By Sara Flounders
July 21, 2023

What is the material basis of the growing hostility on every level of the U.S. ruling class toward China?

No great struggle is based on the personalities or aspirations of individuals. At the root is a very concrete, material basis that drives the conflict. Otherwise, meetings, discussions and diplomacy would succeed. These techniques can paper over differences – but not fundamentally resolve them.

Secretary of the Treasury Janet Yellen’s talk on June 7 to a group of U.S. businesspeople at the American Chamber of Commerce in China exposed how well these U.S. corporate heads understand the basic, irreconcilable difference. They are deeply frustrated about their inability to maintain their dominant global position, as well as by China’s non-compliance with their self-proclaimed “rules-based order.” (tinyurl.com/2s45jh53)

Yellen is a top capitalist economist. She is a former Chair of the Federal Reserve and headed the White House Council of Economic Advisors. Yellen has taught economics at Harvard, Yale and the London School of Economics. Her words carry weight and reflect the thinking of imperialist think tanks, strategists, politicians and businesspeople.

Yellen’s talk in China was similar to a longer presentation she gave at the Johns Hopkins School of Advanced International Studies on April 20, published in preparation for her announced trip to China. It sharply defined the Biden administration’s demands on China.

The magazine “Foreign Policy” summarized Yellen’s presentation in a major article on April 24 titled “America Has Dictated Its Economic Peace Terms to China – By refusing negotiation over China’s rise, the United States might be making conflict inevitable.”

This voice of the Washington establishment explained: “For Yellen, it is obvious that America is entitled to define its national security at a planetary level.”

Shift to capitalism and open the gates

While in China, Yellen brazenly called on China to “shift to a market-oriented system.” This wording was repeated in all the major media. Yellen’s talk was broadly summarized as “Change your economic system – or there will be consequences.”

This is a shockingly arrogant way to open a state visit. It confirms the depth of the U.S. ruling class’s hostility and how threatened it feels by China’s rise.

Yellen called on China to lift its “coercive actions against American firms,” claiming that ending “barriers to market access for foreign firms … would be better for the Chinese economy.” She did not come with any announcement that the hundreds of U.S. trade barriers and sanctions on China would then be lifted. That would seem to be required as the first step in any genuine negotiation.

Demand China join in sanctioning Russia

Instead, there were only demands. Yellen said it was “essential that Chinese firms avoid providing Russia with material support or assistance with sanctions evasion.”

Enforcing U.S.-declared sanctions against Russia, its neighbor with whom it shares its longest border and extensive trade, or any other country, is hardly in China’s interests.

The most explicitly worded demand made on China was that it should participate, with the U.S. and the G7 countries, in the criminal strangulation of Russia. This is what is really meant by the demand that China accept the Washington-led “rules-based order.”

Strategists for the U.S. and NATO ruling classes hoped that Russia’s rapid collapse under the weight of combined sanctions would be a launching pad for spreading U.S. military bases across Central Asia and encircling, isolating and containing China. President Joe Biden predicted the Russian ruble would quickly become rubble. That plan has failed.

Yellen claimed that the hundreds of sanctions, or coercive economic measures, the U.S. government is enforcing against China are merely “diversifying critical supply chains” or taking “targeted national security actions.”

The sanctions against China include import-export bans as well as investment bans against Chinese companies, products, government agencies and officials.

The blockade of goods and material includes systems, equipment and services from Huawei, a Chinese telecommunications giant, and all cotton products. China is the world’s largest cotton exporter.

The U.S. sanctions extend to all investments or purchases in any company connected to Chinese military companies, along with electronics companies that could provide satellite imagery. Any technology that China could conceivably provide to Russia or Iran is included. New semiconductors were also targeted to slow down China’s tech sector.

On July 5, China imposed export restrictions on the rare earth minerals gallium and germanium. These critical minerals are used in technologies like semiconductors. Washington responded with outrage at this “unfair trade restriction.”

Washington demands full-scale capitalist restoration

If China does not concede to this demand of the U.S. capitalist class – that it unravel its socialist-based economy and join the U.S. in enforcing sanctions on other countries – then it faces the consequences of intensifying economic warfare. U.S. politicians are calling their efforts to sabotage China’s developing economy through a widening net of sanctions “national security measures.”

Yellen said that the U.S. was eager to work with China on this project of “shifting to a market-oriented system.”

Essentially, Yellen’s thinly veiled threats, and the demand that China change its economic system to favor U.S. corporate profits, highlighted once again how acutely aware the imperialists are that China is engaged in building a developed socialist economy.

The corporate media can spread reams of lies and spin from thin air charges against China. But at the root, the fundamental basis of their hostility is China’s centralized planning and state ownership of vital industries, all land and natural resources. They see this as a threat!

While foreign as well as Chinese capitalists are allowed to lease land, and industries can be built and partially owned while profits are extracted for a period of years, there are explicit conditions and tight controls. The conditions are that ultimately, the Chinese state will own the equipment, machinery and blueprints and Chinese technicians will be trained in their use. Capitalists can’t just pull their factories out of China in order to operate where labor is cheaper.  The U.S. labels this Chinese policy “intellectual property theft.”

