Below is a translation of “China: Neijuan” from issue #107 (spring 2021) of the German magazine Wildcat – fourth in their series on trends and struggles in China since 2018, the second and third installments of which we published here as “Winter is Coming” and “Trade War or Redistribution of Wealth?” This translation is directly reposted from Wildcat without any revision, except changing the title to the standard English rendering of the Chinese term neijuan (内卷) as “involution.”
We repost this article because it contains many insights into how things have been changing on the ground in China over the past year. It musters a multitude of data, original calculations, first-hand observations and analysis of a broad range of topics from Hong Kong to Xinjiang, Africa, Sino-US relations, espionage, poverty, gender and the demographic crisis. We hope this may help combat the recent rise, in international left circles, of pro-CCP “tankie” positions on such issues.
But this article differs from the previous two Wildcat pieces in its more despondent attitude toward the possibilities for the emergence of widespread linkages between workers in China and elsewhere. This reflects the European author’s own frustrated experience in trying to initiate such connections over the course of several years living in southern China. Specifically, the article remarks on rising xenophobia and nationalism among different sectors of society—a trend that has only escalated in the year since the COVID-19 pandemic got under control domestically last spring—facts which have made any organizing difficult and have posed particular challenges for anyone seeking to cultivate a true internationalist perspective. The article also outlines an account of China’s economic and social “involution” consistent with the recently popular Chinese discourse of neijuan—used to describe the widespread sense that no amount of hard work will result in happiness or significant improvement of one’s conditions. (Our forthcoming blog piece on suicidal protests will explore one disturbing symptom of this “involution.”)
We too have lost hope at times, and the present moment does feel like one of the most hopeless periods in recent memory, especially with regard to the possibility of a mass movement emerging. China today seems to stand in striking contrast to the dramatic mobilizations that have illuminated the world over the past decade. However, we caution readers to put such sentiments into a broader historical perspective. Many of the great insurrections of history, from the 1870s through the 1960s all the way up to the Arab Spring and the George Floyd Uprising, emerged from conditions where an economic boom was running out of steam and simmering discontent seemed to have been skillfully channeled into some form of conservativism, nationalism or racism. Those who witnessed such explosions often described how shocked they were that people could transform so radically in such a short period of time. Even in China itself, such rapid shifts are not unprecedented if we extend our horizon by just a few decades. Surrendering to the cynicism of our era is tempting. But hope hides in the shadows of even the worst repression.
In addition to this divergence in tone, there is also an important difference between our own economic analysis and the framework used in this piece. This framework appears to be drawn largely from “balance sheet” accounts of crisis, as can be found in the work of authors like Michael Pettis. Such accounts draw from classical Hobsonian theories of imperialism, which prefigure the later “Keynesian” emphasis on the lack of effective demand as the cause of crisis, and extend this logic to explain trade wars, imperial conflicts and even long-run “secular stagnation” itself, arguing that such phenomena are caused by domestic inequality and the diminishing income of “consumers.” The implication is that a “rebalancing” of trade will lead to a reduction of inequality, rising consumption and increased prosperity for all. This position has been critiqued elsewhere, such as in this piece by Aaron Benanav. Dismantling such positions is important, because it also remains the basic ideological framework used by the Chinese state in its own industrial policy. For decades, the state has been posing its own goals in the same terms, emphasizing the need to cultivate domestic consumption, to reduce reliance on exports and US financial assets (i.e. “rebalance” trade) and to funnel money into R&D to assist domestic industry in advancing up the “value chain.” In contrast to such accounts, we argue that none of these policies, even if successful, would reduce conflict, crisis, inequality or the imperial inequities of the global economy. In fact, we argue that such measures will only worsen global industrial overcapacity, intensify competition, induce further imperial expansions, and even then ultimately prove unable to truly diminish relative stagnation and the growing “surplus” conditions of labor in China itself, epitomized by the intense exploitation of gig workers (leading to several strikes and resultant repression over this last year, documented in our translations here and here), rising informality and the discourse on neijuan documented below. This case will be made in more detail in the forthcoming third installment of our economic history.
China: Neijuan 内卷
The word ‘Neijuan’ is composed of the characters for ‘inside’ and ‘roll’ or ‘to roll’ and is intuitively understood as something like ‘turning inwards.’ It can be translated as ‘retreat’ or ‘involution’. It means stagnation or stasis due to loss of friction or a process that binds its participants without benefiting them. Involution also means the opposite of evolution.
Neijuan is fashionable right now, like Sang culture a few years ago, or currently (Hunshui)Moyu (‘fishing in muddy waters’, see below). Originally used to describe a self-reinforcing process in agrarian societies that prevents them from progressing, ’Neijuan’ has now become the term that the metropolitan Chinese use to describe the ills of their modern lives, their sense of frantically treading water in a hyper-competitive society. Intense competition with low chances of success, be it in high school exams, on the job (or marriage!) market, or when working mad overtime. Everyone is afraid of missing the last bus – and yet knows that it has already left. Johannes Agnoli used the concept of involution to describe the “regression of democratic states, parties, theories into pre- or anti-democratic forms.”
If you want to read more about Neijuan / Involution – please do: Wang Qianni, Ge Shifan: ‘How One Obscure Word Captures Urban China’s Unhappiness’, www.sixthtone.com, 4th of November 2020.
Due to the length of the text, we follow the bad Anglo-Saxon tradition of putting an abstract ahead:
The strike wave of 2010 and the struggles against factory closures happened a long time ago. For the last few years, the China Labour Bulletin records a marked decline in labour struggles, with a low point in 2020. While there have been protests by construction workers, parcel delivery workers, food delivery workers, and still some against factory closures, the protests have remained very modest relative to the sharp drop in incomes, layoffs, widespread wage arrears, and the harshness and irrationality of the lockdowns. Politically, the CCP was able to skilfully use Corona, and the massive criticism of the first lockdown has since died down. There is widespread fundamental support for and defense of the government and public figures against criticism. Even many leftists and ‘critical thinkers’ ultimately assume that the state or state representatives actually mean well. However, it would be completely wrong to explain authoritarian structures as a result of ‘brainwashing’ or East Asian characteristics such as Confucianism.
Why didn’t the Chinese government use the chaos under Trump for creating new alliances and to increase its own international standing? Why has it achieved rather the opposite effect by annexing Hong Kong, expanding forced labour and re-education camps in Xinjiang, enforcing border closures, engendering nationalism and border skirmishes with India, initiating a trade war with Australia, in addition to kidnapping and other forms of Rambo-type diplomacy? In Wildcat 104, we had explained the state’s willingness to escalate was to form a blockade within China, where growing prosperity and continued CCP rule no longer ran in parallel. The strikes of the 2000s had shown that increasing industrialization could also lead to increasing workers’ power. The phase of development of capitalist industrialized countries usually called ‘Fordism’ managed to make class struggle the engine of development through growing private consumption and trade union rights – until workers’ struggles from 1969 onwards plunged capitalist accumulation into crisis. The CCP studied both this context and the demise of the Soviet Union and determined to avoid this fate. That is why the system switched to authoritarian rule. This switch happened, as is customary in China, in the form of factional struggle when the ‘paramount leader’ Xi Jinping came to power. Since then, state economic policy has attempted to stimulate the economy without increasing the disposable income of the working class. This exacerbates social inequality and entrenches the ‘Great Social Divide’. China is falling into the ‘middle income trap’ precisely because class struggles are successfully suppressed as a transformative force. China will not pull the world economy out of the crisis – rather the opposite.
Currently, the CCP seems firmly in the saddle, but time is running against it. That is precisely why it is fuelling nationalism and foreign policy adventurism. How then is international solidarity possible? How can it survive the current phase without siding with one of the major geopolitical adversaries, and instead stick to a class perspective? To find answers, the international left must stop looking at things through anti-imperialist and culturalist lenses and sharpen its gaze on Chinese class society.
My own situation
In South China, where I live, the Corona crisis has made contradictions more visible to me; it raised questions and caused conflicts to erupt. Since the Wuhan lockdown in January 2020, I have had to repeatedly rethink my political perspective on the world around me. This included many emotions that I now find difficult to keep out of a factual observation. Therefore, I will start with my observations. I make no claim to their general validity.
In the beginning, my friends here compared Covid-19 to the 2003 SARS epidemic, which had a fatality rate of nearly ten percent per case in China and Hong Kong. The initial cover-up from the authorities, general uncertainty and lack of information did the rest. Like most here, I was very scared and hardly dared to leave the house. In the first few weeks, there was a lot of lively online dissent and criticism of the CCP and the government. This made me feel more optimistic that the lies and blatant lockdown measures would not be accepted without dissent. But the more the epidemic became a global pandemic, the quieter and smaller the criticism became. This was based not only on censorship and the relative success in controlling the disease in the country, but also on the widespread spread of conspiracy ideologies that either the US army, Italy, India or frozen meat were the original sources of the Corona virus.
