US didn’t ‘engage’ China to make it rich and free; it profited off it
In a sense, what happened to the Hong Kong economy was repeated in the US, only on a much greater scale: in the 1980s and ’90s, our city moved its entire manufacturing base to mainland China, and refocused on services, finance and of course, real estate.
The US did something similar, though driven by different if comparable socio-economic forces. By the 1980s, the US was having second thoughts about its trade with, and foreign investment in Japan, which was emerging to become the world’s second-largest economy and naturally becoming less beholden to Washington. To counter Japan’s manufacturing might, US corporations were encouraged to offshore practically their entire manufacturing base to developing countries with low labour costs, chief of which was, of course, China.
This turned out to be extremely lucrative for American multinationals. Take Apple, arguably the most profitable company in the world. On an iPhone 7, it’s been calculated it left just 3.6 per cent of its cost as profit margin to its numerous mainland Chinese manufacturing partners to fight over. It presumably left a few more crumbs on the table for Foxconn, but not much more.
Much of the profits made from the sweat and blood of Chinese workers were recycled through the US treasury market. China was loaning to Americans so they could keep buying Chinese goods.
Meanwhile, American capitalism was being financialised. Why make things when you can make much more money much faster by just moving money around? In this, China helped too. If you want to leverage, borrowing costs have to be kept low. By lending massively to the US, China helped keep interest rates and inflation low. This role was played by Japan in the last century; China took over at the beginning of this century. How else could the US have carried out its expensive “war on terror” if borrowing costs had been high?
What Karl Marx has called the logic of capitalism compelled the US to partner with China, just as it did previously with Japan. The Nichibei economy was replaced by Chimerica. Yesterday, it was Toyota, Honda, Sega, Nintendo, Sony, Canon, Toshiba and JVC. Today, it’s Huawei Technologies, ZTE, ByteDance with its TikTok app, Alibaba, Tencent, Xiaomi, Didi Chuxing, DJI and Baidu.
There is, also, a historical dimension to this whole story. At least since the first Opium War and actually well before that, all major Western powers had wanted to take over the Chinese market with its vast profit potentials. When Chinese communists opened up, of course Americans and others jumped right in. The problem is that this communist party, it turns out, isn’t a tinpot dictatorship but a rather competent one. It has learned from its mistakes and those of others. It prefers its own “Beijing consensus” rather than “the Washington consensus”.
This is looking after your own interests, but in Washington, it’s called not following or challenging a rules-based international system; never mind the US is the one that sets up most of the rules and breaches them when it finds suitable. The logic of global capitalism dictated the US partner with China; the logic of empire now compels it to fight this “monster” because it didn’t turn out to be the plaything America had wanted.