Beijing’s Corporate Fascism
William Norman Grigg
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The New American, August 3, 1998
For the customer who seeks to avoid purchasing goods made in Red China, a visit to nearly any retail store in the United States is an exercise in frustration. |
At nearly every retail outlet, shelves groan beneath the weight of merchandise imported from the Asian slave state: Cookware, cutlery, running shoes, children’s toys, casual wear — for the cost-conscious consumer it is all but impossible to avoid the “Made in China” label.
More than a few economically literate shoppers must be puzzled by Marxist China’s productivity. One key to this puzzle is the fact that nearly half of the goods bearing the “Made in China” label are actually made with foreign assistance. “China’s economy has become heavily dependent on foreign trade and investment,” observes Harry Wu, a survivor of 19 years in Red China’s laogai prison camp system. “Today, 48 percent of the goods China produces for export are made by foreign or joint-venture enterprises. These foreign and joint ventures employ some 17 million people.” In many — if not most — of those joint ventures, the Chinese partner is the People’s Liberation Army (PLA). The PLA either controls or owns outright an estimated 20,000 commercial enterprises in Red China, including transportation services, hotels, nightclubs, construction companies, and farms. The military also controls China’s pharmaceutical industry and a sizable chunk of its medical services. This is entirely predictable, given the role played by the military and security police in enforcing Red China’s draconian population control program.
PLA in the U.S.A.
The PLA also maintains a network of export companies and subsidiaries in the United States. Norinco, an arms conglomerate whose chairman is the notorious Wang Jun, has numerous U.S.-based subsidiaries, including Beta Chemical, Beta Toys, Larin, and Forte Lighting. Norinco’s corporate earnings in 1994 were an estimated $31 billion. While some of those profits came from sales of “Sparky the Dog” and “Princess the Cat” toys in American stores, another big earner for the firm was arms sales to Iran, Pakistan, and other “rogue states.”
“The PLA engages in toy and frozen-fish exports to the United States to earn the foreign exchange that it needs for its military modernization program,” explain analysts Richard Bernstein and Ross H. Munro in their 1997 book The Coming Conflict with China.This is another key to understanding the puzzle of Red Chinese “capitalism.” Unlike free market capitalism, in which entrepreneurs and consumers engage in mutually beneficial commerce, China’s “socialist market system” remains controlled by the Party and the PLA, and exists to enrich and serve the interests of the Chinese elite. “If trade between Americans and Chinese could help people on both sides and promote individual freedom, there would be no reason to oppose it,” Harry Wu told THE NEW AMERICAN. “But China’s economic system is still dominated by the Party, and most of its export sales are used to build the PLA. Of course, every penny made by the PLA’s businesses is used to build up the military, yet they’re allowed to operate in this country.”
Beijing’s partners in building the Party-dominated economy include some of the largest U.S.-based transnational corporations. Telecommunications giant Motorola recently built a huge mobile telephone factory in Tianjin, and General Motors has constructed a new factory in Pudong. Aerospace giant Boeing — which is also one of America’s chief defense contractors — has relocated manufacturing assets to China. “Boeing expects China to account for one-tenth of all its aircraft sales in the next decade,” reported the May 1998 Harvard Business Review. “General Electric already has more than 20 projects there, and other prominent companies such as IBM, General Motors, Microsoft, AT&T, and Goldman Sachs are pulling out the stops to gain market share.”
The Giant Grows
In their recent book Big Dragon — China’s Future: What it Means for Business, the Economy, and the Global Order, business consultants Daniel Burstein and Arne de Keijzer portray China as an emerging economic behemoth. “In our assessment, China will become the world’s largest economy sometime in the 2030s,” they write. “During the first half of the next century, it will increasingly emerge as a superpower in every sense — economically, politically, militarily, culturally, technologically. But China will be different from any great power the world has ever seen. The political-economic system it will evolve — a unique hybrid of many influences, including elements of socialism as well as capitalism — will also be different from any system the world now knows.”
In fact, there is nothing novel about the political-economic system emerging — with Western corporate aid — in Beijing: It is merely a refinement on Mussolini’s corporate state, in which the government controls the means of production and composes industrial policies in collaboration with favored corporate entities. For U.S.-based transnational corporations, receiving a “market share” in the state-controlled Chinese economy offers some noteworthy advantages. The relationship is just as profitable for Chinese commissars who desperately need aid, trade, credits, and technology. That relationship is rather less beneficial for Beijing’s subjects and for U.S. taxpayers.