I did not go to China for a lucrative expat job with a lavish expatriate allowance, nor as an academic. I came on my own, had saved money so that I wouldn’t have to work at first and would have time to learn Chinese, and wanted to get to know life, society and working class reality in China. China’s rise to become the workbench of the world represents one of the most influential changes in recent decades, and I wanted to see that up close and make contacts.
At the beginning, a lot of time was spent not only on learning characters, but also on recognizing and discarding unconscious prejudices. My guiding principle was that cultures which differed to the one in which I had grown up do not arise from any inherent “otherness” but are a consequence of geographical distance, and the consequent lack of social exchange.
In contrast to the widespread idea in the West of the passive, acquiescent Chinese workers, who were primarily victims, what stood out for me was the high rate of conflict and wildcat strikes, non-conformity and everyday anarchism compared to Europe. Although at the time I thought that the image of the ‘iSlave’ in the Foxconn factory was portraying workers too much as victims, I nevertheless joined symbolic protests in front of offices of international corporations that profit from sleazy and dangerous exploitation in China. International solidarity with Chinese workers and their struggles seemed natural to me – despite having never talked to them about it. Even back then, in the early 2010s, it was almost impossible for even a fluent Chinese-speaking foreigner to talk to Chinese workers during a strike. In the meantime, repression, epidemic and xenophobia have further reduced my opportunities for contact with workers. A year or two ago, I was able to visit labour NGOs regularly, teach English once a week in a working-class neighbourhood, and talk much more easily on the street with truck drivers or warehouse workers.
At the time, I wondered what international solidarity could look like, but took it for granted that it was right, important and wanted. In recent years, I’ve had to realize that it’s much harder – you usually run into the wrong people first; and the hopes and desires you project onto others are often the entrance to a maze. Since my encounters with nationalism, chauvinism, xenophobia, and the lack of criticism and resistance, I have developed fundamental doubts about the possibility and usefulness of international solidarity projects that don’t consider the methods they use and the people they work with.
My workplace: collective blockade due to competition
I have been working in an international IT company for several years. One good thing about the job is that unlike in almost all Chinese IT companies, there is rarely any overtime. My colleagues are all Chinese – except for one Frenchman in another city. They belong to the urban middle class, but many without local hukou (see below for more details!). I have no special role as a foreigner, my employment contract and my responsibilities are the same as those of my Chinese colleagues. There is no language barrier because basically everything is discussed in Chinese, which I now speak reasonably fluently.
Racist prejudices and derogatory remarks about colleagues in India are common among Chinese team leaders. For me, it is also disconcerting that I cannot find the slightest movement of solidarity among colleagues. Everyone dances to the boss’s tune, no one voices criticism or even rejection, and there is no discussion of any kind at work meetings. Resistance is expressed silently at best: people slow down when the boss isn’t looking. But everyone is isolated. Most wouldn’t think of even winking to their fellow worker in solidarity. Even in informal conversations, a critical attitude is almost never even hinted at – at least to me – and I hardly ever get a reaction to ironic remarks.
In contrast, I regularly see dissent, expressions of opinion and defensiveness from team leaders and managers. If the boss comes up with modernization programs, the lower managers dilly-dally and stonewall, they water down the programs and explanations are put forward as to why they are unsuitable. They pass the bucket. These mechanisms are very pronounced. My French colleague says he has not experienced such a “kindergarten” in any other country for fifteen years. With this (quite successful) defence against modernization – even for changes that could reduce their own work stress! – team leaders and lower managers defend their privileges and their power of command, often with a good dose of arrogance and by turning against each other. Knowledge is monopolized in order to increase one’s own position. All of this forms an almost impenetrable wall for the department head.
Unfortunately, the colleagues at the bottom seem to have very little confidence in themselves and almost never voice concerns or objections. They are indifferent to issues of work organization. It seems like an act of mercy every time one gets an important piece of information, or even if two or three days of vacation are approved!
Management like in the classroom
In the last two months, two deaths related to overwork and overtime at online retailer Pindoudou have revived the debate about 996 (working from 9 a.m. to 9 p.m. 6 days a week) and (unpaid) overtime has been revived. When I asked why there was so little collective resistance if everyone was complaining about the pressure to do overtime, a friend replied that it was due to a lack of trust. She herself has worked as a graphic designer in five different companies over the past few years and has never lasted longer than a year anywhere. Everywhere, she says, the bosses were anxious for the employees to distrust each other. As soon as she became friends with an office colleague and was able to work well together, the bosses became suspicious and set her as far apart as possible. “Just like school!” For the boss, control is more important than productivity. Because if he loses control, his authority suffers; low employee productivity, on the other hand, leads to overtime and low wages for them, not for the boss.
Another acquaintance whose friend had worked at Pindoudou explained the willingness to work 300 or more hours a month with the high starting salaries at Pindoudou. Young college graduates try to do crazy overtime for a few years with the hope of saving up and buying a home. Most of them actually leave after one, two or three years. There is a lot of distrust among colleagues, he says, and everyone fears being ratted out immediately if they suggest refusing to work overtime together. My question was met with understanding by others – and at the same time was seen as an indication of me being an outsider, because within the tread-mill no one apparently even thinks about refusing overtime as a team.
Against individual forms of working slow or other unwanted behaviour, schools, like factories and offices, now use all sorts of monitoring technology such as facial recognition, seat cushions with sensors, and the like, to automatically detect (and punish) ‘misbehaviour’ such as daydreaming, resting on the table, or going to the bathroom a few seconds too long. 1 This justifies pay deductions and trains behaviour geared toward avoidance of mistakes, criticism, and especially punishment. Everyone keeps quiet and no one actively steps forward with new ideas and solutions either. Pointing out gaps in knowledge and small mistakes in others is associated here with marking superiority and authority to a degree that I wasn’t used to before – and unfortunately extremely common among men.
As long as bosses insist on the exploitation of absolute surplus value, i.e., on long working days, colleagues will continue to dawdle and put the brakes on modernization. If individual bosses stop insisting on long workdays and hard deadlines, then everyone feels encouraged to slow down even more. Under these conditions, it’s just as hard for me to imagine the bosses pushing through significant productivity increases as it is for my colleagues to collectively force the shortening of long workdays. How could the team collectively become aware of the fact that the boss depends on us and that we basically already have all the knowledge to implement the job, and therefore can influence the organization of work and the setting of deadlines?
These examples all concerned well-educated office workers. Two years ago, I was still hopeful that the 996 complaints would contribute to a rethinking of the work culture here, because the IT people have certain leverage that they could use. But the leverage is not their technical training or their place in the production chain, the leverage can only be in solidarity by doing it together; as individuals they are as interchangeable as a worker on an assembly line. But while the latter have managed a whole series of strikes, the former don’t get anything done at all!
Racism in everyday life
I have lost count of my own encounters with racism. Several times, as a foreigner, I was denied access to neighbourhoods and transportation, I was told that foreigners could not handle the pandemic responsibly, were unreasonable, and did not wear masks. I had hotel reservations cancelled at the last minute, I was yelled at and threatened, I was told to my face that incoming foreigners, as opposed to returning Chinese, would carry the virus, etc. The special attention shown to me as a white European can turn into rejection and discrimination in the next moment. The same person who just praised my Chinese can – for example because he has ‘authority and responsibility’ as a gatekeeper – apply racial profiling and drive away ‘the foreigner’ using obscure excuses. Racial profiling is taken for granted in the eyes of the vast majority and is built into facial recognition software by Alibaba, for example. Racist portrayals on television are virtually the norm.
Friends published a small report of mine online about racist discrimination in Chinese, which received attention and approval in my close circle of acquaintances. Outside this narrow circle, I either encounter denial (I’m just misunderstanding something), or what-about-ism (in other countries there would also be racism), or I am told that Chinese are even worse to each other than they are to foreigners. In fact, discrimination against Chinese with slightly darker skin or from poorer parts of the country is widespread. Construction workers, for example, can be seen from afar by their stocky stature and sunburned bodies, as they work in construction and come from poor and malnourished parts of the country. They erect the multi-million-dollar residential and office towers – and earn not much more than the minimum wage. Their work crews are barracked in containers and have no contact with urban society. They have long workdays and hardly any days off, wash their clothes by hand in vats in front of the housing container, and I have never seen anyone in construction wearing safety shoes or a welder wearing welding goggles. Even during the pandemic, when most hotels were empty, they were not paid for even the cheapest hotel rooms.
Compared to the stigmatization and exclusion of construction workers, my own encounters with xenophobia are almost trifles.