Most frustrating to the imperialists is that the socialist development of the economy is guided by the 90-million member, popularly supported Communist Party of China. There is a party cell in every workplace, school and neighborhood. This is what U.S. politicians and corporate investors consider a “dictatorship,” restricting their freedom. On the other hand, unelected billionaires making all decisions are proof of “democracy.”

U.S. capitalists, and other major capitalists in the G7 countries, want unrestrained access not only to their own countries, but to China’s resources and the labor power of its hundreds of millions of workers for the personal enrichment of a handful of billionaires.

What state control means in China

Because the Chinese state has had control of a significant amount of the profits taken in by foreign capitalists who have invested in China, it has been able to rapidly build the infrastructure – a web of high-speed rail, highways, ports and commercial hubs – and economically integrate and subsidize those industries that enhance growth and spur further development.

Government control over essential industries – banking, petroleum and other key resources – allows the state to ignore the short-term profitability of various projects, provided they lay the groundwork for a stronger and more expansive economy in the years ahead.

China’s state-owned industries (SOEs) are shielded from foreign competition and receive government subsidies. This has angered foreign corporations. They claim it gives China an unfair advantage. Yellen has raised this as a major complaint.

Of course, every capitalist economy, including that of the U.S., subsidizes key industries – especially military industries. In times of capitalist crises, they also subsidize banks with trillions of dollars in loans to rescue them from default.

The most presumptuous statement from Yellen was to credit capitalism with ending poverty in China: “A market-based approach helped spur rapid growth in China and helped lift hundreds of millions of people out of poverty. This is a remarkable economic success story.”  (treasury.gov, July 7)

But it was not the ruthless capitalist market that accomplished this historic feat. It was state planning, in the hands of the working class. The conscious development of small industries, local markets, skill training and infrastructure in rural, underdeveloped areas helped raise the standard of living for millions.

China was able to accomplish something that no capitalist economy in history has accomplished. It was able to end poverty and hunger through a web of social and economic development programs. More than 800 million people quickly benefited, as will billions more in generations to come.

It was the largest and most rapid improvement in material conditions in modern history. China had been one of the poorest countries on Earth. Now it is an economic powerhouse.

Belt and Road Initiative

China is now sharing the same development model with developing countries around the world. Its Belt and Road Initiative is changing the Global South. It is the largest infrastructure and investment project in history, covering more than 140 countries and numerous international organizations. It already includes 65% of the world’s population and 40% of global gross domestic product.

The Belt and Road Initiative has made dramatic improvements to road, rail, sea routes, electrification, education and health care. Over $1 trillion has already been invested since it was initiated in 2013. It will vastly increase connectivity, lower shipping costs, boost productivity, and enhance widespread prosperity.

But it has also undercut the power of the International Monetary Fund, the World Bank and the biggest commercial banks, formerly the only sources of funding. Their onerous loan conditions and high interest rates have left many countries buried in unpayable debt, with very little development to show for it.

A multipolar world

A multipolar world is coming into being, one which does not abide by U.S. dictates. New forms of currency exchange are a challenge to the almighty dollar. This development challenges the U.S. ruling class’s ability to enforce sanctions, not only on Russia and China, but on a total of 40 countries.

The BRICS, a powerful grouping of the world’s leading emerging market economies – Brazil, Russia, India, China and South Africa – is challenging U.S. economic dominance. China’s strong economy is an anchor in this emerging alliance.

The Shanghai Cooperation Organization, now involving 25 countries, reflects new trade and cooperation as the best form of security.

China presently controls its own future, independent of the “rules-based order.” The strength of its economy is a lifeline to many emerging countries. This makes it a threat to U.S. dominance.

The danger is that U.S. imperialism is determined to halt this challenge to its global domination. It is willing to stir up coups, wars and regime-change operations in countries developing favorable trade agreements with China.

China, which suffered more than 100 years of colonial subjugation, imperialist looting, unequal treaties and an imposed opium trade, understands very well why it cannot concede to U.S. demands.

Secretary of the Treasury Janet Yellen’s visit to China is a sharp warning and should be a wake-up call to anti-imperialist forces here. Her visit, and that of Secretary of State Anthony Blinken the previous month from June 16-21, confirm that the U.S. ruling class and its functionaries, politicians, think tanks, strategists and media hacks well understand what they oppose in China.

The socialist, state-planned economy and its people-oriented decisions, controlled by the 90-million-strong Communist Party, are a threat to the future of the capitalist private-profit system.

China’s further development into a strong socialist economy has enormous liberating potential for the workers of the whole world, including workers in the U.S. The working class in China, 600 million strong, is larger than the working class of the U.S. and G7 countries combined and is organized with communist leadership.

It is in the interests of workers here to defend China and condemn the onerous demands of U.S. imperialism. The first step for anti-imperialist forces is to understand what is at stake.