Note on author:

Wen Tiejun (温铁军) is a a Professor at Renmin University in Beijing and the head of the University’s School of Agricultural Economics and Rural Development.  Wen is 69 years old and like so many others of his age group in China spent many years ‘in the countryside’ during the Cultural Revolution period – he worked in agriculture, in industry and in the armed forces over a period of 11 years.  He later obtained a doctorate in management studies, spent many years researching various aspects of agriculture and also helped to develop agricultural policy for the Chinese government.  I have read a number of articles by Wen Tiejun, some of which like the one I have summarised here are based on talks he has given to student groups.  I can well imagine he is a fiery speaker and he also has strong nationalistic views.

Wen’s article was published on the http://www.aisixiang.com site on 13th May, 2020.  It is based on an online talk he gave to students of China’s Southwest University and Construction Bank University on 23rd April.

Main content of article:

Wen Tiejun argues that the Covid-19 pandemic has been a catalyst for a ‘crisis of globalisation’ that is likely to lead rapidly to a ‘hard decoupling’ between China and the United States.  He believes this in turn will lead to a division of the world into ‘three blocs’ dominated by NAFTA (US, Canada and Mexico), the EU (plus possibly Russia and some parts of the Middle East) and East Asia (China plus other countries possibly including Japan).  He is realistic about the respective strengths and weaknesses of China and the US in this developing situation and believes the US has a particular strength in the primacy of the dollar as ‘the’ world currency.  He also warns about the danger of China becoming involved in conflicts over the South China Sea or Taiwan, as this could make it difficult for China to attract neighbouring countries, in particular Japan, to participate in an Asian trading group.

Summary of article:

Wen starts by saying that the Covid-19 pandemic has created a crisis unlike any others in recent history.  It has also occurred at a time when a large proportion of the world’s manufacturing capacity has been transferred from advanced western countries, in particular the US, to developing countries, in particular China.  The production and supply chains of multinational groups have been ‘globalised’ and their various elements have been dispersed to whatever locations in the world have the most favourable production factors.  This system is entirely dependent on the rapid movement of raw materials, parts and finished products from one location to another.  The pandemic has brought that system to a halt, with aircraft stuck at airports, ships in ports and containers piling up around the world.

Wen says anti-globalisation forces were already on the move before the pandemic, but the pandemic has brought them to a head.  He believes these forces are now certain to bring about a complete restructuring of the globalised production model.  He says that parts of China reliant on foreign trade such as Guangdong, Zhejiang and Fujian Provinces, which are now rushing to restart production, need to be fully aware of this, as the investments they make from now on could ‘melt like clay oxen entering the sea’.

Wen considers that another source of instability for globalisation is its reliance on ‘financial capital’, as opposed to ‘industrial capital’.  I am not an economist and do not wholly follow his line of thought, but he strongly believes ‘financial capital’ is a sort of ‘false’ capital dependent wholly on rapid circulation, whereas ‘industrial capital’ involves investment in real assets and is therefore more ‘real’ or ‘substantial’.  He says that reliance on ‘financial capital’ has resulted in the US economy becoming extremely polarised, with .1% of the US population holding 25% of the assets and 40% of the population having less than $400 in savings.  One of the consequences of this is that 40% of the American population lack the means even to pay for a test to determine whether they have contracted the virus, leading to even more deaths than would otherwise have occurred.  This has also led many Americans to conclude they can look to no-one for help other than themselves, with the result that many have gone out to buy firearms for fear of a breakdown in social order.  Wen says this in turn will lead politicians to pursue a type of ‘populist fascism’ including ‘racism’, which could result in serious social turmoil in the middle of the pandemic.  [I am typing this summary in early June when some disorder has indeed broken out in the United States.  Wen must be following the reports with interest.]

Wen goes on to say that while in the past globalisation has been pursued for ‘economic reasons’, anti-globalisation is now being pursued for ‘political reasons’.  The pandemic has given American politicians a perfect opportunity to put pressure on US based companies to return manufacturing production to the US, particularly strategic production, in order to recreate a fully integrated industrial structure in the US.

Wen is realistic about American strengths.  He says the US is the world’s largest producer of agricultural products and military equipment in the world. He describes US advantages in terms of cheap capital, low taxes, energy resources and raw materials, plus advanced science and technology.  While US labour costs are high, this would not be a serious weakness in the light of the aforementioned advantages.  If the US seriously pursues the ‘reshoring’ of strategic manufacturing industry from abroad, it could easily become the world’s leading producer of high end equipment and high technology products.  This in turn would help it to maintain its position as the world’s long-term ‘hegemonic unipolar power’.