All three of these typical defences people used to relativise the problem show a lack of confrontation with racism and an absence of universalist values. In the US and elsewhere, people take to the streets against racism. In China, ‘leftist’ students made a documentary in April 2020 about the eviction of Africans in Guangzhou by landlords and authorities, which ends by insinuating that non-Chinese should better understand Chinese culture and language! 2
Three everyday observations
- In 2017, informal film screenings and discussions in cafés were moderated, but the people who did the moderation were pretty openly and relaxed and didn’t seem to have a particular sense of mission. Today, moderators act like authoritarian village schoolteachers as they ‘explain’ a film they know no more about than anyone else present. They give moralizing lectures and do not allow free discussion, but comment on every contribution from the floor. The increasing authoritarianism does not even stop at small, quasi-private and ‘leftist’ circles.
- In December, uniformed officers systematically forced passengers at the main train station and in the subway to install a cell phone app ‘against online fraud’ without giving any explanation. With such a spy app on the cell phone, insights into the user’s life can be gained that are comparable to a ten-hour police interrogation. We have not been able to observe any protests or outrage.
- An acquaintance with a university degree, who had worked for some time in an NGO for environmental protection, became pregnant unintentionally and decided to have a child and get married. Since then, she has been living with her in-laws in a city of about a million people and already has a second child. Her husband works about an hour’s drive away and only visits her every week or two. She can’t move in with him because he has an eight-year-old sister whose child-rearing duties have largely been assigned to her. When cooking, the eight-year-old calls her mother who had left the house for errands to give her daughter-in-law minute cooking instructions over the phone.
Marriage still serves to appropriate female labour. Through marriage, the woman becomes part of the man’s family and subject to the mother-in-law’s command.
The social hierarchy in businesses, administration and kinship relations is still strongly based on the principle of seniority, which is embellished with meritocracy, a monopoly on knowledge and all kinds of honours. Elders measure their power and position by how many others they can give orders to. Under what conditions do the young and highly qualified decide to go against the hierarchy? And when do they comply?
How propaganda works
In addition to the corporate culture, state propaganda is also having an effect. The CCP basically propagates Chinese exceptionalism: Chinese-style socialism, Chinese culture, medicine, history, Chinese food, Chinese rule of law, and so on. Everything melts down to the formula that China is special. Therefore, non-Chinese could not judge China and non-Chinese values cannot be applied to China (but other countries are very much supposed to “learn from China”!). Imperialism, which all left and right Maoists and nationalists reject, is defined as the imperialism of whites; no matter how China acts in Central Asia, Africa, or elsewhere, it cannot be imperialist per se.
The accusation of double standards against the West is correct; but it becomes absurd once we see it against the background of the CCP’s rejection of universalist values as ‘western’. For, according to the CCP, there cannot exist a uniform morality at all. 3The twelve core values of Chinese socialism of the Xi era include democracy, freedom, and the rule of law (rule of law, but without separation of powers, so rather rule by law). Many believe that China is democratic. This may be helpful when trying to disarm democracy propaganda from abroad, but it is easily attacked: In my Chinese class four years ago, everyone laughed when the teacher claimed that China was democratic.
The CCP’s greatest propaganda success is not the ‘erasing’ of historical events from collective memory, e.g., the Cultural Revolution and Tiananmen Massacre, but the fact that most young people have lost their curiosity. Even those with access to VPNs (virtual private networks) feel little curiosity to find out what they are actually being deprived of. A recent study in the journal Political Behaviour explains very well the social mechanism behind this: people know that everything is censored and stream-lined according to official propaganda and don’t believe the stupid stuff themselves, but they think that their fellow human beings believe it. Propaganda works because the individual then keeps his or her mouth shut in order not to get into the line of fire – and thus in turn suggests to the others that they believe the propaganda. 4
The Power of the Party
The People’s Republic of China has been described as a “cryptocracy.” This is because the main decision-makers and their internal conflicts remain obscure. A circle of extremely powerful and wealthy oligarch families, often like Xi Jinping ‘princelings’ (descendants of the old guard), holds the reins. They base their power on the military (Xi’s most important title is chairman of the Military Commission), the party and state bureaucracies, the security apparatus, state-owned enterprises, the Communist Youth League (Hu Jintao’s pole of power), and informal power centres such as the Shanghai Gang (Jiang Zemin’s pole of power). All large and many medium-sized private enterprises are directly or indirectly caught up in the power elite’s web of relationships in the party, state, banks and state-owned enterprises. In early November and at the last minute, the regime halted the initial public offering (IPO) on the stock-market of Ant Financial, the banking arm of Alibaba. Ant has risen to become the world’s largest money bank by brokering consumer loans without being subject to banking regulation. Because such online loans now account for about 20 percent of GDP, the risk must be contained through tighter regulation and tech companies put on a shorter leash. As things progressed, it turned out that Xi Jinping’s opponents in the power apparatus would also have benefited from the IPO – economic policy also continues to serve the factional struggle, or vice versa.
The state and state administration are not a monolithic block, however. The higher authorities set the direction, while the lower ones must put things into practice and have a relatively large amount of leeway for decision-making and interpretation. They are evaluated against KPIs (key performance indicators) such as GDP growth. Therefore, local and provincial governments tend to favour the short-term achievement of predefined KPIs and neglect sustainable but less spectacular developments.
A large share of taxes flows to the central government, and local governments lack revenue sources. They privatize communal land and borrow from shadow banks to pump money into the local economy in order to meet the targets set for them. In doing so, they often overlook environmental regulations imposed by the central government. Minimum wages, on the other hand, are set locally by city governments….
In education and vocational schools, the situation is similar: The central government wants to raise the educational level of workers, but does not provide local governments with sufficient funds for vocational schools. The latter falsify reports on schools, outsource to private providers (which leads to poor teaching) and hire out students in their third year of training to Foxconn or other companies!
On July 1, 2021, CCP China officially celebrates its centennial. Its representatives are everywhere, in every pore of society. Every state-owned enterprise and all large and many small private – including foreign – enterprises have committees or Party union representatives. Every university, every school has committees, and for every student there is a political overseer responsible for punishing inappropriate behaviour. All streets and housing complexes are part of a grid, and for each grid there is a person in charge who reports to the party bureaucracy.
Most ordinary members probably join the party out of family tradition, career awareness, or by invitation offered to the best students. They tend to be among the better-off, more patriotic, and more conservative in their respective environments without necessarily being nationalists. For several years now, party members and employees in government and state-owned enterprises have been forced to watch propaganda films and solve small exam questions every day via the app Xue Xi, Qiangguo (Study Xi, Strengthen the Country). More recently, ordinary students in nursing, for example, have also been required to listen to Xi’s speeches for fifteen minutes a day via the app.
The central government often controls society with campaigns like under Mao (“Let 100 flowers bloom,” “The Great Leap Forward,” etc.). At the beginning of the pandemic, the entire country and every village was called to lockdown. Such campaigns are effective (targets are met) but very inefficient (large waste of resources). Incidentally, but not surprisingly, there has never been a national campaign to raise wages, reduce working hours, improve working conditions.
Is China once again pulling the global economy out of the crisis?
With growth of more than two percent, China is the only major economy that did not shrink in 2020. However, the economic growth figures have been tweaked to look better than they actually are; they mask debts and unproductive large-scale projects. The situation regarding the Corona pandemic is also not as clear as officially claimed. New infections are usually responded to with mass tests and local lockdowns, which can include curfews for 22 million people in Hebei, as in Wuhan last year, as in early January 2021. And the current entry bans on most foreigners – and many Chinese, too! – show that everything is far from back to normal. The fact that the WHO drags their feet when it comes to epidemiological causal research also suggests that much remains to be done.
According to a study published in the BMJ on February 24, 2021, excess mortality in Wuhan between the end of January and February 12 was about 5000 deaths. This suggests that the infection outbreak in Wuhan started much earlier and was much more massive than officially stated. Deducting from the excess mortality, there are about 100-250,000 infections that must have occurred before the official lockdown on January 23. Thus, the situation in local hospitals was likely already dramatic in early/mid-January. And despite the relative success of the measures that began thereafter, in retrospect one must not forget the harshness and arbitrariness of the lockdowns. 5
China’s stimulus program during the Corona crisis was small compared to that of other developed countries and compared to that in the 2008/9 crisis. Growth occurred particularly in the construction industry and exports. Foreign iron ore exporters are benefiting from the construction boom, and German ‘premium car makers’ are enjoying the fact that luxury consumption is estimated to have increased by almost 50 percent year-on-year. China is now home to more US-Dollar billionaires than the USA and India combined. But private consumption fell by about five percent. The slump in private purchasing power and, in particular, the increased foreign trade surplus suggest that this time China is not once again emerging as the engine of global demand, but on the contrary is having its own upswing financed from abroad. For this upswing has been bought with debt: Total debt rose rapidly by about 25 percent of GDP and now stands at 279 or 335 percent of GDP, depending on the calculation. Private debt has grown from 55 percent to 62 percent of GDP in 2020, or to an extremely high 150 percent of total annual disposable income. And the economic recovery has exacerbated huge social and economic inequalities. The vast majority of migrant workers, as well as many urban workers, have lost one or more months of income due to lockdowns, lost overtime, and cancellation of allowances.