A Retooled Tyranny
“China is not a ‘former communist country,’ as Bill Clinton has been quoted as saying,” Wu observed in a November 1997 address to the Canadian Parliament. “Today’s Chinese communist system is still characterized by totalitarianism and a massive bureaucracy which oversees the public ownership of the primary means of production” — which is the defining attribute of a communist economy. “The recently completed 15th Chinese Communist Party [CCP] congress showed a leadership that wants to institute new economic reforms, but not at the expense of its monopoly on power or its control of the primary means of production,” Wu observed.
“As you think of China, I ask you to picture China’s Communist regime as a gigantic building,” continued Wu. “For most of the past four decades it looked ugly and terrible from the outside because of its disastrous poverty, Red horror, and uncooperative attitude toward the West.” However, under the rule of Deng Xiaoping “the appearance of this Chinese communist building has changed,” in large measure because “Western technology has flooded in.” Under the slogans of developing “socialism with Chinese characteristics” or a “socialist market economy,” the CCP has allowed a form of capitalism to develop in key industries, just as Lenin did in his “New Economic Policy” of the early 1920s. Wu pointed out that this “has given Communist China enough economic leverage to buy off all external pressure. This means Western money and technology are the fuel in the tank which is driving the Chinese Communist vehicle.”
Wu’s assessment is confirmed by the May issue of Harvard Business Review, which reported, “Economic planning, discredited almost everywhere else, has been on the rise in China, as Beijing tries to develop ‘pillar industries’ and big industrial conglomerates like those in Japan and Korea.” Foreign companies seeking to do business in China “face many requirements to transfer technology or to export a certain percentage of their products made in China. Controls on foreign exchange keep them from moving funds freely out of the country.” Bernstein and Munro write, “China has been getting American investment capital and reaping windfall trade surpluses at the same time. As a result, China is one of the leading foreign-exchange-reserve countries in the world — a bizarre situation for a poor and developing country.” Those reserves play a significant role in Beijing’s designs for expansion and subversion.
Beijing’s economic policy is “aimed at enhancing the acquisition of the most advanced Western technology, including ‘dual use’ technology that can be used for both civilian and military purposes,” according to Bernstein and Munro. “One way China does this is by requiring foreign companies to manufacture in China some of the components that go into the products sold there. To continue doing business in China, the American company is required not only to transfer advanced manufacturing technology to China but also to train a Chinese workforce, thereby protecting profits in the short term but helping to produce an eventual competitor at the same time.”
The irony of this situation was underscored by Wu in testimony to the Senate Select Committee on Intelligence last September: “The truth is that today China needs the United States much more than the United States needs China. While some Americans feel they need access to China’s markets to ensure future success, the Chinese [government] must keep the American dollars, the American technology, flooding in to maintain growth.” Wu also cited an ominous precedent for a totalitarian regime which enjoyed dramatic economic growth through Western aid: “From 1933 to 1937 Germany’s economy expanded by 73 percent and most of the Germans generally agreed with Hitler’s policies.” That expansion depended, in significant measure, on economic cooperation with the West, and Wu discerns a similar relationship between Western businesses and Red China’s state-controlled economic entities.
Beijing diligently networks with U.S. corporate interests, and the corporate world is eager to help. The Boston-based China Business Group (CBG) is representative of Beijing’s corporate network. “CBG’s professionals have been involved in the development and implementation of dozens of projects in China,” boasted a recent CBG “Summary of Projects.” Among the projects listed by the organization are a joint venture in manufacturing ceramic chip capacitors in Guangdong Province, a Titanium tube mill in Baoji, Shannxi Province, and telecommunications projects in Beijing, Tianjin, Shanghai, Fuzhou, and the Pearl River Delta. CBG’s leadership melds U.S. and Chinese corporate “professionals” with a China-based “Advisory Board” composed of three Chinese government officials. The chairman of the advisory board is Ni Yaoli, an official of Red China’s Foreign Ministry.
Beijing’s commissars are well aware of the leverage they have over corporations seeking a “market share” in China. Accordingly, one of the most notable characteristics of joint ventures between Beijing- and U.S.-based corporations is the abject servility of American business leaders toward their communist “partners.” For example, in early 1996, then-chairman of Boeing Frank Shrontz attended a UN dinner in honor of Jiang Zemin, where he was dressed down by China’s UN ambassador for the inadequacy of his corporation’s lobbying efforts on behalf of China’s interests. Shortly thereafter, Lawrence Clarkson, Boeing’s vice president for planning and international development, was likewise taken to the woodshed by then-Chinese Vice Premier Li Lanqing during a meeting in Beijing. The May 27, 1996 Seattle Times quoted Clarkson as saying that if Boeing didn’t deliver on behalf of Beijing, “We’re toast.”
