[THS] US - China: Provoking the Creditor, Hugging the Holy Man

[Peter Webster]

http://www.informationclearinghouse.info/article24932.htm

Washington’s Road to Ruin

US – China: Provoking the Creditor, Hugging the Holy Man

By James Petras

March 08, 2010 "Information Clearing House" -- The Obama Administration has
heightened tensions with China through a series of measures which can only be
characterized as major provocations designed to undermine relations between the
two countries. These provocations include political support for separatist movements,
such as the US-funded theocratic-monk led Tibetan secessionists and the
Washington-based Uyghur secessionists, as well as through the $6.4 billion-dollar
advanced arms sales to Taiwan, a virtual protectorate of the US Navy. President
Obama has publicly met with and openly backed these separatist and secessionists
groups, flaunting Washington’s refusal to recognize China’s existing borders. This is
part of the US strategy of encouraging the physical break-up of independent nations,
which are viewed as ‘obstacles’ to its program of global military empire building.

In addition to continuing and escalating the hostile policies of his predecessor, the
Obama Administration has exploited several other issues in order to rally American
public opinion and mobilize overseas allies behind its confrontational posture. First,
the Obama Administration claims that China’s currency (the Renminbi) is artificially
undervalued to give Chinese exports an unfair price advantage, thus undercutting US
manufacturing exports and costing “millions of American jobs”. And secondly, the
Administration claims that, after the US had opened its domestic manufacturing
market to Chinese firms, the Chinese would not ‘reciprocate’ and open their financial
sectors to Wall Street investment banks.

In retaliation for growing Chinese exports, Washington has raised protective tariffs on
steel pipes and automobile tires, and issued Congressional threats of further
protectionist measures.

The US has insists that other nations support its aggressive policy toward Iran,
including imposing trade, investment and financial sanctions, supporting the
provocative US naval build-up in the Persian Gulf and backing Israel’s bellicose
threats to bomb Teheran. In contrast, China rejects economic sanctions, in favor of
negotiations, while increasing its trade and investments in strategic sectors of the
Iranian economy. In the United Nations Security Council, the US has exerted
diplomatic and mass media pressure to force China to vote for a Zionist-authored
proposal of wide-reaching sanctions against Iran. Obama refuses to accept China’s
rejection of the US military-driven policy of regime change and the Chinese pursuit of
free trade with Iran.

The US Administration’s selective definition of “self-determination” includes giving
support to secessionist ethno-religious regional movements in China, while, at the
same time, invading and occupying independent states, like Iraq and Afghanistan,
ordering missile attacks on other states, like Pakistan and Somalia, establishing over
700 military bases world-wide with extra-territorial jurisdiction and engaging in
assassinations of its opponents abroad via the CIA and Special Forces.

In contrast, China is not at war and opposes military invasions of sovereign states.
China does not have overseas military bases and is menaced by the US policy of
encircling China’s frontiers with American bases in client states in Northeast,
Southeast and Central Asia.

While US military occupation forces brutally violate human rights of millions of citizens
in occupied or targeted countries, and threaten the civil rights of critical Americans
with arbitrary rulings, secret trials and the suspension of habeas corpus, the Obama
regime excoriates China for its prosecution of opposition activists.

The Obama regime has latched onto a conflict between a private US corporation,
Google, and Chinese hackers, which it alleges are state sponsored, turning the issue
into a major struggle for “internet freedom” at the level of state to state relations.
Despite the expanding presence of scores of US-owned IT companies in China, the
Obama regime has raised the issue of “internet censorship” to the level of a major
ideological confrontation.

Climate change is another source of aggravation between the states. At the
Copenhagen summit in December 2009, Obama rejected any formal agreement on
the reduction of carbon emissions while deflecting criticism and blame on to China
and other developing countries, which had agreed to informal substantive targets on
CO2 reductions.

