore both are parts of the economy’s supply side, perhaps consumption could be increased to 80 percent of GDP, and investment reduced to 20 percent, and production growth would continue as before? But this is entirely false.
If consumption were increased from 67 percent of GDP to 80 percent, and total GDP remained the same, then certainly total demand would remain the same—because both consumption and investment are sources of demand. Total demand would remain the same, and simply its division between consumption and investment would change. But if investment were reduced from 33 percent of GDP to 20 percent, because consumption had been raised from 67 percent of the economy to 80 percent, then the inputs into production would have been radically reduced. And because inputs into production had been radically reduced then, other things remaining equal, the increase in GDP would be radically slowed. That is, consumption cannot substitute for investment in production, because consumption is not an input into production.
This is why, for clarity of thinking and policy making, it is necessary to entirely eliminate such statements as “consumption contributed 67 percent of GDP growth”—consumption always contributes zero percent of GDP increase. This confusion between the economy’s demand side and its supply side provided the economic rationale for the damaging consumer, that is demand side only, U.S. stimulus programs.
This confusion over demand and supply sides of the economy, and therefore over the role of consumption and investment, then follows directly from statements such as “With consumption accounting for 67 percent of GDP growth.” If both consumption and investment are an input into production this suggests then one can replace the other. For example, if consumption and investment are both inputs into production, and therefore both are parts of the economy’s supply side, perhaps consumption could be increased to 80 percent of GDP, and investment reduced to 20 percent, and production growth would continue as before? But this is entirely false.
If consumption were increased from 67 percent of GDP to 80 percent, and total GDP remained the same, then certainly total demand would remain the same—because both consumption and investment are sources of demand. Total demand would remain the same, and simply its division between consumption and investment would change. But if investment were reduced from 33 percent of GDP to 20 percent, because consumption had been raised from 67 percent of the economy to 80 percent, then the inputs into production would have been radically reduced. And because inputs into production had been radically reduced then, other things remaining equal, the increase in GDP would be radically slowed. That is, consumption cannot substitute for investment in production, because consumption is not an input into production.
This is why, for clarity of thinking and policy making, it is necessary to entirely eliminate such statements as “consumption contributed 67 percent of GDP growth”—consumption always contributes zero percent of GDP increase. This confusion between the economy’s demand side and its supply side provided the economic rationale for the damaging consumer, that is demand side only, U.S. stimulus programs.
The aim is consumption, but the means is investment
This same confusion of the supply and demand sides of the economy appears in other forms. For example, I read one recent article in the Chinese media which started by arguing, correctly, that the eventual benefit to humanity of all production is only in consumption. This is correct because, to take an example, the aim in constructing a railway is not at all to have steel lines or locomotives (means of production/investment), it is to transport food or other goods to consumers, to allow people to travel to work, to let them go on vacation etc.—that is, to enable consumption. But the article then went on to argue that because the ultimate goal was consumption therefore the intermediate stage of investment (e.g., building a railway) should be cut out and money should simply be put directly into consumption—for example coupons to purchase food, carrying out tourism etc.
But that argument is false. If a billion yuan is used to give consumer tokens for purchasing food, or a billion yuan is used to subsidize free or cheap travel for tourism, that is all used at once in consumption, but it does not increase the capacity of the economy to produce in the future. The food which is purchased, or the trips which are made for tourism, are not an input into production, and therefore do not produce anything—that is why they are consumption, not investment. But if a billion yuan is used to build a railway, or purchase machinery for manufacturing cars, then the productive capacity of the economy is increased—it will produce new goods and services in the future. This fact, that the contribution of consumption to an increase in production, will always be precisely zero, because consumption is not an input into production, is crucial for economic clarity.
Confusions over these elementary but crucial issues of economic theory as will be seen, determined the strategic failure of the U.S. stimulus packages. They rationalized the huge boost in consumption but no increase in supply and therefore are also crucial lessons for future stimulus packages for China in 2023.
But that argument is false. If a billion yuan is used to give consumer tokens for purchasing food, or a billion yuan is used to subsidize free or cheap travel for tourism, that is all used at once in consumption, but it does not increase the capacity of the economy to produce in the future. The food which is purchased, or the trips which are made for tourism, are not an input into production, and therefore do not produce anything—that is why they are consumption, not investment. But if a billion yuan is used to build a railway, or purchase machinery for manufacturing cars, then the productive capacity of the economy is increased—it will produce new goods and services in the future. This fact, that the contribution of consumption to an increase in production, will always be precisely zero, because consumption is not an input into production, is crucial for economic clarity.
Confusions over these elementary but crucial issues of economic theory as will be seen, determined the strategic failure of the U.S. stimulus packages. They rationalized the huge boost in consumption but no increase in supply and therefore are also crucial lessons for future stimulus packages for China in 2023.
Under what conditions can consumption increase supply?
Turning from these issues of economic theory to their practical effects in the U.S. stimulus packages this interrelates with the point in the business cycle at which these programs were launched. It was noted above that consumption, as it is not an input in production, cannot directly contribute to the supply side. But consumption can under certain conditions, by increasing demand, indirectly create increases in supply. But this is not automatic or necessary as it is subject to both physical and profitability constraints. Understanding both these distinctions, and the possible role of consumer stimulus, is therefore important.
First, if in any economic system there is spare capacity it is possible that increased demand resulting from increased consumption can result in extra supply to attempt fulfil this demand. But if there is no spare capacity then, until extra capacity is created by investment, there can be no increase in supply no matter what the increase in demand is. That is, there may be a physical constraint on increasing production. If there is an increase in consumer demand, but no ability in the short term to increase supply, what will be produced by the increase in demand is inflation, not an increase in production and GDP.
Second, for capitalist producers, if there is an increase in demand, it is not sufficient that there is unused capacity and therefore no physical constraint on increasing production. In a capitalist enterprise there will only be a meaningful increase in production if there is also an increase in profit—that is, there may be a profitability constraint on production if there is an increase in demand led by consumption even if spare capacity exists.
First, if in any economic system there is spare capacity it is possible that increased demand resulting from increased consumption can result in extra supply to attempt fulfil this demand. But if there is no spare capacity then, until extra capacity is created by investment, there can be no increase in supply no matter what the increase in demand is. That is, there may be a physical constraint on increasing production. If there is an increase in consumer demand, but no ability in the short term to increase supply, what will be produced by the increase in demand is inflation, not an increase in production and GDP.
Second, for capitalist producers, if there is an increase in demand, it is not sufficient that there is unused capacity and therefore no physical constraint on increasing production. In a capitalist enterprise there will only be a meaningful increase in production if there is also an increase in profit—that is, there may be a profitability constraint on production if there is an increase in demand led by consumption even if spare capacity exists.
Why the U.S. stimulus package was a strategic failure
Taking into account these fundamental conditions immediately makes clear why the U.S. stimulus programs to deal with the COVID pandemic were a complete failure in both the short term and strategically. At the end of 2019, immediately before the pandemic, the U.S. economy was growing above its trend rate of growth. Year on year growth in the 4th quarter of 2019, the last before the pandemic, was 2.6 percent, significantly above the U.S. long term average at that time of 2.1 percent. As the U.S. economy was already growing above its trend rate of growth when the pandemic hit it was unlikely that at this position in the business cycle there was meaningful spare capacity in the U.S. economy.
In the purely short term, obviously when the pandemic struck there was immediately a sharp fall in U.S. production—in the 2nd quarter of 2020 U.S. GDP was 9.6 percent below its level in the 4th quarter of 2019 prior to the pandemic. But U.S. recovery was rapid, in part because of the stimulus packages—by the 1st quarter of 2021 U.S. GDP had already regained its pre-pandemic level. But, as already analyzed, the U.S. stimulus packages were designed to be, and were, almost exclusively consumer focused. As a result, U.S. consumption, but not investment, continued to rise strongly even after the pre-pandemic level of GDP had been regained. By the 1st quarter of 2021 U.S. consumption was already $741 billion above its 4th quarter of 2019 level, and then it rose by a further $3,028 billion by the 4th quarter of 2022. In contrast U.S. net fixed investment rose by only $73 billion between the 4th quarter of 2019 and the 1st quarter of 2021. Then it actually fell by $166 billion by the 4th quarter of 2022—to finish $93 billion below its pre-pandemic levels.
This experience during the U.S. stimulus packages clearly illustrates the theoretical issue that increasing consumer demand does not automatically lead to an increase in productive capacity, in investment—substantially rising U.S. consumer demand did not lead to an increase in investment but was accompanied by investment failing even to increase by sufficient to replace capital depreciation.
In the purely short term, obviously when the pandemic struck there was immediately a sharp fall in U.S. production—in the 2nd quarter of 2020 U.S. GDP was 9.6 percent below its level in the 4th quarter of 2019 prior to the pandemic. But U.S. recovery was rapid, in part because of the stimulus packages—by the 1st quarter of 2021 U.S. GDP had already regained its pre-pandemic level. But, as already analyzed, the U.S. stimulus packages were designed to be, and were, almost exclusively consumer focused. As a result, U.S. consumption, but not investment, continued to rise strongly even after the pre-pandemic level of GDP had been regained. By the 1st quarter of 2021 U.S. consumption was already $741 billion above its 4th quarter of 2019 level, and then it rose by a further $3,028 billion by the 4th quarter of 2022. In contrast U.S. net fixed investment rose by only $73 billion between the 4th quarter of 2019 and the 1st quarter of 2021. Then it actually fell by $166 billion by the 4th quarter of 2022—to finish $93 billion below its pre-pandemic levels.
This experience during the U.S. stimulus packages clearly illustrates the theoretical issue that increasing consumer demand does not automatically lead to an increase in productive capacity, in investment—substantially rising U.S. consumer demand did not lead to an increase in investment but was accompanied by investment failing even to increase by sufficient to replace capital depreciation.
Therefore, because an essentially totally consumer focused U.S. stimulus was launched, creating a strong demand side boost, when the U.S. economy had already been growing above trend, and therefore spare capacity was small, and there was no increase in net investment, i.e., in capital stock and supply, the result was the huge U.S. inflationary wave already noted. As the Wall Street Journal editorial board, normally a firm supporter of the U.S., admitted, even if it didn’t accurately admit the reasons why: “This isn’t Putin’s inflation, this inflation was made in Washington.”
Strategic consequences for the U.S. economy
Turning from the short term to the strategic consequences for the U.S. economy these theoretical issues have clear medium- and long-term implications.
The short-term destabilization of the global economy caused by the U.S. stimulus packages, is extremely striking. But it is only an extreme illustration of the damage done by confusion over the role of consumption in the economy—this confusion also affects long term growth. Clarifying this theoretical conclusion leads to immediate factual, and therefore testable, conclusions which further clarify the reasons for the damaging strategic effects of the almost entirely consumer-based U.S. stimulus packages.
The prediction from economic theory is that because consumption is not an input into production, and investment is, then other things being equal the greater the share of consumption in the economy, and therefore the lower the share of investment, then over anything other than the short term the slower will be economic growth. Equally because, by definition, investment is an input into production, then, other things being equal, the higher the percentage of investment in the economy the more rapid will be economic development. As will be seen analysis of the U.S. economy fully factually confirms these theoretical predictions. This allows the long term strategic, as well as short term, failure of the U.S. stimulus packages to be clearly understood.
The short-term destabilization of the global economy caused by the U.S. stimulus packages, is extremely striking. But it is only an extreme illustration of the damage done by confusion over the role of consumption in the economy—this confusion also affects long term growth. Clarifying this theoretical conclusion leads to immediate factual, and therefore testable, conclusions which further clarify the reasons for the damaging strategic effects of the almost entirely consumer-based U.S. stimulus packages.
The prediction from economic theory is that because consumption is not an input into production, and investment is, then other things being equal the greater the share of consumption in the economy, and therefore the lower the share of investment, then over anything other than the short term the slower will be economic growth. Equally because, by definition, investment is an input into production, then, other things being equal, the higher the percentage of investment in the economy the more rapid will be economic development. As will be seen analysis of the U.S. economy fully factually confirms these theoretical predictions. This allows the long term strategic, as well as short term, failure of the U.S. stimulus packages to be clearly understood.
The slowing of the U.S. economy
Turning to medium/long term consequences, the changes in the structure of the U.S. economy which have been produced by the COVID stimulus packages have already been analyzed—that is they produced a further shift into consumption. But in addition to their negative short-term consequences how did these changes correspond, or fail to correspond, to the changes required to speed up U.S. economic growth over the medium and longer term—that is how do they strategically affect the U.S. economy? This was analyzed in detail in 引发世界经济危机的罪魁祸首是美国，而非乌克兰战争 so here only the main points are summarised—for other factual data please see that article.
Over the short term no single structural factor of U.S. GDP has a decisive influence on U.S. economic growth—as analyzed below this means, for example, that a consumer stimulus can have a short-term effect. However, if longer time periods are considered then the situation is entirely different. Taking a 10-year period, as would be predicted by economic theory, there is a positive correlation, to be precise 0.66, between the share of net fixed investment in the U.S. economy and GDP growth—a very high correlation. That is, the higher the percentage share of net fixed investment in U.S. GDP the faster the rate of U.S. GDP growth.
For present purposes it is unnecessary to determine why there is this close positive long-term correlation between net fixed investment and U.S. GDP growth—although the obvious explanation, in line with economic theory, would be the positive cumulative effect of high levels of fixed investment, an input into the economy’s supply side, in increasing U.S. capital stock. Nor is it even necessary, for present purposes, to determine the direction of causation between high levels of net fixed investment and high levels of GDP growth, or even to ascertain whether some third process determines both. It is simply sufficient to note that, due to this high correlation, the U.S. economy cannot achieve high levels of GDP growth without there also being high levels of net fixed investment in GDP. In other words, if over the longer term the U.S. economy is to grow more rapidly the percentage of net fixed investment in the U.S. economy must increase.
This, therefore, provides the fundamental criteria for evaluating the strategic effect of the U.S. stimulus packages to deal with the consequences of COVID on longer term U.S. economic growth. As already noted, these failed to raise U.S. net fixed investment—on the contrary U.S. net fixed investment fell as a share of U.S. GDP during these stimulus programs. Figure 12 shows the declining levels of U.S. net fixed investment during successive post-World War II business cycles, which explains the long-term slowdown in the U.S. economy. As the latest stage in this decline, U.S. net fixed investment was 4.8 percent of GDP in the 4th quarter of 2019, on the eve of the pandemic. This had fallen to 3.6 percent of GDP by the 4th quarter of 2022. Given that the closest correlation for U.S. GDP growth is with net fixed investment the U.S. stimulus packages will therefore fail to raise the rate of U.S. long term economic growth—in line with IMF projections of a continuing slowdown of the U.S. economy. That is, the stimulus packages were accompanied by a further fall in U.S. net fixed investment—which in turn will undermine U.S. long term growth due to the close correlation of U.S. GDP growth and U.S. net fixed investment. That is these consumer-based packages not only produced extremely damaging short term inflation but were a strategic failure for the U.S. economy.
Over the short term no single structural factor of U.S. GDP has a decisive influence on U.S. economic growth—as analyzed below this means, for example, that a consumer stimulus can have a short-term effect. However, if longer time periods are considered then the situation is entirely different. Taking a 10-year period, as would be predicted by economic theory, there is a positive correlation, to be precise 0.66, between the share of net fixed investment in the U.S. economy and GDP growth—a very high correlation. That is, the higher the percentage share of net fixed investment in U.S. GDP the faster the rate of U.S. GDP growth.
For present purposes it is unnecessary to determine why there is this close positive long-term correlation between net fixed investment and U.S. GDP growth—although the obvious explanation, in line with economic theory, would be the positive cumulative effect of high levels of fixed investment, an input into the economy’s supply side, in increasing U.S. capital stock. Nor is it even necessary, for present purposes, to determine the direction of causation between high levels of net fixed investment and high levels of GDP growth, or even to ascertain whether some third process determines both. It is simply sufficient to note that, due to this high correlation, the U.S. economy cannot achieve high levels of GDP growth without there also being high levels of net fixed investment in GDP. In other words, if over the longer term the U.S. economy is to grow more rapidly the percentage of net fixed investment in the U.S. economy must increase.
This, therefore, provides the fundamental criteria for evaluating the strategic effect of the U.S. stimulus packages to deal with the consequences of COVID on longer term U.S. economic growth. As already noted, these failed to raise U.S. net fixed investment—on the contrary U.S. net fixed investment fell as a share of U.S. GDP during these stimulus programs. Figure 12 shows the declining levels of U.S. net fixed investment during successive post-World War II business cycles, which explains the long-term slowdown in the U.S. economy. As the latest stage in this decline, U.S. net fixed investment was 4.8 percent of GDP in the 4th quarter of 2019, on the eve of the pandemic. This had fallen to 3.6 percent of GDP by the 4th quarter of 2022. Given that the closest correlation for U.S. GDP growth is with net fixed investment the U.S. stimulus packages will therefore fail to raise the rate of U.S. long term economic growth—in line with IMF projections of a continuing slowdown of the U.S. economy. That is, the stimulus packages were accompanied by a further fall in U.S. net fixed investment—which in turn will undermine U.S. long term growth due to the close correlation of U.S. GDP growth and U.S. net fixed investment. That is these consumer-based packages not only produced extremely damaging short term inflation but were a strategic failure for the U.S. economy.
Negative effects on U.S. growth
To clarify these trends further, it is possible to analyze the factors which are negative for U.S. growth. Again, there are no short-term correlations. But over the long term there are strong correlations. Strongest of all is the negative -0.63 correlation, over a 10-year period, between the percentage of GDP U.S. devoted to total consumption and U.S. economic growth—i.e., the higher the percentage of consumption in U.S. GDP the slower is long term U.S. economic growth. This entirely confirms factually the theoretical issues noted above—that because consumption is, by definition, not an input into production an increase in the percentage of consumption in GDP will lead to slower economic growth.
As already seen the U.S. stimulus packages raised the percentage of total consumption in U.S. GDP. As the closest negative correlation in U.S. GDP growth is between the percentage of total consumption in the U.S. economy and its economic growth these packages will therefore have a negative effect on long term U.S. economic growth. This explains the projections of slowing U.S. medium-long term growth already noted.
It is therefore clear that the U.S. stimulus packages, because they were concentrated on consumption, produced no fundamental increase in the share of net fixed investment in U.S. GDP. Given that net fixed investment has the strongest correlation with U.S. GDP growth these U.S. stimulus packages therefore produced no increase in long term U.S. GDP growth. That is, they were a strategic failure.
It is therefore clear that the U.S. stimulus packages, because they were concentrated on consumption, produced no fundamental increase in the share of net fixed investment in U.S. GDP. Given that net fixed investment has the strongest correlation with U.S. GDP growth these U.S. stimulus packages therefore produced no increase in long term U.S. GDP growth. That is, they were a strategic failure.
The distinction between the percentage of consumption in GDP and the growth rate in consumption
Clarifying the relation of consumption and economic growth, and eliminating the confused idea that consumption is an input into production and therefore contributes to GDP growth, has a further immediate consequence. It makes clear why it is necessary to avoid confusion between the two different issues of the rate of growth of consumption and the percentage of consumption in GDP—a confusion which sometimes appears in sections of China’s media. This distinction is obscured by an unclear phraseology of “increasing consumption,” without specifying if what is meant is increasing the percentage of consumption in GDP or increasing the rate of growth of consumption. This distinction is crucial because, as will be seen, the two move in opposite directions over the medium/long term—other things being equal, the higher the percentage of consumption in GDP then, except in the very short term, the lower with be the growth rate of consumption.
As already noted, the long-term growth rate of consumption in the U.S. economy is highly positively correlated with overall economic growth in the U.S. economy. But as already show, the higher the percentage of consumption in U.S. GDP the slower is the rate of U.S. economic growth. Other things being equal, therefore, a higher share percentage share of consumption in GDP, by slowing economic growth, will lead to a slower growth rate of consumption. This prediction from basic economic theory, is confirmed by the fact that the negative correlation of the share of total consumption in U.S. GDP and the rate of growth of consumption is an extremely high -0.79. That is, the higher the share of consumption in U.S. GDP the more slowly consumption, and therefore U.S. living standards, grows. The same processes will be seen to operate in China’s economy.
But it is the level and rate of growth of consumption, not the percentage share of consumption in GDP, which affects people’s real lives. This is indeed obvious. For example, a country such as the Central African Republic has an extremely high percentage of consumption in GDP, 99 percent, but is one of the poorest countries in the world, with a per capita GDP of $492 and its per capita consumption has fallen by 15 percent in the last 10 years. It would be absurd to tell the inhabitants of the Central African Republic that they had a high level of consumption because it is 99 percent of GDP! What matters to them is their extremely low level of consumption, due to the very low level of per capita GDP, and the extraordinarily low rate of growth of consumption.
The correlation of GDP growth and consumption growth.