Wen then discusses further US advantages in terms of its ‘language’ or ‘discourse’ rights in the battle of ideologies, plus its ability to ‘determine systems’.  These advantages have given it unmatched ‘soft power’ and have made it very hard for China to make its voice heard around the world and influence global public opinion.  A further major advantage is the US dollar.  The dollar is by far the world’s largest reserve currency and currency of settlement, and the US Federal Reserve Bank leads the world in global currency management.  Wen says the US is therefore in a strong position to combine soft power, hard power based on military assets, and what he describes as ‘clever’ or ‘skilful’ power.  This combination has enabled it to achieve its foreign policy aims without resorting to force.  He says the United States has sown four ‘poisons’ in China – in relation to Hong Kong, Taiwan, Tibet and Xinjiang – at little cost to itself.  He says the US only has to ‘pay out a little money’ to create large amounts of disturbance.  China meanwhile has been unable to fight the ‘global public opinion war’ and has been saddled with sanctions.

Wen says that despite China being the largest manufacturing country and its banks having the largest financial assets in the world, China is still ‘not strong’, because it lacks the United States’ advantages of ‘discourse rights’ and  being able to ‘determine systems’.  The US will therefore inevitably target China in its efforts to ‘become great again’.  He refers to Marx’s theory of contradictions and says that China is now the focus of the ‘principal contradiction’ and is controlled by the ‘principal aspect’ of that contradiction.  Whereas in the past it was simply part of a ‘non-principal contradiction’.

Wen goes on to describe how China successfully recovered from the 1997 Asian Financial Crisis through capital control measures and then went on to create an independent banking system, i.e., in which commercial banks were distinct from the state financial system.  China set up a system of joint retail and investment banks from the outset, whereas the US operated a separated banking system for many years before it switched to a joint banking system in the late 1990s.  Wen argues that China’s haste in setting up a joint banking system made it the ‘non-principal aspect’ of the ‘main contradiction’ [i.e., in Marxist theory].

Wen relates how co-operation grew between the US and China after the 911 terrorist attack in September 2001 and the bursting of the ‘Dotcom Bubble’ in 2001/2002.  China joined the United States in the fight against global terrorism.  In the following years it also invested huge sums in capital construction and developing its high speed road network.  It received vast amounts of capital investment from the US and other western countries, attracted by its low labour and other production costs.  China’s exports and its financial assets rose dramatically as a result, but it still lacked the US’s advantages in ‘determining systems’ and ‘discourse rights’.

Wen then turns to the impact of Covid-19.  He says that China rushed to produced ventilators, face masks and all types of productive medical equipment, leading some Chinese to say that the world is now relying even more on China.  He says this is a mistaken view, as the pandemic gives people in the west the excuse to force a ‘hard decoupling’ on China and gang up to pursue claims against it.  He notes that a large proportion of industry in China is controlled by foreign capital, including the majority of businesses involved in manufacturing exports.  Foreign currency reserves also account for a large amount of China’s financial assets.  All of this means China urgently needs to prepare to deal with the ‘hard decoupling’.

Wen goes on to ask whether the breakup of the globalised system is in fact something China should fear.  He says it will certainly pose great challenges, but it will not necessarily be a bad thing in the long term.  He notes that Huawei has prepared itself for the possibility of decoupling, but other science and technology businesses in China are at the mercy of countries like the US pursuing ‘extraterritoriality’ [i.e., where foreign countries are able to impose their own laws in another country] and ‘long-arm jurisdiction’ against them.  He says this is another reason why China should beware of simply reconstructing the globalised economic model following the pandemic.  He says the pandemic is bringing about a ‘once in a hundred years transformation’ and it is essential to do a lot of ‘thought preparation’ for it.  He says that while many people in China are indeed thinking about the implications of this transformation, there are not many academics who are giving proper attention to the issues.

Wen then moves on to describe how he believes the post-pandemic restructuring of global industry will result in the world being dominated by three integrated trading regions based in North America, Europe and East Asia.  He describes how the recently renegotiated NAFTA (North America Free Trade Agreement) links US high end manufacturing with Canada’s natural resources and Mexico’s cheap labour to create a free trading area covering the whole of North America.  He predicts that as the restructuring proceeds, the European Union will forge closer links with Russia (for its resources) and certain Middle Eastern countries (for their cheap labour), thereby creating a free trading area focussed on Europe.  As for Asia, he predicts China will link up with ASEAN (the Association of Southeast Asian Nations including Indonesia, Thailand, Vietnam and Singapore among others).  That would be the world’s third free trading area.  Interestingly he suggests that Japan could also join this group.  While Japan is now closely allied with the United States, Wen says it is not now a ‘completely sovereign country’ and that strong feelings of cultural identification may in time lead it to ‘return to Asia’.

