Growing rivalry between China and the United States is having unwelcome repercussions in Australia

(Above: Chiese cartoonist Wang Xiaoyang portrayed Australia as being unable to maintain a foot in each - Chinese and US - camp over the Huawei and NBN controversy discussed below)

Both the US and China are approaching this rivalry from different perspectives. They are like the yin and yang of the famous Chinese symbol, pushing into and encircling one another, each looking for ways to outdo and outsmart the other. The US is in decline economically but maintains the largest armed forces in the world. Its rivalry with China is manifest in the white yang of a military squeeze, of military pressure and military pose-striking. China’s rivalry with the US is manifest in the black yin of economic and financial strength, of economic alliance with emerging powers, of attempts to knock the US further off balance with suggested new international financial architectures. The US has a little bit of black yin as well, particularly the US dollar as an international currency and continued controlling influence in the World Bank and the International Monetary Fund. China has a little bit of white yang as well, for although its capacity to project its military power internationally is currently quite limited, it is growing.


The struggle for the redivision of the world into areas for the most profitable investment of export capital has direct implications for the Australian people. We are cemented into a subservient political and military relationship with US imperialism on the basis of an economic situation that is fluid and changing. Part of that change involves the only significant potential challenger to US “full spectrum domination”, and that is China. “Australia is China’s top foreign direct investment destination...China is Australia’s largest trading partner and will remain so for the foreseeable future” (see http://www.lowyinstitute.org/Publication.asp?pid=1616 ). However, China is no longer free of the contradictions and crises of capitalism, its Gini coefficient (a measure of the gap between rich and poor) is one of the highest in the world, and there is an underlying social discontent amongst its working and peasant classes. These circumstances mean that the current struggle for economic redivision of sources of raw materials and markets between the US, Western Europe and China (with smaller but significant input from India, Russia, Brazil) is directly involving Australia and that the political and military loyalties of the Australian bourgeoisie will confront expanding economic ties with China; moreover, this contradiction will sharpen at a potentially huge expense to our people and our class.


Growing the yang


In addition to the many military bases and port facilities maintained by the US imperialists in our region, the US wants additional capacity to put the squeeze on China. It is poised to use a new naval base South Korea is trying to impose on the heroic people of Jeju Island which lies close to the entrance to the Bohai Sea and close to the shipping lanes into Tianjin, the major port city servicing the region around Beijing. (To complicate matters, the Bohai Sea is oil-rich; the US ConocoPhillips, in partnership with the China National Offshore Oil Company has two platforms in the Bohai Sea. Last June they began to leak. The US company initially tried to cover up the leak but by October there was a major oil spill which polluted the seas and coasts around Penglai in Shandong Province.)


The US is also after a renewed military pact with Japan and additional bases there. It has considerable military force on Japan’s Okinawa Island as well as on the Chinese separatist province of Taiwan. In the Philippines it is seeking to boost its military presence and it has conducted joint naval exercises with Vietnam.


The US is currently negotiating the stationing of four littoral combat ships (LCS) in Singapore. These developments are being closely watched by Lockheed Martin Corp, Australia's Austal, General Dynamics Corp and other arms makers that are building two models of the new warships for the U.S. Navy, and hope to sell them to other countries in coming years.


The Singaporean proposal (and similar proposals involving the Philippines and the HMAS Stirling naval base outside Perth) conveys something of the dilemma the US faces as a declining economic power trying to expand its military reach.


"Because we will probably not be able to sustain the financial and diplomatic cost of new main operating bases abroad, the fleet of 2025 will rely more on host-nation ports and other facilities where our ships, aircraft, and crews can refuel, rest, resupply, and repair while deployed," Chief of Naval Operations Admiral Jonathan Greenert wrote in the naval magazine Proceedings last November.


That is the US dilemma in a nutshell – its inability to sustain the financial cost of its military activity.


Hence the 2500 marines to be stationed outside of Darwin will be in a base that is ostensibly under Australian control and contributed to financially by Australian tax-payers.


There is also the plan to use the coral atolls of the Cocos (Keeling) Islands as a launch pad for US Global Hawk surveillance drones and the P-8 surveillance aircraft. These fragile atolls are in the Indian Ocean and provide access to the South China Sea.


The significance of the Indian Ocean and the South China Sea was captured in a piece by pro-imperialist US journalist Robert Kaplan, now working for intelligence analysts Stratfor. In America’s Pacific Logic (April 2012) Kaplan wrote:

The Indian Ocean is the world's energy interstate, across which passes crude oil and natural gas from the Arabian Peninsula and Iranian Plateau to the burgeoning, middle-class urban sprawls of East Asia. Though we live in a jet and information age, 90 percent of all commercial goods that travel from one continent to another do so by container ship, and half of those goods in terms of global tonnage -- and one-third in terms of monetary value -- traverse the South China Sea, which connects the Indian Ocean with the Western Pacific. Moreover, the supposedly energy-rich South China Sea is the economic hub of world commerce, where international sea routes coalesce. And it is the U.S. Navy and Air Force, more than any other institutions that have kept those sea lines of communication secure, thus allowing for post-Cold War globalization in the first place. This is the real public good that the United States provides the world.