In contrast, there is almost a perfect long-term correlation between U.S. GDP growth and growth of household consumption as shown in Figure 13. Taking a 20-year moving average, to remove short-term effects of business cycles, the correlation between U.S. GDP growth and U.S. household consumption is 0.97—an extraordinarily high figure, leaving no doubt as to the extremely high interrelation between U.S. GDP growth and the growth rate of U.S. consumption.
In summary, an increase in the share of consumption in U.S. GDP will lead to a slower rate of increase of consumption, and a higher rate of growth of GDP will be associated with a higher rate of consumption growth. This basic prediction of economic theory is fully factually confirmed for the U.S. and, as will be seen below, equally applies to China.
As already noted, the long-term growth rate of consumption in the U.S. economy is highly positively correlated with overall economic growth in the U.S. economy. But as already show, the higher the percentage of consumption in U.S. GDP the slower is the rate of U.S. economic growth. Other things being equal, therefore, a higher share percentage share of consumption in GDP, by slowing economic growth, will lead to a slower growth rate of consumption. This prediction from basic economic theory, is confirmed by the fact that the negative correlation of the share of total consumption in U.S. GDP and the rate of growth of consumption is an extremely high -0.79. That is, the higher the share of consumption in U.S. GDP the more slowly consumption, and therefore U.S. living standards, grows. The same processes will be seen to operate in China’s economy.
But it is the level and rate of growth of consumption, not the percentage share of consumption in GDP, which affects people’s real lives. This is indeed obvious. For example, a country such as the Central African Republic has an extremely high percentage of consumption in GDP, 99 percent, but is one of the poorest countries in the world, with a per capita GDP of $492 and its per capita consumption has fallen by 15 percent in the last 10 years. It would be absurd to tell the inhabitants of the Central African Republic that they had a high level of consumption because it is 99 percent of GDP! What matters to them is their extremely low level of consumption, due to the very low level of per capita GDP, and the extraordinarily low rate of growth of consumption.
The correlation of GDP growth and consumption growth.
In contrast, there is almost a perfect long-term correlation between U.S. GDP growth and growth of household consumption as shown in Figure 13. Taking a 20-year moving average, to remove short-term effects of business cycles, the correlation between U.S. GDP growth and U.S. household consumption is 0.97—an extraordinarily high figure, leaving no doubt as to the extremely high interrelation between U.S. GDP growth and the growth rate of U.S. consumption.
In summary, an increase in the share of consumption in U.S. GDP will lead to a slower rate of increase of consumption, and a higher rate of growth of GDP will be associated with a higher rate of consumption growth. This basic prediction of economic theory is fully factually confirmed for the U.S. and, as will be seen below, equally applies to China.
Part 3. The Implications for China
These theoretical issues, confirmed factually by the U.S. stimulus packages, can be applied to China and help clarify the discussion on its own stimulus programs.
First, regarding the position in the business cycle, the situation of China’s economy at the beginning of 2023 is significantly different to that of the U.S. when it launched its stimulus packages. In the 4th quarter of 2019, immediately before the pandemic struck, China’s annual growth rate was 6.0 percent. However, in the previous three years China’s annual average growth rate was 6.4 percent, and in the preceding five years it had been 6.6 percent. In short, when the pandemic struck China’s economy was growing significantly below trend—whereas when the pandemic struck the U.S. was growing significantly above trend. Furthermore, during the three years since the beginning of the pandemic China’s economy significantly slowed further—its annual average growth rate in 2020-2022 was only 4.3 percent. In summary China’s growth during the last period, before it launches any stimulus measures in 2023, has been significantly below trend.
First, regarding the position in the business cycle, the situation of China’s economy at the beginning of 2023 is significantly different to that of the U.S. when it launched its stimulus packages. In the 4th quarter of 2019, immediately before the pandemic struck, China’s annual growth rate was 6.0 percent. However, in the previous three years China’s annual average growth rate was 6.4 percent, and in the preceding five years it had been 6.6 percent. In short, when the pandemic struck China’s economy was growing significantly below trend—whereas when the pandemic struck the U.S. was growing significantly above trend. Furthermore, during the three years since the beginning of the pandemic China’s economy significantly slowed further—its annual average growth rate in 2020-2022 was only 4.3 percent. In summary China’s growth during the last period, before it launches any stimulus measures in 2023, has been significantly below trend.
Furthermore, during the pandemic the pattern of change in China’s economy was also completely different to the U.S. Over the whole period 2020-2022, calculated from the annual summary data published by the National Bureau of Statistics, China’s fixed asset investment rose by 13.4 percent while retail sales rose by 7.9 percent. Although China’s retail sales are a narrower category than the U.S. data for overall consumption, they are a sufficiently large part of consumption to make clear that during the pandemic China’s fixed investment grew more rapidly than consumption—the exact opposite of the U.S. pattern in the same period.
In addition, the fact that whereas the U.S. experienced very high inflation China’s producer price index has actually been falling since October 2022, combined with China’s low rate of consumer price inflation, is entirely in line with China’s lower than trend rate of growth—indicating both an absence of substantial inflationary pressures and the existence of spare capacity.
Therefore, China’s economy as it enters 2023 is in almost the exact opposite situation in terms of position in the business cycle to the U.S. when it launched its COVID stimulus packages.
These changes in the U.S. and China were therefore both in line with economic theory. They also determine the different situations regarding economic stimulus programs. It is clear that in the short-term China has the economic space to launch a program containing a significant consumer, that is demand side only, stimulus without the likelihood of this creating major inflation. Indeed, a stimulus for consumption is necessary for both economic and political reasons. Politically, the relatively low rate of increase in consumption during the pandemic period, compared to its previous growth rates, means that a rapid short-term increase in consumption will aid the population in recovery from the sacrifices of the three —which saved millions of lives but involved sacrifices in living standards. Economically, consumer industries have been growing more slowly than their historic rate creating negative pressure on them. A stimulus to consumption would therefore greatly aid output in the consumer industries.
A boost to consumption is also particularly appropriate for a stimulus program aimed to have relatively rapid results—as, in general, short-term increases in production in consumer facing industries can be more rapid than in capital goods industries as consumer facing industries, in general, are less capital intensive than investment ones. Therefore, output can be increased in a shorter period without the very high capital expenditures frequently required in investment industries.
In addition, the fact that whereas the U.S. experienced very high inflation China’s producer price index has actually been falling since October 2022, combined with China’s low rate of consumer price inflation, is entirely in line with China’s lower than trend rate of growth—indicating both an absence of substantial inflationary pressures and the existence of spare capacity.
Therefore, China’s economy as it enters 2023 is in almost the exact opposite situation in terms of position in the business cycle to the U.S. when it launched its COVID stimulus packages.
- The U.S. economy was growing above trend when it entered the pandemic and then launched a stimulus package overwhelmingly focused on the demand side—on consumption. As already noted, the result was predictable. With a large increase in demand, and no increase in net fixed investment, that is no increase in the supply of capital, the U.S. suffered extremely high inflation and low growth.
- China entered the pandemic growing below trend and its fixed investment, that is the supply of fixed capital, grew more rapidly than retail sales during the pandemic itself. China experienced more rapid growth than the U.S. and entirely escaped the inflationary wave in the U.S. China’s consumer price inflation in December was 1.8 percent and its peak inflation in that year was 2.8 percent, whereas U.S. consumer price inflation in December was 6.5 percent and its peak inflation during 2022 was 9.1 percent.
These changes in the U.S. and China were therefore both in line with economic theory. They also determine the different situations regarding economic stimulus programs. It is clear that in the short-term China has the economic space to launch a program containing a significant consumer, that is demand side only, stimulus without the likelihood of this creating major inflation. Indeed, a stimulus for consumption is necessary for both economic and political reasons. Politically, the relatively low rate of increase in consumption during the pandemic period, compared to its previous growth rates, means that a rapid short-term increase in consumption will aid the population in recovery from the sacrifices of the three —which saved millions of lives but involved sacrifices in living standards. Economically, consumer industries have been growing more slowly than their historic rate creating negative pressure on them. A stimulus to consumption would therefore greatly aid output in the consumer industries.
A boost to consumption is also particularly appropriate for a stimulus program aimed to have relatively rapid results—as, in general, short-term increases in production in consumer facing industries can be more rapid than in capital goods industries as consumer facing industries, in general, are less capital intensive than investment ones. Therefore, output can be increased in a shorter period without the very high capital expenditures frequently required in investment industries.
The forms of consumer stimulus
Regarding the form of consumer stimulus economic theory and analysis indicates, as already widely discussed in China, that this should aim to minimize the chances of an increase in resources for households being saved rather than spent and should aim to bring forward in time consumption that would occur in any case but at a later date. This includes measures such as price reductions, financed by subsidies that are limited in time, consumer tokens that must be used by a certain date etc. A number of such programs have been launched by Chinese regions. It is not possible by these means to 100 percent prevent “leakage” of such financial flows into saving but nevertheless theoretical issues are in line with the author’s personal experience that the bulk of such measures stimulate consumption and do not leak into saving.
Certainly, the present author does not have personal experiences of economic stimulus in an economy the size of China, but nevertheless his experiences in a very large city economy, London, are relevant. The author was in charge of London’s economic policy from 2000-2008 and London’s economy is larger than that of the majority of European countries—due to its extremely high level of productivity, with it being the only city in Europe that equals U.S. levels of per capita GDP. The author’s experience was entirely in line with the experience of Chinese regions that have launched steps to stimulate short term consumption via marketing, price reductions, coupons, and other steps. The most powerful specific experience of such consumer stimulus programs in London was in 2003 when the city suffered an extremely severe external economic shock due to the consequences of the U.S. invasion of Iraq. This invasion, as with COVID, was an extraneous blow, that is not due to normal economic processes in the business cycle.
London is one of the world’s largest internationally oriented city economies—in particular, one of the world’s most important financial centers and largest travel destinations for both business and tourism, and these form a large part of its economy. Fear of terrorism or military attacks during the Iraq war led to an extremely severe collapse of international, and to a lesser extent domestic, visitors. An indicator of the scale of this was that under this impact of the war the daily price of hotel rooms in London fell by 70-80 percent and those locations which, for branding reasons, refused to reduce their prices suffered 70-80 percent falls in visitors. Visits by domestic visitors also declined due to fear of terrorist attacks. This created serious downward pressure on London’s economy.
To meet this crisis no stimulus package was launched during the war itself, as no price or marketing incentive would lead to people travelling or going to visitor attractions if they believed they might be killed. But a stimulus package was prepared in advance for when the war ended. As soon as that occurred a consumer facing stimulus package was launched by London’s city government essentially similar to that launched by some Chinese regions and cities at the beginning of this year. This consisted of two elements. First, a major marketing campaign, financed by the city government, was launched promoting visitor attractions, restaurants, exhibitions etc. in the city. Second, in an interrelated move, subsidies were launched to allow temporary price reductions to visitor attractions, restaurants, exhibitions etc. In the case of London, the private sector companies involved in this were encouraged to offer temporary price reductions and the city government also gave a subsidy to such companies to make the price reductions still greater.
The results of this consumer facing program were extremely successful. Both international and domestic visitor numbers recovered extremely rapidly boosting economic recovery in the city. It is entirely possible some of this stimulus may have leaked into saving, but overall it is clear that the majority was used for consumption and the overall short term program was successful. Therefore, for both theoretical reasons and those of practical experience the present author is a strong supporter of launching consumer-oriented stimulus packages in the appropriate economic circumstances.
But as already analyzed any such consumer stimulus, that is one purely on the demand side, does not automatically increase supply. Therefore, except in conditions of deep economic depression, with enormous amounts of unused capacity, which does not exist in China at present, a purely consumer, that is demand side, stimulus will, outside of the short term, lead to putting back to use large amounts of spare capacity but only an increase in the supply side, which involves increased fixed investment, can sustain over the medium/long term an increase in production/GDP. Therefore, to judge the strategic effect of any stimulus program it is necessary to constantly measure not only the short-term effects on demand and consumption but also to see if it is producing an increase in investment.
Certainly, the present author does not have personal experiences of economic stimulus in an economy the size of China, but nevertheless his experiences in a very large city economy, London, are relevant. The author was in charge of London’s economic policy from 2000-2008 and London’s economy is larger than that of the majority of European countries—due to its extremely high level of productivity, with it being the only city in Europe that equals U.S. levels of per capita GDP. The author’s experience was entirely in line with the experience of Chinese regions that have launched steps to stimulate short term consumption via marketing, price reductions, coupons, and other steps. The most powerful specific experience of such consumer stimulus programs in London was in 2003 when the city suffered an extremely severe external economic shock due to the consequences of the U.S. invasion of Iraq. This invasion, as with COVID, was an extraneous blow, that is not due to normal economic processes in the business cycle.
London is one of the world’s largest internationally oriented city economies—in particular, one of the world’s most important financial centers and largest travel destinations for both business and tourism, and these form a large part of its economy. Fear of terrorism or military attacks during the Iraq war led to an extremely severe collapse of international, and to a lesser extent domestic, visitors. An indicator of the scale of this was that under this impact of the war the daily price of hotel rooms in London fell by 70-80 percent and those locations which, for branding reasons, refused to reduce their prices suffered 70-80 percent falls in visitors. Visits by domestic visitors also declined due to fear of terrorist attacks. This created serious downward pressure on London’s economy.
To meet this crisis no stimulus package was launched during the war itself, as no price or marketing incentive would lead to people travelling or going to visitor attractions if they believed they might be killed. But a stimulus package was prepared in advance for when the war ended. As soon as that occurred a consumer facing stimulus package was launched by London’s city government essentially similar to that launched by some Chinese regions and cities at the beginning of this year. This consisted of two elements. First, a major marketing campaign, financed by the city government, was launched promoting visitor attractions, restaurants, exhibitions etc. in the city. Second, in an interrelated move, subsidies were launched to allow temporary price reductions to visitor attractions, restaurants, exhibitions etc. In the case of London, the private sector companies involved in this were encouraged to offer temporary price reductions and the city government also gave a subsidy to such companies to make the price reductions still greater.
The results of this consumer facing program were extremely successful. Both international and domestic visitor numbers recovered extremely rapidly boosting economic recovery in the city. It is entirely possible some of this stimulus may have leaked into saving, but overall it is clear that the majority was used for consumption and the overall short term program was successful. Therefore, for both theoretical reasons and those of practical experience the present author is a strong supporter of launching consumer-oriented stimulus packages in the appropriate economic circumstances.
But as already analyzed any such consumer stimulus, that is one purely on the demand side, does not automatically increase supply. Therefore, except in conditions of deep economic depression, with enormous amounts of unused capacity, which does not exist in China at present, a purely consumer, that is demand side, stimulus will, outside of the short term, lead to putting back to use large amounts of spare capacity but only an increase in the supply side, which involves increased fixed investment, can sustain over the medium/long term an increase in production/GDP. Therefore, to judge the strategic effect of any stimulus program it is necessary to constantly measure not only the short-term effects on demand and consumption but also to see if it is producing an increase in investment.
Longer term growth
Although such short-term consumer stimulus programs can be successful at appropriate points in the business cycle, such as exist in China at present, nevertheless, to integrate these with economic strategy, it is simultaneously necessary to bear in mind the fundamental medium/long term economic issues.
First, other things being equal, what is being achieved by such consumer-oriented programs is to change in time when expenditure occurs—for example, this is achieved by a price and/or advertising incentive given for consumers to spend now and not to delay in time expenditure. But while experience shows this can have a significant short-term impact nevertheless over the medium/long term, if nothing else changes, expenditure will remain limited by income. The consumer stimulus may change in time the point at which expenditure takes place, which in some circumstances is extremely economically useful, but by its direct effect it cannot by itself alter the overall expenditure that takes place over time. Long term expenditure is determined by income. If everything else stays the same higher expenditure than normal in the short term will be accompanied by lower expenditure than normal later. Only an increase in income can create, other things being equal, an overall long-term increase in consumption. And such long-term increases in income are determined by economic growth and production.
Second, in anything other than the short term, that is while unused capacity is being put back to work, only an increase in investment, that is in supply, can increase output. If this does not occur then, as with the U.S. stimulus packages, the increase in demand from increased consumption will primarily, or even exclusively, over the medium/longer term produce inflation, not an increase in output.
It is on this point that there is a clear medium/long term issue in China’s economy, and therefore for its strategy, which differs significantly from the short term. While China’s fixed investment has grown more rapidly than consumption during the pandemic this is exclusively due to the extremely sharp fall in consumption’s growth rate—it is not at all due to an increase in the growth rate of fixed asset investment. Figure 14 shows that the annual rate of increase of China’s fixed asset investment in December 2022, at 5.1 percent, was actually slightly slower than the 5.4 percent in December 2019 on the eve of the pandemic.
First, other things being equal, what is being achieved by such consumer-oriented programs is to change in time when expenditure occurs—for example, this is achieved by a price and/or advertising incentive given for consumers to spend now and not to delay in time expenditure. But while experience shows this can have a significant short-term impact nevertheless over the medium/long term, if nothing else changes, expenditure will remain limited by income. The consumer stimulus may change in time the point at which expenditure takes place, which in some circumstances is extremely economically useful, but by its direct effect it cannot by itself alter the overall expenditure that takes place over time. Long term expenditure is determined by income. If everything else stays the same higher expenditure than normal in the short term will be accompanied by lower expenditure than normal later. Only an increase in income can create, other things being equal, an overall long-term increase in consumption. And such long-term increases in income are determined by economic growth and production.
Second, in anything other than the short term, that is while unused capacity is being put back to work, only an increase in investment, that is in supply, can increase output. If this does not occur then, as with the U.S. stimulus packages, the increase in demand from increased consumption will primarily, or even exclusively, over the medium/longer term produce inflation, not an increase in output.
It is on this point that there is a clear medium/long term issue in China’s economy, and therefore for its strategy, which differs significantly from the short term. While China’s fixed investment has grown more rapidly than consumption during the pandemic this is exclusively due to the extremely sharp fall in consumption’s growth rate—it is not at all due to an increase in the growth rate of fixed asset investment. Figure 14 shows that the annual rate of increase of China’s fixed asset investment in December 2022, at 5.1 percent, was actually slightly slower than the 5.4 percent in December 2019 on the eve of the pandemic.
The fall in the proportion of net fixed investment in China’s GDP It is also crucial to note that over the longer term the percentage of fixed investment in China’s GDP, in particular net fixed investment, has fallen very considerably. Figure 15 show that between 2009 and 2020, the latest available internationally comparable data, the share of net fixed investment in China’s economy fell from 26.2 percent of GDP to 16.5 percent of GDP—a huge fall of almost 10 percent of GDP. |  |
It as this point that any theoretical confusion between the economy’s demand and supply sides becomes crucial. If consumption were an input into production, that is into the economy’s supply side, then consumption could compensate for this fall in investment in terms of producing economic growth. But, as already seen, consumption is not an input into production and therefore contributes zero percent of production of GDP. The fall in net fixed investment therefore necessarily leads to fall in the rate of growth of GDP—as shown in Figure 16.
 | The percentage of net fixed investment in China’s GDP peaked in 2009 at 26.2 percent and fell by 2020, the latest available internationally comparable data, to 16.5 percent of GDP. Annual GDP growth peaked slightly earlier at 14.2 percent of GDP in 2007 and by 2020 had fallen to 2.2 percent—this last figure was certainly lowered by the COVID pandemic but the downward trend before this was clear. |
This shift is exactly as would be predicted by economic theory and as factually confirmed by the U.S. experience—other things being equal the lower the percentage of net fixed investment in GDP the lower will be the rate of GDP growth. The correlation between the two is a high 0.74. This is in line with the point that as consumption is not an input into production, into the economy’s supply side, it cannot substitute for, that is, be an alternative source of GDP growth, for investment. The long term, that is strategic, growth of China’s economy depends on investment.
Confusion over the percentage of consumption in GDP and the rate of growth of consumption It is at this point that another theoretical confusion referred to previously comes in, again with exactly the same consequences as in the U.S. This is that loose talk of “increasing consumption” obscures the difference between the two different things of the percentage of consumption in GDP and the rate of growth of consumption. |  |
As already seen in the U.S. these move in exactly the opposite direction—the higher the percentage of consumption in GDP the lower is the growth rate of consumption. This factual finding in the U.S. is in line with economic theory. Figure 17 shows that exactly the same applies in China—as would be expected. Figure 17 shows that, taking a two-year moving average to even out purely short-term fluctuations caused by the pandemic between 2020 and 2021, the latest available data, the percentage of consumption in China’s GDP grew sharply by 5.3 percent of GDP, from 49.5 percent of GDP to 54.8 percent. But accompanying this the growth rate of consumption fell sharply by 5.4 percent of GDP—from 10.1 percent a year to 4.8 percent a year. There was a strong, -0.76, negative correlation between the percentage of consumption in GDP and the rate of growth of consumption. That is, raising the percentage of consumption in China’s GDP led to a slower growth rate of consumption and therefore to a slower rate of growth of Chinese living standards—precisely as with the U.S.