Wen again mentions the difficulties China could face in this restructured trading world due to the dominance of the US dollar.  If the ‘hard decoupling’ he anticipates includes China’s ejection from the world’s dollar based trading system, he says China would need to make more extensive use of its existing bilateral currency agreements with around 100 other countries.

Wen says China would otherwise be well placed to thrive in a new world system based on three trading blocs, given the huge scale of its industrial and manufacturing base.  He does however point out that this would be conditional on no serious clashes occurring in relation to the South China Sea or Taiwan.  That would ruin any chance of US allies Japan, South Korea and Singapore linking up with China in an Asian trading bloc.

Wen concludes by saying it is critical for China to prepare itself for the coming global restructuring.  He also stresses the need for new thinking and says China must end its practice since the 1990s of basing its development on imported American economic principles.

Comments:

I do not have many comments on Wen Tiejun’s article, as I believe it largely speaks for itself.  I would just make the following points:

• Wen’s article reminds us that China is not an entirely passive actor in the ‘decoupling’ scenario we have been reading about for some time now.  While the United States and other western countries may have their particular reasons for ‘decoupling’ China, Wen believes there could also be advantages in the process for China.
• Wen is very realistic about the relative strengths and weaknesses of the US and China in the coming restructuring of the global industrial model and in dealing with the consequences of decoupling.  He has no doubt about the ability of the United States to recover its position as the world’s dominant industrial and manufacturing power. 
• Wen puts great emphasis on the advantages accruing to the US from the key role of the dollar in the world trading and currency system.  One thing he does not mention is that this is also a problem for European countries.  Working out a way to counter the dollar’s primacy could be an opportunity for cooperation between the European and Asian trading areas he foresees emerging after the pandemic.  
• Wen’s suggestion that Japan could join with China and the ASEAN countries to form an Asian trading area is interesting.  He says nothing on the other hand about the Belt and Road Initiative, which is designed to extend China’s influence in a westward direction.  
• I interpret Wen’s concern about the impact of clashes over Taiwan or the South China Sea on China’s economic future as an implicit warning to Xi Jinping not to take undue risks in these areas.  If China continues to recover quickly from the pandemic, and if it also succeeds in implementing its new security law in Hong Kong, there is a chance the Chinese leadership may be emboldened to raise the pressure in both Taiwan and the South China Sea.  Wen makes clear that could have serious economic consequences for China.  

评论

在我看这这篇文章写的很清楚，我只有几点看法：

• 从本文可知，西方评论家经常提到中西方的‘脱钩’中国在此局面中并不是完全被动的。尽管美国和其他西方国家鉴于各自的形势考虑对中国脱钩，但温先生明确地指出中国也有脱钩的理由。
• 中国和美国面临着全球化工业制度的重构和脱钩的后果，在这种情况下温先生对它们各自的优势和缺点有适度的评价。他明确地表示美国的工业和制造业能够恢复其世界的主导地位。
• 温先生特别强调美元在全球货币和贸易制度中的关键角色带给美国的优势。而他没有提到美元的主导地位也给欧洲国家带来麻烦。温预测疫情后亚欧国家会各自出现一体化贸易区，找到抗击美元的全球主导地位的方法可能是这些国家的合作机会。
• 温提出日本会跟中国和东盟国家连接以构成一个一体化的贸易区域，这个看法很有意思。然而他没提到一带一路的合作倡议。一带一路的目的是使中国的影响力向西部延伸，而不是创造一个以东亚为中心的一体化的贸易区。
• 温先生担心起因于台湾或南海的战争会威胁东亚贸易区一体化的出现，因而给中国经济的未来发展带来负面的效应。我认为他所提到的这个看法是对习近平的一个暗示：“在那里不要太冒险”。如果中国从目前的疫情危机继续恢复下来的话，如果大陆也在香港成功地落实人民代表大会刚刚通过的国安法的话，那么以习近平为代表的中国政府有可能在台湾和南海两个领域中敢于施加压力。不过温明确地表示这么做会给中国带来严重的后果。

Link to the original article: http:/www.aisixiang.com/data/121289.html

Michael Ingle – michaelingle01@gmail.com

Categories: Uncategorized

Tags: 疫情给中国带来的危与机, 温铁军