Doubts about actual growth
According to official forecasts, per capita GDP in China will reach $13,000 in about three years; and in eight to ten years, GDP is expected to be nominally larger than that of the United States.
In light of this, Premier Li Keqiang’s statement in May that 600 million Chinese live on 1000 RMB (about €125) or less per month was a slap in the face. This sparked a lively debate among my colleagues as well, with many refusing to believe that China was so poor. Caixin has confirmed Li’s statement based on research from Beijing Normal University and the National Bureau of Statistics. According to the report, 600 million were living on a monthly disposable income of RMB 1090 or less at the end of 2019. According to Caixin, the poorest households typically live in rural areas, have an average of one minor child and one member over 60 years old. The median per capita disposable income is about 1300 RMB (165 euros). China’s ‘middle class’ (defined as per capita income above 2000 RMB = 252 euros), thus consists of 250 million and not 400 million people as officially claimed.
Based on these figures, if we try to estimate the total amount available for private consumption each year and put it in relation to the official GDP of 2019, we get a share of private consumption in GDP of 22-28 percent. This would not only be historically unique, it would also probably be simply impossible (officially it is about 38 percent). In other words, it can be estimated from Li’s statement that the real GDP can only be about 65-80 percent of the official figure of RMB 99 trillion. A comparison with figures on income and income inequality by Piketty leads to a similar result considering the high savings rate and interest service. Doubts about the actual level of GDP are not new, and the figure tinkering on the part of provincial governments is well known. My calculation serves only as a conservative estimate, but if the growth of the last ten years had been productive, incomes would have to be much higher than Li indicates. But if his figures are correct, the debt burden as a percentage of GDP is also much higher than indicated above.
Michael Pettis points out that Chinese GDP should be understood as an input (!) measure used to determine how much economic activity provincial governments should generate. The CCP sets growth targets. Most of the GDP is channelled into infrastructure, propaganda, and the like, according to its interests. This public infrastructure was largely built for GDP growth and has limited utility (empty bridges, underutilized high-speed rail lines…). Growth is generated with debt-financed prestige projects that de facto increase social wealth hardly at all. Pettis estimates the actual annual growth at about two to three percent.
Li’s income figures mean not only that 600 million Chinese live on less than 125 euros a month, but also that a considerable part of the economic growth of the last ten years has not taken place. It also follows that future growth will be correspondingly lower and will slow down even further due to an ageing population, debt, etc. The chimera of rapid growth could then not be maintained for much longer, and overtaking the USA would only be possible if the USA economy collapses (which is also what Chinese propaganda keeps alluding to). In other words, time is running against Beijing. 6
Regarding my own calculations: The report gives the number of people for specific income groups, e.g., that 202 million receive a monthly disposable income p.p. of RMB 500-800. I estimated averages and added them up in a weighted way to approximate the total sum of all household disposable incomes. However, the latter cannot be meaningfully determined because the incomes of the richest percentile are not precisely known. For private consumption, however, this percentile does not play a decisive role; they cannot eat up all the money at all, so I cap above a certain sum. I reduce the total sum by a savings rate of about 20-35% and the interest service of about 10-15% and increase this by the annual new debt of 9%. to Piketty see: World Inequality Database, www.wid.world Michael Pettis: What Is GDP in China? Jan. 16, 2019 [https://carnegieendowment.org/chinafinancialmarkets/78138]
The Great Divide
There are political reasons for the high levels of social inequality in China. In the Mao era, the CCP divided the growing working class into privileged state employees and precarious workers. By the time some 50 million were laid off from state-owned enterprises in the late 1990s, a new local stratum of privileged homeowners and bosses had already emerged in the coastal regions. This was because the 1990s had seen the largest privatization of all time: that of China’s housing market.
Social groups in China can be described in terms of their proximity to or distance from centres of power. Access to social resources and power depends on relationships (party cadres), local privileges (hukou, home ownership) and proximity to wealthy metropolitan areas. Cities are officially divided into grades from 1 to 4 according to size, economic performance, and political importance; Beijing, Shanghai, Shenzhen, and Guangzhou are 1st tier cities, other provincial capitals are counted as 2nd tier, important other cities are 3rd tier, and so on. 7. Power and wealth are concentrated in 1st and 2nd tier cities, where the upper class (state elite, billionaires) and a rich layer of administrative officials, real estate owners, entrepreneurs, managers comparable to industrialized countries are located… But professors, doctors, teachers, (non-tenured) employees in state-owned enterprises, as well as the local working class are each also better off here than in other cities. Cities of the 4th tier and below are part of the periphery; cities of the 3rd tier can be counted partly in the first, partly in the second group. Again, there is a local upper and middle class that owns real estate or businesses and exploits local labour at low wages. In the four decades since the ‘opening’, the working class has grown enormously. Hundreds of millions of migrant workers came to the coastal industrial metropolises from the countryside or from cities without sufficient earning opportunities. It is they who have carried Mandarin Chinese to all parts of the country and made it the universal lingua franca (while local elites in Guangdong, for example, continue to cling to their dialect of Cantonese as a mark of distinction). And only they have a material interest in dismantling the hukou system with its local privileges, which denies them (about 40 percent of the workforce) and their children access to the public health and education system at the place of work and is diametrically opposed to egalitarian (equal pay) and universalist (equal access to justice) values. The majority of migrant workers are not given employment contracts at all. Where labour contracts do exist, they are often invalid or virtually unenforceable in the event of a dispute. Your employment contract is worth nothing without the favour of the boss, and neither is your rental contract. There are no universally applicable norms and laws to rely on instead of the word of your betters.
Because of these multiple divisions, it is not at all easy to describe the Chinese industrial working class, at least sociologically; here are just a few bullet points to make the picture clearer.
In the Pearl River Delta young workers’ wages in simple factories start at 3000 RMB (just under 400 euro), which then goes up to 4-5000 or even 6000. Car workers in the ultra-modern BMW factory in Shenyang also earn only 4500, because the factory is situated in the rust belt. (For comparison: social workers with a bachelor’s degree in the Pearl River Delta sometimes earn starting salaries of only 4-5000; programmers with a bachelor’s degree in a German IT company were also hired for 4500 in 2017). Top wages are paid by VW in Foshan, where one earns about 7000 on the assembly line, technicians even 10.000 – but hiring requirements are a technical college degree and municipal hukou! And still, the vast majority of VW workers sleep two to a room and cannot buy an apartment locally which would allow them to live with their family. Experienced textile workers can make up to 5000-8000 in the Jiangtse or Pearl River Delta (in recent years, several factories have relocated to Cambodia and Vietnam, where wages are much lower). Some of the wages in state-owned enterprises are better, and you can’t be fired so easily either. But you only get in through connections and have to pay several monthly salaries in bribes to get hired. In the interior of the country, wages are lower.
Factory work is still characterized by long working days, authoritarian regimes with all kinds of punishments, and the hukou system that makes it impossible for workers to live with their families close to their workplace. None of these three issues have been improved. The Foxconn workers I met through English classes were doing all sorts of things to get away from the factory: besides learning English (to work in marketing or sales), they were getting driver’s licenses (cab drivers), or trying to get jobs with real estate agents.
In the old state-owned factories, these three issues were or are better. But here management had completely failed to increase productivity. The new, private-capitalist factories on the coasts were the answer to the productivity crisis. Since quite a few years, the wages of migrant workers have been growing much more slowly than those in formal and especially in (highly) skilled occupations. Wages of semi-skilled service jobs such as waiters, cashiers and cleaners are barely keeping pace with inflation and, according to my observations, have declined since Corona. Regional inequalities also continue to grow; an average income in Shanghai is ten to twelve times the average income in poor parts of the country.
To return to my company: Here, people with bachelor’s degrees in technical subjects start at 5-6000. In the hellish IT units at Pindoudou or Huawei, they could get starting salaries over 10,000. My colleagues buy an apartment on the outskirts of town after getting married with a 30 percent down payment, the rest as a loan that they pay off over 30 years. Interest rates of 4.8 percent mean that for many of them, one spouse’s entire salary goes towards the mortgage payments. Such technical college or university graduates are also part of the migrant workforce. Unlike workers, they have the hope of acquiring an apartment and the hukou on the outskirts of the city. This hope persists because millions have made it. They work 996 for it, but the chances have shrunk in the last ten years. Xi’s campaign of nationalism and of exaggerating of his own achievements seems to be particularly effective among these wage earners with high formal education and the hope of moving up into the middle class.