Because the percentage of consumption in GDP and the rate of growth of consumption move in opposite directions it is necessary to clearly strictly distinguish the two. This real relation is confused by unclear formulas of “raising consumption” as this obscures that an increase in the percentage of consumption in GDP will lead to a lower rate of growth of living standards. Therefore, to take the phrase in one recent article, talk of China having historically been “tightening its belt” because of its low percentage of consumption in GDP is highly misleading. It is the high level of investment in China’s economy which has led to a rapid rate of economic growth and therefore a rapid rate of growth of consumption and therefore of China’s living standards. “Loosening the belt,” if by that is meant a higher percentage of consumption in China’s GDP, other things being equal, will lead to a lower rate of growth of consumption and therefore a lower rate of growth in living standards—and therefore, over time, to lower living standards than are possible with a lower percentage of consumption, and higher level of investment, in GDP.
Because the percentage of consumption in GDP and the rate of growth of consumption move in opposite directions it is necessary to clearly strictly distinguish the two. This real relation is confused by unclear formulas of “raising consumption” as this obscures that an increase in the percentage of consumption in GDP will lead to a lower rate of growth of living standards. Therefore, to take the phrase in one recent article, talk of China having historically been “tightening its belt” because of its low percentage of consumption in GDP is highly misleading. It is the high level of investment in China’s economy which has led to a rapid rate of economic growth and therefore a rapid rate of growth of consumption and therefore of China’s living standards. “Loosening the belt,” if by that is meant a higher percentage of consumption in China’s GDP, other things being equal, will lead to a lower rate of growth of consumption and therefore a lower rate of growth in living standards—and therefore, over time, to lower living standards than are possible with a lower percentage of consumption, and higher level of investment, in GDP.
 | Relation of GDP growth a consumption The reason why increasing the percentage of consumption in GDP will lead in China to a slower rate of growth of consumption, and therefore of living standards, precisely as in the U.S., is because of the close correlation of GDP growth with the growth of consumption—as shown in Figure 18. The correlation is 0.76. |
That is if GDP grows slowly so also will consumption. As investment is an input into production, increasing the percentage of consumption in GDP, and therefore lowering the percentage of investment, will lead to slower GDP growth—and therefore lower the rate of increase of consumption and living standards. This fundamental prediction of economic theory is confirmed factually just as much by China as by the U.S.
| Clarity on these issues then allows the interrelation between short term stimulus programs, to deal with the situation in 2023, and longer-term strategic goals to be clearly understood. |  |
A short-term consumer, therefore purely demand side, stimulus is highly desirable in order to put existing unused capacity back to work. But because consumption is not an input into production, and not part of the economy’s supply side, such a stimulus program will not by itself add to the economy’s productive capacity. Therefore, only if this increase in consumer demand leads to an increase in supply, which necessarily includes investment, will it lead to long term growth and therefore achievement of the strategic goals to 2035. The only way to know if this is occurring is to carefully factually monitor the factual situation regarding investment.
In regard to this, certainly various predictions, theoretical or factual, may be made but, as always, in the end “the proof of the pudding is in the eating.” If there is not an increase in investment created by the demand created by the consumer stimulus program, which is precisely what occurred in the U.S., then all that a prolonged consumer stimulus will create, once unused capacity is put back to work, is inflation—again this is what factually occurred in the U.S. and was entirely in line with economic theory. To achieve the strategic goals for 2035, doubling GDP/per capita GDP compared to 2020, which requires a doubling of the economy’s productive capacity, then a very large increase in investment is required. An increase in consumption, because it is not an input into production, will itself create no increase in the economy’s productive capacity—despite the fact consumption is the ultimate goal of economic activity.
Incorrect statements, such as that consumption accounted for 67, or any other, per cent of GDP growth, as sometimes appear in sections of the Chinese media, obscure this reality and helped provide a rationale for damaging programs and results such as were seen in the U.S. in the last period. Investment will account for a large part of the increase in productive capacity which is required to achieve the 2035 strategic goals, consumption necessarily will be zero percent of the increase in productive capacity necessary to achieve the 2035 goals.
Finally. for clarity, these issues, naturally do not mean that even in the short term any initial demand side stimulus should consist wholly of consumption—demand for investment increases overall demand just as much as does consumption demand. But this difference of the demand and supply sides of the economy becomes particularly clear over the medium/long term. Therefore, increase in consumption demand, if unaccompanied by increased investment, can only produce relatively short-term increases in output. An increased in investment, in contrast, because it increases not only demand, but supply can lead to a medium/long increase in output and, therefore achievement of strategic goals.
The strategic goals in the economy, in particular, therefore require an examination of the conditions which will create a sustained increase in investment. That large issue, however, has to be the subject of another article simply for reasons of word length.
In regard to this, certainly various predictions, theoretical or factual, may be made but, as always, in the end “the proof of the pudding is in the eating.” If there is not an increase in investment created by the demand created by the consumer stimulus program, which is precisely what occurred in the U.S., then all that a prolonged consumer stimulus will create, once unused capacity is put back to work, is inflation—again this is what factually occurred in the U.S. and was entirely in line with economic theory. To achieve the strategic goals for 2035, doubling GDP/per capita GDP compared to 2020, which requires a doubling of the economy’s productive capacity, then a very large increase in investment is required. An increase in consumption, because it is not an input into production, will itself create no increase in the economy’s productive capacity—despite the fact consumption is the ultimate goal of economic activity.
Incorrect statements, such as that consumption accounted for 67, or any other, per cent of GDP growth, as sometimes appear in sections of the Chinese media, obscure this reality and helped provide a rationale for damaging programs and results such as were seen in the U.S. in the last period. Investment will account for a large part of the increase in productive capacity which is required to achieve the 2035 strategic goals, consumption necessarily will be zero percent of the increase in productive capacity necessary to achieve the 2035 goals.
Finally. for clarity, these issues, naturally do not mean that even in the short term any initial demand side stimulus should consist wholly of consumption—demand for investment increases overall demand just as much as does consumption demand. But this difference of the demand and supply sides of the economy becomes particularly clear over the medium/long term. Therefore, increase in consumption demand, if unaccompanied by increased investment, can only produce relatively short-term increases in output. An increased in investment, in contrast, because it increases not only demand, but supply can lead to a medium/long increase in output and, therefore achievement of strategic goals.
The strategic goals in the economy, in particular, therefore require an examination of the conditions which will create a sustained increase in investment. That large issue, however, has to be the subject of another article simply for reasons of word length.
Conclusion
To summarize, the present world economic situation, is largely determined by the interrelation between two sets of stimulus measures. The first is the simultaneous inflationary wave and slowdown of production in the main Western economies which is inseparably bound up with the predictable failure of the U.S. stimulus programs launched to deal with the consequences of the COVID pandemic. Clarification of the reasons for this failure, in turn, has crucial lessons both for the short-term stimulus measures China’s economy requires in 2023 and their interrelation with the achievement of the strategic goals for 2035. In particular:
As the present global economic situation is largely defined by the by the extremely negative consequences of the U.S. stimulus programs, which was fully in line with economic theory, clarity on these issues is crucial both for achievement of China’s immediate economic targets in 2023 and the achievement of its strategic goals to 2035.
- As shown, confusion between the economy’s demand side and its supply side is extremely damaging. The facts regarding the results of the U.S. stimulus programs, and the issues involved for China, are entirely in line with both Marxist and serious Western economics. But they also show the dangerous errors of “vulgar” Western economics—errors which unfortunately sometimes appear in parts of China’s media.
- The negative aspects of the Western economies’ situation, the most severe stagflationary problems for forty years, was not caused by the Ukraine war—as this inflationary wave was already taking place long before that war started. It was directly caused by the major errors in the stimulus programs launched by the U.S. Frequently rationalized by the wrong idea that consumption can produce something, that is that it is an input into production, the U.S. launched a massive essentially exclusively consumer based, i.e., demand side only, stimulus. If such a stimulus had been launched when the U.S. had been growing below trend, and had spare capacity, then despite its theoretical confusions this stimulus package might have been effective—the impact of economic measures is determined by their practical content not by their theoretical economic rationale. But instead, this massive demand side only stimulus was launched when the U.S. economy was already growing above trend. The result was entirely predictable—with a huge increase in demand, and no increase in supply, the inevitable consequence was a huge inflationary wave, that is a short-term crisis. This inflation in turn led to sharply contractionary policies, notably steep interest rate rises, to attempt to bring it under control. These contractionary polices in turn slowed the economy—meaning that the stimulus packages were not only a short term but a complete strategic failure.
- China faces a sharply different practical situation. Its economy has been growing significantly below trend. A demand side stimulus will therefore find a situation where there is significant unused capacity. Under those circumstances a consumer stimulus, that is one solely on the demand side, is likely to be effective and necessary. Therefore, based both on considerations of economic theory and of personal practical experience, the present author strongly supports the idea of consumer stimulus as part of any overall stimulus program in China at present.
- A potential danger in China’s situation is of a different type. It is the confusion that appears in some sections of China’s media of repetition of the same confusions as in vulgar Western economic theory—the false idea that consumption is an input in production and therefore that consumption can produce something.
- The damaging practical consequences of this error are clear. A consumer-based stimulus launched in the current conditions of China’s economy, as already analyzed, should lead to a rapid and significant increase in production. But what will happen over the medium/long term will be determined by whether this demand side stimulus is accompanied by an increase in the economy’s supply side—which requires investment. The initial increase in output created by the consumer stimulus should not lead to damagingly high inflation in the short term for the reasons given, but after a certain period of time, exactly how long depends on how much spare capacity there is, unless there is an increase in investment, that is an increase in the supply side, there will either be slow growth, or inflation, or both—as in the U.S.
- The long-term implications for consumption of raising the percentage of consumption in GDP must be clearly understood. Other things being equal, over the medium/long term, the higher the percentage of consumption in GDP, because this lowers the percentage of investment, the lower will be the growth rate of the economy and of consumption. Over a longer period, such as the twelve years to 2035, increasing the percentage of consumption in GDP will lead to a lower level of consumption, and a lower standard of living, than with a higher percentage of investment, and therefore a lower percentage of consumption, in GDP. Those arguing for a higher percentage of consumption in GDP are in fact arguing in favor of a lower living standard by 2035 than would otherwise be the case. This is an inevitable consequence of the fact, demonstrated by economic theory, and confirmed factually by both the U.S. and China, that over anything other than the short term the percentage of consumption in GDP and the growth rate of consumption move in opposite directions—that is, the higher the percentage of consumption in GDP the lower will be the rate of growth of consumption.
- A consumption, that is purely demand side, stimulus is valuable in creating a rapid revival in 2023 by putting unused capacity back to work. But consumption, because it is not an input into production, can constitute nothing, that is precisely zero percent, of the doubling of productive capacity which is required to achieve the strategic goals to 2035. That doubling of productive capacity, however, requires a huge increase in investment. A necessary condition of the achievement of these strategic goals of 2035 is therefore creation of such investment—the conditions for achieving this, solely for reasons of space, requires another substantial article.
As the present global economic situation is largely defined by the by the extremely negative consequences of the U.S. stimulus programs, which was fully in line with economic theory, clarity on these issues is crucial both for achievement of China’s immediate economic targets in 2023 and the achievement of its strategic goals to 2035.
Author
John Ross is a senior fellow at Chongyang Institute for Financial Studies, Renmin University of China. He was formerly director of economic policy for the mayor of London.
This article was republished from Monthly Review.
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Passengers walk out of Haikou Meilan International Airport on December 9, 2022. Photo: VCG
On January 6, 2023, China's National Health Commission (NHC) and National Administration of Traditional Chinese Medicine issued China's 10th edition of its diagnosis and treatment protocol for novel coronavirus infection. This is the NHC's first national guiding protocol after China announced to downgrade management of COVID from Class A to Class B from January 8. Two items are worth noting here: the definition has changed from "novel coronavirus pneumonia" to "novel coronavirus infection" and its classification is now at a "B" level. The classification has significant implications for the measures taken to deal with the virus, but a question arises: Has China "lain down" before the virus, has it given up on dealing with it? The answer is a resounding no. Instead, China is the first country in the world to move from the coronavirus being a pandemic to it being endemic. This point needs some explanation.
First, for a little over three years I have been closely following China's approach in dealing with the COVID-19 pandemic. The results have been nothing less than stunning: the number of per capita infections and deaths are at the lowest level in the world, life expectancy has increased during this time, and the dialectic of economic development and public health has been managed very well.
The health of the population has not been significantly compromised - as has happened in some other countries - by the earlier and more toxic mutations of the virus, and the level of full vaccinations among the population above 3 years old is over 90 percent. In many respects, China has set a new "gold standard" for dealing with a pandemic. As one example, I have noted the huge amount of discussion with each revision of the measures for dealing with the pandemic, seeing how medical specialists and scientists were dealing daily with the many questions people had. The specialists were always "on message," seeking to explain the content, connotations, implications, and reasons behind each revision of the measures. Friends and colleagues in China gave me regular updates concerning the experiences with their own families, their workplaces, their concerns, and - most importantly - their hopes.
This leads to the second point: the "people-centered approach," or "taking the people as the center." While this has been a core position of the CPC, a people-centered approach has seen renewed emphasis in the new era since the CPC's 18th National Congress in 2012, when Xi Jinping was elected general secretary of CPC Central Committee. During the pandemic, this approach became absolutely central, expressed in "people come first, and life comes first," which has been the commitment of the CPC to the whole Chinese people since the first days of the pandemic. Without the health of the people, development and a moderately well-off society is not comprehensive, or is not complete is all respects.
Third, an international observer cannot avoid noticing how all of the policy measures are based on rigorous and comprehensive science. For example, on December 15, 2022, I listened to a two-hour lecture by Zhong Nanshan, the "hero of SARS" and recipient of the Medal of the Republic, China's highest state honor, for his services in fighting the COVID pandemic. The lecture has been watched by tens of millions of people across China, since it explains the immense amount of science that is behind China's huge success in dealing with the pandemic. Zhong Nanshan's lecture summarised much of the science, but this requires an immense amount of evidence, research, and collaboration between scientists, in China and across the world. For example, it is precisely because China has undertaken such comprehensive testing that we know now that 90 percent of Omicron infections are asymptomatic and that those who are symptomatic are mostly mild. Only rigorous science produces such results. Zhong Nanshan's message was very clear: Do not get infected but do not be afraid of the virus in its Omicron form.
Fourth is the comprehensive approach. As we well know, departmentalism is typical of the few Western societies, with their individualism and liberalism. The result has been that their "single solution" approach to the pandemic was an obvious failure. By contrast, one finds again and again that China takes a comprehensive approach: Health and economic development; all effective measures for ensuring a healthy population, and so on. For example, one's risk of infection or reinfection is very low with mixed vaccines (especially deactivated and adenovirus-based vaccines), Traditional Chinese Medicine, wearing quality face-masks, opening windows regularly, focusing on the elderly and children, and maintaining a high level of attention with disinfected surfaces. Clearly, this is a comprehensive approach, considering all aspects of what is effective. It is in this sense that we can see how China is the first country in the world where the coronavirus is moving from a pandemic to an endemic - and thus seasonal and non-threatening - status. Yes, China is stepping out of the pandemic, with 1.4 billion people. This is a momentous achievement and I am waiting eagerly to see how 2023 unfolds.
Fifth, I am struck by the way that China has identified where and how the health system can be improved. This feature always impresses me about China: no matter how good a practice may be, there is always room for improvement. This is also true with the all-important health system. It goes without saying that the improvements are comprehensive, leveraging the strengths of grassroots health services through to the highest research hospitals. As others have observed, with the lessons learned from the last three years, China's health system has seen impressive improvement.
By now it should be obvious why China is stepping out of the pandemic, and why the coronavirus has become endemic. I would like to conclude on a note of hope. As I have been engaging with friends and colleagues in China, I have seen a distinct hope and eagerness as 2023 begins. People are very much looking forward to returning to their home towns for the Spring Festival, which for many will be the first time in three years. All of this has also given me hope and put me in a very good mood, since I know that in 2023 I will finally be able to return to China.
First, for a little over three years I have been closely following China's approach in dealing with the COVID-19 pandemic. The results have been nothing less than stunning: the number of per capita infections and deaths are at the lowest level in the world, life expectancy has increased during this time, and the dialectic of economic development and public health has been managed very well.
The health of the population has not been significantly compromised - as has happened in some other countries - by the earlier and more toxic mutations of the virus, and the level of full vaccinations among the population above 3 years old is over 90 percent. In many respects, China has set a new "gold standard" for dealing with a pandemic. As one example, I have noted the huge amount of discussion with each revision of the measures for dealing with the pandemic, seeing how medical specialists and scientists were dealing daily with the many questions people had. The specialists were always "on message," seeking to explain the content, connotations, implications, and reasons behind each revision of the measures. Friends and colleagues in China gave me regular updates concerning the experiences with their own families, their workplaces, their concerns, and - most importantly - their hopes.
This leads to the second point: the "people-centered approach," or "taking the people as the center." While this has been a core position of the CPC, a people-centered approach has seen renewed emphasis in the new era since the CPC's 18th National Congress in 2012, when Xi Jinping was elected general secretary of CPC Central Committee. During the pandemic, this approach became absolutely central, expressed in "people come first, and life comes first," which has been the commitment of the CPC to the whole Chinese people since the first days of the pandemic. Without the health of the people, development and a moderately well-off society is not comprehensive, or is not complete is all respects.
Third, an international observer cannot avoid noticing how all of the policy measures are based on rigorous and comprehensive science. For example, on December 15, 2022, I listened to a two-hour lecture by Zhong Nanshan, the "hero of SARS" and recipient of the Medal of the Republic, China's highest state honor, for his services in fighting the COVID pandemic. The lecture has been watched by tens of millions of people across China, since it explains the immense amount of science that is behind China's huge success in dealing with the pandemic. Zhong Nanshan's lecture summarised much of the science, but this requires an immense amount of evidence, research, and collaboration between scientists, in China and across the world. For example, it is precisely because China has undertaken such comprehensive testing that we know now that 90 percent of Omicron infections are asymptomatic and that those who are symptomatic are mostly mild. Only rigorous science produces such results. Zhong Nanshan's message was very clear: Do not get infected but do not be afraid of the virus in its Omicron form.
Fourth is the comprehensive approach. As we well know, departmentalism is typical of the few Western societies, with their individualism and liberalism. The result has been that their "single solution" approach to the pandemic was an obvious failure. By contrast, one finds again and again that China takes a comprehensive approach: Health and economic development; all effective measures for ensuring a healthy population, and so on. For example, one's risk of infection or reinfection is very low with mixed vaccines (especially deactivated and adenovirus-based vaccines), Traditional Chinese Medicine, wearing quality face-masks, opening windows regularly, focusing on the elderly and children, and maintaining a high level of attention with disinfected surfaces. Clearly, this is a comprehensive approach, considering all aspects of what is effective. It is in this sense that we can see how China is the first country in the world where the coronavirus is moving from a pandemic to an endemic - and thus seasonal and non-threatening - status. Yes, China is stepping out of the pandemic, with 1.4 billion people. This is a momentous achievement and I am waiting eagerly to see how 2023 unfolds.
Fifth, I am struck by the way that China has identified where and how the health system can be improved. This feature always impresses me about China: no matter how good a practice may be, there is always room for improvement. This is also true with the all-important health system. It goes without saying that the improvements are comprehensive, leveraging the strengths of grassroots health services through to the highest research hospitals. As others have observed, with the lessons learned from the last three years, China's health system has seen impressive improvement.
By now it should be obvious why China is stepping out of the pandemic, and why the coronavirus has become endemic. I would like to conclude on a note of hope. As I have been engaging with friends and colleagues in China, I have seen a distinct hope and eagerness as 2023 begins. People are very much looking forward to returning to their home towns for the Spring Festival, which for many will be the first time in three years. All of this has also given me hope and put me in a very good mood, since I know that in 2023 I will finally be able to return to China.
Author
Roland Boer is a Marxist scholar from Australia, distinguished overseas professor at Renmin University of China, and on editorial board of the Australian Marxist Review. opinion@globaltimes.com.cn
This article was republished from Global Times.
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I arrived in Shanghai, 36 hours after leaving São Paulo, a near deportation in South Africa, and a canceled connecting flight. It was March 21, 2020. In the following days, China implemented its mandatory centralized quarantine for all international travelers. Exactly a week later, on March 28, China started its travel ban1 to prevent the spread of a still little-known virus called Covid-19, which was making its way to all corners of the earth.
Nearly three years later, on the coming January 8, 20232, China will officially open its borders, remove the mandatory quarantine and nucleic acid tests for people entering the country, and downgrade the management of Covid-19 from Class A to Class B3. It is not an end of an era; rather, it is a continuation of a rigorous process of confronting a historic and global pandemic, while putting science and the people at its center. It has been an incredible experience to see how the Chinese government and people have taken on this pandemic, while the world has suffered4 6.68 million recorded deaths, with over 650 million people infected. The impact of this virus is one for the history books, the lasting effects to be studied for years to come, and the fight has not yet ended.
