US steps up military and economic pressure on China

Photo: US Navy
US Navy and Coast Guard in the South China Sea

By Jane West

While US imperialism has turned its attention from Libya to Iran and Syria, it has not taken its eyes off the threat that it sees in China.

As referred to in previous articles on this website, China presents US imperialism with a potential challenge to its global dominance, as China’s continuing rapid growth threatens to catch up and overtake the stagnating US economy.

A top priority for the US and its imperialist allies is doing everything possible to prevent this.

In the aftermath of its victory in Libya, imperialism has stepped up its offensive against China on both the economic and military front.

Economic offensive

There are a number of key planks in the US’s economic offensive against China: blocking high technology exports to China, using claims of ‘dumping’ to put tariffs on some Chinese imports, vetoing Chinese companies’ proposals to takeover US companies, pushing for rapid RMB revaluation with the aim of reducing the competitiveness of Chinese imports, discouraging FDI into China on a variety of grounds. Alongside there is a continuous ideological intervention against China’s high rate of investment which has powered its economic growth.

Since the victory in Libya it has renewed this offensive. In the run up to the G20 meeting, new legislation attacking China for alleged currency manipulation was introduced in Congress, agreed by the Senate, debated by the powerful Ways and Means committee and become an issue for all the Republican presidential hopefuls.

At the same time, a new front in the economic and propaganda war was also opened, explicitly aimed at China’s hugely successful state-owned enterprises.

A report was produced in late October by the Congressional review group, the U.S.-China Economic and Security Review Commission, which sets out an attack on China’s state sector, alleging the Chinese state-owned companies compete unfairly as – according to the report – they get preferential interest rates on loans from state-owned banks, tax breaks and capital injections if they hit trouble.

Potential sanctions against the ‘unfair advantages’ of state owned companies – meaning Chinese companies – was raised by the US at the recent Trans-Pacific Partnership talks negotiating a nine-nation trade agreement in the Pacific region. China is not one of the current nine negotiating nations, but had been flagged as a future participant.

Alongside building up external pressure, this attack on the state sector in China is also aimed at making a pro-Western ally out of the Chinese private sector, whipping up opposition within the country to the alleged ‘unfair advantages’ of the state sector.

This whole offensive was rather a damp squib in the context of the G20 dominated by the Eurozone crisis, where the European imperialists were desperately courting China to contribute funds to the new European Financial Stability Facility (EFSF).

On the eve of the G20, Klaus Regling, the head of the fund, went to China to seek support, offering preferential protection for Chinese loans. In this context it was not likely that the G20 would be singling out China as a ‘currency manipulator’, and the US did not push for it.

However, despite retreating from direct criticism at the G20, the US has clearly blocked the EU from making any economic or political concession to China that might persuade it that there was an upside to a very risky investment of China’s sovereign wealth in Eurobonds.

There are three areas where it is known that China would like to see progress: greater influence at the International Monetary Fund and the inclusion of the RMB in the IMF’s special drawing rights (SDR) currency unit, market economy status in the World Trade Organisation, and the lifting of the European arms embargo (which China desires for diplomatic reasons not because it has any intention of buying European arms at this point in time).

The US is hostile to all of these. Increasing the weight of China in the IMF, and including the RMB in the SDR, would correspondingly reduce the weight of the US and the role of the dollar. Granting China market economy status would make it harder to impose embargoes or sanctions against Chinese goods. Lifting the arms embargo would give China increased diplomatic and international political status.

With no hint of progress on any of these, Beijing’s support for the bail-out fund is on hold!

Reuters reported a senior Chinese source saying, quite rightly: ‘We are willing to help, but we are not a charity’. ‘The United States and the IMF also attach conditions (when they help financially troubled countries). It is not unreasonable for China to do the same.’

While the imperialist world economy stumbles from stagnation to crisis to stagnation, economic pressure on China is difficult to achieve. The US would like a major economic offensive against China, but China’s growing domestic market and its financial firepower mean that this is contradictory for the US itself, let alone its embattled European allies.

Military encirclement

Unsurprisingly therefore, the Autumn has also seen a new round of US military initiatives in the Pacific aimed at China.

As spelled out in more detail in this article on this web-site, the US is developing – and arming – a series of strategic military alliances around China, immediately aimed at heating up regional and border tensions forcing China to redirect resources towards military defence.

The US has taken a series of diplomatic and military initiatives around China’s extensive land and sea borders: on the Korean peninsula, in the islands of the East China sea disputed with Japan, selling arms to Taiwan, stirring up confrontations with Vietnam and other Southern neighbours over disputed gas, oil and mineral rights in the archipelagos of the South China Sea and with India over long-disputed borders.

Leon Panetta, Obama’s recently appointed new defence chief, went on an October tour of Indonesia, Japan and Korea to reassure the US’s key regional partners that the current drive to reduce American military spending will not lead to a reduction in its presence in the Pacific against China.Spelling out the US position, he said: ‘I want to make very clear that the United States is going to remain a presence in the Pacific for a long time. That means, just so you understand, that we are not anticipating any cutbacks in this region. If anything, we’re going to strengthen our presence in the Pacific.’

Pentagon officials have reinforced this saying there are no plans to reduce the 85,000 US servicemen stationed in the Pacific, nor the 7 aircraft carriers and 18 nuclear submarines in the region.

The pressure of this military capacity on China is clear. The US may be a declining power, but it is still the greatest military power on the planet by a very large margin.

China is being forced to take defensive steps and increase its military spending in response.

However, while China’s total military budget may have roughly tripled since the 1990s to an estimated $160bn last year, the US spent more than $500bn, or nearer $700bn if the costs of Iraq and Afghanistan are included. The Peoples’ Liberation Army may be the largest in the world with an estimated 1.25m troops compared to around 750,000 US Army soldiers and Marines. But the US army is vastly better trained and equipped and has recent experience of active duty.

However, technologically the Chinese are catching up, particularly developing land-to-sea missiles and recently test flying the J-20, a new-generation stealth jet fighter. The US is therefore deepening its military engagement with its regional allies. The Panetta tour of the region underlined that while the US may be pulling out of Iraq, scaling down in Afghanistan, and trying to limit its role in interventions like that in Libya, the same does not apply to its pressure on China.

Imperialism’s attention for the moment remains focused on the Gulf and the Middle East, seeking to reverse the setback it suffered through the overthrow of Mubarak in Egypt earlier in the year by advancing in Libya, Syria and Iran.

But it has not taken its eyes off the rise of China.