In abandoning the Marxist path of anti-imperialist independence and self-reliance, the architects of China’s “reform and opening” have sacrificed both the state power and the labour power of the Chinese workers and peasants. The latter have “enjoyed’ the fruits of a process of primitive accumulation – unbearably long working hours, starvation wages, prohibition of union activity, unsafe conditions, lack of civil rights as migrants in their own country. The beneficiaries include multinational investors, a new Chinese bourgeoisie, and a state apparatus in China that purports to address new inequalities for the sake of social harmony but whose every move widens the gap between rich and poor.


The construction of China as the sweatshop of the world created a trading environment in which China’s central banks amassed huge amounts of US dollars. But a hoard is dead capital. China has released its dollar reserves back into circulation through the purchase by those dollars of US Treasury securities making it the largest single holder of US government debt, with 26 percent of all foreign-held US Treasury securities (8% of total US public debt).


To put China's ownership of U.S. debt in perspective, its holding of $1.2 trillion is even larger than the amount owned by American households. U.S. citizens hold only about $959 billion in U.S. debt, according to the Federal Reserve. (Other large foreign holders of U.S. debt include Japan, which owns $912 billion; the United Kingdom, which owns $347 billion; Brazil, which holds $211 billion; Taiwan, which holds $153 billion; and Hong Kong, which owns $122 billion.)


China continues to buy huge amounts of US Treasury securities, although it is seeking to diversify and become less dependent on the future convertability of US bonds. In fact, it became a net seller of U.S. Treasuries in the second half of 2011. China’s holdings of U.S. Treasuries accounted for 54% of its foreign-exchange reserves as of June 30, 2011 according to a U.S. Treasury survey released in March 2012. That is down from 65% in 2010 and a record 74% in 2006 and no doubt partly prompted by a growing awareness of what its leaders have derided as the US “addiction to debt” and the possibility of a downgrade in the rating of US debt. The latter came to fruition last August courtesy of Standard and Poors and was a nightmare come true for China which has 1.2 billion reasons for not wanting to see a drop in the value of the US dollar.


Whilst China is in a strong position economically, both in terms of its own ability to sustain GDP at a relatively high rate and by virtue of its ownership of substantial US debt, it needs a new international financial system in order to bring the yuan into play as a competitor to the dollar.


China has signaled on a number of occasions its desire to have the yuan achieve reserve currency status. It has taken some initial steps with proposals for the inclusion of the yuan in the IMF’s special drawing rights (a basket comprising dollars, euros, pounds and yen). On a bilateral basis it has set up currency swaps with countries including Argentina, Belarus and Indonesia, and has allowed letting institutions in Hong Kong issue bonds denominated in renminbi (yuan). China is supporting itself and other countries to diversify their reserve holdings away from the dollar, knowing that this will weaken the US.


Nouriel Roubini sees the Chinese goal in these terms: “Now, imagine a world in which China could borrow and lend internationally in its own currency. The renminbi, rather than the dollar, could eventually become a means of payment in trade and a unit of account in pricing imports and exports, as well as a store of value for wealth by international investors. Americans would pay the price…”


In 2009, China supplanted the US as Brazil’s largest trading partner. Brazilian President Lula visited China that year, observing “Between Brazil and China, we need to establish a trade that is paid for in our own currencies. We don’t need dollars. Why do two important countries like Brazil and China have to use the dollar as a reference, instead of our own currencies?....It’s crazy that the dollar is the reference, and that you give a single country the power to print that currency.”


In our own region, China has supported the 2009 Chiang Mai Initiative Multilateralization (CMIM) Agreement, which took effect on March 24, 2010, marking the official establishment of regional currency swaps as a crisis prevention measure in the wake of the 1997 regional financial crisis. Although Japan was the lead player in the early stages of establishing CMIM, its place has now been taken by China. When the CMIM established the ASEAN+3 Macroeconomic and Research Office (AMRO) in 2011 to provide it with a regulatory arm, Wei Benhua – who had until then managed China’s foreign reserve funds - became its first director. AMRO represents the Ministries of Finance, Central Banks and Monetary Authorities of ASEAN countries, China (including Hong Kong, China), Japan and Korea. The latter three countries contribute 80% of the $120 bn. held by CMIM regional currency swaps, with 20% contributed by the other 10 (ASEAN) members.


Economic commentators note that AMRO’s creation is a reflection of the “unrepresentative and unaccountable character of the global economic governance architecture…. it may also eliminate the need for a global lender of last resort—a role currently fulfilled by the IMF” and that if Western powers continue to exercise “unfair” control of bodies like the IMF, then they “risk further delegitimizing their current guardianship of the global economy” (K. Nachiappan and M. Joksic for the Carnegie Council).