The Western mainstream media, however, has been quick to criticize China every step of the way, from the “draconian5” Zero-Covid strategy to the “dystopian6” measures to ensure a safe Winter Olympics games in Beijing, and now to the “nightmare7” of relaxing the country’s Covid-19 requirements. Rhetoric aside, what has the fight against the virus been like in China—characterized by the Zero-Covid strategy—and why are the relaxation measures happening now? It is important to look back at the last three years to understand how we arrived at this point today. Having lived in China throughout the ebbs and flows of the Covid-19 virus, I would categorize the country’s dynamic strategy into four key phases.
Nearly three years later, on the coming January 8, 20232, China will officially open its borders, remove the mandatory quarantine and nucleic acid tests for people entering the country, and downgrade the management of Covid-19 from Class A to Class B3. It is not an end of an era; rather, it is a continuation of a rigorous process of confronting a historic and global pandemic, while putting science and the people at its center. It has been an incredible experience to see how the Chinese government and people have taken on this pandemic, while the world has suffered4 6.68 million recorded deaths, with over 650 million people infected. The impact of this virus is one for the history books, the lasting effects to be studied for years to come, and the fight has not yet ended.
The Western mainstream media, however, has been quick to criticize China every step of the way, from the “draconian5” Zero-Covid strategy to the “dystopian6” measures to ensure a safe Winter Olympics games in Beijing, and now to the “nightmare7” of relaxing the country’s Covid-19 requirements. Rhetoric aside, what has the fight against the virus been like in China—characterized by the Zero-Covid strategy—and why are the relaxation measures happening now? It is important to look back at the last three years to understand how we arrived at this point today. Having lived in China throughout the ebbs and flows of the Covid-19 virus, I would categorize the country’s dynamic strategy into four key phases.
Phase 1: Emergency response (December 2019 to May 2020)
Two-and-a-half weeks after I arrived in China, on April 8, the country celebrated the end to the 76-day historic lockdown in Wuhan, where the pandemic first broke out and claimed the lives of 4,512 Chinese people8. It was an emotional and bittersweet victory for the entire country, which had mobilized its people and resources to fight a very deadly and never-before-seen virus.
On December 26, 2019, Dr. Zhang Jixian9, director of the Department of Respiratory and Critical Care Medicine of Hubei Province hospital of Integrated Chinese and Western Medicine, saw an elderly couple that had a high fever and a cough—symptoms that characterize the flu. But further examination ruled out influenza A and B, mycoplasma, chlamydia, adenovirus, and SARS. She and her team then quickly determined there was a new virus at play. Three days later, the provincial authorities were alerted, then the Chinese Center for Disease Control (CDC) and by December 31 the WHO was informed10. On New Year’s Day, the CDC officials called11 Dr. Robert Redfield, head of the U.S. Center for Disease Control and Prevention, while he was on vacation, to inform him of the severity of their findings.
On January 3, the virus was identified with its genetic sequence which was then shared12 with the world a week later. At this point, there were many unknowns—what the virus was, how it was transmitted, and how it could be stopped. There were no vaccines, while the country—and the world—was unprepared. A strict lockdown of the city of 11 million people began on January 23, and 41,000 medical workers13 were dispatched from across the country to Wuhan. Saving lives and studying this new virus were the main priorities in this phase.
On December 26, 2019, Dr. Zhang Jixian9, director of the Department of Respiratory and Critical Care Medicine of Hubei Province hospital of Integrated Chinese and Western Medicine, saw an elderly couple that had a high fever and a cough—symptoms that characterize the flu. But further examination ruled out influenza A and B, mycoplasma, chlamydia, adenovirus, and SARS. She and her team then quickly determined there was a new virus at play. Three days later, the provincial authorities were alerted, then the Chinese Center for Disease Control (CDC) and by December 31 the WHO was informed10. On New Year’s Day, the CDC officials called11 Dr. Robert Redfield, head of the U.S. Center for Disease Control and Prevention, while he was on vacation, to inform him of the severity of their findings.
On January 3, the virus was identified with its genetic sequence which was then shared12 with the world a week later. At this point, there were many unknowns—what the virus was, how it was transmitted, and how it could be stopped. There were no vaccines, while the country—and the world—was unprepared. A strict lockdown of the city of 11 million people began on January 23, and 41,000 medical workers13 were dispatched from across the country to Wuhan. Saving lives and studying this new virus were the main priorities in this phase.
Phase 2: Control and elimination (June 2020 to July 2021)
After Covid-19 had been successfully contained in Wuhan, and throughout the rest of 2020 and 2021, China implemented a Zero-Covid strategy, characterized by extensive measures to track, test, isolate, and treat infected people. The Chinese mainland recorded extremely few deaths14 in this period since the Wuhan outbreak, while successfully containing 11 outbreaks15 of the Delta variant, which is more transmissible and the cause of more serious infections. Meanwhile, the global reported death toll had climbed to over 5.4 million people16 by the end of 2021 with countless millions more infected.
Far from “failing17” as the Western media is claiming now, Zero-Covid worked extremely effectively. Since the pandemic broke, the average life expectancy of Chinese people actually increased from 77.318 to 78.219 years (2019-2021), surpassing the United States for the first time in history (Chart 1). In the U.S., however, the average life span dropped from 78.820 to 76.421 years during that same period, owing in large part to the high number of Covid-related deaths. This is particularly striking when you consider that China was the eleventh22 poorest country in the world in 1949 (measured by per capita PPP GDP) with a life expectancy of only 3623 versus 6824 for the U.S. This means that an average Chinese person’s lifespan more than doubled, whereas in the U.S., the average lifespan only grew by eight years in nearly eight decades.
Far from “failing17” as the Western media is claiming now, Zero-Covid worked extremely effectively. Since the pandemic broke, the average life expectancy of Chinese people actually increased from 77.318 to 78.219 years (2019-2021), surpassing the United States for the first time in history (Chart 1). In the U.S., however, the average life span dropped from 78.820 to 76.421 years during that same period, owing in large part to the high number of Covid-related deaths. This is particularly striking when you consider that China was the eleventh22 poorest country in the world in 1949 (measured by per capita PPP GDP) with a life expectancy of only 3623 versus 6824 for the U.S. This means that an average Chinese person’s lifespan more than doubled, whereas in the U.S., the average lifespan only grew by eight years in nearly eight decades.
Chart 1. Life expectancy in China and the U.S. during the COVID-19 pandemic
Life expectancy in China increased beyond that of the U.S. during the pandemic.
The U.S. has recorded 1.1 million deaths due to Covid-19. The cumulative U.S. death rate per one million people is currently 83425 times that of China (3,339 versus 4). In the case of the U.S. and China, the use of “excess-death” numbers—the difference between observed and expected mortality rates—is of little value for analysis purposes as both countries had relatively low numbers of these deaths in the last three years. If China had followed the reckless U.S. path, these figures indicate China would have suffered 4.8 million dead. Even a quick calculation reveals that China’s strategy indeed saved millions of lives.
While it was containing the virus, China was also intensely studying the virus and developing responses, inaugurating26 its first vaccine, Sinopharm, in December 2020, which was subsequently approved27 by the WHO for emergency use on May 7, 2021. By October of that year, according to a Nature study28, Chinese vaccines accounted for nearly half of the 7.3 billion doses delivered globally. Since then, China has approved29 eight vaccines, with 35 others undergoing clinical trials, donated30 328 million doses, pledged31 over US$100 million to the Covax global vaccine distribution program for Global South countries, and proposed32 that vaccines become a global public good.
While it was containing the virus, China was also intensely studying the virus and developing responses, inaugurating26 its first vaccine, Sinopharm, in December 2020, which was subsequently approved27 by the WHO for emergency use on May 7, 2021. By October of that year, according to a Nature study28, Chinese vaccines accounted for nearly half of the 7.3 billion doses delivered globally. Since then, China has approved29 eight vaccines, with 35 others undergoing clinical trials, donated30 328 million doses, pledged31 over US$100 million to the Covax global vaccine distribution program for Global South countries, and proposed32 that vaccines become a global public good.
Phase 3: Adaptation and preparation (August 2021—October 2022)
In August 2021, in response to the spread of the highly transmissible Delta variant, China adopted33 a new strategy called “Dynamic Zero-Covid.” It was designed to balance health, economic, and social needs and to minimize the impact of the epidemic on the economy, society, production, and the people’s everyday life.
There is no one-size-fits-all measure for a country of 1.4 billion people. During this third phase, guided by science, the country experimented with its prevention and implementation practices. Mass testing was developed to high levels of efficiency, in which Guangzhou34’s 18 million inhabitants could be tested a mere three days, while the cost of pooling PCR tests (ten samples per test tube and taking advantage of low infection rates) were reduced to merely 3.5 yuan35 (US$0.50) per person. The country developed a nation-wide digital travel code and city-level “green code” cellphone applications36 to track Covid cases and those who have visited high-risk areas. All the while, the government moved towards more targeted measures to limit the use of large-scale lockdowns. During the Shanghai outbreak, for example, residential communities were classified37 into “lockdown,” “controlled,” or “precautionary” zones based on their risk level to try to minimize the interruption of daily and economic life.
Between January 2020 and mid-April 2022, China had spent38 an estimated US$45.1 billion to provide 11.5 billion free PCR testing for its residents. The costs of this mass testing strategy, however, were also mounting, with estimates reaching 1.8 percent39 of the country’s GDP and putting pressure especially on local government budgets. Despite the economic pressures, rather than “crippling40” China’s economy, the country’s GDP grew nearly four times faster than the U.S. and five times compared to the EU, from the start of the pandemic to Q3 of 2022.41
Despite being the second largest economy, China is still a developing country. The pandemic strained the country’s medical system, which was lacking in several key areas. Accordingly, China used the last three years to begin to fill in those gaps, primarily through increasing its intensive care unit (ICU) capacity. In 2019, China had only 3.6 ICU per 100,000 residents42, which was nine times less than the U.S. with 34.7 units. Since 2019, China increased43 its supply of ICU beds 2.4-fold (57,160 in December 2019 to 138,800 in December 2022). In the same period, ICU doctors and nurses44 increased by one-third and doubled, respectively.
On January 15, 2022, China had its first case of locally transmitted Omicron infection. On April 18, 2022, Shanghai announced45 its first three Covid-related deaths, all unvaccinated elderly people aged over 89 years. At the time of the Shanghai outbreak, while 87 percent46 of the country were already fully vaccinated, that number dropped to only 62 percent47 for the city’s 3.6 million elderly aged over 60, with 38 percent having received booster shots. The country knew that this vulnerable sector of the population had to be protected.
Significant efforts have since been made to increase vaccination of the elderly. The official National Health Commission reported48 that on November 30, 2022, the breakdown of vaccination rates for people aged over 80 years are as follows: 76.6 percent at least one shot, 65.8 percent two shots or more, and 40 percent three or more doses. Despite the lower mortality rates of the Omicron variant, its highly contagious nature posed serious challenges to the country’s existing prevention and control measures, while putting great strains on the economy. Even two doses49 of so-called advanced Western mRNA vaccines like Pfizer/BioNTech’s vaccine or Moderna’s similar mRNA vaccine provide only about 30 percent protection against symptomatic infection from Omicron for about four months.
There is no one-size-fits-all measure for a country of 1.4 billion people. During this third phase, guided by science, the country experimented with its prevention and implementation practices. Mass testing was developed to high levels of efficiency, in which Guangzhou34’s 18 million inhabitants could be tested a mere three days, while the cost of pooling PCR tests (ten samples per test tube and taking advantage of low infection rates) were reduced to merely 3.5 yuan35 (US$0.50) per person. The country developed a nation-wide digital travel code and city-level “green code” cellphone applications36 to track Covid cases and those who have visited high-risk areas. All the while, the government moved towards more targeted measures to limit the use of large-scale lockdowns. During the Shanghai outbreak, for example, residential communities were classified37 into “lockdown,” “controlled,” or “precautionary” zones based on their risk level to try to minimize the interruption of daily and economic life.
Between January 2020 and mid-April 2022, China had spent38 an estimated US$45.1 billion to provide 11.5 billion free PCR testing for its residents. The costs of this mass testing strategy, however, were also mounting, with estimates reaching 1.8 percent39 of the country’s GDP and putting pressure especially on local government budgets. Despite the economic pressures, rather than “crippling40” China’s economy, the country’s GDP grew nearly four times faster than the U.S. and five times compared to the EU, from the start of the pandemic to Q3 of 2022.41
Despite being the second largest economy, China is still a developing country. The pandemic strained the country’s medical system, which was lacking in several key areas. Accordingly, China used the last three years to begin to fill in those gaps, primarily through increasing its intensive care unit (ICU) capacity. In 2019, China had only 3.6 ICU per 100,000 residents42, which was nine times less than the U.S. with 34.7 units. Since 2019, China increased43 its supply of ICU beds 2.4-fold (57,160 in December 2019 to 138,800 in December 2022). In the same period, ICU doctors and nurses44 increased by one-third and doubled, respectively.
On January 15, 2022, China had its first case of locally transmitted Omicron infection. On April 18, 2022, Shanghai announced45 its first three Covid-related deaths, all unvaccinated elderly people aged over 89 years. At the time of the Shanghai outbreak, while 87 percent46 of the country were already fully vaccinated, that number dropped to only 62 percent47 for the city’s 3.6 million elderly aged over 60, with 38 percent having received booster shots. The country knew that this vulnerable sector of the population had to be protected.
Significant efforts have since been made to increase vaccination of the elderly. The official National Health Commission reported48 that on November 30, 2022, the breakdown of vaccination rates for people aged over 80 years are as follows: 76.6 percent at least one shot, 65.8 percent two shots or more, and 40 percent three or more doses. Despite the lower mortality rates of the Omicron variant, its highly contagious nature posed serious challenges to the country’s existing prevention and control measures, while putting great strains on the economy. Even two doses49 of so-called advanced Western mRNA vaccines like Pfizer/BioNTech’s vaccine or Moderna’s similar mRNA vaccine provide only about 30 percent protection against symptomatic infection from Omicron for about four months.
Phase 4: Downgrading severity and easing controls (November 2022 to present)
As Omicron began to spread, comparisons50 showed that the risk of death when infected with Omicron BA.2 was less than half that of Delta. One Chinese scientific study51 on mice showed that the new Covid-19 strains had 100 times lower virus load than the original, but was highly transmissible. China knew it needed to adjust its policies with the shifting nature of the virus, but with some important considerations.
On November 11, the central government released its “20 measures”52 to begin to relax its Zero-Covid policies. This included reducing mandatory quarantine time for inbound flights, decreasing isolation times, promoting vaccination of elderly, and eliminating the use of mass testing. For a country of its size, any central government policy takes time and huge organizational capacity to be implemented at the local scale.
The easing created initial confusion, and some people were upset with local community officials for not upholding the central government’s easing measures, frequently aired on Chinese social media platforms. Though there was frustration and exhaustion, it would be a mistake to believe that the downgrading phase was a response to the series of small, coordinated “white paper protests” that occurred after an Urumqi apartment fire that claimed the ten lives on November 24. Not only did the protests occur two weeks after the government began relaxing its Covid measures, but they were also not representative of the Chinese public opinion at large. The government easing also sparked another concern, with many people worried about getting infected. Several Weibo social media users53 expressed anger and criticism of the protesters, seeing them as irresponsible, middle-class youth who wanted their personal liberties at a collective expense. Unlike the blanketing Western media portrayals, Chinese people do not have a singular voice.
On Monday December 26, China announced54 it will downgrade the management of Covid-19 from Class A to Class B of infectious diseases on January 8, 2023. The three main reasons for this change include the fact that Omicron is not as virulent as Delta, a large percentage of the population had been vaccinated, and the country’s health system was better prepared. China uses a three-level system for the classification of infectious diseases, each delimiting specific response measures. Class A, the most dangerous, includes only cholera and the plague. Class B includes SARS, AIDS, and tuberculosis. Class C includes the flu and the mumps. Corresponding to this change, Covid-19 measures will be further relaxed.
Twelve55 main countermeasures were identified for the new Covid-19 policy corresponding to Class B control: 1) Increase vaccination rates; 2) prepare drugs and testing reagents for patients; 3) increase investment in construction of medical resources including ICU beds; 4) shift from mass PCR testing; 5) treat patients according to severity; 6) improve health survey and data, including vaccination status of those aged over 65 years; 7) control vulnerable population institutions, including elder care, hospitals, and schools; 8) strengthen prevention and control for rural areas and for high-risk patients; 9) increase epidemic monitoring, response, and control; 10) promote personal protection and the principle of everyone’s responsibility for their own health; 11) enable information access and education; and 12) optimize international personnel exchanges.
In a press conference56 of the State Council Joint Prevention and Control Mechanism, Dr. Yin Wenwu, Chief Physician of CDC’s Division of Infection Prevention, addressed the consequence of classifying Covid-19 as a Class B, which would reduce the frequency of the publication of data. The new data, which will be released monthly, will include the number of existing hospitalized cases and serious illnesses, including critical illnesses, and the cumulative number of deaths.
As expected, downgrading the severity of the virus’s management would also mean increasing the number of infections and related deaths. However, no single prediction model can be easily applied to China. Existing models for Covid-19 infection and mortality predictions have a wide range of outcomes. Forecast accuracy tends to decrease as prediction times increase, with models showing up to fivefold increase57 in error comparing one-week to 20-week horizons. Even the same Omicron variant has resulted in varied mortality rates in different countries. As of December 21, the U.S. seven-day rolling death rate58 was as high as 437 people, or a rate of 1.29 per million. Meanwhile, Japan had a comparable rate of 2.0 per million and New Zealand 0.85 per million.
Although China has now surpassed the life expectancy of the U.S., it has relatively fewer people 75 years and older than the U.S. (46 percent59 fewer as a percentage of the total population for each country). Omicron has had the impact that a massive 69 percent60 of all Covid-19 deaths in the U.S. in September 2022 were from this age group. The demographic difference in this age group, taken as a stand-alone factor, would imply an over 30 percent reduction in likely death rates for China.
Western media have been quick to use selective stories and photographs to create a broader image of the “chaotic61” situation in China, including alleging very high death rates. China, with a population of over 1.4 billion people, had over 27,00062 deaths per day prior to the pandemic. Using existing Omicron death rates from other countries would infer a possible 6 percent increase in death rates. These would be significant deaths, into the many tens of thousands, but there is no evidence yet provided that supports the millions that the West is speculating.
This downgrading phase is indeed complex and challenging, as doctors are working overtime with increase in cases, some hospitals are in full capacity, fever medicines have faced shortages, and winter-related ailments are adding complications. However, relaxing measures now means that China has used the last three years to try to prepare itself the best that it can by vaccinating the people, studying the virus, building medical infrastructure, training workers, and waiting until a much less deadly strain had emerged. It has also gained hard-earned experience that is essential to managing any future pandemic.
On November 11, the central government released its “20 measures”52 to begin to relax its Zero-Covid policies. This included reducing mandatory quarantine time for inbound flights, decreasing isolation times, promoting vaccination of elderly, and eliminating the use of mass testing. For a country of its size, any central government policy takes time and huge organizational capacity to be implemented at the local scale.
The easing created initial confusion, and some people were upset with local community officials for not upholding the central government’s easing measures, frequently aired on Chinese social media platforms. Though there was frustration and exhaustion, it would be a mistake to believe that the downgrading phase was a response to the series of small, coordinated “white paper protests” that occurred after an Urumqi apartment fire that claimed the ten lives on November 24. Not only did the protests occur two weeks after the government began relaxing its Covid measures, but they were also not representative of the Chinese public opinion at large. The government easing also sparked another concern, with many people worried about getting infected. Several Weibo social media users53 expressed anger and criticism of the protesters, seeing them as irresponsible, middle-class youth who wanted their personal liberties at a collective expense. Unlike the blanketing Western media portrayals, Chinese people do not have a singular voice.
On Monday December 26, China announced54 it will downgrade the management of Covid-19 from Class A to Class B of infectious diseases on January 8, 2023. The three main reasons for this change include the fact that Omicron is not as virulent as Delta, a large percentage of the population had been vaccinated, and the country’s health system was better prepared. China uses a three-level system for the classification of infectious diseases, each delimiting specific response measures. Class A, the most dangerous, includes only cholera and the plague. Class B includes SARS, AIDS, and tuberculosis. Class C includes the flu and the mumps. Corresponding to this change, Covid-19 measures will be further relaxed.
