I just wrote what I think is a thoughtful and lengthy reply to this article in the interesting economic blog Naked Capitalism and I thought I'd share here as well.
The main point that Naked Capitalism tries to make, I understand, is that Chinese more or less covert protectionism is not tenable because the other powers, essentially the so-called West (or US Empire or NATOplus or...) will not tolerate it but will rather drift towards a boycott of China for this reason.
I think they will not and this is why:
I do not truly understand why China artificially-supported trade surplus is untenable. More exactly: I understand the macroeconomic concepts but, unless the rest expel them from WTO and establish a boycott on Chinese products, they can get away with it until the former First World completely collapses. Then they would proceed with whatever restructuring is needed but by then they will have already won the trade wars.
|Projected GDP(PPP) in 2015, from Leherensuge|
The only problematic scenario would be that boycott, which possibly the US and its allies can get together to enforce, but the Chinese do not feel truly threatened at this stage for two reasons:
1. They hold such a huge share of US and other developed countries’ debt that they could throw it as an economic bomb. And they consciously use this as leverage by purchasing “toxic” debt from these countries, not just the USA. If you try make us fall, you will fall with us is the message.
2. The capitalist oligarchs who effectively rule NATOplus, from Seoul to Athens, have already invested heavily in China and like it the way it is. The Chinese enemy of the West is westerner and, worse, it rules the West. That’s why some of what we see politicians and central banks doing looks so inconsistent: it is what a drug addict does, regardless it is the path of doom.
Instead, it seems to me that the Chinese (who after all invented virtual paper money and have a long history of resisting becoming the market for the West’s products, since very early in Modern history) know rather well what they are doing: they are sucking the blood of the Western alliance, exploiting carefully the design errors of globalized Capitalism in their benefit.
Their goal is not so much to have a healthy market economy, that is a Western prejudice. Their goal, logically, is to become the first global superpower, replacing the USA, by careful controlled and slow, and profitable, demolition of their rivals and by co-opting their elites to some extent.
This is, I understand, a legitimate goal from the viewpoint of China, which would like to recover its past glory. The main risk they have is possibly to be drawn to a Cold War style military confrontation, where they cannot win (not yet at least) but that is why, partly, they emphasize soft power by trickling rather than openly confronting their rivals.
On the other side, we can already see how much of a failure is the militarist policy of the USA. The US invaded Iraq, spending huge amounts of money and credibility, China has largely reaped the benefits without raising a single gun. Similarly the intervention in Afghanistan and Central Asia is not really producing the results the USA would like from it (to be able to blackmail China and Russia from their weak spot). Instead they softly organize their pipelines and make trade agreements with whatever US puppet there is around. The USA reacts investing in a government change and China bribes them to their side again.
And so on.
While I agree that the Chinese regime is not mid-term stable because the growing bourgeois class will eventually want to reform the system, they have so far managed to satisfy most of their demands and even co-opt them into the ex-Communist Party. For the Chinese bourgeoisie anyhow allowing the USA to set the rules is not desirable in any case, so they are so far happy with the deal, more or less. But unless the USA and allies are willing to assume the huge costs of besieging China (costs in economic readjustment, in greater military expenditure and costs in dissatisfaction from their ruling elite of global capitalists, who would lose much of their own profits as they’d get excluded from China too) this is not going to happen.
We can see the tension between these Western internal contradictions: the nationalist and the globalist poles but these tensions precisely cause only half-hearted reactions from the West, as it drifts without a clear plan in relation to China and its own future.
The West, specially the USA, is caught in its own globalist/imperialist trap, in its own capitalist system trap and China, whose leaders probably have read Marxist economists (often more realist and objective than Liberal ones), know that and toy with it, like a cat with the mouse they have just captured.
I do not blame China, sincerely. I blame the Western ruling elite and I think that the only option in the mid-term is Socialism, including a good deal of Chinese-style protectionism (but also other things done much better too - thinking here specially in ecology and democracy, as key pillars of genuine and viable Socialism). However this will not happen yet, so the West is trapped in its own imperialist project that someone finally has managed to manipulate in their own favor.
Note: minor style and clarification changes were made to the original comment.