In China, COVID-19 Corona virus, False narratives, Issues

Xinhua News Agency

All countries in the world are currently facing a common crisis. Only cooperation and dialogue can overcome the pandemic and the other crises the world faces. China should continue to act as much as possible in a responsible and cooperative manner, and seek to build friendship and trust in the international community. However, for as long as ruling elites in the United States view China as one of the major threats to the United States’ ‘influence, interests, power, and values’ (White House, February 25, 2017), the international political arena will be replete with serious risks. In the end, no country can turn the tide of the times through the exercise of its own power alone, and no country can forever occupy the top of the mountain and look down with disdain on heroes.

By Michael Dunford and Qi Bing

Published on NCW, Apr 15, 2020
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COVID-19 was first identified in China on 31st December 2019 as ‘an influenza of unknown origin’. In the three days from 9th and 11th January 2020, the SARS-CoV-19 virus was identified and its genome sequenced by Chinese researchers, with the details uploaded to an international database. Although the pandemic first exploded in Wuhan, the origin of the virus remains unclear. For some it lies in industrialized agriculture and for others in other human interactions with the natural world. No matter what the source was, there is increasing evidence that the virus was circulating unrecognized in a number of countries towards the end of 2019.

Figure 1: Mao Zedong

This pandemic serves, alongside the climate and the more general earth system crisis, as an important reminder of the vulnerability of our societies and the importance of their interaction with nature. In a world in which selfishness has been encouraged and deepened in many countries as a result of the diffusion of neo-liberal and neo-colonial economic and political practices and the imperatives of capitalist competition and profit-seeking, these two crises, along with the ever-present threat of nuclear war, are reminders of human kind’s deep-rooted needs for solidarity, cooperation and mutual aid. At the same time they are also point to the challenges facing those who are working together to create a more equal, sustainable and peaceful world.

The difficulty is that solidarity, cooperation and mutual aid take second place in many countries to narrow zero-sum economic and political interests. These zero-sum attitudes are reflected in the intention of ruling elites in the United States to prevent the rise of China. The United States stance has become increasingly explicit since the November 2011 announcement of a US strategic, diplomatic and economic pivot to Asia. The 2018 US national security strategy identified China (with Russia, Iran and North Korea) as the main threats to US ‘influence, interests, power and values’ (The White House, 2017, 2, 25). Great power competition is now the primary focus of US national security and is reflected in a whole series of attacks on China: a trade war, restrictions on Chinese companies especially in high technology sectors and US interference in Tibet, the South China Sea, Xin Jiang, Hong Kong and increasingly Taiwan with US supported demands for international recognition.

The China threat thesis and the erosion of US strategic power

At the root of this change of course are a number of factors. First, as they developed, western countries and later Japan embarked on the colonization of the world and struggles for hegemony. China has made it absolutely clear that it will never seek hegemony. Unfortunately western countries can only see the world through their own lenses and assume that any rising power will imitate their behaviour and seek hegemony.

Figure 2: G7 productivity growth rates decline

Second, the long-term economic performance of the United States and indeed of G7 countries has declined almost constantly since the economic crisis of the 1970s. Secular stagnation is reflected in particular in declining rates of growth of labour productivity. This decline in productivity growth is due to insufficient productive investment (where rates of return are considered insufficient for private investors) and the diversion of resources into financial and other rent-seeking activities. At the same time the Chinese economy has grown rapidly, China has become the manufacturing workshop of the world, has increased imports of energy, raw materials and food and exports capital, constructing infrastructure, offshoring some industrial activities and seeking markets and technology. Although China is today only an upper middle income country, the size of its population makes it one of the largest economies in the world. On present trends China’s Gross Domestic Product at market prices will soon exceed that of the United States.

Alongside long-term relative decline, the United States faces other challenges. For the United States energy security is an important priority. In recent years the fracking industry made it not just self-reliant but also a potential exporter of oil and gas. Costs are however high, and US gas, which it has tried to force Europe to purchase instead of Russian gas, is expensive. The United States oil and gas industry is also saddled with immense debts. At present it is completely unviable as a result of the fall in oil prices that followed Russia’s refusal to continue to limit production in the framework of OPEC+ (of which the US is not a part) to preserve relatively high oil prices.