Twelve55 main countermeasures were identified for the new Covid-19 policy corresponding to Class B control: 1) Increase vaccination rates; 2) prepare drugs and testing reagents for patients; 3) increase investment in construction of medical resources including ICU beds; 4) shift from mass PCR testing; 5) treat patients according to severity; 6) improve health survey and data, including vaccination status of those aged over 65 years; 7) control vulnerable population institutions, including elder care, hospitals, and schools; 8) strengthen prevention and control for rural areas and for high-risk patients; 9) increase epidemic monitoring, response, and control; 10) promote personal protection and the principle of everyone’s responsibility for their own health; 11) enable information access and education; and 12) optimize international personnel exchanges.
In a press conference56 of the State Council Joint Prevention and Control Mechanism, Dr. Yin Wenwu, Chief Physician of CDC’s Division of Infection Prevention, addressed the consequence of classifying Covid-19 as a Class B, which would reduce the frequency of the publication of data. The new data, which will be released monthly, will include the number of existing hospitalized cases and serious illnesses, including critical illnesses, and the cumulative number of deaths.
As expected, downgrading the severity of the virus’s management would also mean increasing the number of infections and related deaths. However, no single prediction model can be easily applied to China. Existing models for Covid-19 infection and mortality predictions have a wide range of outcomes. Forecast accuracy tends to decrease as prediction times increase, with models showing up to fivefold increase57 in error comparing one-week to 20-week horizons. Even the same Omicron variant has resulted in varied mortality rates in different countries. As of December 21, the U.S. seven-day rolling death rate58 was as high as 437 people, or a rate of 1.29 per million. Meanwhile, Japan had a comparable rate of 2.0 per million and New Zealand 0.85 per million.
Although China has now surpassed the life expectancy of the U.S., it has relatively fewer people 75 years and older than the U.S. (46 percent59 fewer as a percentage of the total population for each country). Omicron has had the impact that a massive 69 percent60 of all Covid-19 deaths in the U.S. in September 2022 were from this age group. The demographic difference in this age group, taken as a stand-alone factor, would imply an over 30 percent reduction in likely death rates for China.
Western media have been quick to use selective stories and photographs to create a broader image of the “chaotic61” situation in China, including alleging very high death rates. China, with a population of over 1.4 billion people, had over 27,00062 deaths per day prior to the pandemic. Using existing Omicron death rates from other countries would infer a possible 6 percent increase in death rates. These would be significant deaths, into the many tens of thousands, but there is no evidence yet provided that supports the millions that the West is speculating.
This downgrading phase is indeed complex and challenging, as doctors are working overtime with increase in cases, some hospitals are in full capacity, fever medicines have faced shortages, and winter-related ailments are adding complications. However, relaxing measures now means that China has used the last three years to try to prepare itself the best that it can by vaccinating the people, studying the virus, building medical infrastructure, training workers, and waiting until a much less deadly strain had emerged. It has also gained hard-earned experience that is essential to managing any future pandemic.
Steps being taken now
Not for lack of vaccines, there are several reasons for the relatively slow vaccination rates for China’s elders. Many of them63 had preconceived notions about vaccines or were worried about complications related to underlying health conditions, while the successful control of the virus disincentivized elders to get vaccinated. Comparatively, in the United States, only 36 percent of people 65 and older have received the updated shot, known as the bivalent booster64, according to data65 from the Centers for Disease Control and Prevention. China, on the other hand, has consistently made efforts to convince, and not coerce, this vulnerable group to get vaccinated.
On November 29, the State Council’s Joint Prevention and Control Mechanism, adjusted the booster vaccination protocol, and required localities66 to extensively survey senior populations and ramp up services and awareness campaigns. Between December 1 and 13, 823,00067 of those over 80 years old received a third vaccine. China has created the world’s first commercially released inhaled vaccine68 for Covid-19: CanSino Biologics’ Convidecia Air, a non-replicated viral vector vaccine. This booster is already gaining popularity69 with the elderly.
Regarding the supply of medicines, some cities had shortages of fever medicines in the first weeks of December as cases increased. Hoarding, price-gouging, and the spike in demand were among the factors that contributed the supply shortage. In response, local governments started to distribute70 Ibuprofen for free, and Beijing residents, for example, can now get Ibuprofen and Paracetamol within an hour. China also passed a regulation71 on online pharmaceutical suppliers, that included penalties up to five million RMB (US$720,000) for pharmacies that increase prices according to speculative behavior. China has72 also made Pfizer’s Paxlovid oral antiviral treatment available.
Due to mass testing during phase three of the anti-pandemic fight, the government was able to obtain accurate data about the virus to inform its responses. As mass testing has been phased out in this current phase, some data precision will inevitably be foregone. However, China’s resilience is demonstrated in its ability to respond to new situations, applying technologies and science to evolve its public health system. For example, in the past two weeks, over ten provincial CDC’s, including in Sichuan, Jiangsu, Zhejiang, have launched surveys73 with hundreds of thousands of participating citizens. This survey data, though limited by sampling methodology, provides an important reference for local and central authorities to monitor the path of the disease, and collect information including on important hospitals, availability of fever drugs, and response capacity of local governments.
On December 31, Hainan released74 the results of their second online survey (conducted December 19-25) filled in by about 3.4 percent of the province’s population. Below is one of the charts released (Chart 2).
On November 29, the State Council’s Joint Prevention and Control Mechanism, adjusted the booster vaccination protocol, and required localities66 to extensively survey senior populations and ramp up services and awareness campaigns. Between December 1 and 13, 823,00067 of those over 80 years old received a third vaccine. China has created the world’s first commercially released inhaled vaccine68 for Covid-19: CanSino Biologics’ Convidecia Air, a non-replicated viral vector vaccine. This booster is already gaining popularity69 with the elderly.
Regarding the supply of medicines, some cities had shortages of fever medicines in the first weeks of December as cases increased. Hoarding, price-gouging, and the spike in demand were among the factors that contributed the supply shortage. In response, local governments started to distribute70 Ibuprofen for free, and Beijing residents, for example, can now get Ibuprofen and Paracetamol within an hour. China also passed a regulation71 on online pharmaceutical suppliers, that included penalties up to five million RMB (US$720,000) for pharmacies that increase prices according to speculative behavior. China has72 also made Pfizer’s Paxlovid oral antiviral treatment available.
Due to mass testing during phase three of the anti-pandemic fight, the government was able to obtain accurate data about the virus to inform its responses. As mass testing has been phased out in this current phase, some data precision will inevitably be foregone. However, China’s resilience is demonstrated in its ability to respond to new situations, applying technologies and science to evolve its public health system. For example, in the past two weeks, over ten provincial CDC’s, including in Sichuan, Jiangsu, Zhejiang, have launched surveys73 with hundreds of thousands of participating citizens. This survey data, though limited by sampling methodology, provides an important reference for local and central authorities to monitor the path of the disease, and collect information including on important hospitals, availability of fever drugs, and response capacity of local governments.
On December 31, Hainan released74 the results of their second online survey (conducted December 19-25) filled in by about 3.4 percent of the province’s population. Below is one of the charts released (Chart 2).
Chart 2. Proportion of infected persons health care seeking behavior in the two rounds of survey population
China’s CDC continues to actively conduct real-time dynamic monitoring on Covid-19. From December 1 to 29, it had completed the whole genetic sequencing of 1,14275 cases through sampling survey. There are seven Omicron subvariants circulating, two of which, BA.5.2 and BF.7, account for more than 80 percent of all cases. BF.7 has greater immune escape ability, a shorter incubation period, and faster transmission. Guangzhou reported76 that 96 percent of people infected and tested had the BA5.2 variant, the symptoms of which are generally considered milder. There has been no reemergence of the Delta variant or other previous strains. However, the U.S. has conveniently used this moment to target visitors from China, requiring them to show negative Covid-19 tests to enter the country. Ironically, it was the U.S. that failed77 to prioritize Covid-19 variant surveillance in 2020.
Several prediction models have been published in the last week, including one by former CDC chief scientist of epidemiology Zeng Guang,78 states that the infection rate in Beijing may have exceeded 80 percent. These models also predict that the second wave is likely to be much milder and point to three factors behind the higher hospitalizations in the city: Beijing’s winter exacerbates respiratory symptoms among the elderly, Beijing is now listed as a moderately aging society (with 20 percent79 of the residents are above 60 years old, and the dominant80 BF.7 subvariant appears more virulent.
The government is paying close attention81 to the availability of medical resources, especially in the rural areas, in anticipation of the week-long spring festival starting January 21. China has increased daily production82 of antigen tests to 110 million units, along with 250,000 oximeters per day, and is prioritizing supply to rural areas. Rapid antigen tests cost as low as US$0.51 each on the e-commerce platform, Pinduoduo. In the rural areas where the medical infrastructure is less developed, the severity of the virus is not as bad as originally feared, according to online accounts83. Barefoot doctors84, a legacy of the Mao-era and sometimes pilloried by those seeking to privatize rural health, have been essential in providing care in rural eras despite having less resources than major city hospitals.
A look back at the last three years shows how difficult the pandemic has been for China and the world, testing the Chinese government’s capacity to confront such an unforeseen public health crisis as well as the people’s patience. In Beijing where I live, however, people are back and bundled in the streets, at work, and on the subways, with traffic and travel recovering. People are anxiously awaiting the spring festival, the most important holiday of the year. As we enter into a new year and a new era of fighting Covid-19—while anticipating the new viruses that will inevitably emerge—the hope is that the world can learn from these hard-earned lessons, act and cooperate using science, not rumors, and embody a spirit of international solidarity, not stigma.85
Several prediction models have been published in the last week, including one by former CDC chief scientist of epidemiology Zeng Guang,78 states that the infection rate in Beijing may have exceeded 80 percent. These models also predict that the second wave is likely to be much milder and point to three factors behind the higher hospitalizations in the city: Beijing’s winter exacerbates respiratory symptoms among the elderly, Beijing is now listed as a moderately aging society (with 20 percent79 of the residents are above 60 years old, and the dominant80 BF.7 subvariant appears more virulent.
The government is paying close attention81 to the availability of medical resources, especially in the rural areas, in anticipation of the week-long spring festival starting January 21. China has increased daily production82 of antigen tests to 110 million units, along with 250,000 oximeters per day, and is prioritizing supply to rural areas. Rapid antigen tests cost as low as US$0.51 each on the e-commerce platform, Pinduoduo. In the rural areas where the medical infrastructure is less developed, the severity of the virus is not as bad as originally feared, according to online accounts83. Barefoot doctors84, a legacy of the Mao-era and sometimes pilloried by those seeking to privatize rural health, have been essential in providing care in rural eras despite having less resources than major city hospitals.
A look back at the last three years shows how difficult the pandemic has been for China and the world, testing the Chinese government’s capacity to confront such an unforeseen public health crisis as well as the people’s patience. In Beijing where I live, however, people are back and bundled in the streets, at work, and on the subways, with traffic and travel recovering. People are anxiously awaiting the spring festival, the most important holiday of the year. As we enter into a new year and a new era of fighting Covid-19—while anticipating the new viruses that will inevitably emerge—the hope is that the world can learn from these hard-earned lessons, act and cooperate using science, not rumors, and embody a spirit of international solidarity, not stigma.85
Notes
- ↩ Ministry of Foreign Affairs, PRC, MFA News
- ↩ Ministry of Foreign Affairs, PRC, MFA News
- ↩ Global Times, China to downgrade management of COVID-19 from Class A to Class B from January 8
- ↩ World Health Organization, WHO Coronavirus (COVID-19) Dashboard
- ↩ Bloomberg, China Hits Zero Covid Cases With a Month of Draconian Curbs
- ↩ Daily Mail and Reuters, Winter Olympics Dystopian Scenes Inside Beijing’s Closed-Loop Covid Quarantine
- ↩ The Washington Post, China’s new covid nightmare could become a global catastrophe
- ↩ CGTN, COVID-19 testing to be increased in China’s Wuhan after new case confirmed
- ↩ Tricontinental: Institute for Social Research, China and CoronaShock
- ↩ World Health Organization, Novel Coronavirus (2019-nCoV) SITUATION REPORT-1 JANUARY 21 2020
- ↩ The New York Times, The Lost Month: How a Failure to Test Blinded the U.S. to Covid-19
- ↩ World Health Organization, Novel Coronavirus (2019-nCoV) SITUATION REPORT-1 JANUARY 21 2020
- ↩ China Daily, Entire nation mobilizes to help Wuhan
- ↩ Worldometer, COVID-19 Data in China
- ↩ China CDC Weekly, Eleven COVID-19 Outbreaks with Local Transmissions Caused by the Imported SARS-CoV-2 Delta VOC—China
- ↩ Worldometer, Coronavirus Death Toll
- ↩ Consumer News and Business Channel, Here’s what lies ahead for China after zero-Covid failed
- ↩ National Health Commission, PRC, Statistical Bulletin of China’s Health Development in 2019
- ↩ National Health Commission, PRC, Statistical Bulletin of China’s Health Development in 2021
- ↩ National Center for Health Statistics of CDC, U.S. Life Expectancy Increased in 2019, Prior to the Pandemic
- ↩ National Center for Health Statistics of CDC, Mortality in the United States, 2021
- ↩ Asia Times, A history of China’s fight against poverty
- ↩ National Library of Medicine, Nutrition and health in China, 1949 to 1989
- ↩ National Center for Health Statistics of CDC, Mortality Trends in the United States, 1900–2018
- ↩ Worldometer, Reported Cases and Deaths by Country or Territory
- ↩ Contagion Live, China’s Sinopharm COVID-19 Vaccine Approved by WHO
- ↩ World Health Organization, WHO lists additional COVID-19 vaccine for emergency use and issues interim policy recommendations
- ↩ Nature, China’s COVID vaccines have been crucial—now immunity is waning
- ↩ COVID19 Vaccine Tracker, 8 Vaccines Approved for Use in China
- ↩ Bridge of Global Health Strategy, China COVID-19 Vaccine Tracker
- ↩ South China Morning Post, Xi Jinping says China promises 2 billion Covid-19 vaccine doses to other countries in 2021
- ↩ China Daily, China’s vaccines are global public good
- ↩ China CDC Weekly, Perspectives: The Dynamic COVID-Zero Strategy in China
- ↩ South China Morning Post, Coronavirus: 18 million tests in three days as Guangzhou tries to stem spread in latest outbreak
- ↩ Caixin Global, China Further Slashes Price of a Covid-19 Test to $2.40
- ↩ The Paper, When will the health codes be interconnected?
- ↩ Global Times, Shanghai reports three COVID-19 related deaths due to underlying diseases for the first time amid the latest flare-up
- ↩ Caixin Global, In Depth: As Mass Covid Testing Becomes China’s New Normal, Debate Grows Over Who Pays
- ↩ Caixin Global, Will Regular Covid Testing Help or Hurt China’s Economy?
- ↩ Financial Times, How China’s lockdown policies are crippling the country’s economy
- ↩ This data was provided by British economist John Ross and is included in his upcoming article on Covid-19 and the Chinese economy.
- ↩ Global Times, China further focuses on severe COVID cases treatment with tiered medical services plan
- ↩ Yujian Finance and Economics, ICU beds increased 2.4 times in three years: our critical care supporting facilities have been racing against time
- ↩ Yujian Finance and Economics, ICU beds increased 2.4 times in three years: our critical care supporting facilities have been racing against time
- ↩ Global Times, Shanghai reports three COVID-19 related deaths due to underlying diseases for the first time amid the latest flare-up
- ↩ YCharts, China Coronavirus Full Vaccination Rate
- ↩ Global Times, Shanghai reports three deaths, all elderly, unvaccinated
- ↩ Joint Prevention and Control Mechanism of the State Council, Work Plan for Strengthening COVID-19 Vaccination for the Elderly
- ↩ The Scientist, Omicron Appears to Evade Vaccines Better Than Other Variants
- ↩ JAMA Network, Estimates of SARS-CoV-2 Omicron BA.2 Subvariant Severity in New England
- ↩ Global Times, Exclusive: Chinese scientists prove Omicron’s pathogenicity has geometrically decreased compared with previous strains
- ↩ Global Times, China optimizes anti-epidemic measures, shortens quarantine period for intl arrivals
- ↩ The Wall Street Journal, China’s Censors End Crackdown on Covid-Policy Criticism—of a Certain Kind
- ↩ China Daily, China to manage COVID-19 with measures against Class B infectious diseases
- ↩ National Health Commission, PRC, Explanation on Overall Plan for Implementing Class B Infectious Disease Management for COVID-19 Infections
- ↩ National Health Commission, PRC, Transcript of the Press Conference of the Joint Prevention and Control Mechanism on December 27, 2022
- ↩ PNAS, Evaluation of individual and ensemble probabilistic forecasts of COVID-19 mortality in the United States
- ↩ Our World in Data, Coronavirus (COVID-19) Deaths
- ↩ Statistics Times, United States vs China by population
- ↩ Kaiser Family Foundation, Deaths Among Older Adults Due to COVID-19 Jumped During the Summer of 2022 Before Falling Somewhat in September
- ↩ The Economist, Ending China’s zero-covid policy could unleash chaos
- ↩ National Bureau of Statistics, PRC, Statistical Bulletin of China’s National Economic and Social Development in 2019
- ↩ Caixin Global, Weekend Long Read: Why China’s Seniors Hesitate to Get Vaccinated
- ↩ U.S. Food & Drug Administration, COVID-19 Bivalent Vaccine Boosters
- ↩ Centers for Disease Control and Prevention, COVID-19 Vaccinations in the United States
- ↩ China Daily, Vaccination action plan to target elderly
- ↩ Joint Prevention and Control Mechanism of the State Council, Work Plan for Strengthening COVID-19 Vaccination for the Elderly
- ↩ Business Wire, World-First Inhaled COVID-19 Vaccine, Developed in Partnership Between Aerogen® and CanSinoBIO, First Public Booster Immunization in China.
- ↩ CGTN, Inhalable COVID-19 vaccines gain popularity among seniors in China
- ↩ Communist Youth League Central Committee, Free medicines deliver in many places! Mobile diagnosis and treatment vehicles drive to the door and the PCR test booths turn into a diagnosis and treatment station.
- ↩ South China Morning Post, China targets online pharmacies for price gouging on Covid-19 medication
- ↩ Global Times, Beijing to distribute COVID-19 drug Paxlovid to community health centers to help key population amid approaching peak caseload
- ↩ The Paper, Why did Sichuan, Jiangsu, Zhejiang and other provinces launch the COVID-19 infection survey?
- ↩ Sanya Released, Online survey of COVID-19 infection in hainan province
- ↩ Global Times, Virologists and CDC departments deny reemergence of COVID-19 original strain and Delta variant in China
- ↩ Guangming, What strains are dominant in Guangzhou now?
- ↩ JAMA Network, How the U.S. Failed to Prioritize SARS-CoV-2 Variant Surveillance
- ↩ IFeng, Zeng Guang:Beijing covid infection rate may exceed 80%. The first storm is relatively large, then the second wave is very low.
- ↩ Global Times, Beijing now a moderately aging society, to become severely aging by 2035
- ↩ Guangming, Beijing’s main strain is BF.7, the most contagious one so far.
- ↩ Joint Prevention and Control Mechanism of the State Council, Notice of the current work program for the prevention and control of covid infection in rural areas
- ↩ Guancha, All-out efforts to ensure the supply of medical supplies and drugs
- ↩ Yuyan Guancha, My hometown has survived the “pandemic”.
- ↩ Gongdushijian, The barefoot doctors won a headwind game, while the online experts were confused
- ↩ World Health Organization, WHO Director-General’s remarks at the media briefing on COVID-2019 outbreak on 14 February 2020
Author
Tings Chak is a researcher and the art director of Tricontinental: Institute for Social Research and co-founding member of the Dongsheng collective. She is currently pursuing a doctorate at Tsinghua University and lives in Beijing.
This article was republished from Monthly Review Online.
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12/1/2022
Western Media Has Not Much Evolved From the Era of the Yellow Peril in Its Routine China-Bashing By: Felix Abt
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Distorted coverage of alleged removal of Hu Jintao from Communist Party Congress is par for the course along with other recent coverage.
It is common for Western media to automatically imply or label everything that happens in China as “evil.” The most recent case concerns the events surrounding former Communist Party Chairman Hu Jintao at the 20th National Congress of the Chinese Communist Party in Beijing.
[Source: jpost.com]
“A ghostly scene at China’s top of power: Xi Jinping’s predecessor is taken away. The ‘new emperor’ is reaching for absolute power. What are the consequences for the world?” This is the title and the introduction of the newspaper Die Weltwoche to a German-language article by the British historian Francis Pike, in which he writes: “Hu’s media-fueled removal takes on the appearance of a political drama reminiscent of Chairman Mao’s brutal purges of party members in the 1950s.” He is referring to a video from the Chinese Party Congress showing former party leader Hu Jintao allegedly being “forcefully taken away.”
“The removal of Hu from the hall occurred mere minutes after foreign media were allowed into the Great Hall,” Pike adds. This immediately raises the question of why Xi Jinping should wait to “remove” Hu Jintao until Western media are on the scene, having only waited for such an opportunity to pillory the “cruel and inhumane dictator Ji Jinping”?