The demographic crisis
In 2008, Giovanni Arrighi justified his belief in China’s continued economic growth by pointing out that the population had a high level of education and good health. Today, neither is true. Among middle-income countries, China is the least educated (just over 30 percent of the working population has a secondary education); it has a relatively high median age (apart from Thailand and Cuba, only former Eastern bloc countries have a higher median age among middle-income countries); more than 70 percent of children are near-sighted, more than 50 percent of adults are overweight; more than 15 percent of all couples are infertile. According to just-published statistics, the number of births in 2020 has plummeted by 15 percent compared to 2019, to about 12.5 million. In the generation of the parents of these new-borns, the number of births was almost twice as high (between 1985 and 2000, an average of 21.7 million children were born annually; in the generation of grandparents, the number was 24.8 million). Society is aging rapidly; the demographic crisis is accelerating.
In the 1990s and 2000s, booming factories were still able to pick and choose from the large masses of young men and especially women in their 20s who flocked to industrial cities. In the years after China joined the WHO in the early 2000s, about 25 million young people entered the labour market each year, and only about one million had university or technical college degrees. These migrant workers assumed that after five or ten years of factory work, they would go home to the countryside and open a store, restaurant or small business. Many, if not most, of these ventures ended in bankruptcy and they had to return to toil in the industrial metropolitan areas. By now, however, they are too old for the tough jobs that were never designed to be done for a lifetime. The prospects of owning their own small store are also dwindling, as large corporations are pushing into the kiosk business and have turned almost all kiosks and many restaurants into franchises. Many conflicts are ignited by the disappointed expectations regarding the supposed temporary nature of the hard labour and its health consequences!
In parallel, the influx of young migrant workers is drying up. In 2010, about 21 million had come, 2.5 million of them with university or technical college degrees. This year, 15 million young people are still entering the labour market, including nine million with university or technical college degrees – and many of the other six million would rather do low-paid service jobs than go into the factories! In 20 years, roughly speaking, the ratio of blue collar workers to white collars has fallen from 24:1 to 2:3. There is an increase in ‘qualified labour’, yet already in 2011, the supply of fresh graduates exceeded demand by 15 percent! 8
The only age group in the active workforce that will continue to grow over the next 20 years is the group over 50. The hundreds of millions of workers who have been uprooted from the countryside are still there, but they have grown older. The age limit for hiring in many factories has now been raised to 40, but there has been no qualitative change in work processes that would allow them to work until retirement. Ageing workers face poverty, and even the cheerful proclamation of the ‘end of absolute poverty’ (defined as an annual income of less than 4,000 RMB = 519 euros per person, or 1.42 euros a day; the World Bank sets the threshold for extreme poverty at 1.59 euros a day and for poverty in upper middle income countries like China at 4.60 euros) does not change that. Even the official propaganda reveals that poverty reduction is more about handouts than profitable jobs. By the way, the CCP had already celebrated the victory over absolute poverty in 2000.9
Nationalism not egalitarism
Xi Jinping has been General Secretary of the CCP and Chairman of the Central Military Commission since 2012 and State President since 2013. His accession to power marked the beginning of the third phase of the People’s Republic of China (the first was under Mao Zedong, the second from Deng Xiaoping to Hu Jintao). Xi’s “fight against corruption” eliminated all opponents in the apparatus (one and a half million party functionaries ended up in jail). Xi focuses on authoritarianism and nationalism instead of economic wellbeing like Deng and Hu Jintao. In 2015 he unleashed a wave of repression, first against feminists, then against human rights lawyers, then against labour NGOs. Confident posture – most recently the glorious victory over the Corona virus – is supposed to convey strength. China is building up its military and interfering massively, e.g. in the domestic politics of African countries.
At the same time, China is sealing itself off from “foreign influences”, although, from an economic point of view, it needs more, rather than less exchange with foreign countries; for example, for further developing its export industries, for industrial upgrading and generally for improving work processes and language skills. The decline of international cooperation will have a negative impact on productivity gains, including but not limited to key industries like microprocessors. In my workplace, in a department of Chinese-only software developers, work methodology and organisation lags behind “western” companies by about 15 years. This is less blatant in software projects managed from Europe. China’s economic development is paying a significant price for escalation external conflicts and increasing isolation!10
Economic policy (recently called the “dual circulation model”) encourages entrepreneurial activity while bypassing the equalising tendencies of a growing freely disposable share of the wage. Housing construction and related industries account for about a quarter of GDP. They create demand, jobs and make some people rich; but they keep sharp class divisions in place and the overall wage bill is kept low, which continues to limit people’s power over their own lives. Methods range from compulsory savings to home loans, and from the state’s investment policies to forced resettlement.
Compulsory savings: There are no legally guaranteed entitlements to social benefits, financial compensation and the like. People depend on the favour of local authorities. This forces them to save for a rainy day and leads to an extremely high savings rate. Money put aside does not go into consumption (this is why all attempts to expand the domestic market have failed).
Home loans: Regular employees have a “housing fund”. If the employer has paid enough contributions, a worker can apply for cheap loans to buy a house. Some employers pay more into their employees’ housing fund than into their pay-checks to save taxes; employees gladly accept this and even perceive it as a wage increase because the lion’s share of their income goes into buying a house anyway.
Most state investments flow into the rich cities and exacerbate the inequality between metropolises and the periphery. They lead to the over-exploitation of cheap labour in construction (for empty housing!) and have inflated a huge real estate bubble. Currently, the total real estate value is more than four times higher than China’s entire GDP. To get some perspective on this, in Japan it was 2.7 times higher than GDP at the peak of the bubble! When a real estate company builds a new innovation centre or an office complex for IT companies, local government not only pays the rent for the first three years but also subsidises each worker, for example, with 3000 RMB per month while the minimum wage is less than 2500 RMB. Hundreds of billions of euros are thus transferred to the metropolises for a speculative bubble and subsidy scam in areas such as e-cars and microprocessors, for office jobs in mediocre R&D, etc. – raising housing and living costs there.
Forced relocation: As part of so-called “extreme poverty alleviation”, 2.4 million people, or 2.4% of the population, have been forcibly relocated in Shandong province alone. The new village is built as a terraced housing estate in whatever location suits the local government. After completion or even before, villagers are thrown out of their old houses and the old village is razed to the ground. Many would not have voluntarily moved into the new houses because they are not an improvement (e.g. they are much too far away from the farmland). Here, too, poverty was fought and wealth was created on paper, but without the inhabitants’ participation and its egalitarian effect. If they had been allowed to decide for themselves, the “modernisation of the villages” would have required very different concessions from the government.
Now the state generates economic activity and growth while workers’ actual disposable share of GDP, i.e. the wage in their pay-check, stagnates or even declines and their personal dependence on mortgages, state handouts, jobs, homeowners’ assemblies and administration increases. State authoritarianism, as well as the economic model, are based on the lack of legal security. And while young Chinese people are proud and optimistic about the future of the nation, it is with with great concern that they look to their own economic future.
“Patriots rule Hong Kong”
Since the introduction of the National Security Law on 1 July 2020, Hong Kong has been gradually transformed into a Chinese city like any other. Since February 2021, Hong Kong schoolchildren are being “patriotically educated”: from kindergarten and primary school onwards, children will learn that secession and foreign influence are crimes against national security and that singing songs with political content is forbidden. On 4 March 2021, “one country, two systems” came to an end.
And while Beijing always claims that the Extradition Law of 2019 and the National Security Law are governed by the rule of law, they do not make the slightest effort to keep up this pretence: The first Hong Kongers to be tried in Mainland China (for attempting to flee to Taiwan) since the laws have been introduced don’t have a lawyer because their actual lawyer has just been disbarred.
Under repression and pandemic, the protest movement in Hong Kong has become radicalised (unlike at the beginning, a considerable part now calls for secession from China) and has largely come to a standstill. Many people are planning to leave the city, including some of my friends and comrades. In the past, they organised social movements against privatisation, gentrification, precarious wages, in short against Hong Kong-style extreme liberalised capitalism. Since last year, the situation in Hong Kong has changed so radically that they now see Xinjiang as an indication of how bad things can still get.
Meanwhile, there are more and more testimonies, sources and leaked internal documents about the Uyghur camps in Xinjiang, where an estimated one million people are held. Repression ranges from replacing the Uyghur language with Mandarin Chinese, to preventing visits to mosques and pervasive surveillance, to imprisonment, forced labour, reduction of Uyghur births and torture.
There are ten million Uyghurs living in China, which is only about 0.7 percent of the total population. In Xinjiang, they make up 45% of the population. Many have gone to eastern China as migrant workers. They are not only construction workers, but play an important role in the catering industry in all Chinese cities. Migrant workers who would like to return to Xinjiang now think twice because they have little chance of being let out from there again. Han Chinese, whom the government deliberately settled in Xinjiang for decades, are leaving the province too.