At the same time US corporations as a whole are sitting on $10 trillion in debt, while US household debt has reached US$ 14 trillion. Most western economies have been financialized in the sense that financial institutions have become dominant, while non-financial corporations concentrate on financial activities. At the same time households whose real income has stagnated are increasingly dependent on credit. As the principle of shareholder value drove out that of stakeholder value corporations concentrated overwhelmingly on rewarding shareholders and senior executives awarded share options. Not only did these developments increase inequality. They also provided a clear indication of what these societies value and do not value. In the last decade United States airlines spent 96% of their free cash flow on stock buybacks. In the case of Boeing which spent US$43 billion on share buybacks financial engineering assumed more significance than aeronautical engineering with devastating consequences for the safety of its aircraft. In September last year its liabilities exceeded its assets. In the absence of debt write-downs and/or interest rate concessions, debt service powerfully constrains consumption, investment, growth and employment, while an inability to pay leads to a transfer of assets to wealthy financial interests. This problem is exacerbated by the tendency for debt to grow exponentially (Michael Hudson).

Figure 3: Comparative investment in the US and China

Third, as a result of successful industrial upgrading in China and inadequate productive investment in the United States, China has made significant relative progress in some of the technologies that will lead the next industrial revolution. These industries include robotics, artificial intelligence, nanotechnology, quantum computing, biotechnology, the Internet of Things, 3D printing and autonomous vehicles. A consequence is that US corporations may not control some of the leading sectors of a new industrial age starting with 5G wireless telecommunications. The emergence of new industries to replace older ones and the emergence of new geographical centres of development are characteristics of past economic change and, in the end, led to an accommodation of new industrial nations in reformed world systems. The US is however determined that it should continue to dominate all critical technologies and aims to prevent China from making progress and finding markets. Examples include US restrictions on Huawei and the call by the United States Congress for an embargo to wreck COMAC’s C919.

Fourth, China advocates a world in which different countries work together, while respecting each country’s choice of its own national economic and political order. The United States and the European Union consider that other countries should adopt western models or ‘European values’ creating a global liberal order. Starting in the 1970s US engagement with China was in part designed to isolate the former Soviet Union but it was also expected to result in political and economic change in China. The change (reform or colour revolution) western countries desired has not occurred and, what is worse for them, a country with a different economic and political order has proved that it can make remarkable progress. As the rise of China and indeed of other civilizations (such as India and Russia whose roots also lie in Judeo-Christian traditions and Abrahamic religion but followed a different path) will in all probability continue, the only sensible course of action is for western civilization (Europe and its offshoots) to adjust and co-exist peacefully with countries with different economic and political systems and civilizational values. However, the response of the United States was one of confrontation with China, while the European Union which has seen a certain erosion of trans-Atlantic relations looks on with some anxiety.

Fifth, the United States continues to live beyond its means. Throughout much of the world it has established military bases, and it has been at war for all but four years of its existence, most recently as it has sought a redivision of areas connected with the former Soviet Union, starting with Yugoslavia. Since the Second World War, the drain on its balance of payments has been immense and was one of the reasons for shelving the link between the US dollar and gold and ending the Bretton Woods fixed exchange rate system in 1971. The domination of the US dollar generates significant advantages for the United States. First it gains from international seigniorage as fiat dollars used to pay for US imports go into circulation in other countries and are not used to purchase US goods and services. The US finances its trade deficits and government budget deficits by borrowing in its own currency at low rates of interest, as Saudi Arabia, Japan and China used trade surpluses to purchase US dollar denominated assets. The US dollar dominates world credit markets enabling the US to avoid exchange rate risk and secure loans at low rates of interest. And as most trade and finance is denominated in dollars, just about every country is subject to US commercial rules. As a result, the US can easily threaten and damage countries that do not defer to United States interests by cutting them off from the US banking system.

And finally the US is one of the major centres for world equity markets. The continued appropriation of resources from the rest of the world has tempered economic decline and enabled the United States to continue to occupy a dominant position in the global system. This advantageous position is however threatened by de-dollarization and the use of other currencies such as the renminbi to settle international payments.

