The Class Politics of the China Boom

Ever since the onset of the latest global financial crisis in 2008, China’s continuous rapid growth has led many to see the Chinese model as a viable alternative to neoliberal development. Some even see Chinese capitalism as the last hope for the rejuvenation of global capitalism. Instead of constituting a progressive alternative to neoliberalism, China’s export-led economic boom is in fact a core part of the global neoliberal order. The exceptional competitiveness of China’s export sector originates in a policy regime that aggravates rural-urban inequality and represses wage growth, creating a large rural surplus labor, perpetuating the low manufacturing wage, and restraining domestic household consumption. The falling consumption share of the economy led China to depend on western markets, the US in particular, for its exports. The global financial crisis ended the consumption spree in the US and elsewhere in the global North, precipitating a crisis of China’s export-led growth. China’s apparent success in weathering the global economic crisis is grounded on an orgy of debt-financed fixed asset investment undertaken by big state owned enterprises controlled by a neo-feudal party-state elite. The resulting explosion of indebtedness in the Chinese economy is the source of the recent economic slowdown and financial turbulence. The continuation of China’s growth in the long run hinges not on the perpetuation of China’s current model of development, but on whether and how China could shift to a new model of development based on balanced, inclusive, and redistributive growth that relies more on household consumption than on investment and export.