Of all these points of contention, the most serious is Washington’s financial,
diplomatic and political support for ethnic secessionist groups in China, threatening
the security and territorial integrity of the Chinese state. This paramount issue has re-
awakened painful memories of earlier imperialist carving up of China, its rich port
cities and territories and has forced the Chinese authorities to consider retaliatory
measures.

Imperial Policies: At What Price?

The Obama regime’s political and diplomatic provocations against China in pursuit of
its military-driven empire, come at a very high real and potential price. We cannot
assume that China will remain a stoic punching bag for the US, absorbing territorial
threats, economic pressures and gratuitous diplomatic insults without taking counter-
measures especially in the economic sphere.

China’s Crucial Role as US Creditor

Obama’s provocative militarist posturing toward China endangers major US private
and public economic interests, including China’s financing of the burgeoning US
debt.

China is the world’s largest and fastest growing investor in US securities. According to
a detailed study by the Congressional Research Service (CRS) (July 30, 2009), China
holds a vast amount of long-term treasury debt, US agency debt, US corporate debt,
US equities and short-term debt estimated at over $1.2 trillion. China’s investment in
US Treasury securities were used to help finance the economic ‘recovery’ (such as it
is). If the Obama regime persists in its provocations, China may decide to unload a
large share of its US securities holdings, inducing other foreign investors to also sell
off their holdings (CRS op cit). This would lead to a sharp depreciation of the dollar
and force Washington to raise interest rates, which could drive the US into a deeper
recession/depression. Economists, who claim Chinese economic interests would suffer
from such a sell off, overlook the fact that for Beijing, national sovereignty is more
important than short-term economic losses, especially in view of US support for
secessionist movements. Moreover, the Chinese have a high rates of savings, huge
foreign reserves and increasingly diverse markets and suppliers of essential
commodities. China is in a better position to absorb the ‘shock’ of a decline in US
economic relations resulting from American bellicosity than the debt-ridden, negative-
saving, military-driven North American economy.

Foreign Direct Investments

Almost all of the 400 biggest US multi-national corporations, listed in Forbes, have
major profitable investments in China, which are growing. The Obama regime’s
increasingly confrontational position toward China puts these investments at risk.

US foreign investments in China far exceed the latter’s investments in the US,
according to a report published by the UCLA Asian American Studies Center. In 2006,
China’s foreign direct investment (FDI) in the US was $600 million, while US
investments in China were $22.2 billion. The Report goes on to state “
the
complaints by many American businesses and politicians that China can invest in US
companies with relative ease while China still tightly restricts access to Chinese
markets and companies appear not to be borne out by the numbers”. The US
government has, in fact, blocked several large scale investments by Chinese
companies, including the multi-billion dollar purchase of an oil company (UNOCAL),
an appliance company (Maytag) and computer company (3Com Corp). Chinese
investments in the US are not always profitable. The Sovereign Wealth Fund (a
Chinese government-run investment fund) lost over 50% of its $8 billion-dollar
investment in the finance groups, Blackstone Group and Morgan Stanley, in less than
a year.

The Obama regime’s complaints about China’s “restrictive” treatment of US
companies fly in the face of economic reality. The attacks are part of a political
strategy of anti-Chinese propaganda to heighten the American public’s antagonism
against China and rally domestic support for any military confrontation. Even as US
companies in China reap profits a thousand times greater than Chinese investments
in the US, and the leading investment houses swindle Chinese sovereign investors of
billions, the White House claims foul play!.

China’s much-maligned policy of restricting financial takeovers by Wall Street firms
was one of the reasons the US speculative collapse did not impact its economy. And
still Washington continues to attack Beijing on the issue of “opening Chinese financial
markets to Wall Street”.

US – China Trade

The Obama regime has repeatedly raised the issue of China’s ‘undervalued’ currency,
conveniently ignoring the fact that China’s imports from the US are growing faster
than its exports to the US. Between 2006 – 2008 US annual exports to China grew
32%, 18%, 9.5%, while its imports of Chinese goods grew 18.2%, 11.7%, 5.1%.
Moreover top US exports included electrical machinery and equipment, power
generation equipment, oil seeds and oleaginous fruits, aero-space products, optical
equipment and iron and steel – a broad spectrum of American industrial products
with high value-added, well-paying skilled employment and lucrative profits.