Captive Workforce
Wu points to Red China’s dreaded laogai (“reform through labor”) camps as another illustration of the kinship between the Beijing regime and Hitler’s totalitarian Reich. The laogai gulag system encompasses some 1,100 labor camps, in which an estimated ten million prisoners serve terms of forced labor. The laogai population includes common criminals, accused individuals awaiting trial (pre-trial detention often lasts as long as ten years), and political offenders sentenced to “reform through labor.” “The Chinese government says that political offenders are an ‘administrative’ matter and aren’t to be counted as prisoners,” Wu told THE NEW AMERICAN. The laogai also plays host to an unspecified number of “former” prisoners who are forced to settle permanently in the camps after their sentence expires. “If the original crime is ‘counter-revolutionary’ in nature, the prisoners often can never go home,” according to Wu. “They’re compelled to remain as laborers in state-run enterprises.”
Apologists for Beijing often dismiss criticism of the laogai system by comparing it to the “hard labor” sentences often imposed on American convicts. The chief distinction between these systems resides in the fact that slave labor is used to “reform” the thinking of political prisoners, rather than to punish those who have committed crimes against persons or property. The Beijing regime’s Criminal Reform Handbook, published in 1988, explains that among the laogai’s primary functions is “organizing criminals in labor and production, thus creating wealth for our society.” The regime’s official statement of labor policy, as cited in Harry Wu’s testimony before the European Parliament, offers this chilling summary: “Our economic theory holds that the human being is the most fundamental production force. Except for those who must be exterminated physically out of political considerations, ‘human beings’ must be utilized as ‘productive forces’ with submissiveness as the prerequisite. The laogai system’s fundamental policy is ‘Forced Labor as a means, while Thought Reform is our basic aim.’ Our laogai facilities force prisoners to labor … [with the] aim of reforming prisoners to new, socialist people.”
Among the “counter-revolutionaries” to be reformed into “new, socialist people” can be found Christians and other religious believers who worship in unregistered congregations. “In China, all religious bodies have to register with the government, and be supervised by the Party,” Wu told THE NEW AMERICAN. “Unregistered bodies like ‘house churches’ are defined as ‘illegal gatherings against social order,’ they’re raided by the Public Security police, and their members are sent to the laogai,” where they are put to work creating goods for export to the West.
Among the goods produced by Chinese Christians imprisoned in the laogai are the Christmas decorations sold by many American retail stores every Christmas season. “Let there be no mistake about it — China persecutes Christians,” Wu declared. “Yet it is the largest manufacturer and exporter of Christmas products to the United States.”
But the export of laogai goods is hardly a seasonal enterprise. “According to the Chinese government itself, 200 different kinds of laogai products are exported to the international market,” stated Wu. Describing the laogai system as “an integral part of the national economy,” Wu has documented that “one third of China’s tea is produced in laogai camps; sixty percent of China’s rubber vulcanizing chemicals are produced in a single laogai camp in Shenyang; the first and second chain hoists to receive direct export authority are laogai camps in Zhijiang Province; one of the largest and earliest exporters of hand tools is a camp in Shanghai; an unknown but significant pipe works in the country is a laogai camp....” Another illustration of the economic role played by the laogai system is found in the recent discovery that “auto components from the Beijing laogai were being used at the Beijing Jeep joint venture involving Chrysler.”
Corporate Subsidies
Making use of laogai -produced raw materials and components does help U.S.-based transnational corporations “drive cost curves down,” as do the miniscule wage costs offered by the slave-labor conditions that prevail outside the Chinese gulag. Collaboration with Beijing’s communist elite offers opportunities for exploitation never dreamed of in Karl Marx’s rhetoric. But U.S.-based corporations bent on exploiting the Chinese people also exploit U.S. taxpayers by forcing them to subsidize their ventures. Through the Export-Import (Ex-Im) Bank, corporate investments in China are subsidized, and any losses incurred are socialized — while the profits remain private and legitimate market competition is undermined.
The Ex-Im Bank was created during the New Deal essentially as a means to underwrite corporate investment in the Soviet Union. Since that time it has expanded to offer loan guarantees for corporate projects throughout the world. Under the Trade Act of 1974, “nonmarket economy countries” such as Communist China are denied access to “programs of credits, credit guarantees, [and] investment guarantees” if most favored nation (MFN) status is revoked. This is why the U.S. Chamber of Commerce and nearly the entire Fortune 500 have been perennial supporters of MFN renewal for China, and why the same constellation of corporate interests favors extending to Beijing membership in the World Trade Organization, which would in essence grant it permanent MFN status.
An Ex-Im fact sheet explains that the bank “exists to support U.S. exporters in making sales to foreign buyers. It does this by filling the gap where private sector export financing is inadequate or unavailable” — that is, it forces taxpayers to underwrite loans the private sector wouldn’t touch. Ex-Im also admits that Red China is its “largest market in Asia” — much to the delight of Beijing’s commissars and their corporate fellow travelers.