CCP cadres in Xinjiang used to be Uyghurs. As part of the industrialisation policy in the 1980s, they were replaced by Han Chinese. Terrorist actions took place against this settlement of Han Chinese in Xinjiang. This alarmed the Chinese government, which has always cracked down on separatist aspirations. After 9/11, there was fear of a second Chechnya in Xinjiang. For about the last four years, the government has been tightening repression there. One reason for this is that the Silk Road passes through here. But it is certainly no coincidence that this is happening simultaneously alongside the entire domestic political development under Xi Jinping. Xinjiang is a kind of model and testing ground; the camps there are not only for the Uyghurs. (Incidentally, Han Chinese are also interned there.) In state propaganda, the labour camps are portrayed as training schemes, re-education, a fight against terrorism or, in the style of colonialism, as the enlightenment of uncivilised peoples.
China is the world’s largest producer of tomatoes; they come mainly from Xinjiang, often in the form of tomato paste. Similarly, 80 percent of China’s cotton is grown there. But while individual farms certainly benefit, the camp system cannot be explained by economic rationality. Its security costs are massive.
VW is the only foreign carmaker to operate a factory in Xinjiang; again, probably not a productive investment, but a gesture of goodwill by VW towards the CCP. The plant is designed to produce 50,000 cars a year, but has never produced even half of that (by comparison, the VW plant in Foshan, in southern China, has a capacity of 300,000 cars a year per assembly line). When asked, VW boss Diess claimed he had never heard of human rights violations in Xinjiang and could not say anything about the subject.
For a long time, NATO countries and Russia gave China a free hand in Xinjiang – after all, the “fight against Islamist terror” is a common concern (with many nuances obviously, see Syria!). In the meantime, however, the camps are being used as a tool by other countries in the confrontation with China; in mid-January 2021, the USA imposed an import ban on cotton and tomatoes from Xinjiang. We should criticise the propagandistic accusation of “genocide”; according to the evidence, what’s happening is oppression, not extermination, and Han Chinese are also among the victims. But revealing Western policies as propaganda should not mean denying the existence of the camps!
Domestically, the camps represent a conflict that the regime cannot end with a victory – unless it continues the repression for the next 50 years until hardly any Uyghurs will be left alive. If internment and surveillance ended tomorrow, the CCP’s lies would become obvious to all, and certainly quite a lot of people would take revenge on the security apparatus. In Chinese society, there is no public discussion about this and no opposition. A taxi driver who had been to Xinjiang told us about police checks there as if he was telling us about his holidays. He was not disturbed by the fact that Uyghurs are not allowed to go out on the street in groups of three: you have to treat them like that because they are always meeting each other and spending all their time with friends.
With Xi in power, a fundamental change of policies on Xinjiang is almost impossible. Until then, however, authoritarian despotism will not be challenged and legal security will not be possible in the rest of the country either; it would be too easy to use this to11 claim compensation for internment and torture. The draconian measures in Hong Kong and especially in Xinjiang lock the CCP into a one-way street in which the country can only move towards authoritarianism. And as we have seen above, without strengthening legal security, no effective increase of the share of consumption or the birth rate will be possible either. Camp despotism, poverty, low wages and demographic crisis are interrelated and mutually dependent.11
Is China in the Middle Income Trap?
Before the global crisis, the BRIC countries (Brazil-Russia-India-China; later also South Africa: BRICS) were presented as the big winners of globalisation. After the crisis, the perspective shifted. What had previously been propagated as almost “automatic development” was now problematised. In 2008, Gill and Kharas coined the term Middle Income Trap. Only 14 of the 101 countries defined as ‘middle income’ in 1960 have managed to become ‘high income’ by 2008 (including Ireland, southern European countries, as well as South Korea, Taiwan and Singapore). The Middle Income Trap theory explains this by saying that industrialisation in emerging economies enters a phase when certain industries relocate elsewhere due to increasing wages (in China, for example, the textile industry is doing that), but the countries do not (yet) manage to attract other industries and compete with more advanced industrialised countries. This process cannot be understood one-dimensionally as ‘technological development’. Economics describes it as a transition from “quantitative” to “qualitative” development, and Marxists would understand it as a transition from the production of absolute to relative surplus value. “External factors” play an important role, too: In the 1930s it was the class struggle; during the ‘Cold War’ many frontline states were heavily supported by NATO… And since the Volcker shock in 1979, only (the former frontline state) South Korea has managed to become a ‘high income’ country. In 1987 alone, there were more than 3000 strikes that could push through 25 to 30 percent wage increases. Most importantly, these struggles broke down the military work discipline in the factories! In the period that followed, giant China became an “external factor”, using dumping prices to deny smaller countries this opportunity for development. In the wake of the global crisis of 2008/9, a discussion has now arisen as to whether China itself is caught in this trap.12
In the years of double-digit growth, it was very easy for entrepreneurs in China: they could flood global markets with cheap products, for which falling wages in the industrialised countries created the demand. And the combination of rural labour, use of machinery and extension of working hours guaranteed sufficient profits.
Under Hu Jintao, there were certainly efforts to increase the wage and consumption share. There was talk of introducing industrial unions like in Germany. Massive state investment programmes were brought in to cushion the effects of the global crisis of 2008 onwards, and even after the Honda strike in 2010 there were brief experiments with company trade unions in Guangdong.
But the transition to “qualitative growth” would have required – or even provoked – profound changes. Wages would need to rise not only faster than GDP, but also faster than corporate profits. To reduce the savings rate, social security and labour laws would have had to be improved and enforced (as well as rent law and more). All of that in a global crisis situation in which the high growth rates of the last two decades were no longer possible – as well as against the backdrop of fierce domestic class struggles…
When Xi took over from Hu in 2012, the experimentalists soon retired. Wage and consumption shares of GDP had risen between 2010 and the 2015/6 economic slump, partly as a result of the strike movement, but Xi was able to use the economic slump to fully consolidate his power and tightened repression. Since then, the wage and consumption share has declined again.
Ultimately, this intensified the constellation which had been the basis of the Chinese economic miracle: rising wages with a declining wage share (i.e. the share of wages and benefits in relation to GDP; the wage share can be taken as a measure of workers’ power). The wage share had declined from 51.4 percent in 1995 to 43.7 percent in 2008. In recent years it has declined further to around 40%. And as shown above, the real wages of the lower sections of the working class are now also declining. That ship has sailed, and more autonomy for company unions or even independent unions are unimaginable at present.13
According to the Asian Development Bank, three things are essential to escape the Middle Income Trap: Making labour processes more effective, finding new markets to sustain export growth and increasing domestic demand. However, the recent rehash of economic policy as a “dual circulation economy” continues to boost domestic demand through a dangerous mix of debt and real-estate bubble; a lot of government money continues to flow into infrastructure projects of dubious benefit. And we have discussed how the economic policy prevents the domestic market from actually shifting towards growth through wage increases and mass consumption.
China’s greatest competitive advantage in the phase of rapid growth is now blocking the “qualitative development” demanded by all economic advisors. The Hukou system is similar to the Bantustan system in Apartheid South Africa: workers were taken to where they were needed, while their families and children had to stay in places where the costs of reproduction and living were cheap. This created and maintained a huge urban-rural wage gap. With the Hukou system, the state has guaranteed cheap labour for enterprises. They could therefore save on investments in the improvement of the quality of labour processes. The low level of formal education of older workers is a consequence rather than a cause of this economic development. South Africa, by the way, is one of the typical examples of countries in the ‘middle income’ trap! Incidentally, the Hukou system has recently been relaxed only in the smaller 3rd and 4th tier cities with less industry and jobs; the 22 first- and second-tier cities, on the other hand, have made it even more difficult to get a local Hukou.
“When the pool of cheap labour from the country has been exhausted … other qualities are required. From that moment on, in order to master the next stage of development it is necessary to apply more efficient production methods, to produce higher-quality goods and to push on with homegrown research and development”, wrote business journalist and former China correspondent Elisabeth Tester in a China special issue of Schweizer Monat in 2018 (Elisabeth Tester “Middle Income Trap” October 2018). But she is wrong! If the pool of cheap labour is already exhausted – and you don’t want to bring many millions of foreign workers into the country – it is already too late!
China has followed the advice on how to avoid the Middle Income Trap (education, research, infrastructure…). But formal education alone is not enough to create suitable jobs. Cutting-edge research and rockets to Mars do not make industrial mass production more effective. Technological catch-up in telecommunications, electric cars, high-speed trains, computer chips, aerospace, quantum computers, etc. works well as import substitution but is not enough to open up new markets. Nor can China hope that the rest of the world will be capable and willing to absorb a growing share of exports without import growth. Robotisation is also proving more difficult than envisaged in the Made in China 2025 industrial plan. ##[https://www.scmp.com/economy/global-economy/article/3122430/chinas-robotics-revolution-falls-behind-target-technology] According to the World Bank, Total Factor Productivity, a measure used by economists to determine “technical progress” or growing productivity, grew by 4% annually before 2010, then by about 2 percent, and most recently by only 0.7 percent.
