Axis of Logic
Finding Clarity in the 21st Century Mediaplex

Critical Analysis
The Truth About China
By T.J. Coles, Axis of Logic
Submitted by author
Saturday, Jul 29, 2017

Editor's Note:

Taken from his newest book, President Trump, Inc. (2017, Clairview), T.J Coles argues that since the 1980s, China’s economy has been largely liberalized via massive loans from the US-run “global” financial institutions. This has resulted in the financialization of China’s economy (particularly in the housing sector) and the opening of Chinese labour markets for US products (particularly iPhones).

But China wants to pursue an independent course, with its “new Silk Road”, regional trade and investment agreements, and the creation of Asian development banks. America’s response is what Obama called the “pivot to Asia,” i.e., military threats as part of its overall global grand strategy, Full Spectrum Dominance. Trump is expanding Full Spectrum Dominance with his Syria, Yemen, and North Korea policies.

Look for our review of this book in the coming weeks.
- prh, ed.

The Truth About China: Militarism, Neoliberalism and the Battle for Independence

Trump’s view of China, and the world in general, is that different cultures are a market for US goods. When they are held captive by corrupt dictatorships, they are often too poor to buy American products. Likewise, if the given regime is socialist and sponsors domestic industry, it pushes American producers out. Ergo, America must promote a certain kind of democracy which makes people around the world free to buy American goods.
In The America We Deserve (2000), Trump has a subchapter called “How to take on China” (p. 117) and calls China “our biggest long-term challenge” (p. 125). Trump writes: “We want to trade with China because of the size of its consumer market. But if the regime continues to oppress individual freedoms, how many consumers will there really be?” (p. 119). Trump was screaming about China’s alleged theft of American technologies and secrets as far back as 2000. He writes: “under no circumstances will we keep our markets open to countries that steal from us” (p. 123).
Trump continues China-bashing in Great Again (2015). “There are people who wish I wouldn’t refer to China as our enemy. But that’s exactly what they are. They have destroyed entire industries by utilizing low-wage workers, cost us tens of thousands of jobs, spied on our businesses, stolen our technology, and have manipulated and devalued their currency” (p. 43). Though you wouldn’t know it from his rhetoric, Trump understands that China’s economy is largely a false one as it depends on foreign investments, as we shall see below. Quoting Steve Forbes: “Beijing is becoming more dependent on the US and the rest of the world for its strength and prosperity” (pp. 44-45).
But Trump is part of the “problem.” He goes on to write: “The Chinese are very savvy business people, and they have great advantages over our manufacturers. I’ve had several Trump-brand products made there’ (p. 43). He also writes: “I’m actually landlord to China’s largest bank, which has its offices in Trump Tower” (p. 45).


MYTH: China has been “raping” America, as Trump claims.
FACT: China’s huge GDP is largely a false economy because it is highly dependent on foreign investors, mainly the US. If anyone has been harming the American worker, it’s been the system of globalization which has outsourced jobs to China.
The share of China’s state-owned enterprises in the processing and assembly sectors has declined from 40% in 1995 to 6% in 2015. China’s private corporations have increased their share of the sector from 0.01% to 11.65%. Globally, China has 38% of the world’s export market in telecoms (mainly cell phones), but only 6% of the profits go to Chinese firms. US exports account for 7.4% of telecoms exports, but US firms make 59% of the profits. This pattern generalizes across telecoms, electronic data processing, office equipment, clothing, chemicals, pharmaceuticals and integrated circuits/components. Because the other sectors—banking, construction, forestry, mining, real estate and energy—are largely controlled by a state-sector at the low-end of the global value chain, it is unlikely that Chinese firms can compete globally.
The materials for an iPhone 6 cost an estimated $211.10. Assembly costs just $4.50. The phone retails for $749 in the USA. Apple subcontracts the Taiwanese firms Hon Hai Precision Industry (Foxconn) and Pegatron. “So it is not even a Chinese firm that assembles and exports the iPhone,” says Assistant Professor Sean Starrs. Starrs also points out that “Foxconn’s profit in 2014 was $4.3 billion while Apple’s alone was ten times larger, at $44.5 billion.” 60% of China’s assembly economy is controlled by foreign corporations (80% when we include joint China-foreign ventures).

MYTH: China is a military threat to America.
FACT: America’s military budget at the close of Obama’s administration was $598.5bn. China’s budget for 2016 was $120bn. In 2012, America spent more on its military than ten other countries combined (China, Russia, the UK, Japan, France, Saudi Arabia, India, Germany, Italy and Brazil). The question about China’s threat to America is answered by the US Defense Department in its report to Congress 2016. It says that, despite regional expansion, “China still seeks to avoid direct and explicit conflict with the United States.” China’s military strategy is defensive, not offensive. Its leaders are “developing the capabilities they deem necessary to deter or defeat adversary power projection and counter third-party—including U.S.—intervention during a crisis or conflict.”
China has zero overseas military bases, except one under construction in Djibouti in the resource-rich Horn of Africa. America has at least 662 military bases in at least 38 countries. Unlike the US, China has a no-first-use policy for nuclear weapons. As early as 2008, Russia and China formally proposed banning space-based weapons via a United Nations’ treaty. The US rejected it and continues to do so.

MYTH: China is a communist economy.
FACT: China liberalized its economy in the 1980s to the benefit of America. The origins of China’s rapid GDP growth can be traced to 1978. Between 1985 and 2005, China borrowed $3bn from the US-led World Bank and subsidiaries for privatization projects. In the 1980s, state banks extended credit beyond levels authorized by the national credit plan. Foreign direct investment “poured in” to China “like never before,” writes Pieter Bottelier, Chief of the World Bank’s Resident Mission in China from 1993 to 1997. “China became the World Bank’s largest borrower and one of the largest recipients of technical assistance in the early 1990s before the program began to shrink towards the end of the decade.” Bottelier also notes that “the World Bank withdrew from sectors where the private sector could take over (e.g. telecommunications, commercial ports, conventional thermal power plants and highways).”
A paper by the International Monetary Fund cites three reasons for China’s economic growth: 1) foreign direct investment; 2) labour mobility (farmers moving to cities to become manufacturers); and 3) privatization. “[W]hile capital investment is crucial to growth, it becomes even more potent when accompanied by market-oriented reforms that introduce profit incentives to rural enterprises and small private businesses,” the authors explain.
A paper by Wing and Sachs notes that private interests successfully lobbied the Chinese Communist Party. During the 1980s, the liberalization of State-owned enterprise (SOE) regulation meant that the managerial class siphoned off profits. SOEs rapidly paid fewer taxes (just 1.7 percent of GDP by 1993) and made substantial losses (19.1 per cent profit in 1978 compared to 0.1 per cent in 1993). Chinese banks lent to SOEs, getting them into debt. In late-1995, the Bureau for the Administration of State Property issued a report suggesting that privatization equalled 50 billion yuan per annum, by which time the one thousand largest SOEs had been privatised (smaller ones were sold to workers). The process was accelerated by the existence of privatized town-village enterprises (TVE), whose private owners merely registered their TVE as a “collective” for formal purposes.

MYTH: China has power over the US because it owns US debt.
FACT: This myth makes it easy for politicians like Trump to sound off about China and scare the living daylights out of American voters. But the reality is that renminbi (a.k.a. yuan) is tied to the US dollar. One yuan is worth just 14 cents. Although America owes China $1.15 trillion, China owes America $750 billion, which is more in real terms because the renminbi is so weak. America’s debt to China is actually half of its debt to its own central bank, the Federal Reserve.

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