Moreover, the fact that US exports to China include a diverse array of manufacturing
sectors and are competitive at the current exchange rate, suggests that the vast US
trade deficit with China has less to do with China’s currency policy and more to do
with US public and private investment policies and the relative strengths of the
productive forces of each economy. In large part, the majority of exports from China
to the US are the result of US multi-national corporate decisions to produce and sub-
contract in China. In other words, the trade deficit with China is directly related to US
corporate global investment strategy, which, in turn, flourished after the US
government liberalized it rules and deregulated US corporate conduct. Liberal
investment policies under the US government, and not Chinese “unfair trade rules”,
are a major cause of the trade deficit.

The angry posture adopted by the Obama regime toward China’s “undervalued”
currency is a political ploy to deflect attention from its disastrous liberal economic
policies and its support for the investment conduct of large US corporations.

The US annual trade deficit with China has grown almost four fold between 1999 –
2008, from $68.7 billion to $266.3 billion. The growth of the trade deficit coincides
with the massive shift of US investment from manufacturing to speculative financial,
real estate and insurance activities. In other words, the US re-directed its investment
strategies from producing useful, quality commodities for domestic consumption and
export to importing manufactured goods from abroad at a greater profit for the
corporations. The weakening of US productive capacity - its productive forces - was
reflected in its declining competitive position and its deepening trade imbalances.
Given the tight relations between the White House and Wall Street, policy makers
sought to blame Chinese monetary officials for an undervalued currency, rather than
confront the bubble economy stimulated by the policies of the Federal Reserve and
generated by the Wall Street investment houses, whose executives go on to occupy
key economic posts in the US government and who provide substantial funding for
electoral campaigns.

In those economic sectors where US investment has led to increased efficiency, like
agriculture, the US has competed successfully. China is the leading buyer of
American soybeans and cotton – accounting for over half world sales of the former
and between almost a third of the latter according to the U.S. International Trade
Commission and the US Department of Commerce.

Trade, Credit, Investments versus Militarism and Speculation

China’s economic relations with the US have been extraordinarily lucrative and
favorable to the big US capitalists and the American government. By purchasing low-
interest US Treasury notes, China has financed US trade and budget deficits, which
are the result of exorbitant military spending, multiple imperial wars and occupations,
and unproductive speculative investments. The US multi-nationals have reaped high
rates of profit from their investments in China, profits far in excess of what they
would have gained in the US, and many times more than what a few Chinese firms
earn in the more restrictive US climate. Important US economic sectors in aerospace,
agro business, port facilities, transport and giant commercial retailers and importers
depend on and profit from trade with China. US speculators have been able to rake
in huge profits from the Chinese Sovereign Funds by pumping and dumping
speculative US stocks.

As China’s dynamic growth and rate of consumer demand continue to race ahead of
the US, American exports to China outpace its imports from China.

The growing political antagonism and reckless diplomatic actions against China taken
by the White House and Congress serve to undermine the basic economic interests of
a broad swath of US capitalist enterprises as well as the credibility of the US
economy. What is even more striking is that many of the charges leveled against
Beijing, including its ‘unfair treatment’ of investors and ‘closed economy’ – apply with
greater force to Washington.

The Paradox of Economic Gain and Political Hostility

The key to understanding this paradox of economic gain and political hostility lies in
the fundamentally different political and economic structures and global strategies of
the two countries. The US economy has been driven by its financial and speculative
capitalist classes, which in turn wield decisive political influence over state economic
policy. At the same time, the commercial capitalist class is more attuned to importing
manufactured goods, rather than in long-term investment in research, development
in the American manufacturing sector. Neither commercial nor financial capital has a
stake in stimulating US exports and in investing in the productive forces of the
country. The design and implementation of US global strategy is controlled by the
civilian militarists and imperial ideologues, (especially the Zionists) in government and
their counterparts in sectors of the military high command.

