China's Expansion and Development: The Reality and the Illusions

"China sees the worst stock market crash" because Trump's tariffs may have exposed the inherent weakness of China's economy. Frank Dikotter makes the case that China remains fundamentally a communist nation, characterized by widespread poverty, a fragile domestic market, and a paranoid inefficient system that will eventually implode.

China has not been "transitioning" towards an open economy, creating its own Confucian version of modernity and openness. The Communist Party has total control over the government, economy, and society, and its world view remains firmly rooted in Marxist-Leninist ideology.

Listening to this interview, one get's the impression that China's success was merely a result of its ability to persuade the West to let it join the WTO, which opened the West to Chinese products, and destroyed the manufacturing capacities of the US.

But how did a communist-controlled economy manage to churn out goods the world wants to buy? China’s economy, Dikotter must know this, isn’t a pure command economy like that of the Soviet Union. It has incorporated market mechanisms. While the Party keeps a tight grip over society and the economy, it allows private enterprises -- albeit owned primarily by Party members -- and foreign investment.

Dikotter's argument seems to be along the lines that China’s growth exploded thanks to the West. But one can't deny that the Communists created the conditions for China's success in the global market through massive subsidies of domestic industries, tax breaks, and a disciplined, cheap workforce. Western firms decided to design their high tech goods in China because the Communists created a cost efficient system.

Dikotter says that China's amazing cities and major infrastructural projects are more show than expressions of real wealth and strength. The nation remains heavily agrarian with a low per capita income. The major highways eventually lead to dirt roads.

What I get from Dikotter, though this interview is more focused on the political than the economic system, is that export-led growth has fueled China's economy, not a healthy domestic market. The communists in charge of businesses are not as innovative and entrepreneurial as we may believe. Masses of goods and buildings can't find markets inside China. Many businesses would go bankrupt if it were not that the Party subsidizes them and the West purchases its goods.

From this analysis, we can see that Trump's tariffs are designed to exploit China's dependence on foreign markets and vulnerability to global demand fluctuations. It may be that one of Trump's key aims is to derail China's "unstoppable economic growth".

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