Some of the growing sectors are control technology and the security service business which yield zero social benefit. China is failing to “make labour processes more effective” as economists call it. The productivity of the industrial working class is lacking. The hundreds of thousands of young female workers who have very profitably filled a technology gap at Foxconn and elsewhere have ruined their eyes in the process, but have not acquired the necessary skills “to master the next stage of development”. China’s factories are stuck in authoritarian “pre-union Fordism” (Gambino) – and are therefore also shunned by young proletarians.
China is stuck in the ‘middle income’ trap. In contrast to South Korea, the ruling structures have so far been able to politically defeat workers’ struggles without having to change themselves. Authorities have not been removed, working conditions have not been improved – that is why productivity is stagnating! The mechanisms of maintaining power block the inner contradictions at the price of stagnation. Economics professor Eva Paus has called the situation of countries in the Middle Income Trap the ‘Red Queen Effect’: Like the Red Queen in Alice Behind the Mirrors, such societies must run faster and faster – just to stay in the same place and not slip. The ‘Neijuan’ slogan thus captures the situation quite aptly!14
Potholes in the Silk Road
Like “Made in China 2025”, the Silk Road was an attempt to escape the Middle Income Trap, but it too is languishing… Many African countries have suspended payments to China or are seeking debt relief. Since 2016, lending around the mammoth project has steadily declined from around $75 billion to a low of $4 billion in 2020. Reasons are a lack of economic viability, Corona travel restrictions and political tensions. In many places, large-scale Chinese investments have been promised, but are not making any progress. Reports on working conditions in Chinese factories in Serbia and other places have done further damage to the reputation of China’s initiative. Many Silk Road projects are being continued, but will not fulfil the high expectations that were raised. The Silk Road is not a win-win for all parties involved, as the Rosa-Luxemburg-Stiftung hallucinates. Nor is it China’s diabolical strategy of deliberately luring countries into a debt trap. Pettis sees the debt problems of many projects as the kind of banal rookie mistakes that happen to aspiring powers.15
Until a few years ago, the image of the USA in China was predominantly positive, despite anti-Americanism. In terms of private prosperity, consumption, legal security and gender equality, the western industrialised countries represented a goal to strive for. This was shown in the widespread wish to study abroad in the USA, the enthusiasm for Hollywood and various US brands, and it lead to brain drain to the USA. For decades the West had tried to influence domestic political development in China with cultural goods, NGOs, sports and the like. And even before Xi came to power, CCP began to try and seal off society against these influences, little by little. Besides culture and ‘foreign agents’ (which all NGOs were labelled as), real spy agents were targeted. In 2010, several espionage cases were uncovered. Publicly, they were presented as corruption cases to avoid the embarrassing admission that the CIA had several agents of influence in the party and the military, who had even been paid bribes for promotions. If Xi had not intervened with the continued anti-corruption campaign, the takeover of Hong Kong, tightening of censorship and surveillance, visa restrictions, control of NGOs and, more generally, expanded repression, the Party’s cultural and ideological power would be severely eroded today (and the state no doubt riddled with spies).
The trade war with Trump only slowed down the brain drain of Chinese students towards the US. It took the pandemic to turn the tide: About 700,000 Chinese people returned from abroad in 2020. The high infection and death rates, especially in the USA, have been an opportunity for Chinese propaganda to portray their own system as superior: “The East rises, the West declines.” And many people believe and perpetuate this. Even some farmers who invited me to dinner in their village explained to me, when they asked where I came from, that Germany is good (in relation to China), but the USA and Britain, and now also France, aren’t, and that in China the pandemic was beaten successfully because life has the highest priority. Zhongguo hen niu, China is great, as my colleague says.
Even if it continues to look as if the main goal was to distract/mobilise its own population, China is arming itself vigorously and at the People’s Congress in March, Xi called on the army to be “ready for battle” (which led US military officials to warn of a Chinese attack on Taiwan). With hundreds of bases spanning the globe, the US will remain militarily superior for a long time to come. But China is actively engaged in the arms race. In terms of the number of warships and gross tonnage, its navy is the largest in the world and is set to expand from 300 to about 425 ships including 90 submarines and at least six aircraft carriers in the near future. This belies the hope of Arrighi and others that it could be inferred from China’s history that it will be a peaceful hegemon.
Long live …?
Their rejection of a new Cold War leads many leftists and liberals in Western countries to long for good news from China. A few small strikes are then taken to signal the return of class struggle, Xi’s propaganda promise of CO2 neutrality is fantasised to bring about the salvation of the planet. (By the way, in a police and censorship state, who would be able to verify whether the promise has actually been kept? The obstruction of the WHO in their search for the origin of the virus does not leave much room for optimism!) The Left in the West must understand that organised groups, journals, public debates and meetings can only exist where people have at least some freedom to express their own rejection of public order. Such a Left does not exist in China. Instead, here young people dissatisfied with the society like a woman who decorated a Xi poster with ink are sent to a psychiatry.16
These are additional reasons why the call “against a new Cold War” by anti-war alliances and Chinese nationalists in the US and elsewhere17 8 may sound good but unfortunately is unrealistic and naive. Celebrities from state propaganda television have signed it too – but none of them would ever criticise militarism and nationalism in China. The website Qiao Collective is another example of such two-faced politics: in English they are against war, but in China they would never protest the CCP’s sabre-rattling. They are openly patriotic, justifying police violence in Hong Kong and the Tiananmen Square massacre, denying the camps in Xinjiang…why are they even considered leftists? Many Chinese nationalists use leftist, internationalist or anti-neoliberal rhetoric, but promote authoritarianism. They are using “Sinophobia” as a politically charged term to denounce any criticism of China as racism – while defending a regime that is not based on universalist values nor a fundamental rejection.
In September 2020, a Maoist online magazine targeting workers claimed in an article on Covid infections that there had been no Covid outbreaks in factories in China, but there had been many in the US, Germany, France, Spain, Italy, etc. “Capitalists only care about profit, they don’t care about workers’ lives.” In reality, there have also been Covid infections in Chinese factories. What sounds critical of capitalism easily turns into nationalist propaganda. Anyone who translates texts about the epidemic in Europe for such people or organises solidarity protests abroad must expect to be used for nationalist propaganda.
On the other hand, I know many Chinese people who do not want to shut themselves off from the world at all and who, on the contrary, are fighting against authoritarianism together. We can only fight together with them if we criticise nationalism and authoritarianism and do not buy into the (false) leftist rhetoric. Anyone wanting to avoid this mistake must do three things: 1) Stop seeing things through anti-imperialist glasses, criticise nationalism and exploitation. 2) Stop focusing on the middle class. 3) Judge cultural phenomena in their social context.
- The left that is critical of capitalism outside China must finally understand that the CCP does not offer a better alternative to liberal capitalism. From a waged worker’s point of view, China has long been capitalist – combined with a high degree of repression and authoritarian despotism!
The struggles of the working class in South Korea were politically thwarted by democratisation and trade unions in the 1990s, but have “paid off economically”. The working class in China has been stopped with censorship, despotism and violence; it has been marginalised politically and economically. Under today’s conditions, is it possible to fight and win massive material improvements – and will this subsequently also lead to something like the emergence of the rule of law? Or must the vicious circle of censorship, propaganda and despotism be broken first before common struggles become possible again? Here in China, both sides (economic and political suppression) are strongly interlocked. Those who don’t understand this will only continue to embarrass themselves, like the German journal Konkret celebrating Hong Kong police truncheons against “Asia’s Pegida”.
The workshop of the world is controlled by Chinese bosses. The main benefactor of low wages and long working days is the ruling class in China, and the counter-pressure must come from people in China. There is a lot of misunderstanding around this, for example in the claim that Chinese workers pay the price for the global demand for masks. Their sweating bodies pay for long working days, speedy work pace and poor conditions, but not for local or global demand! As waged workers, we suffer from being forced to work and from our working conditions, but not from anyone offering us wages for our labour power.18
- When rich middle-class homeowners protest against real-estate market reforms, there is definitely no need to build solidarity with them! They might be best described as BMW or Porsche drivers with a sense of class. The upper middle class in China who now has western standards of living cannot even be considered a potential ally! (By the way, their own assessment is quite materialist: Western democracies would not bring them any advantages.)
Many of the movement’s ‘heroes’ also come from the middle class. The CCP has always lauded “heroes of labour” or “heroes in the fight against the pandemic” and it even has the power to name the “heroes of the opposition”. It goes like this: Influencial activists in NGOs or other critical social circles are arrested to make an example of them as a warning to others; supporters (often left-wing Maoists) then organise a solidarity campaign for the imprisoned and celebrate them as examples and heroes. This makes the contributions of all the other “non-heroes” invisible and reinforces hierarchies. We don’t need individual heroes, but broad and egalitarian solidarity!
