The IMF cut China’s growth outlook from 8 per cent to 7.75 per cent for the coming year. These are still the strongest figures to be anticipated for any of the leading industrial countries so the leadership in Beijing is not immediately anxious. In Beijing last week the IMF’s David Lipton noted that this forecast cut came because the IMF believes that absent “continued liberalisation and reduced governmental involvement in the economy” and with a consequent “greater role for market forces,” a financial crisis might strike China.
Such words are simply formulaic. The real problem, Lipton conceded, is that China’s leadership had committed the country to far too much “social financing” – namely credit from the state-owned banking sector and commercial lenders – that rose by almost 60 per cent this year. This credit growth is largely in capital investment, although some of it is sloshing around China’s vaunted shadow banking sector. “Growth has become more dependent – perhaps too dependent – on the continued expansion of investment,” said Lipton.
The IMF warns that too much investment by Beijing in its own country will create unbalanced growth. A Goldman Sachs report from last year, however, disagrees. Investment flow is important, says Goldman, but so too is a country’s capital stock, its residual assets – “On this metric, China still has a long way to go. Its capital stock/worker is only 6 per cent of Japan’s level and 16 per cent of Korea’s.” In other words, per capita investment in infrastructure is not at levels that are seen as normal in the Global North and in its East Asian satellites.
But perhaps the ink on the IMF reports suggest something other than what is on the page. In other IMF departments there is anxiety about the capital drought in the Global North – with intimations of terrible austerity for Europe on the near horizon. For example, Portugal’s official unemployment rate is 18 per cent, with a debt to GDP ratio of 124 per cent. The Chair of the Euro Zone finance ministers, Jeroen Dijsselbloem was in Lisbon recently where he said that if the Portuguese do not hold onto their targets of reducing their public deficit from 6.4 per cent last year to 5.5 per cent this year, and then to 4 per cent (2014) and 2.5 per cent (2015), the surplus holding countries of Europe will not be able to arrange any further bailout. Small protests in Portugal will certainly take on Greek-like proportions. The US Fed, meanwhile, has begun to cut back on its own buy back of Treasury bills. Who will buy the debt that has been accumulated in the Global North? If the Chinese are busy recycling their surplus inside China, which surplus holder will “balance” the “global” economy? That seems to be the proximate IMF worry.
When you go to sell your RMB back for dollars in China these days, the currency kiosk personnel ask why you want to do this – the RMB has slowly become the regional currency in East Asia, and onwards. Anxiety about the slow demise of the dollar’s role as world currency has meant less desire to buy US Treasury Bills with the Chinese surplus. What the Chinese Sovereign Fund, the Chinese commercial ventures and the state-owned firms would like to do instead is to use their surplus to buy tangible assets – whether real estate or firms that will provide a strategic advantage to the Chinese economy. The attempt to buy UNOCAL in 2005 and the current attempt to buy Smithfield is along this grain.
American anger at these purchases is hollow. The US is perfectly content to allow the Chinese to buy its debt, and finance its debt-driven consumption and its debt-driven asset bubbles. American pride does not want to countenance Chinese purchases of actual US assets. A similar moment of racist shudder went through the UK when the Saudi magnate Mohamed Al-Fayed bought Harrods department store in 1985.
Remarkably, a US-based NGO, Food & Water Watch joined in the xenophobia, sending out an activist advisory titled “Chinese Bacon? Stop the Largest Chinese Takeover of an American Company.” The NGO, which has Canadian activist Maude Barlow on its board, asked its email list to call their members of the US Congress (aka Pork Barrel HQ) to let the Committee on Foreign Investment in the United States know that it must vote against this purchase.
Smithfield is no saint. It already has a horrendous record on labor and environmental matters, having earned one of the few Human Rights Watch reports on corporate violations of human rights (that was in 2005; the first such report was on the now vanished Enron). Food & Water Watch acknowledges that Smithfield “is already the biggest, baddest bacon producer around, controlling about one third of the US pork supply, most of which is raised on factory farms.” Yet Food & Water Watch believes that it needs to stand up to “protect” the consumer from the big, bad Yellow Peril.
No sense that the Committee on Foreign Investment is an arm of US foreign policy, having targeted Venezuela, the Gulf Arabs (Dubai Ports) and the Chinese alone. US liberals have a serious problem confusing anti-capitalism with xenophobia. The anti-China view is racist and dangerous. US liberals have substituted jingoism for anti-capitalism. For them, China is the enemy, not Capital.
Shuanghui International bought Smithfield not because it is interested in the US market. It wants the hogs for the increasingly Chinese market for pork – as the consumer base increases more meat eating is going to take place in China. Vegetarians can cavil at this, so can environmentalists (the waste of resources entailed by meat eating is well established). These are important, and universal objections – having nothing to do with Shuanghui’s purchase of Smithfield itself.
The Chinese government has tried to bring its domestic pork production into compliance with environmental regulations –now with the US regulations at their lowest ebb, firms like Shuanghui are eager to take advantage of this laxity. As Tom Philpott put it in The Atlantic, “Industrial pork: the iPhone’s culinary mirror image.”
The Global North wants the Chinese surplus, but on its own terms. It simply won’t do to allow the Chinese to do as they please.
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