“The removal of Hu from the hall occurred mere minutes after foreign media were allowed into the Great Hall,” Pike adds. This immediately raises the question of why Xi Jinping should wait to “remove” Hu Jintao until Western media are on the scene, having only waited for such an opportunity to pillory the “cruel and inhumane dictator Ji Jinping”?
Ex-Chinese President Hu Jintao being removed from Communist Party Congress on October 22, 2022. [Source: nypost.com]
As for Xi Jingping’s dictatorship, it is worth noting in passing that last month at the Athens Democracy Forum (in collaboration with The New York Times), a scholar from the University of Zurich was asked to comment on democracy in China, and her response was not exactly what one would expect with so much Western dictatorship talk: In recent years, under Xi Jinping, there have been increased “democratic experiments, for example, to allow greater citizen participation and to make local government officials more responsive and accountable to citizens.” This is all the more remarkable because, in the so-called democratic West, the trend is in the opposite direction, namely toward a creeping dismantling of citizens’ democratic rights. And, as might be expected, the media did not report on it because, unlike Hu Jintao’s earth-shattering “removal” from the convention hall, it was apparently an insignificant detail that would also upset their China narrative.
[Source: biz-at-it.blogspot.com]
Unwelcome details blanked out
The same media did not mention that the frail 80-year-old man, who left a somewhat bewildered impression, had been escorted to and from the convention for several days during the Party Congress and before the “forced removal” hyped by the Western media on the last day of the Congress.
Here, for example, you can see Xi Jinping taking care of him as a friendly usher.
Cutting away an important part of the message and changing perceptions with misleading text is manipulation and is—rightly!—castigated by the same media when it is done by China.
Here, for example, you can see Xi Jinping taking care of him as a friendly usher.
Cutting away an important part of the message and changing perceptions with misleading text is manipulation and is—rightly!—castigated by the same media when it is done by China.
“Child soldiers” in newsrooms turned into shooting galleries drop speculative bombs on China: Young German journalist Fabian Kretschmer writes from Beijing for the Neue Zürcher Zeitung (NZZ) and various other media in Germany, Austria and Switzerland, as well as “for the history books.” (Above translation into English by Felix Abt)
That Hu Jintao has a health problem was first noticed by China observers at the 2019 National Day parade, when he was seen on the Tiananmen Balcony in Beijing with his hands shaking badly.
Immediately prior to the incident at the Party Congress, Hu Jintao participated in the election as the second eligible voter, just after Xi Jinping, who cast his vote at the ballot box. In a society that is much more Confucianist than Communist, this symbolic placement in the vote signifies great respect for the elder statesman. The Western media also blanked this out of the overall picture. This made it easier for them to construct a coup, a purge and a humiliation of the former president.
Immediately prior to the incident at the Party Congress, Hu Jintao participated in the election as the second eligible voter, just after Xi Jinping, who cast his vote at the ballot box. In a society that is much more Confucianist than Communist, this symbolic placement in the vote signifies great respect for the elder statesman. The Western media also blanked this out of the overall picture. This made it easier for them to construct a coup, a purge and a humiliation of the former president.
On the Chinese evening news (in the video starting at 5:21), Hu Jintao was shown casting his vote after Xi Jinping had cast his vote at the ballot box and just before Hu was “removed.” [Source: cctv.com]
If Hu had really been purged during the day, as Western media claimed, it is highly unlikely that Chinese television would have shown him in its report in the evening.
According to George Soros, Xi is the “most dangerous man in the world.”
According to George Soros, Xi is the “most dangerous man in the world.”
The “most dangerous man in the world” according to George Soros: Yes, Xi Jinping invaded Iraq and destroyed Libya. He has killed children in Venezuela, Palestine and Afghanistan with military weapons or the “sanctions” hunger weapon. He has supported extremists and murderers in Syria and Nicaragua. He has reduced the citizens of Iran and Cuba to misery with embargoes. He is running a genocide in Yemen. He is waging drone wars all over the world, wiping out innocent families and wedding parties.—Sorry, I mistyped that one: It’s the morally superior opponents of Xi Jinping who are supported by the speculative billionaire and do-gooder Soros! [Source: investopedia.com]
Political purge and humiliation for the history books or disruption of “worship”?
Little was heard from the official Chinese side about the incident, apart from a tweet from Xinhua News Agency saying Hu “did not feel well” during the meeting.
A report by Singaporean TV station CNA added an important detail that Western media representatives who were in the room seemed to have deliberately ignored: Hu had been looking at some documents on the table in front of him and apparently had a disagreement with the current chairman of China’s legislature, Li Zhanshu, who was sitting to his left, who took the documents out of his hand.
And when Li Zhanshu tried to get up to help Hu stand, Li was briefly dragged back to his seat by Wang Huning, a party ideologue and former professor of international politics to his left, making matters even more confusing. Xi stopped this disruption to the choreographed party meeting and summoned a staffer, who then tried to get Hu to leave, and who then escorted him out of the room. The video also shows that Hu, after standing up, first hovered in place, then took a few slow steps, then stopped and turned to Xi, who nodded briefly but continued to look at the assembled delegates.
A report by Singaporean TV station CNA added an important detail that Western media representatives who were in the room seemed to have deliberately ignored: Hu had been looking at some documents on the table in front of him and apparently had a disagreement with the current chairman of China’s legislature, Li Zhanshu, who was sitting to his left, who took the documents out of his hand.
And when Li Zhanshu tried to get up to help Hu stand, Li was briefly dragged back to his seat by Wang Huning, a party ideologue and former professor of international politics to his left, making matters even more confusing. Xi stopped this disruption to the choreographed party meeting and summoned a staffer, who then tried to get Hu to leave, and who then escorted him out of the room. The video also shows that Hu, after standing up, first hovered in place, then took a few slow steps, then stopped and turned to Xi, who nodded briefly but continued to look at the assembled delegates.
Chinese leader Xi Jinping (bottom left), Li Zhanshu, and Wang Huning (right), look on as former leader Hu Jintao (center) speaks to Xi as he is helped to leave early from the closing session of the 20th National Congress of the Chinese Communist Party at The Great Hall of the People in Beijing, China, on October 22, 2022. [Source: theepochtimes.com]
Claimed purge makes no sense
If it had been a dispute, the incident would have been extraordinary, because in communist parties, which are not known for their transparency, disagreements are settled behind closed doors, and in any case not in front of running cameras from the whole world. So one would need to know what is in the documents. A former Chinese insider told the BBC, “Why would the party put a document on Hu’s desk if he wasn’t allowed to see it?”
Bill Bishop of the China newsletter Sinocism stated that the “purge claimed by the media doesn’t make sense that way.” Hu Haifeng, Hu Jintao’s son and party secretary of Lishui, Zhejiang, also sat in the room. “A purge of one without the other would be unlikely,” Bishop explained.
Bill Bishop of the China newsletter Sinocism stated that the “purge claimed by the media doesn’t make sense that way.” Hu Haifeng, Hu Jintao’s son and party secretary of Lishui, Zhejiang, also sat in the room. “A purge of one without the other would be unlikely,” Bishop explained.
Hu Heifeng [Source: taiwannews.com]
A real China insider was interviewed by the Hong Kong-based South China Morning Post. When asked about Xi Jinping’s possible motives for the alleged “forced removal” of Hu Jintao, he replied:
“Xi is certainly not shy about taking drastic action, but his obsession is to restore party discipline through rules and procedures. He has never gone the way of Stalin or North Korea of just making his enemies disappear. Even with his bitterest foes—such as Bo Xilai, Zhou Yongkang, and Guo Boxiong, people who, in fact, plotted a coup against him—Xi took them down, but did everything according to the procedures.
He is a stern but not an arbitrary ruler. His books and speeches have more citations from China’s Legalism school than anything else. Legalism (a bad translation) stresses the importance of rules and regulations over arbitrary power.
If anyone wants to challenge Xi, it would be incredible for them to do so on the last day of the party congress, which is mainly for formal endorsement and communication. The debate and negotiations happened behind the scene MONTHS beforehand. There were plenty of opportunities for the two to argue if they didn’t agree with each other. This was simply not the case.”
Why have some Western media platforms gone wild with speculation, including suggesting it was a purge, the interviewer asked:
“This is the problem I have with the Western media and those ‘experts.’ You can be critical of the Chinese system, and you may dislike it intensely, but you at least need to understand what you are criticizing. Their imagination of China is just a plus-size North Korea, a modern-day Stalinist state, or the new Nazis. In fact, many Western media just borrow the same analytical tools they used to analyze the Soviet Union or North Korea or even Nazi Germany and apply it to China.
This is what I call the intellectual Procrustean bed they have forced on everyone studying China. Sometimes it can get really ridiculous. It’s either laziness or dogmatic rigidity or having an agenda—or a combination of all these.
There are many problems in Xi’s system, and so far he and the party have not come up with convincing answers to them. But to imagine it simply as another Soviet Union or North Korea is missing the point. If people start to make decisions based on such skewed views and perceptions, that will lead to real-life consequences. Hong Kong is a living example of it.”
So it is okay to criticize the Chinese system harshly, and pundits and the media may deeply loathe it, but they do so while being quite clueless.
Also, contrary to the predictions and speculations of experts and media in the West in the run-up to the Party Congress, the “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era” was not shortened to Xi Jinping Thought in the Constitution, nor was Xi given new descriptive titles such as “Leader/领袖.”
“Xi is certainly not shy about taking drastic action, but his obsession is to restore party discipline through rules and procedures. He has never gone the way of Stalin or North Korea of just making his enemies disappear. Even with his bitterest foes—such as Bo Xilai, Zhou Yongkang, and Guo Boxiong, people who, in fact, plotted a coup against him—Xi took them down, but did everything according to the procedures.
He is a stern but not an arbitrary ruler. His books and speeches have more citations from China’s Legalism school than anything else. Legalism (a bad translation) stresses the importance of rules and regulations over arbitrary power.
If anyone wants to challenge Xi, it would be incredible for them to do so on the last day of the party congress, which is mainly for formal endorsement and communication. The debate and negotiations happened behind the scene MONTHS beforehand. There were plenty of opportunities for the two to argue if they didn’t agree with each other. This was simply not the case.”
Why have some Western media platforms gone wild with speculation, including suggesting it was a purge, the interviewer asked:
“This is the problem I have with the Western media and those ‘experts.’ You can be critical of the Chinese system, and you may dislike it intensely, but you at least need to understand what you are criticizing. Their imagination of China is just a plus-size North Korea, a modern-day Stalinist state, or the new Nazis. In fact, many Western media just borrow the same analytical tools they used to analyze the Soviet Union or North Korea or even Nazi Germany and apply it to China.
This is what I call the intellectual Procrustean bed they have forced on everyone studying China. Sometimes it can get really ridiculous. It’s either laziness or dogmatic rigidity or having an agenda—or a combination of all these.
There are many problems in Xi’s system, and so far he and the party have not come up with convincing answers to them. But to imagine it simply as another Soviet Union or North Korea is missing the point. If people start to make decisions based on such skewed views and perceptions, that will lead to real-life consequences. Hong Kong is a living example of it.”
So it is okay to criticize the Chinese system harshly, and pundits and the media may deeply loathe it, but they do so while being quite clueless.
Also, contrary to the predictions and speculations of experts and media in the West in the run-up to the Party Congress, the “Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era” was not shortened to Xi Jinping Thought in the Constitution, nor was Xi given new descriptive titles such as “Leader/领袖.”
[Source: english.yunnan.cn]
Further background and insights censored by the Western media
There are two other key current things that pundits like John Pike and the mainstream media will not tell you:
The reason that modern medicine, including hospitals with intensive care units, lags behind the rest of the world in China is that the Chinese believe in their traditional medicine (acupuncture, herbal medicine, diet, exercise, and manual therapy to correct imbalances in the body and promote mental and physical health) because it has been used for thousands of years and is steeped in tradition, belief, popularity and anecdote. Western remedies are far less popular because the vast majority of Chinese also believe that traditional Chinese medicine has fewer side effects and has a stronger restorative effect on the body.
- China has remained essentially Confucian for more than two thousand years. Confucius advocated a government that cares for the people and makes their welfare its primary concern. It should be a meritocracy, in that “those who govern should do so on the basis of merit and not on the basis of inherited status,” he proclaimed, and that it should be enlightened and benevolent (in which the demonstrably most capable people who best serve the people should rise to positions of leadership).
This is in contrast to Western democracies, where even the most incompetent can come to power thanks to empty promises and/or because they were well sponsored, and then have their own interests and those of their patrons in mind rather than the interests of their constituents. In China, civil servants still have to pass exams and prove themselves if they want to keep their jobs. This corresponds to the centuries-old Confucian tradition, according to which anyone, regardless of their social background, could obtain a position in the civil service at the imperial court after passing an entrance examination in various subjects. The fact that 800 million people have been lifted out of poverty in China over the past 40 years, accounting for more than 75% of global poverty, is no accident, but part of the application of this philosophy. - Mainstream media such as Foreign Affairs magazine highlighted the “Collateral Damage in China’s War on Covid,” or Nikkei, the world’s largest financial newspaper, headlined “Self-isolated: China’s lonely zero-COVID battle in spotlight” without ever telling their readers and viewers why the Chinese government took draconian measures against the Covid pandemic: China’s biggest weakness is its health care system. South Korea has 10 intensive care beds per 100,000 people, America has 34, and China has only 4. As a result, the government feared that the health care system would not be able to handle a large influx of seriously ill patients. Most retirees are not vaccinated.
The reason that modern medicine, including hospitals with intensive care units, lags behind the rest of the world in China is that the Chinese believe in their traditional medicine (acupuncture, herbal medicine, diet, exercise, and manual therapy to correct imbalances in the body and promote mental and physical health) because it has been used for thousands of years and is steeped in tradition, belief, popularity and anecdote. Western remedies are far less popular because the vast majority of Chinese also believe that traditional Chinese medicine has fewer side effects and has a stronger restorative effect on the body.
In contrast to the seemingly completely out-of-touch Western media, East Asian media, which have a far better understanding of China, used less charged language related to Hu Jintao’s escort out of the Party Congress hall. It is also important to note in this context that, unlike Europe, Asian countries do not want to be drawn into the U.S. fight against China at their own expense, as I have detailed here.
For example, the conservative Korea Herald in Seoul soberly headlined that Hu Jintao was helped off the stage at the Party Congress.
For example, the conservative Korea Herald in Seoul soberly headlined that Hu Jintao was helped off the stage at the Party Congress.
[Source: Screenshot courtesy of Felix Abt]
It can therefore be assumed that the escorting of Hu Jintao at the Party Congress will not go down in the Korean history books.
“Media war between China and the West"
On the one hand, everything that comes out of China is hyped up, twisted and used in the West for China-bashing. On the other hand, more important things that would contribute to a better understanding of the country are simply suppressed. Another recent example:
Do you know Dilana Dilixiati? No, of course you don’t. But you certainly know Peng Shuai, the famous Chinese tennis player who, according to Western media reports, accused a retired top politician of rape (the word rape does not appear in her original Chinese text), after the years-long secret love affair with many ups and downs between the two had gone to pieces.
Western politicians and media therefore immediately called for a boycott of the Winter Olympics in Beijing.
Do you know Dilana Dilixiati? No, of course you don’t. But you certainly know Peng Shuai, the famous Chinese tennis player who, according to Western media reports, accused a retired top politician of rape (the word rape does not appear in her original Chinese text), after the years-long secret love affair with many ups and downs between the two had gone to pieces.
Western politicians and media therefore immediately called for a boycott of the Winter Olympics in Beijing.
Tennishead magazine wrote (December 6, 2021): “The USA are reportedly set to announce a diplomatic boycott of the Beijing Olympic Games this week in response to the censorship of Peng Shuai and her sexual assault allegations.” This boycott was carried out by the United States and its Western “coalition of the willing.” [Source: Screenshot courtesy of Felix Abt]
The athlete was subsequently often seen in public, laughing and talking to other people. Since she apparently did not disappear into a gulag, as Western politicians and media must have secretly hoped, she soon disappeared again from Western media discourse.
Dr. Pan Wang, a China expert from the University of New South Wales, provided background information and insights into the case on Australian television that were not available elsewhere.
She said it was only natural that Western organizations such as the World Tennis Association interpreted Ms. Peng’s social media post as a complaint of sexual misconduct and were suspicious of Beijing’s response given the lack of detailed information, communication or transparency and censorship on the matter.
However, she dismissed the accusation, saying there is no clear allegation of rape, which is a criminal offense in China, and “sexual harassment” falls under the Civil Code.
Whether the persuasion or coercion of the former vice premier described by Peng Shuai could be called “sexual assault” in the usual sense is subjective, she said.
She added that, while Beijing wants to suppress any controversy about its officials, the Western media are also pursuing their own political agenda regarding China.
“This case is about harassment, power and skepticism, and it occurred in a broader context of growing tensions between China and, for example, Australia, stemming from diplomatic tensions, trade disputes and growing accusations against China’s human rights, democracy and censorship,” she added.
She concluded: “So there’s a media war between China and the West and the Australian media here, too, and that’s reflected in the opposing views of the social media posts.”
Dr. Pan Wang, a China expert from the University of New South Wales, provided background information and insights into the case on Australian television that were not available elsewhere.
She said it was only natural that Western organizations such as the World Tennis Association interpreted Ms. Peng’s social media post as a complaint of sexual misconduct and were suspicious of Beijing’s response given the lack of detailed information, communication or transparency and censorship on the matter.
However, she dismissed the accusation, saying there is no clear allegation of rape, which is a criminal offense in China, and “sexual harassment” falls under the Civil Code.
Whether the persuasion or coercion of the former vice premier described by Peng Shuai could be called “sexual assault” in the usual sense is subjective, she said.
She added that, while Beijing wants to suppress any controversy about its officials, the Western media are also pursuing their own political agenda regarding China.
“This case is about harassment, power and skepticism, and it occurred in a broader context of growing tensions between China and, for example, Australia, stemming from diplomatic tensions, trade disputes and growing accusations against China’s human rights, democracy and censorship,” she added.
She concluded: “So there’s a media war between China and the West and the Australian media here, too, and that’s reflected in the opposing views of the social media posts.”
The hidden story of the amazing career of a Uyghur woman
Back to Dilana Dilixiati. She, too, is a Chinese sports star. Her team had recently won an unexpected, sensational victory in the semifinals against basketball superpower Australia at the FIBA Women’s Basketball World Cup. Australian media reported, “They defeated the hosts 61-59 at the Sydney Superdome on Friday night in a thrilling encounter that was decided only in the final seconds.” The dramatic thriller sent shock waves.
[Source: english.news.cn]
Those who followed the game immediately recognized that Dilana Dilixiati (on the left in the photo above) looked different from her teammates. The journalists must have noticed her. Strangely enough, the Uyghur, who writes her name in Uyghur like this: دىلانا دىلشات, which does not look like Mandarin, did not attract any interest, although she would have been more suitable than any other for a sensational success story inviting clicks.
The 1.94-meter (6’ 4-1/2”) center basketball player of the Guangdong Vermilion Birds, who helped the Chinese women’s national team win a silver medal at the World Cup, regularly visits her family in Xinjiang.
The 1.94-meter (6’ 4-1/2”) center basketball player of the Guangdong Vermilion Birds, who helped the Chinese women’s national team win a silver medal at the World Cup, regularly visits her family in Xinjiang.
[Source: Screenshot courtesy of Felix Abt]
A Twitter user found out that a Uyghur woman played on China’s successful national women’s basketball team and that the media did not want to know about it.
The Australian think tank ASPI, funded in particular by the Australian Department of Defense, the U.S. government, and the Western war industry, published the widely cited but refuted pamphlet “Uyghurs for Sale.” The organization was one of the driving forces in spreading the propaganda campaign of “genocide” against the Uyghurs in China, which originated in the United States.
The case is clear: Dilana Dilixiati, a Uyghur, and her ability to pursue a career as a top athlete and to travel, contradicts the Western narrative that is ingrained in people’s minds that Uyghurs, who are totally discriminated against, are prisoners and victims of genocide and cannot leave Xinjiang. Their story had to be kept quiet by the media, because consumers would naturally have noticed that there was something wrong with the prevailing narrative, and who likes to be manipulated.
The Australian think tank ASPI, funded in particular by the Australian Department of Defense, the U.S. government, and the Western war industry, published the widely cited but refuted pamphlet “Uyghurs for Sale.” The organization was one of the driving forces in spreading the propaganda campaign of “genocide” against the Uyghurs in China, which originated in the United States.
The case is clear: Dilana Dilixiati, a Uyghur, and her ability to pursue a career as a top athlete and to travel, contradicts the Western narrative that is ingrained in people’s minds that Uyghurs, who are totally discriminated against, are prisoners and victims of genocide and cannot leave Xinjiang. Their story had to be kept quiet by the media, because consumers would naturally have noticed that there was something wrong with the prevailing narrative, and who likes to be manipulated.