In contrast to the Chinese market-driven quest for global power, US imperialism is
built around military conquest and appropriation of economic wealth. The
disproportionate influence exercised by the civilian militarists in the US government
has resulted in a series of foreign wars, which have severely strained the US economy
and led to a military definition of US global objectives. Faced with China’s growing
economic relations and influence in Asia, Africa, Latin America and the Middle East
and Beijing’s opposition to US military-driven imperial policies against Iran, the
Washington has escalated its political provocations, diplomatic pressures and
interference in Chinese internal affairs. As these external pressures increase, Chinese
public opinion turns more nationalistic, which in turn serves as a basis for US mass
media charges of “xenophobia” and “chauvinism” on the part of the Chinese. The
irrational nature of the recent anti-China propaganda promoted by the US mass
media is most evident in the shrill warnings of a Chinese military threat to Asian
security, especially when the US continues to expand its chain of military bases
encircling China from South Korea, Japan, Philippines, Australia, Afghanistan and
Central Asia. China has neither military bases abroad nor naval fleets off the coasts of
any US or allied territory.
The greater the US reliance on military force, brutal economic sanctions and outright
blockades to overthrow regimes and extend its network of client regimes, the greater
its hostility toward China, which is expanding its economic ties with US ‘adversaries’,
such as Iran, Venezuela, Sudan, Nicaragua, etc.

The US has severely weakened its productive forces in the process of funding a
global military machine. China, on the other hand, has sought to become a world
power on the bases of the long-term, large-scale development of its productive
forces, even in the face of US opposition. At each and every turn, Washington has
passed up enormous opportunities for the US economy from China’s dynamic growth,
booming market and overseas economic expansion, in favor of petty provocations.

Conclusion

Ultimately what we have is a conflict between two diametrically opposing political
economic systems.

On the one hand, a United States military driven empire, which focuses on
conquering Iraq, Afghanistan and Iran, backs the ambitions of a militarist Israel,
seeks marginal client states in Latin America and militarizes Pakistan, Colombia and
Mexico.

On the other hand, China deepens its economic ties with dynamic Asian countries;
increases its oil links with Saudi Arabia, Iran, the Gulf States, Venezuela, Russia and
Angola; displaces the US as the leading trading partner of Brazil, Argentina, Peru and
Chile; and increases its trade and investment links with Southern Africa in minerals
and related infrastructure projects. The contrast is striking.

China’s global economic expansion is confronted by US military encirclement,
diplomatic provocations and a massive anti-Chinese propaganda campaign designed
to deflect US public attention from the extreme imbalances in its domestic economy.
Instead of looking inward to understand why the US is declining, the Obama regime
encourages the public to blame China’s supposedly unfair trade policies, its
‘restrictive’ investment policies, its manipulated currency rate and its tough response
to secessionist movements funded by the US.

In the end the US will not resolve its budget deficits and trade imbalances, not to
mention its endless imperial wars, by pandering to self-described divine rulers, like
the Dali Lama, and provoking a dynamic economic power such as China. Nor can
Washington escape its profound economic imbalances by catering to Wall Street
speculators and ignoring the decline of America’s productive forces. Drones, military
surges and surrogate puppet armies engaged in endless wars are no match for the
surging investments, robust developing markets and joint ventures linking China with
the dynamic emerging economies of the world.

James Petras has a long history of commitment to social justice, working in particular
with the Brazilian Landless Workers Movement for 11 years. In 1973-76 he was a
member of the Bertrand Russell Tribunal on Repression in Latin America. He writes a
monthly column for the Mexican newspaper, La Jornada, and previously, for the
Spanish daily, El Mundo. He received his B.A. from Boston University and Ph.D. from
the University of California at Berkeley.