The expectations were high when the Chinese government announced on April 14 the 2015 first-quarter growth figures of the country. Governments and banks around the world wanted to know if the reduction in the growth of the Chinese economy, expressed by the Gross Domestic Product (GDP) would be confirmed and what consequences would it have on the world economy.
In 2014 China’s GDP was 7.4%. Despite being higher than the average growth of 4.6% for the “emerging economies” – the IMF classification that includes China – it was the lowest since 1990, when it reached 3.8%. However, the first quarter of 2015 presented an even lower GDP of 7% over the first quarter last year. The IMF projections indicate a growth rate of 6.8% in 2015, lower than the target of 7% of the Chinese government.
This indicates that, contrary to what many people expected, the Chinese economy is being dragged by the global economic crisis and drags dependent economies of its imports, such as Brazil. The total value of Chinese exports grew 5% in the first three months of the year, while imports plummeted by 17%, mainly due to falling oil prices and other commodities.
In addition, the most affected sector was the industrial – included the construction sector – and it fell to the service sector to prevent a further decline of growth. Industrial production in March grew at the slowest pace since the end of 2008, while the increase in household consumption suffered the biggest drop in 10 years. In the first quarter, the sale of land by local governments – the main source of income and of many conflicts – fell 32%. This is a clear indicator of reduced activity in the construction sector, in addition to falling property prices and sales.
Investments in infrastructure have not prevented the economic crisis
When the global economic crisis hit China in 2008 the government injected about $ 600 billion in infrastructure projects and released loans by state banks to stimulate investment. Government aid far exceeded a trillion dollars. This model was followed by the “emerging economies”, including Brazil and India, which boasted of “circumventing” the crisis and took advantage of it to boost the countries’ growth. In Brazil, for example, President Lula said the crisis in Brazil was only a “small wave”.
However, the effects of this policy were not long lasting. As seen in the chart above, China grew by 10.4% in 2010, but then the GDP fell continuously. Such countries have come off momentarily from the effects of the global crisis just to drive them to more worrisome structural conditions. China, for example, has a public debt (including the debts of local governments) of 282% of its GDP, according to the consulting firm McKinsey & Co.
This policy is still in place. Expenditures of US$ 260 billion in new railways, hydropower and water supply projects are planned for 2015, according to the Prime Minister Li Keqiang. But according to Zhu Haibin, an economist at JP Morgan, “infrastructure investments in March were not sufficient to offset the fall in the manufacturing and construction industry.”
The opening of the financial market to imperialism is the government’s central policy
The Chinese prime minister made it clear that the government is working to prevent a sharp economic downturn. According to Li Keqiang, “our ‘toolbox’ still has many policy tools and the most important tool is reform.”
The “reform” means tax policies, such as lowering interest rates to stimulate new investment, but mostly structural measures to open the financial market to foreign banks and thus complete the imperialist penetration in the country.
One of the measures is the permission for sending profits abroad – which was not permitted and constituted a progressive national development policy. The other is the application to the World Bank for the recognition of the Yuan convertibility, the Chinese currency, on the world market.
The British newspaper The Economist lists three measures of “reform” in progress:
1 – Loosening control over interest rates [leaving its attachment to the “market” – author’s note] and the flow of capital across China’s borders. It is planned the full rate-liberalization by the end of this year.
2 – The capitalization of state and local governments, which will receive more tax revenues. It’s already in place a pilot program to allow the issuance of bonds by local governments so that they can be self-financing.
3- Facilitating the installation of private companies in the country. In 2014 there has been a boom in the registration of private firms: 3.6m were created, almost double 2012’s total.
This set of measures is towards greater dependence of the country to international financial markets and, in this way, to imperialism. The Economist, visibly pleased, only makes two warnings: it requires the end of the hukou system – the reactionary internal household control – to finally release the 300 million migrant peasants, so that they can be freely exploited by the capitalists, and that farmers are free to sell the land where they work. Land is nationalized in China and only local governments are allowed to sell land, which leads to deals between the local committees of the Communist Party of China (CPC) and real estate companies at the expense of the peasants, who receive very low compensation and turns them into cheap labor for the own real estate companies.
The Chinese working class continues to struggle against exploitation
However, the reduction in growth did not stop the working class struggles. On the contrary, according to the organization China Labour Bulletin the number of strikes in 2014 was double the previous year in an unofficial assessment, because the government does not disclose such data. Industrial and construction workers, miners, teachers, taxi drivers and truck drivers held 1378 strikes or protests in 2014, of which 61% involved the industrial working class. Of the total in the year, 40% occurred in the fourth quarter.
This number continued to increase in the first quarter of 2015 with a total of 650 strikes or protests against 569 in the last quarter of 2014.
In the period prior to the Chinese New Year (February 20) the strikes erupted, especially against non-payment of wages, for the workers, composed of a majority of migrants, wanted to return to their home cities in the countryside to celebrate the New Year with their families. Thus, the construction workers accounted for 52.5% of strikes or protests, while industrial workers staged 22% of them. The workers blocked roads, occupied their workplaces and protested outside the headquarters of the CPC and local governments demanding their rights.
Besides the increasing number of strikes, they have also occurred in the countryside, following the government’s policy of developing the hinterland and the attempt of the companies to move their factories to regions where the regional minimum wage is lower.
For example, the center and northern states of Henan, Hebei and Sichuan saw the largest number of construction workers protests prior to the New Year, contrary to what occurs traditionally, where Guangdong state others located on the southern coast use to be the main stages of such struggles.
However, in the quarter as a whole, Guangdong still accounted for about one third of all the strikes and protests in China’s manufacturing sector, including a new round of strikes at the Yue Yuen shoes factory, famous for one of the largest strikes in recent Chinese labor history last year. [see article on this site] About 4500 workers demanded housing fund contributions by the employer and changes in the production process.