Figure 4: Economic and demographic weights

The underlying problem is that the United States which especially after the collapse of the Soviet Union initially emerged as an unchallenged leader of the global system able to act as it saw fit is in relative decline. China, it had hoped, would adopt a western economic and political model and defer to the United States. In the event the rise of China is leading to the emergence of a new multipolar world system in which the United States would be one leading power amongst others and in which not all countries would adopt western social models. At present the United States is not prepared to accept this outcome, even though a radically reformed United States would have the capacity to redirect its energies into rebuilding its infrastructure and industries and providing high quality public services for its people. Sadly the United States has also refused to participate in new international programmes such as China’s Belt and Road Initiative and the Asian Infrastructure Investment Bank. Instead dominant neo-conservative United States elites have chosen confrontation and destabilization.

A pandemic that exposes the vulnerability of western societies

It was in this context that the recent pandemic unfolded. Western countries had in fact already made decisions that increased their vulnerability. In a world in which more and more people travel, new viruses, which emerge quite frequently, spread more easily. Although western corporations dominate many supply chains and appropriate a great deal of the value added, production occurs in distant places, making them vulnerable to supply disruptions (exacerbated by cost minimizing zero stock strategies). In the United States the large pharmaceutical companies have almost all abandoned the development of new antibiotics, antivirals and a universal vaccine for influenza in favour of activities with higher profit margins and had moved core activities to lower wage countries. At the very least when markets fail, governments should take responsibility for manufacture and distribution of items so vital for the welfare of all.

Western countries are privileged in that since the Second World War few have suffered real generalized hardship. The exceptions are those people and communities devastated by occasional localized disasters and the major economic recessions of the early 1980s and 2007/9. Hardship, wars, pandemics and natural disasters were things that happened in other less developed parts of the world. Many people in the west consider themselves and their societies superior and not subject to such events. It is one of the reasons why western governments did not take the outbreak seriously, why a large share of the population responded in a selfish and self-interested manner and why, in the words of the World Health Organization’s Director General, Tedros Adhanom Ghebreyesus, there was a ‘missed opportunity’ to prepare for outbreaks in their own countries.

For any country dealing with an outbreak of a previously unknown contagious disease is extremely difficult at the best of times. In acting quickly to shut down Wuhan between 23rd and 25th January and in earlier informing the WHO and other countries, China made a major contribution to worldwide struggle against the COVID-19 outbreak. Unfortunately, the initial response of some political figures and most mass media in the western world was to slander China and its people. These criticisms were quickly reflected in more widespread Sinophobia.

Figure 5: China supports France

Faced subsequently with China’s remarkable success in controlling the first wave of the SARS-Cov-19 virus, the government and its people secured the admiration of very many people throughout the world. China itself then made efforts to share information and its experience and provide medical supplies and medical teams to severely hit countries. By 27th March China had provided assistance to over 80 countries and international organization. In this way it points to the value of a new more co-operative world. Many people welcomed China’s contribution, along with other contributions from Russia and Cuba, but the criticism from some circles never ceased.

Critics quickly claimed that Chinese (and Russian) assistance was designed to disrupt an increasingly divided European Union. The European Union was already reeling from the 2007/9 financial crisis, the 2009/14 sovereign debt crisis, the 2015/20 migration crisis and BREXIT. The pandemic has exacerbated its problems in particular due to its inability to come to the help of the most adversely affected countries. In the words of Aleksandar Vučić, the President of Serbia which is expected to join the EU in 2025, ‘we have all understood that European solidarity does not exist.’ As already mentioned, it was China, via the nascent ‘Health Silk Road’, Russia and Cuba that provided assistance. Although the EU will argue that public health is largely a national responsibility it remains the case that cross-border solidarity was almost non-existent, while suggestions for ‘shared European debt’ have met fierce resistance from Germany, Austria and the Netherlands. The Chief Scientific Officer of the European Union resigned over its refusal to fund a COVID-19 research programme.