Typical of Ex-Im’s American corporate beneficiaries is former congressman and Defense Secretary Dick Cheney, who is now CEO of the Texas-based Halliburton energy conglomerate (which has several significant projects underway in China). In a May 8, 1997 speech to an Ex-Im conference in Washington, DC, Cheney declared that Ex-Im helps “U.S. businesses blend private sector resources with the full faith and credit of the U.S. government.” It is doubtful that Mussolini could have provided a clearer description of the corporate state. Of course, not a single penny appropriated for Ex-Im is authorized by the Constitution — a point Cheney, the self-styled “fiscal conservative,” declined to address.
Disdainfully denouncing those who criticize Ex-Im for practicing “so-called corporate welfare,” Cheney sniffed, “They obviously don’t know that for every dollar appropriated to the Bank in the last five years, Ex-Im has returned approximately 20 dollars worth of exports.” Admittedly, this arrangement is profitable for the corporations who receive the taxpayer subsidies; how this justifies extorting money from taxpayers, Cheney did not explain.
In 1996, Ex-Im extended at least $900 million in direct loans and $1.2 billion in loan guarantees to underwrite corporate deals in China. Addressing those who contend that “Ex-Im Bank is a wholly-owned subsidiary of Big Business,” Cheney insisted that “more than 80 percent of Ex-Im Bank’s transactions financed small business exports” in 1996. While this might be technically correct, it still doesn’t change the fact that the Constitution does not authorize export subsidies for businesses of any size. Furthermore, Cheney’s characterization of Ex-Im as an ally of small business investment is difficult to sustain in light of the fact that its prominent clients in 1996 included such “mom and pop” outfits as General Electric, Boeing, McDonnell Douglas (since consolidated with Boeing), Westinghouse, Bechtel, and Texaco.
Furthermore, Ex-Im lavished taxpayer-subsidized loans most generously on projects that helped build China’s energy infrastructure. Westinghouse received a direct loan of $36,347,390 to produce steam turbines for the Qinshan II nuclear power plant. General Electric benefited from a $260,116,302 direct loan to provide turbine generators for the Nantong II power plant. Siemens was awarded a $47,456,071 direct loan to help construct the Fuzhou 2X35 OMU power plant. The Qinshan III nuclear power plant was built with the help of a $20 million loan guarantee for Houston’s Stone & Webster International Projects Corporation and a direct loan of $383,133,959 to Overseas Bechtel. And the New Jersey-based Foster Wheeler Energy Corporation was treated to a taxpayer-guaranteed direct loan of $408,822, 539 to provide coal-fired boilers for the Yangcheng Power Plant.
Significantly, the three largest direct loans — those granted to Foster Wheeler, Overseas Bechtel, and General Electric — were approved by Ex-Im following a “Presidential National Interest Determination.” Bill Clinton granted those determinations at a time when his re-election effort was awash in illegal Chinese campaign contributions.
Not surprisingly, the list of Ex-Im clients for China ventures overlays quite nicely with the roster of Beijing’s corporate lobbyists. Boeing, which received $332.7 million in Ex-Im subsidies in 1996, was a corporate member of the U.S.-China Business Council (USCBC) and the Business Coalition for U.S.-China Trade, in addition to being the corporate co-founder of the U.S.-China Educational Foundation (USCEF). General Electric ($260.1 million in Ex-Im subsidies) also helped create the USCEF and is a member of the USCBC; Foster Wheeler Energy Corporation ($408.8 million from Ex-Im) is also a USCBC member, as are Texaco and Westinghouse. Bechtel is a member of USA-ENGAGE, which describes MFN for China as “a means of encouraging positive change in China and ensuring freedom for Hong Kong.”
The Global Corporation
“For a growth-hungry industrial world, the China market could represent what the New World meant for Europe several centuries ago — a huge new land of dynamic growth, possibility, and profit,” rhapsodize Burstein and Keijzer in their book Big Dragon. “It may also be the fulcrum of global competition, where companies vie for market share and control of the engines that drive cost curves down and consumer benefits up to become the integrated, networked, and truly global corporations of the future.”
Red Chinese officials refer to their political-economic system as “Socialism with Chinese Characteristics,” but there is nothing inherently Chinese about it. Variants of corporatism prevail in most of the industrial world, including the United States. Furthermore, it is likely that continued and escalating economic engagement with China will lead to a “harmonization” of our economy, and that of other industrial nations, with that of the Asian behemoth. Thus, it is entirely likely that the political-economic system emerging in China offers a preview of the coming global corporatist state.
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