European debt crisis offers China many new opportunities.

China has much more muscle on the world stage.

The Chinese strategy is to use capitalism against itself to increase their realpolitik influence in the world. 

by Tom Thorne

The Chinese are now spreading their influence across the globe by keeping their currency exchange rate artificially low which subsequently attracts capital and manufacturing, the profits of which they invest in debt ridden Europe and  the Americas and the rest of the world. They have also built up trade deficits with most western countries by producing cost effective and low cost goods. The result is $3 trillion US sitting in a pot to buy up resources and infrastructure world wide.

The new Chinese revolution is state run capitalism and its effects are being felt world wide on every continent. The new Chinese revolution is financial and it is a strategic world revolution taking advantage of tapped out debt ridden European Union (EU) countries, resource rich but undeveloped African countries needing investment, Central and South American countries with valuable resources and of course the United States. Canada is also feeling this pressure to accept Chinese investment in our resource based economy.

In Mao Zedong’s wildest dreams he couldn’t have spawned a revolution world wide the likes of this one. The Chinese leadership have mastered capitalism and turned it on itself. Communism made be dead but revolutionary state run capitalism has taken its place. Most western countries seem to think that the Chinese have joined the world community as a honest partner.

I don’t see it that way. The Chinese leadership are strategic realpolitik thinkers and they are determined with a quarter of the world’s population to look after, to spread their doctrines across the Globe by economic control of assets, resources and infrastructure. 

The Chinese Revolution is still in play.

The revolutionary nature of  modern China has not changed from Mao Zedong’s time. The only thing that has changed is how the revolution will be implemented. This is a Great Leap Forward that is actually working unlike the Mao Zedong wide eyed debacle in the 1960’s.

Deficit financing of the EU and the huge debt of the United States have given the Chinese a wide open opportunity to expand with their surplus revenues. It is not a matter of whether they will do this it is a fact that they are actively and aggressively buying up debt or making investments world wide.

The outcome of this current situation is a bigger role for the Chinese on the world stage. Their low cost manufacturing has made it easy for western countries to manufacture high quality low cost goods in China. That has cost jobs in the west and as a result created social costs that have mounted up as Western countries try to maintain living standards of their populations that are in most cases aging. 

Hence the EU fiscal crises we see starting with Greece’s profligate over spending and the EU attempts to maintain a high living standards without enough revenues to maintain them.

Chinese self interest will always trump any altruism for the rest of the world.

Make no mistake, the Chinese aggressive form of capitalism is there to serve only China. There is very little thought given to what happens in the west. China will fuel the economies of the west so they can continue to sell to us. They are investing in the west because they fear a downturn at home will create social unrest. We saw their response to the 2008 meltdown and that should be our guide now.

So the Chinese are on a learning curve about the effects of their brand of state capitalism. They actually need to keep the west operating to keep their economy humming although at the end of this western debt exercise they will own more of the west. That is the outcome of dealing with revolutionary state capitalism.

Another Chinese strategy could be to let the west fester in debt problems for a while and begin to serve the internal markets they have at home. Millions of Chinese people do not share in the economic revolution they have started. The wealth that has accumulated is mostly located in their Economic Zones not in the countryside which is remains poor.  There is a giant demand for goods and services from their own population and they could take the wealth they have gained in the west and turn it inward to raise their own internal living standards.

However, the internal politics and inherent corruption of their fast built economy is now coming home to roost. Too many in the Economic Zones have too much to lose if the economy is extended too fast to the Chinese countryside or if it falters in the west. The the rapid economic growth has built a level of them and us self interest into Chinese society that has the potential to create dissension within the country as many Chinese see that they are not sharing in this Great Leap Forward.

Combine this with the levels of corruption that are ongoing in the Chinese internal systems and the problems they face at home may very well become more important that their realpolitik activities across the globe. However the Chinese will probably multitask their problems and opportunities to make it all work for their self interest.

© Copyright 2011, Tom Thorne, All Rights Reserved.