In other cases there were criticisms of Chinese products. These criticisms are warnings. In one case ill-informed decisions were made, purchasing equipment to test for the presence of antibodies rather than for COVID-19. Quality issues and unscrupulous market behavior do however require serious attention, and in fact led the Ministry of Commerce to introduce a new regulation requiring from 1st April any exporter of medical supplies to provide a quality statement, a medical license and meet specific importing country requirements. Also important however are the risks that arise from differences in industrial standards. In seeking to provide assistance or enter US markets Chinese companies should reflect on the existence of different standards in the United States and China and the case of Beixin Building Materials that entered the US gypsum plasterboard market at the time of Hurricane Katrina in 2005. At the time of the 2008 financial crisis 4,000 owners seeking a reason to not make mortgage repayments lodged a complaint. Although there was no evidence of quality problems in multiple world markets, Beixin Building Materials was forced to settle at the cost of US$ 248 million.

As the pandemic reached Europe and the United States it exposed a serious lack of hospital beds, medical equipment and trained personnel as a result of decades of market-principle and profit-driven restructuring of health services in many western countries. The situation in Europe where there are strong welfare state traditions was far superior to that in the United States. These countries are however rich and should therefore lead the world in health care provision. In relation to the United States Robert Reich has said: ‘Instead of a public health system, we have a private for-profit system for individuals lucky enough to afford it and a rickety social insurance system for people fortunate enough to have a full-time job’. More severe critics have reportedly said that the current pandemic revealed moral bankruptcy in cases where Western civilization initially failed the test of ‘humanity’.

In handling the pandemic different countries chose different paths and as events unfolded changed course. Of the first wave of countries seriously affected, the performance of the US which was extraordinarily ranked first in the world on a Global Health Security Index was the worst. In a country with relatively low per capita health resources, the Chinese government conversely had clearly demonstrated its administrative competence and capacity to secure the support of its people. As a result of the inferiority of its own response, the United States government and mass media and some of their international allies are now desperate to blame China for their own failings, in some cases demanding compensation.

An economic shockwave, modern monetary theory and another massive government transfer for Wall Street and Corporate America

Ahead of the pandemic the advanced capitalist economies were already heading for recessions. In most economies containment of the pandemic resulted in dramatic slumps in production, investment, employment and incomes with growth rates dropping by some 2% per month of containment (New OECD outlook on the global economy). In the US 10 million people declared themselves as unemployed in two weeks, while ahead of the crisis the labour force participation rate had already fallen to 62.8%.

Governments in capitalist countries have announced stimulus packages and for the capitalist sector credit, asset purchases, loan guarantees and interest rate cuts that dwarf the support provided since 2008. Of a US $2 trillion package in the United States, two-thirds will go in cash and loans to companies that may never repay, and just one-third assumes the shape of a $1,200 advance on tax returns or cash payments to workers and self-employed. Alongside these measures rent, student loan and mortgage repayments are suspended. Since early February the United States Federal Reserve has also created $1.5 trillion (nearly $12,000 for each of 130 million US households) and given it to Wall Street financial institutions either as loans or to purchase financial instruments to protect stockholders and overleveraged companies. Combined with other purchases of bonds and other assets after the 2007/9 financial crisis these purchases (which do not add to the money supply as technically they are swaps) drove the Federal Reserve’s balance sheet over US$500 trillion. To date these initiatives have largely led to stock market inflation with valuations increasingly divorced from underlying economic realities.

Just as the surge in liquidity after the 2007/9 crisis did little to boost productive investment, so too will it fail to do so on this occasion, as the fundamental issue is not a lack of cash. In these circumstances only massive government investment, public ownership of strategic sectors, more planning and state direction of productive sectors could restore economic and employment growth.

Figure 6: Mao Zedong Get rid of illusions

Which way forward?

Where do we now stand? The world faces major challenges that require joint action, of which handling pandemics is one. Climate change and the sustainability of the earth system is another. The pandemic itself may lead to a significant re-assessment of our ways of life and of what is valued: in these few month air quality has improved sometimes quite dramatically, noise pollution has diminished, traffic congestion has declined. Virtual meetings replace some face to face meetings. In the case of white collar work more is done from home.

In all societies the pandemic has demonstrated the vital roles of the people who worked to provide health care, essential services, community care, groceries, security, construction of hospitals, deliveries of goods and services. It also demonstrated the importance of medical science and technology innovation system and their contribution to people’s livelihoods, health and life, social and economic development and national security and social stability. This observation raises serious questions about the values of societies that most richly reward financial engineers, shareholders and superstars.