Author
Felix Abt is the author of “A Capitalist in North Korea: My Seven Years in the Hermit Kingdom” and of “A Land of Prison Camps, Starving Slaves and Nuclear Bombs?” He can be reached via his Twitter account.
This article was republished from CovertAction Magazine.
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For the Western press, the 20th National Congress of the Chinese Communist Party offered a number of signals which—if read in good faith—could have been perceived as reassuring.
Instead, establishment outlets reverted to familiar narratives regarding China’s Covid mitigation strategy and tied these into renewed predictions of a long-prophesied economic disaster—one that would inevitably befall China as a result of its government’s decision to forsake the orthodoxy of open markets.
More than anything else, corporate media fixated on Hu Jintao’s departure from the congress hall, engaging in tabloid-variety speculation around the fate of CCP General Secretary Xi Jinping’s 79-year-old predecessor.
Invoking the specter of a purge, outlets like the New York Times and CNN pushed the narrative that Xi manipulated events to consolidate his power. However, the “evidence” used by corporate media to suggest that Xi orchestrated Hu’s exit as part of a power grab was far from convincing.
Instead, establishment outlets reverted to familiar narratives regarding China’s Covid mitigation strategy and tied these into renewed predictions of a long-prophesied economic disaster—one that would inevitably befall China as a result of its government’s decision to forsake the orthodoxy of open markets.
More than anything else, corporate media fixated on Hu Jintao’s departure from the congress hall, engaging in tabloid-variety speculation around the fate of CCP General Secretary Xi Jinping’s 79-year-old predecessor.
Invoking the specter of a purge, outlets like the New York Times and CNN pushed the narrative that Xi manipulated events to consolidate his power. However, the “evidence” used by corporate media to suggest that Xi orchestrated Hu’s exit as part of a power grab was far from convincing.
Substantive developments
If establishment outlets covering the congress were on the lookout for substantive developments—rather than additional fodder to comport with their prefabricated narratives—they could have found them.
Despite the Biden administration’s belligerent posture vis-à-vis Taiwan, demonstrated by escalations like Nancy Pelosi’s visit to the island and Biden’s own promise to deploy US forces in the event of a forced reunification, Xi indicated that China would continue to approach cross-strait relations with restraint.
Despite the Biden administration’s belligerent posture vis-à-vis Taiwan, demonstrated by escalations like Nancy Pelosi’s visit to the island and Biden’s own promise to deploy US forces in the event of a forced reunification, Xi indicated that China would continue to approach cross-strait relations with restraint.
| Of Xi’s relatively measured statements on reunification, Sung Wen-ti, a political scientist at the Australian National University (Guardian, 10/16/22), said, “The lack of ‘hows’ is a sign he wants to preserve policy flexibility and doesn’t want to irreversibly commit to a particularly adversarial path.” Lim John Chuan-tiong, a former researcher at Taiwan’s Academia Sinica (SCMP, 10/16/22), deemed Xi’s message to the Taiwanese people “balanced and not combative.” This sounds like good news for everyone who wants to avoid a potential nuclear war. |  SCMP (10/16/22): “Analysts said Xi’s remarks suggested that Beijing was exercising restraint on Taiwan, despite the soaring tensions.” |
In addition, Xi’s opening report to the congress placed particular emphasis on the task of combating climate change. The section titled “Pursuing Green Development and Promoting Harmony between Humanity and Nature” presented a four-part framework to guide China’s policy efforts in this area. Even the avidly pro-Western Atlantic Council had to admit that “China is showing its leadership in green development in a number of ways.”
Since China is home to one-fifth of the global population, and is currently the most prolific CO2-emitting country on Earth, its government’s decision to prioritize a comprehensive response to the climate crisis seems like an unambiguously positive development.
The congress even provided some encouraging news for those who claim to care about human rights. In a surprise move, Chen Quanguo, who was hit with US sanctions for his hardline approach as party secretary in both Tibet and Xinjiang, was ousted from the central committee.
But US corporate media generally failed to highlight these developments as positive news. In fact, with the exception of some coverage of Xi’s statements on Taiwan—which largely misrepresented China’s posture as more threatening than a good-faith reading would indicate—US news outlets had remarkably little to say about the substance of any news coming out of the congress.
Since China is home to one-fifth of the global population, and is currently the most prolific CO2-emitting country on Earth, its government’s decision to prioritize a comprehensive response to the climate crisis seems like an unambiguously positive development.
The congress even provided some encouraging news for those who claim to care about human rights. In a surprise move, Chen Quanguo, who was hit with US sanctions for his hardline approach as party secretary in both Tibet and Xinjiang, was ousted from the central committee.
But US corporate media generally failed to highlight these developments as positive news. In fact, with the exception of some coverage of Xi’s statements on Taiwan—which largely misrepresented China’s posture as more threatening than a good-faith reading would indicate—US news outlets had remarkably little to say about the substance of any news coming out of the congress.
Recycled narratives
As FAIR (3/24/20, 1/29/21, 9/9/22) has pointed out at various points in the pandemic, corporate media—seemingly disturbed by China’s unwillingness to sacrifice millions of lives at the altar of economic growth—have been almost uniformly critical of the Chinese government’s Covid mitigation strategy.
| Indeed, establishment outlets have persistently demonized the “zero-Covid” policy despite its successes—in terms of both lives saved and economic development. After Xi indicated to the congress that China would continue along this path, corporate media were predictably dismayed. Returning to its familiar line that, contrary to evidence, China’s decision to prioritize public health would ravage its economy, the New York Times (10/16/22) reported: Mr. Xi argued that the Communist Party had waged an “all out people’s war to stop the spread of the virus.” China’s leadership has done everything it can to protect people’s health, he said, putting “the people and their lives above all else.” He made no mention of how the stringent measures were holding back economic growth and frustrating residents. |  The New York Times (10/16/22) refers to the “idea” that China’s zero Covid policies “have saved lives”—as though it’s possible that China could have allowed the coronavirus to spread throughout its population without killing anyone. |
The article went on to quote Jude Blanchette, a “China expert” at the Center for Strategic and International Studies (CSIS), who declared, “There is nothing positive or aspirational about zero Covid.” That CSIS would disseminate such a narrative—with the assistance of the reliably hawkish Times—is unsurprising, since the think tank’s chief patrons share a common interest in vilifying China.
CSIS’s roster of major donors includes military contractors Northrop Grumman, General Dynamics, Lockheed Martin and Boeing, as well as a litany of oil and gas companies—all of whom derive financial benefit from America’s military build-up in the Pacific.
CSIS has also received millions of dollars from the governments of Taiwan, Japan and South Korea. Sitting on its board of trustees are Phebe Novakovic, chair and CEO of General Dynamics, and Leon Panetta who—as Defense secretary in the Obama administration—helped craft the DOD’s “pivot to Asia.”
CSIS’s roster of major donors includes military contractors Northrop Grumman, General Dynamics, Lockheed Martin and Boeing, as well as a litany of oil and gas companies—all of whom derive financial benefit from America’s military build-up in the Pacific.
CSIS has also received millions of dollars from the governments of Taiwan, Japan and South Korea. Sitting on its board of trustees are Phebe Novakovic, chair and CEO of General Dynamics, and Leon Panetta who—as Defense secretary in the Obama administration—helped craft the DOD’s “pivot to Asia.”
‘No to market reforms’
| In “Xi Jinping’s Speech: Yes to Zero Covid, No to Market Reforms?” CNN (10/17/22) framed Xi’s statement that China would not allow the deadly coronavirus to spread freely across its population as part of a broader rejection of liberalized markets by the CCP. Aside from the obvious shortcomings of a framework that evaluates public health policy on the basis of its relationship to economic growth, CNN presented the opening of Chinese markets to foreign capital as an objective good—the forsaking of which would bode poorly for China’s economic prospects. |  CNN (10/17/22) reported that “experts are concerned that Xi offered no signs of moving away from the country’s rigid zero-Covid policy or its tight regulatory stance on various businesses, both of which have hampered growth in the world’s second-largest economy.” CNN‘s experts don’t point out that China’s economy has grown 9% since 2019, when Covid struck, vs. 2% for the US. |
While China’s “reform and opening-up” has been immensely profitable for corporations—as evidenced in media coverage (Forbes, 10/24/22; NYT, 11/7/22) of global markets’ uneasiness over Xi’s alleged “return to Marxism”—its impact on Chinese workers has been uneven, to say the least. Living standards have improved generally, but labor conditions remain poor and inequality is growing.
Like the Times, CNN went the think tank route to support its thesis, quoting Craig Singleton—senior China fellow at the Foundation for Defense of Democracies (FDD):
Yesterday’s speech confirms what many China watchers have long suspected—Xi has no intention of embracing market liberalization or relaxing China’s zero-Covid policies, at least not anytime soon…. Instead, he intends to double down on policies geared towards security and self-reliance at the expense of China’s long-term economic growth.
Despite the fact that China watchers have, for as long as one can remember, predicted a collapse of China’s economy that has yet to materialize, corporate media keep on returning to that same old well.
For its part, FDD—to which CNN attached the inconspicuous label of “DC-based think tank”—is a neoconservative advocacy group that has an ax to grind with China. The chairman of FDD’s China Program is Matt Pottinger, former deputy national security advisor to Donald Trump.
Early on in the pandemic, a Washington Post profile (4/29/20) of Pottinger stated that he “believes Beijing’s handling of the virus has been ‘catastrophic’ and ‘the whole world is the collateral damage of China’s internal governance problems.’” The article quoted Trump’s second national security advisor, H.R. McMaster—who is also currently employed as a “China expert” at FDD—as calling Pottinger “central to the biggest shift in US foreign policy since the Cold War, which is the competitive approach to China.”
Like the Times, CNN went the think tank route to support its thesis, quoting Craig Singleton—senior China fellow at the Foundation for Defense of Democracies (FDD):
Yesterday’s speech confirms what many China watchers have long suspected—Xi has no intention of embracing market liberalization or relaxing China’s zero-Covid policies, at least not anytime soon…. Instead, he intends to double down on policies geared towards security and self-reliance at the expense of China’s long-term economic growth.
Despite the fact that China watchers have, for as long as one can remember, predicted a collapse of China’s economy that has yet to materialize, corporate media keep on returning to that same old well.
For its part, FDD—to which CNN attached the inconspicuous label of “DC-based think tank”—is a neoconservative advocacy group that has an ax to grind with China. The chairman of FDD’s China Program is Matt Pottinger, former deputy national security advisor to Donald Trump.
Early on in the pandemic, a Washington Post profile (4/29/20) of Pottinger stated that he “believes Beijing’s handling of the virus has been ‘catastrophic’ and ‘the whole world is the collateral damage of China’s internal governance problems.’” The article quoted Trump’s second national security advisor, H.R. McMaster—who is also currently employed as a “China expert” at FDD—as calling Pottinger “central to the biggest shift in US foreign policy since the Cold War, which is the competitive approach to China.”
Desperate search for a purge
If consumers of corporate media only encountered one story about the congress, it probably had something to do with this seemingly innocuous development: During the congress’s closing session, aides escorted Hu Jintao—Xi’s predecessor as China’s paramount leader—out of the Great Hall of the People.
Later that day, Xinhua, China’s state news agency, said that Hu’s departure was health related. This explanation isn’t exactly far-fetched, since the 79-year-old Hu has long been said to be suffering from an illness—as early as 2012, some observers posited that the then-outgoing leader had Parkinson’s disease.
Since the whole episode was caught on camera, however, corporate media were not satisfied with China’s mundane account of events. Instead, establishment outlets seized the moment and transformed Hu’s departure into a dramatic spectacle, laden with sinister connotations. The speculation that followed was almost obsessive in nature.
Later that day, Xinhua, China’s state news agency, said that Hu’s departure was health related. This explanation isn’t exactly far-fetched, since the 79-year-old Hu has long been said to be suffering from an illness—as early as 2012, some observers posited that the then-outgoing leader had Parkinson’s disease.
Since the whole episode was caught on camera, however, corporate media were not satisfied with China’s mundane account of events. Instead, establishment outlets seized the moment and transformed Hu’s departure into a dramatic spectacle, laden with sinister connotations. The speculation that followed was almost obsessive in nature.
| In a piece titled “What Happened to Hu Jintao,” the New York Times (10/27/22) resorted to a form of video and image analysis one would typically expect from the most committed conspiracy theorist. Despite conceding that “it’s far from evident that Mr. Hu’s exit was planned, and many analysts have warned against drawing assumptions,” the Times went on to do just that. The article centered on nine video clips and three stills, providing a moment-by-moment breakdown of Hu’s exit from various angles and zoom levels. Some images even included Monday Night Football–style telestrator circles, which surrounded the heads of certain CCP cadres like halos in a Renaissance painting. |  The New York Times (10/27/22) invited readers to scrutinize video of a 79-year-old retiree being escorted from a meeting for signs that he was “purged”—a conjecture that the Times otherwise provides no evidence for. |
In reference to the haloed party figures whose “expressions did not change” as Hu was escorted away, the Times quoted Wu Guoguang, a professor at Canada’s University of Victoria:
Here was Hu Jintao, the former highest leader of your party and a man who had given so many of you political opportunities. And how do you treat him now?… This incident demonstrated the tragic reality of Chinese politics and the fundamental lack of human decency in the Communist Party.
While noting that Wu “said he did not want to speculate about what had unfolded,” the Times evidently did not consider this statement of caution as being at odds with his subsequent use of Hu’s departure to condemn the CCP in the broadest possible terms.
Indeed, the paper of record saw no problem with attributing the failure of Hu’s colleagues to react in a more appropriate manner—whatever that may have been—to “the tragic reality of Chinese politics” and a “fundamental lack of human decency” on the part of the CCP.
Here was a microcosm of corporate media’s contradictory approach to the episode: a professed reluctance to engage in conjecture, persistently negated by an overwhelming eagerness to cast aspersions. In line with this tack, the Times resorted to innuendo by posing a hypothetical question:
Was Mr. Hu, 79, suffering from poor health, as Chinese state media would later report? Or was he being purged in a dramatic show by China’s current leader, Xi Jinping, for the world to see?
Rather than asserting outright that Hu was the victim of a purge, the Times advanced this familiar red-scare narrative by including two photographs from the Cultural Revolution—one of which depicts Xi’s father being subjected to humiliation during a struggle session. With these images, the Times coaxed readers into making a spurious connection between Hu’s exit and the political repressions of yesteryear.
Here was Hu Jintao, the former highest leader of your party and a man who had given so many of you political opportunities. And how do you treat him now?… This incident demonstrated the tragic reality of Chinese politics and the fundamental lack of human decency in the Communist Party.
While noting that Wu “said he did not want to speculate about what had unfolded,” the Times evidently did not consider this statement of caution as being at odds with his subsequent use of Hu’s departure to condemn the CCP in the broadest possible terms.
Indeed, the paper of record saw no problem with attributing the failure of Hu’s colleagues to react in a more appropriate manner—whatever that may have been—to “the tragic reality of Chinese politics” and a “fundamental lack of human decency” on the part of the CCP.
Here was a microcosm of corporate media’s contradictory approach to the episode: a professed reluctance to engage in conjecture, persistently negated by an overwhelming eagerness to cast aspersions. In line with this tack, the Times resorted to innuendo by posing a hypothetical question:
Was Mr. Hu, 79, suffering from poor health, as Chinese state media would later report? Or was he being purged in a dramatic show by China’s current leader, Xi Jinping, for the world to see?
Rather than asserting outright that Hu was the victim of a purge, the Times advanced this familiar red-scare narrative by including two photographs from the Cultural Revolution—one of which depicts Xi’s father being subjected to humiliation during a struggle session. With these images, the Times coaxed readers into making a spurious connection between Hu’s exit and the political repressions of yesteryear.
Unfazed by lack of evidence
| The same day as the Times released its “analysis,” the Wall Street Journal (10/27/22) published a similar piece under the headline “Hu Jintao’s Removal From China’s Party Congress, a Frame-by-Frame Breakdown.” Short on substance, since there was no actual evidence to suggest that the 79-year-old—who hasn’t held power for a decade and has never even been rumored to oppose Xi—was being purged or publicly humiliated, the Journal chose to hyperfixate on every aspect of the footage. |  The Wall Street Journal (10/27/22) subjected Hu’s exit to the kind of analysis usually done in movies with photos linked by string on a basement wall. |
Predictably, cable news networks and China watchers also took part in the orgy of speculation. On CNN’s Erin Burnett Out Front (10/25/22), international correspondent Selina Wang said this:
Now, I have spoken to experts who think there is more to this than that pure health explanation, including Steve Tsang of [the] SOAS China Institute. He told me that this is humiliation of Hu Jintao. It is a clear message that there is only one leader who matters in China right now and that is Xi Jinping.
She did not mention the fact that Tsang is a fellow at Chatham House, a think tank that derives a substantial proportion of its funding from the US State Department and the governments of Britain and Japan.
The day before, on CNN Newsroom (10/24/22), Wang stated, “Hu Jintao. . . was publicly humiliated at the closing ceremony of the Party Congress.” The only support she offered for this assertion came from Victor Shih, another China watcher from the aforementioned CSIS, who conjectured:
I am not a believer of the pure health explanation. And it seemed like [Hu] sat down in a pretty stable manner. And then suddenly, he was asked to leave. I’m not sure if he whispered something, said something to Xi Jinping.
Half-acknowledging that Shih’s description of events actually said nothing at all, Wang concluded: “Regardless, it was a symbolic moment. Out with Hu and the collective leadership of his era.” For Wang and for corporate media’s treatment of the episode writ large, “regardless” was the operative word—regardless of the fact that they were merely engaged in baseless speculation, they would still inevitably arrive at the most sinister conclusion.
Now, I have spoken to experts who think there is more to this than that pure health explanation, including Steve Tsang of [the] SOAS China Institute. He told me that this is humiliation of Hu Jintao. It is a clear message that there is only one leader who matters in China right now and that is Xi Jinping.
She did not mention the fact that Tsang is a fellow at Chatham House, a think tank that derives a substantial proportion of its funding from the US State Department and the governments of Britain and Japan.
The day before, on CNN Newsroom (10/24/22), Wang stated, “Hu Jintao. . . was publicly humiliated at the closing ceremony of the Party Congress.” The only support she offered for this assertion came from Victor Shih, another China watcher from the aforementioned CSIS, who conjectured:
I am not a believer of the pure health explanation. And it seemed like [Hu] sat down in a pretty stable manner. And then suddenly, he was asked to leave. I’m not sure if he whispered something, said something to Xi Jinping.
Half-acknowledging that Shih’s description of events actually said nothing at all, Wang concluded: “Regardless, it was a symbolic moment. Out with Hu and the collective leadership of his era.” For Wang and for corporate media’s treatment of the episode writ large, “regardless” was the operative word—regardless of the fact that they were merely engaged in baseless speculation, they would still inevitably arrive at the most sinister conclusion.
Author
Eric Horowitz is a FAIR intern and student at the CUNY School of Law, with a particular focus on housing and labor. He is also involved in organizing around Palestinian solidarity. You can follow him on instagram at Eric_Horowitz.
This article was republished from Fair.
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The Lane Xang EMU train passes by the China-Laos borderline inside a tunnel, October 15, 2021. /Xinhua Source: CGTN
History
The Lao People’s Democratic Republic (Lao PDR) is a small, inland nation; the only landlocked country in southeast Asia. Known as the “crossroads of Indochina,” its geographic position—situated in the middle of the peninsula, bordering Vietnam, Cambodia, Thailand, Myanmar, and China—historically saw the region benefit greatly from the growth of overland trade in ancient times. With the emergence of colonialism, however, Laos was placed in a similar position to that of most other global south nations at the time. Under the French colonial boot, infrastructure and development was limited to only the areas that would be profitable for the colonialists—extraction rather than construction; destruction rather than growth. Today, the Lao PDR stands on the cusp of a golden age of socialist development, not unlike the periods of growth and construction underway in neighboring China and Vietnam.
How did the Lao people get here, what developments are underway, and what might the future hold?
On 23 August 1975, the Lao People’s Liberation Army (LPLA)—also known as the Pathet Lao—entered the city of Vientiane, capital of the then-Kingdom of Laos. In the months that followed, the last King of Laos—Sisavang Vatthana—would formally abdicate, and the Kingdom would officially be replaced by the new People’s Democratic Republic (Lao PDR), with the Lao People’s Revolutionary Party (LPRP) leading the way. The founding of the Lao PDR marked the end of more than a century of struggle; first against the French colonialists, then the Japanese fascists, then the American imperialists. Their struggle-filled history presented the Lao people, and their newly born Democratic Republic, with a dual problem:
First, Laos became, and remains to this day, the most heavily bombed country on the planet. During the war of resistance against imperialism, the US reportedly dropped some 2 million tons of bombs, or roughly 1 ton per person, on Laos despite never formally declaring war. The US has never fully taken responsibility for its crimes, and offers little more than hush-money to solace the victims of its brutality.