Covering all bases


Of course it would be foolish to think that US imperialism relies on military muscle alone and that China is restricting itself to a game of financial chess. The US will probably have to make some changes to governance arrangements at the IMF and the World Bank to prevent the rise of more regional financial rivals based on the AMRO model in areas like the Middle East and Latin America. It is also waging an aggressive campaign to force the Chinese into increasing the value of the yuan, arguing that it has been kept artificially undervalued, giving China an unfair trade advantage by making China’s exports to the US cheaper and imports from the US more expensive. This turns into populist domestic rhetoric about Chinese responsibility for US job losses.

US imperialism can also be expected to place further pressure on China to deregulate its financial sector – a key neoliberal objective throughout the world. In March 2012 the World Bank President Robert Zoellick delivered a report, China 2030, which set out a comprehensive plan for restructuring the nation's State-owned sector to allow more private participation, and emphasising the need for the Bank of China to lose its monopoly position and accept competition from local and foreign financial institutions. The release of the report was disrupted by a lone protester, Du Jianguo, (above) who distributed anti-World Bank leaflets titled “Go home with your poison!” The incident prompted furious on-line criticism of any further opening of China to imperialist finance capital. Nevertheless, Premier Wen Jiabao called on April 3 for the nation’s biggest state-run banks to be broken up “because they earn far too much money”.

In Australia, US economic retaliation against China takes the form of pressuring our puppet government to deny China opportunities for investment here. This year’s rejection of the Huawei bid for participation in the National Broadband Network echoed the 2009 Government rejection of Chinalco’s US$ 19.2 billion bid for a stake in Rio Tinto. Like the earlier decisions to block Chinese investment in mines in the Woomera Prohibited Area and the Hawks Nest mining area in WA, the Huawei rejection was justified on national security grounds. The 2011 FIRB decision to order Chinese mining giant Shenhua to sell the 43 farms it had bought for $213m near Gunnedah in northen NSW if they were not used for mining was justified in terms of Australian agricultural interests . China justifiably complains of unfair treatment, although none of these contending groups of investors proceed from the interests of the Australian people. Forces loyal to US imperialist domination of Australia are certainly not beyond whipping up xenophobic and racist sentiments to obstruct and delay Chinese investment here.

For its part, China has been accused for over a decade of secretly building military bases in Burma as part of a planned extension of its influence into the Indian Ocean. These allegations are without foundation (see Andrew Selth, Chinese Military Bases in Burma: The Explosion of a Myth, Griffith Asia Institute, 2007). However, it has sent destroyers, frigates and supply ships to combat piracy in the waters off the coast of Somalia (for their part Somali pirates defend their actions as necessary to combat illegal fishing and the dumping of toxic wastes, including nuclear waste, in Somali waters). The presence of even a small escort flotilla so far from China has some in China calling for the creation of overseas military bases with Pakistan, the Seychelles, Sri Lanka and Madagascar as possible sites (see Prof. Shen Dingli, Don't shun the idea of setting up overseas military bases, http://www.china.org.cn/opinion/2010-01/28/content_19324522_3.htm  ). Indeed, Pakistan has asked China to build a naval base at its south-western port of Gwadar and expects the Chinese navy to maintain a regular presence there, according to Chaudhary Ahmed Mukhtar, Pakistan’s defence minister.

The main venue for a Chinese naval presence, quite legitimately, is the South China Seas and the US, through its Filipino proxy, has recently created a serious incident, the Huangyan Island incident, to test Chinese resolve. Where China is in the right, particularly in relation to US imperialism, we must unswervingly support it. Where China extends its naval presence into international waters, we should assess the situation according to its circumstances, and if China ever uses its military or naval power to practice interference, subversion, bullying or control, we should denounce it as China itself called on us to do in 1974 (Deng Xiaoping, Speech at the Special Session of the UN General Asembly, http://www.marxists.org/reference/archive/deng-xiaoping/1974/04/10.htm  ).


Conclusion


The growing rivalry between the US and China is having unwelcome repercussions in Australia. The primary responsibility for increasing tensions in our region is US imperialism which is strategically threatened by China’s economic strength and consequently seeking to expand its military encirclement of that country. As a willing participant in the imperialist globalised economy, and with substantial and growing economic interests abroad, there is capacity and motive for China to complement its economic might with the ability to project its military strength into the international arena.


The task of Australian communists is to develop the movement against US imperialism, to force the Australian bourgeoisie into ending its dependence on and alignment with US imperialism, and to propagate the ideal of Australia as an independent force in world affairs capable of making judgements and decisions that reflect the will and the interests of the Australian people.


The rivalry between the US and China will develop unevenly and we must make tactical adjustments as required, but our strategic goal must be anti-imperialist Australian independence and socialism.

Growing the yin