All countries certainly have a great deal to learn from the strengths and weaknesses of their responses and about the roles of governments and markets and public and private sectors. It may be that an awareness of the deficiencies and inequalities of western societies will lead in the direction of a change of economic and political course. In recent days even the Financial Times in the UK called for abandonment of the policies of the last 40 years that have created divided societies and deep-rooted dissatisfaction and for a new path designed to increase solidarity and coherence.

A number of other vulnerabilities that the pandemic revealed may lead in the direction of de-globalization. The absence of domestic supplies of vital goods and services may lead to a reconfiguration of some supply chains and greater national self-reliance. In the absence of a vaccine limited immunity will increase the importance of examining for the presence of antibodies, the monitoring, testing and isolation of vulnerable groups to address the dangers of a new wave. These considerations may impact on economic and social development, international exchanges, and opening up.

Whether a radical change of direction occurs is far from certain. The way western governments have adopted more of the same economic policies that have failed to restore sustainable growth and decent employment and have exacerbated inequalities suggests that elites are intent on no significant change. At present a response of governments and influential figures and media outlets in the United States and the United Kingdom and other members of the Five Eyes is to seek to hold China responsible for their own shortcomings, in some cases demanding compensation. After an initial wave of criticism China’s practical actions have impressed many people. Most people in most countries are most concerned about their own lives and livelihood and are not interested in conflicts with other countries. At an elite level however, widely disseminated disinformation campaigns and hostility tempered by short-term needs continue, and it is increasingly clear that the United States wants to prevent the rise of China.

In 1947, shortly after the end of the Second World War, President Truman of the United States put forward the Truman doctrine. Intent on extending the realm in which the United States exercised hegemony, Truman proposed the containment of Communism as the guiding political and foreign policy agenda of the United States. In 1949, Mao Zedong wrote a commentary for the Xinhua News Agency on a White Paper published by the US State Department and Acheson’s letter. Acheson was a member of the Truman Administration at the time. Mao Zedong said in his comment entitled ‘Cast away illusions and prepare for struggle’: ‘Imperialism is very vicious, that is, its nature cannot be changed. The imperialists will never let go of the butcher ’s knife, will never become Buddhas until their demise.’ Today, it remains difficult to persuade imperialists to change course, and so it is highly improbable that the United States will ‘turn back to shore.’

The West is still the West, but China is no longer the China of the past. 2020 is once again the year of Gengzi. In this particular year of Gengzi compensation will not be paid as it was in the past (at the time of the First Opium War and after the Boxer rebellion of 1900). In the absence of fundamental political change in the United States, China should have no illusions about the challenges it will face, nor should it expect a 180-degree change in its relationship with political and economic leadership of the United States. For as long as ruling elites in the United States view China as one of the major threats to the United States’ ‘influence, interests, power, and values’ (White House, February 25, 2017), the international political arena will be replete with serious risks.

Figure 7: Sun Zhongshan (Sun Yat-sen) World trend

The world does not need a new cold war, but China must act with caution. All countries in the world are currently facing a common crisis. Only cooperation and dialogue can overcome the pandemic and the other crises the world faces. China should continue to act as much as possible in a responsible and cooperative manner, and seek to build friendship and trust in the international community. Sun Yat-sen once said: ‘The tide of the world is magnificent, those who succeed  are prosperous, and those who act perversely perish.’ The wheel of history rolls forward, no country can turn the tide of the times through the exercise of its own power alone, and no country can forever occupy the top of the mountain and look down with disdain on heroes. Time is the best answer …

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Michael Dunford is Distinguished Professor of the Institute of Geographical Sciences and Natural Resources (IGSNRR) of the Chinese Academy of Sciences, Professor Emeritus of the School of Global Studies, University of Sussex, UK, and Managing Editor-of the Journal Area Development and Policy.

Qi Bing is Associate Professor, School of Marxism, Beijing Sports University, Secretary of the Teaching and Research Office of the Theory of Socialism with Chinese Characteristics Group.

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Main photo: In this photo released by Xinhua News Agency, Chinese President Xi Jinping, left, wearing a protective face mask receives a temperature check as he inspects the novel coronavirus pneumonia prevention and control work in Beijing

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