Second, while not all infrastructure was destroyed, infrastructure and productive forces developed in Laos under the colonialists had been oriented exclusively towards extractive industries, rather than national construction. The same problem plagues most—if not all—post-colonial nations, which is also especially evident in Africa. It is due to the little surviving infrastructure that, until recently the most reliable and readily-available form of transportation, at least along the country’s western border, was by boating up and down the Mekong river.
How did the Lao people get here, what developments are underway, and what might the future hold?
On 23 August 1975, the Lao People’s Liberation Army (LPLA)—also known as the Pathet Lao—entered the city of Vientiane, capital of the then-Kingdom of Laos. In the months that followed, the last King of Laos—Sisavang Vatthana—would formally abdicate, and the Kingdom would officially be replaced by the new People’s Democratic Republic (Lao PDR), with the Lao People’s Revolutionary Party (LPRP) leading the way. The founding of the Lao PDR marked the end of more than a century of struggle; first against the French colonialists, then the Japanese fascists, then the American imperialists. Their struggle-filled history presented the Lao people, and their newly born Democratic Republic, with a dual problem:
First, Laos became, and remains to this day, the most heavily bombed country on the planet. During the war of resistance against imperialism, the US reportedly dropped some 2 million tons of bombs, or roughly 1 ton per person, on Laos despite never formally declaring war. The US has never fully taken responsibility for its crimes, and offers little more than hush-money to solace the victims of its brutality.
Second, while not all infrastructure was destroyed, infrastructure and productive forces developed in Laos under the colonialists had been oriented exclusively towards extractive industries, rather than national construction. The same problem plagues most—if not all—post-colonial nations, which is also especially evident in Africa. It is due to the little surviving infrastructure that, until recently the most reliable and readily-available form of transportation, at least along the country’s western border, was by boating up and down the Mekong river.
Map of Laos
Mekong River, Luang Prabang, Laos. 2011 Source: Wikimedia
The withdrawal of imperialist forces and establishment of the PDR however did not, in and of itself, solve all of the myriad obstacles standing in the way of further development. Beginning from around 1960 onwards, the Sino-Soviet split marked another great obstacle to the Lao people. Laos and Vietnam sided with the Soviet Union in the split, putting them at direct odds with neighboring China, which also resulted in exacerbating isolation. A mere four years following the establishing of the Lao PDR, tensions between neighboring Vietnam and China would hit a fever pitch. The people of Laos, having maintained the closest of fraternal and Comradely relations with the Vietnamese ever since their common founding in the Indochinese Communist Party (ICP) in 1930, supported their Vietnamese compatriots without question—even at the cost of further isolation and tenuous relations with China. Likewise, trade relations with the United States did not become normalized until December of 2004.
Map of rail lines in SEA (outdated) Source: Johomaps
Overview of the Pan-Asia Railway Network southeastern routes Source: Bangkok Post
As highlighted by the above (now thankfully outdated) map of regional rail lines, the desperation, sacrifice, and courage of the Lao position in that period becomes apparent: although direct overtures began as early as 1976, relations with Thailand did not begin to fully normalize until the late-80’s, with armed interactions along the border being relatively frequent until around 1988. Relations with China, while never arising to the point of military conflict, would remain fraught until the late-80’s as well. In other words, during this period the only close partner Laos had was Vietnam. For their part, Vietnam reciprocated the Lao view of fraternal solidarity and comradery; however, reciprocation does not assuage material difficulties. Partly as a result of their historic status as colonial nations, and partly as a result of the US dropping millions of tons of bombs along the border, there is not a single rail connection between Laos and Vietnam. There is not, for that matter, a single rail connection between Laos and any other country, period. Or at least there wasn’t until 2015.
President Xi Jinping meets with then-Prime Minister, now-President Thongloun Sisoulith at the National Convention Center in Vientiane. 14 November 2017. Note: Sisoulith is now President of Laos. Source: LMC China
BRI Flagship Project
On 2 December, 2015, construction officially began on the Vientiane-Boten Railway, a flagship high-speed rail project of the new Chinese-led Belt and Road Initiative (BRI). As reported by the Vientiane Times, the first train from the Laos side departed from Vientiane by order of President Sisoulith, with Prime Minister Phankham Viphavanh leading the delegation aboard; simultaneously, President Xi gave the signal for the first train to depart Kunming as well. Not only would Laos finally have a rail network linking some of its most important cities—such as Vientiane and Luang Prabang—but it would also link directly with the Chinese side, and allow seamless travel all the way to Kunming, capital of southern China’s Yunnan province. Six years and one day later, on 3 December, 2021, President Xi Jinping and President Thongloun Sisoulith met via video conference, to officially mark the opening of the historic project. During the meeting, both sides stressed the necessity for mutual cooperation, development, and friendship—that united in the spirit of serving the people, there is nothing that cannot be overcome. As highlighted by People’s Daily, the ultimate goal of the Vientiane-Boten line is to further link with Thai networks, and thereby establish a direct rail network expanding from Beijing to Singapore. Such an achievement, coupled with ongoing developments in Vietnam and Cambodia, would permanently change the socioeconomic fabric of southeast Asia—beginning a new age of hyperconnectivity, integration, and, one hopes, peace, friendship, and common prosperity. Because the railway uses the Chinese standard gauge, traffic—logistics, transport, etc.—can seamlessly cross between China and partner countries without needing to changeover or employ specialized equipment; a problem which has plagued international rail developments for centuries. All told, construction of the line cost an estimated $62.3 billion, of which 70% was paid for by the Chinese side. The Vientiane-Boten line extends some 427.2 kilometers (265.5 miles), and uses electric-powered high speed cars capable of reaching top speeds of 160 km/h (99.4 mph). A journey from Vientiane to Luang Prabang, roughly 310 kilometers (190 miles), would normally take up to six hours by driving. Roughly equal in distance as driving from Baltimore, Maryland to New York City, New York, which in the United States would take around three-and-a-half to four hours. Instead, thanks to the Laos-China railway, the journey takes only around two hours.
As highlighted in subsequent reporting by both Chinese and Lao outlets, the Laos-China railway has, in a brief period of time, already achieved great milestones, and made irrevocable contributions to the development of both countries. As of writing, it is reported that total goods transported has exceeded 10 million tonnes (11 million US tons), valued at over 12 billion yuan (1.7 billion USD), and has continued increasing month-by-month since the opening of the line. The value of the Laos-China railway to the Lao people and their continued development can be made no clearer than the fact that the value of goods transported within the past 12 months is, as of writing, identical to the country’s total GDP in the year 2000.
Conclusion
The victory of the People’s Liberation Army all those decades ago was a great triumph of the forces of the working and oppressed masses over the forces of Capitalism and its bastard offspring—colonialism, fascism, and imperialism. In view of the situation following that triumph, the continued existence, development, and success of the Lao People’s Democratic Republic can be described as nothing less than a man-made miracle: an unquestionable triumph of people-centered governance, the strength of the masses, and the great truth of the science of Marxism-Leninism. The Lao people have faced the greatest horrors, and made the greatest sacrifices. Today it seems those long years of struggle and commitment to the great cause of socialist construction are beginning to reap the greatest harvest. As regional developments continue, it appears the crossroads of Indochina are open once again, and the great undertakings of building a community with a shared future for mankind will give way to common prosperity, dignity, and peace.
Author
Michael C.
This article was republished from Red World Review.
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11/12/2022
Does the U.S. Chip Ban on China Amount to a Declaration of War in the Computer Age? By: Prabir Purkayastha
Read NowSanctions can at best slow China from taking the global lead in chip manufacturing. At their worst, they will raise the chances of chip wars spilling into a physical or economic sphere.
The United States has gambled big in its latest across-the-board sanctions on Chinese companies in the semiconductor industry, believing it can kneecap China and retain its global dominance. From the slogans of globalization and “free trade” of the neoliberal 1990s, Washington has reverted to good old technology denial regimes that the U.S. and its allies followed during the Cold War. While it might work in the short run in slowing down the Chinese advances, the cost to the U.S. semiconductor industry of losing China—its biggest market—will have significant consequences in the long run. In the process, the semiconductor industries of Taiwan and South Korea and equipment manufacturers in Japan and the European Union are likely to become collateral damage. It reminds us again of what former U.S. Secretary of State Henry Kissinger once said: “It may be dangerous to be America’s enemy, but to be America’s friend is fatal.”
The purpose of the U.S. sanctions, the second generation of sanctions after the earlier one in August 2021, is to restrict China’s ability to import advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors. Though the U.S. sanctions are cloaked in military terms—denying China access to technology and products that can help China’s military—in reality, these sanctions target almost all leading semiconductor players in China and, therefore, its civilian sector as well. The fiction of ‘barring military use’ is only to provide the fig leaf of a cover under the World Trade Organization (WTO) exceptions on having to provide market access to all WTO members. Most military applications use older-generation chips and not the latest versions.
The specific sanctions imposed by the United States include:
The sanctions also encompass any company that uses U.S. technology or products in its supply chain. This is a provision in the U.S. laws: any company that ‘touches’ the United States while manufacturing its products is automatically brought under the U.S. sanctions regime. It is a unilateral extension of the United States’ national legal jurisdiction and can be used to punish and crush any entity—a company or any other institution—that is directly or indirectly linked to the United States. These sanctions are designed to completely decouple the supply chain of the United States and its allies—the European Union and East Asian countries—from China.
In addition to the latest U.S. sanctions against companies that are already on the list of sanctioned Chinese companies, a further 31 new companies have been added to an “unverified list.” These companies must provide complete information to the U.S. authorities within two months, or else they will be barred as well. Furthermore, no U.S. citizen or anyone domiciled in the United States can work for companies on the sanctioned or unverified lists, not even to maintain or repair equipment supplied earlier.
The global semiconductor industry’s size is currently more than $500 billion and is likely to double its size to $1 trillion by 2030. According to a Semiconductor Industry Association and Boston Consulting Group report of 2020—“Turning the Tide for Semiconductor Manufacturing in the U.S.”—China is expected to account for approximately 40 percent of the semiconductor industry growth by 2030, displacing the United States as the global leader. This is the immediate trigger for the U.S. sanctions and its attempt to halt China’s industry from taking over the lead from the United States and its allies.
While the above measures are intended to isolate China and limit its growth, there is a downside for the United States and its allies in sanctioning China.
The problem for the United States—more so for Taiwan and South Korea—is that China is their biggest trading partner. Imposing such sanctions on equipment and chips also means destroying a good part of their market with no prospect of an immediate replacement. This is true not only for China’s East Asian neighbors but also for equipment manufacturers like the Dutch company ASML, the world’s only supplier of extreme ultraviolet (EUV) lithography machines that produces the latest chips. For Taiwan and South Korea, China is not only the biggest export destination for their semiconductor industry as well as other industries, but also one of their biggest suppliers for a range of products. The forcible separation of China’s supply chain in the semiconductor industry is likely to be accompanied by separation in other sectors as well.
The U.S. companies are also likely to see a big hit to their bottom line—including equipment manufacturers such as Lam Research Corporation, Applied Materials, and KLA Corporation; the electronic design automation (EDA) tools such as Synopsys and Cadence; and advanced chip suppliers like Qualcomm, Nvidia, and AMD. China is the largest destination for all these companies. The problem for the United States is that China is not only the fastest-growing part of the world’s semiconductor industry but also the industry’s biggest market. So the latest sanctions will cripple not only the Chinese companies on the list but also the U.S. semiconductor firms, drying up a significant part of their profits and, therefore, their future research and development (R&D) investments in technology. While some of the resources for investments will come from the U.S. government—for example, the $52.7 billion chip manufacturing subsidy—they do not compare to the losses the U.S. semiconductor industry will suffer as a result of the China sanctions. This is why the semiconductor industry had suggested narrowly targeted sanctions on China’s defense and security industry, not the sweeping sanctions that the United States has now introduced; the scalpel and not the hammer.
The process of separating the sanctions regime and the global supply chain is not a new concept. The United States and its allies had a similar policy during and after the Cold War with the Soviet Union via the Coordinating Committee for Multilateral Export Controls (COCOM) (in 1996, it was replaced by the Wassenaar Arrangement), the Nuclear Suppliers Group, the Missile Control Regime, and other such groups. Their purpose is very similar to what the United States has now introduced for the semiconductor industry. In essence, they were technology denial regimes that applied to any country that the United States considered an “enemy,” with its allies following—then as now—what the United States dictated. The targets on the export ban list were not only the specific products but also the tools that could be used to manufacture them. Not only the socialist bloc countries but also countries such as India were barred from accessing advanced technology, including supercomputers, advanced materials, and precision machine tools. Under this policy, critical equipment required for India’s nuclear and space industries was placed under a complete ban. Though the Wassenaar Arrangement still exists, with countries like even Russia and India within the ambit of this arrangement now, it has no real teeth. The real threat comes from falling out with the U.S. sanctions regime and the U.S. interpretation of its laws superseding international laws, including the WTO rules.
The advantage the United States and its military allies—in the North Atlantic Treaty Organization, the Southeast Asia Treaty Organization, and the Central Treaty Organization—had before was that the United States and its European allies were the biggest manufacturers in the world. The United States also controlled West Asia’s hydrocarbon—oil and gas—a vital resource for all economic activities. The current chip war against China is being waged at a time when China has become the biggest manufacturing hub of the world and the largest trade partner for 70 percent of countries in the world. With the Organization of the Petroleum Exporting Countries no longer obeying the U.S. diktats, Washington has lost control of the global energy market.
So why has the United States started a chip war against China at a time that its ability to win such a war is limited? It can, at best, postpone China’s rise as a global peer military power and the world’s biggest economy. An explanation lies in what some military historians call the “Thucydides trap”: when a rising power rivals a dominant military power, most such cases lead to war. According to Athenian historian Thucydides, Athens’ rise led Sparta, the then-dominant military power, to go to war against it, in the process destroying both city-states; therefore, the trap. While such claims have been disputed by other historians, when a dominant military power confronts a rising one, it does increase the chance of either a physical or economic war. If the Thucydides trap between China and the United States restricts itself to only an economic war—the chip war—we should consider ourselves lucky!
With the new series of sanctions by the United States, one issue has been settled: the neoliberal world of free trade is officially over. The sooner other countries understand it, the better it will be for their people. And self-reliance means not simply the fake self-reliance of supporting local manufacturing, but instead means developing the technology and knowledge to sustain and grow it.
The purpose of the U.S. sanctions, the second generation of sanctions after the earlier one in August 2021, is to restrict China’s ability to import advanced computing chips, develop and maintain supercomputers, and manufacture advanced semiconductors. Though the U.S. sanctions are cloaked in military terms—denying China access to technology and products that can help China’s military—in reality, these sanctions target almost all leading semiconductor players in China and, therefore, its civilian sector as well. The fiction of ‘barring military use’ is only to provide the fig leaf of a cover under the World Trade Organization (WTO) exceptions on having to provide market access to all WTO members. Most military applications use older-generation chips and not the latest versions.
The specific sanctions imposed by the United States include:
- Advanced logic chips required for artificial intelligence and high-performance computing
- Equipment for 16nm logic and other advanced chips such as FinFET and Gate-All-Around
- The latest generations of memory chips: NAND with 128 layers or more and DRAM with 18nm half-pitch
The sanctions also encompass any company that uses U.S. technology or products in its supply chain. This is a provision in the U.S. laws: any company that ‘touches’ the United States while manufacturing its products is automatically brought under the U.S. sanctions regime. It is a unilateral extension of the United States’ national legal jurisdiction and can be used to punish and crush any entity—a company or any other institution—that is directly or indirectly linked to the United States. These sanctions are designed to completely decouple the supply chain of the United States and its allies—the European Union and East Asian countries—from China.
In addition to the latest U.S. sanctions against companies that are already on the list of sanctioned Chinese companies, a further 31 new companies have been added to an “unverified list.” These companies must provide complete information to the U.S. authorities within two months, or else they will be barred as well. Furthermore, no U.S. citizen or anyone domiciled in the United States can work for companies on the sanctioned or unverified lists, not even to maintain or repair equipment supplied earlier.
The global semiconductor industry’s size is currently more than $500 billion and is likely to double its size to $1 trillion by 2030. According to a Semiconductor Industry Association and Boston Consulting Group report of 2020—“Turning the Tide for Semiconductor Manufacturing in the U.S.”—China is expected to account for approximately 40 percent of the semiconductor industry growth by 2030, displacing the United States as the global leader. This is the immediate trigger for the U.S. sanctions and its attempt to halt China’s industry from taking over the lead from the United States and its allies.
While the above measures are intended to isolate China and limit its growth, there is a downside for the United States and its allies in sanctioning China.
The problem for the United States—more so for Taiwan and South Korea—is that China is their biggest trading partner. Imposing such sanctions on equipment and chips also means destroying a good part of their market with no prospect of an immediate replacement. This is true not only for China’s East Asian neighbors but also for equipment manufacturers like the Dutch company ASML, the world’s only supplier of extreme ultraviolet (EUV) lithography machines that produces the latest chips. For Taiwan and South Korea, China is not only the biggest export destination for their semiconductor industry as well as other industries, but also one of their biggest suppliers for a range of products. The forcible separation of China’s supply chain in the semiconductor industry is likely to be accompanied by separation in other sectors as well.
The U.S. companies are also likely to see a big hit to their bottom line—including equipment manufacturers such as Lam Research Corporation, Applied Materials, and KLA Corporation; the electronic design automation (EDA) tools such as Synopsys and Cadence; and advanced chip suppliers like Qualcomm, Nvidia, and AMD. China is the largest destination for all these companies. The problem for the United States is that China is not only the fastest-growing part of the world’s semiconductor industry but also the industry’s biggest market. So the latest sanctions will cripple not only the Chinese companies on the list but also the U.S. semiconductor firms, drying up a significant part of their profits and, therefore, their future research and development (R&D) investments in technology. While some of the resources for investments will come from the U.S. government—for example, the $52.7 billion chip manufacturing subsidy—they do not compare to the losses the U.S. semiconductor industry will suffer as a result of the China sanctions. This is why the semiconductor industry had suggested narrowly targeted sanctions on China’s defense and security industry, not the sweeping sanctions that the United States has now introduced; the scalpel and not the hammer.
The process of separating the sanctions regime and the global supply chain is not a new concept. The United States and its allies had a similar policy during and after the Cold War with the Soviet Union via the Coordinating Committee for Multilateral Export Controls (COCOM) (in 1996, it was replaced by the Wassenaar Arrangement), the Nuclear Suppliers Group, the Missile Control Regime, and other such groups. Their purpose is very similar to what the United States has now introduced for the semiconductor industry. In essence, they were technology denial regimes that applied to any country that the United States considered an “enemy,” with its allies following—then as now—what the United States dictated. The targets on the export ban list were not only the specific products but also the tools that could be used to manufacture them. Not only the socialist bloc countries but also countries such as India were barred from accessing advanced technology, including supercomputers, advanced materials, and precision machine tools. Under this policy, critical equipment required for India’s nuclear and space industries was placed under a complete ban. Though the Wassenaar Arrangement still exists, with countries like even Russia and India within the ambit of this arrangement now, it has no real teeth. The real threat comes from falling out with the U.S. sanctions regime and the U.S. interpretation of its laws superseding international laws, including the WTO rules.
The advantage the United States and its military allies—in the North Atlantic Treaty Organization, the Southeast Asia Treaty Organization, and the Central Treaty Organization—had before was that the United States and its European allies were the biggest manufacturers in the world. The United States also controlled West Asia’s hydrocarbon—oil and gas—a vital resource for all economic activities. The current chip war against China is being waged at a time when China has become the biggest manufacturing hub of the world and the largest trade partner for 70 percent of countries in the world. With the Organization of the Petroleum Exporting Countries no longer obeying the U.S. diktats, Washington has lost control of the global energy market.
So why has the United States started a chip war against China at a time that its ability to win such a war is limited? It can, at best, postpone China’s rise as a global peer military power and the world’s biggest economy. An explanation lies in what some military historians call the “Thucydides trap”: when a rising power rivals a dominant military power, most such cases lead to war. According to Athenian historian Thucydides, Athens’ rise led Sparta, the then-dominant military power, to go to war against it, in the process destroying both city-states; therefore, the trap. While such claims have been disputed by other historians, when a dominant military power confronts a rising one, it does increase the chance of either a physical or economic war. If the Thucydides trap between China and the United States restricts itself to only an economic war—the chip war—we should consider ourselves lucky!
With the new series of sanctions by the United States, one issue has been settled: the neoliberal world of free trade is officially over. The sooner other countries understand it, the better it will be for their people. And self-reliance means not simply the fake self-reliance of supporting local manufacturing, but instead means developing the technology and knowledge to sustain and grow it.
Author
Prabir Purkayastha is the founding editor of Newsclick.in, a digital media platform. He is an activist for science and the free software movement.
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