- When Chinese people protest, foreign democrats often see the beginning of fundamental rebellion against the “unjust regime” while in reality, the protesters are actually fighting for the reimbursement of school fees or wage payments. There is a popular hope in the West for anti-systemic protests in China but it is based on the misunderstanding that people living in the dictatorship suffer permanently from the dictatorship as such (such “well-meaning” paternalism is also encountered by friends from mainland China – full of curiosity – travelling to Hong Kong or Taiwan and then being patronised as brainwashed or clueless). First of all, people in China, like everywhere else, suffer from low wages, expensive rents, mean bosses, sexism, etc. From their perspective therefore the fight is primarily about higher wages, social security, cheaper housing, despotic bosses … about concrete problems and improvements and not about abstract principles and political freedoms, and also not about revolution so far.
Out of disappointment, in recent years some Westerners have turned their attention to Chinese subcultures, often overlooking the strong individualistic character that goes with them. People accept the extension of the working day and retaliate by “fishing in muddy waters”, (Hunshui) Moyu, slacking off at work.19
Social changes through women are more important. As in many countries, a silent gender revolution through education has taken place in China. Women account for the majority of university graduates, but remain grossly underrepresented in industry and society. In a typical school, male teachers hold a BA from a mediocre to sub-mediocre university while female teachers have graduated from top universities and many hold an MA! It’s similar in my workplace. Since the 1990s, the female labour force participation rate has dropped from 75 to 60 pecent. The labour market and the education system do not allow women with children to combine paid work and childcare; not to mention an equal distribution of child-rearing and household tasks between women and men! More and more young women prefer to remain single or unmarried rather than give up their autonomy for a dismal marriage and family (and this in a situation of great shortage of women!). At some point, the patriarchal bulwark will no longer be able withstand this change. Already now, most men are not able to fulfil traditional role requirements any longer. Today’s rampant sexualised violence against women in families, at work and even in socially critical circles can also be seen as a reaction to this development.
In Wildcat 103, I still assumed that societies in the West and in China would converge, putting this down to the privatisation of education, growing inequality, rising housing prices and similar developments. While many similar social phenomena, some of them new, will continue to appear in China and in the “West” I would like to raise the fundamental question of whether “systemic convergence” or “alignment” is still a meaningful perspective on the current social developments in China when we consider the politicisation of the economy, the compartmentalisation of society and the suppression of egalitarian and universalist social forces.
In mid-December, the Central Economic Work Conference adopted “five fundamental tasks” and decided that for 2021, security would be prioritised over development – certainly not an indicator of liberalisation.20 It remains to be seen whether the Winter Olympics in Beijing in Spring 2022 will take place as planned. Let’s see how much international media access China will then allow into the country. The isolation of society and the chauvinism, nationalism and racism that go with it may even increase further. Perhaps new opportunities will open up again as the pandemic subsides, but for now things remain difficult.
Neither an abrupt financial crisis nor one of the political order seem likely under Xi. It is more likely that repression and militarisation will continue at the price of stagnation. Xi and the CCP appear overpowering, spreading a sense of paralysing powerlessness. While the political conditions seem stable, the working class has changed significantly: it has aged statistically, young people avoid the factories, they are more mobile geographically, they have not experienced the horrors of hunger first hand, many went to school much longer and are bored at work. Parcel and food delivery workers, as well as construction workers will continue to protest against upaid wages – even if such conflicts remain local. Contradictions are so stark, inequalities so glaring and the young generation so pessimistic about their own future and their place in society, that I wonder how long political stability can be maintained by the over-consumption of resources and the postponement of social change.
 Tiffany May, Amy Chang Chien: Slouch or Slack Off, This ‘Smart’ Office Chair Cushion Will Record It. New York Times, 12/1/21.
 Africans in Guangzhou: misunderstanding, discrimination, and communication. Published on Youtube on 8/18/2020
 See “Document No. 9” on Wikipedia.
 Haifeng Huang and Nicholas Cruz: Propaganda, Presumed Influence, and Collective Protest. “… We test this indirect mechanism of propaganda using a survey experiment with Chinese internet users … they believe that propaganda reduces other citizens’ willingness to protest, which in turn reduces their own willingness to protest….” See Political Behaviour, Jan. 8, 2021.
 Excess mortality in Wuhan city and other parts of China during the three months of the covid-19 outbreak: findings from nationwide mortality registries. The BMJ, Feb. 11, 2021. See: BMJ
 Wan Haiyuan, Meng Fanqiang: China Has 600 Million People With Monthly Income Less Than $141. Is That True? Caixin, 6.6.2020.
 Dorcas Wong: China’s City-Tier Classification: How Does it Work? Chinabriefing, Feb. 27, 2019
 On the struggles of workers suffering from pneumoconiosis, see Wildcat 103: 6 million workers suffering from pneumoconiosis live on an average of just 51 euros a month. Source: Sidney Leng: China’s 6 million ‘black lung’ workers living on just US$61 a month, with most struggling to survive. www.scmp.com, 5.3.21. on the oversupply of graduates, see Vivian Wang: China’s College Graduates Can’t Find Jobs. The Solution: Grad School. NYT, 1/18/2021.
 Cf. the 2019 documentary “China’s Unstoppable Rise: The World of Xi Jinping”
 David Bandurski: Propaganda Soars Into Orbit. JAN. 29, 2021. https://chinamediaproject.org; Nicholas Eberstadt: China’s Demographic Prospects to 2040: Opportunities, Constraints, Potential Policy Responses. www.hoover.org, Oct. 29, 2018; Beijing claims victory in poverty fight, SCMP Nov. 18, 2000.
 Rémi Castets: Bleierne Zeit in Xinjiang [Leaden Time in Xinjiang]. Le monde diplomatique, 7 March 2019.
Interview with Darren Byler: Standing with the Oppressed. On Colonialism and Terror-Capitalism in Xinjiang.
Exklusive Einblicke: Wie China die Uiguren bekämpft [Exclusive insights: How China Combats the Uyghurs], German WDR TV documentary, on youtube.
On VW: Does VW profit from Uighur forced labor in Xinjiang? DW News, 12 November 2020. VW boss ‘not aware’ of China’s detention camps, bbc.com, 16 April 2019.
Darren Byler: ‘Only when you, your children, and your grandchildren become Chinese’: Life after Xinjiang Detainment, https://supchina.com, 6 January 2021
 On the qualitative change caused by class struggle in the 1930s see Ferruccio Gambino: A Critique of the Fordism of the Regulation School.
 For comparison: in the 35 most developed industrialised countries, the wage rate declined from 54 per cent in 1980 to 50.5 per cent in 2014; however, one must bear in mind that the actual consumption of workers in China is even lower because of the high savings rate and private debt.
The savings rate in Germany is a relatively high 12-15 per cent, private debt as a share of income is much lower, so interest service is much lower than in China, where about 20-30 per cent savings rate plus 10-15 per cent interest service are deducted from wages. In addition to the lack of social security, the high savings rate is also due to family structures; the parents have to buy the son a flat, otherwise he will not find a wife… For more details, see Wildcat 103.
 Sources on the Middle Income Trap: Gill, I., & Kharas, H.: An East Asia Renaissance; 2008.
On the opinion of the Asian Development Bank: Rajat M. Nag: Realizing the Asian Century. Speech made on 18 October 2011, at https://www.adb.org
An example that the CCP is well aware of the problem: “China May Be Running Out of Time To Escape the Middle-Income Trap” reports on a meeting between Obama and Xi Jinping in 2013, where Xi outlined his hope that China could escape the middle income trap: China May Be Running Out of Time To Escape the Middle-Income Trap, https://asiasociety.org On the ‘Red Queen Effect’ see Nahee Kang & Eva Paus: The Political Economy of the Middle Income Trap (2020). And for those who want to all the details: the Red Queen hypothesis originally comes from biology; see wikipedia.
 Slave-like conditions in Chinese state-owned enterprise in Serbia. https://www.forumarbeitswelten.de, 28.1.21.
Rosa Luxemburg Foundation: The New Silk Road – On a Megaproject that Makes the World, Maldekstra No. 9
 Mimi Lau: China’s ‘Ink Girl’ who defaced Xi Jinping poster allowed to contact father after protest. SCMP, 2 December 2020
 example: nocoldwar.org
 China’s workers pay the price for growing global demand for face masks. China Labour Bulletin, 4 August 2020. https://clb.org.hk
 A good article on this (in German): “Fische anfassen” [Touching Fish], https://www.forumarbeitswelten.de/blog/fische-anfassen/, 6 January 2021. These are forms of individual isolation (neijuan!).
 See: China wants to initiate new growth phase with measures, http://german.china.org.cn, 21 December 2020.