The truth about China’s economy: Debunking Western media myths

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ECONOMY

The truth about China’s economy: Debunking Western media myths

By Radhika Desai, Michael Hudson and Mick Dunford
Published 2024-03-28

This is part 2 of their discussion. Part 1 is here: “What is China’s future? Economic decline, or the next industrial revolution?” You can find more episodes of Geopolitical Economy Hour here.

The truth about China's economy: Debunking Western media myths / Part 2

Geopolitical Economy Report

Mar 21, 2024
Political economists Radhika Desai and Michael Hudson are joined by Beijing-based scholar Mick Dunford to discuss China's economy and debunk Western media myths, addressing accusations that consumption is too low, fears of "Japanification", the role of exports, and the new Chinese growth strategy. This is part 2 of their discussion. Watch part 1 here:

• What is China's future? Economic decl...

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Things to keep in mind...

Neo-Nazi ideology has become one of the main protagonists of political and social life in Ukraine since the 2014 coup d'état. Meanwhile, fascist ideology and blatant lies also permeate the consciousness of most people in the West. Those in the comfortable top 10%, the "PMCs" (Professional Managerial Class), are especially vulnerable. They support and disseminate such ideas. They are the executors of the actual ruling class' orders, those in the 0.001%, who remain largely invisible. The PMCs are the political class, the media whores, the top military brass, some people in academia, and the "national security/foreign policy" industry honchos. Push back against these unethical, contaminated people with the truth while you can.

AND...where the US Government is at:

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Since the overpaid media shills will never risk their careers to report the truth, the world must rely on citizen journalists to provide the facts that explain reality.

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ALL CAPTIONS AND PULL QUOTES BY THE EDITORS NOT THE AUTHORS

WE LIVE IN THE WORLD THAT TRUMAN MADE.

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Eric Zuesse
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Of humble beginnings, and a devout anticommunist, Missourian Harry Truman left his mark in history, for the worse, but, as usual, larger forces determined the nation's course.

Dr. Marco Soddu’s excellent 13 December 2012 study of “Truman Administration’s Containment Policy in Light of the French Return to Indochina” makes clear that (unlike FDR) President Truman’s historical understanding was poor and vulnerable to shaping by advisors who themselves had poor understanding, or perhaps ulterior motives.

President Roosevelt was far more of a strategic thinker than Truman was, and therefore was far less manipulable. In his 1 January 1945 Memorandum for the Secretary of State (Stenttinius, whom Truman viewed as being soft on communism and therefore Truman replaced him on 28 June 1945, even before deciding irrevocably to start a Cold War), FDR made clear that, “I still do not want to get mixed up in any Indochina decision. It is a matter for post-war.” And, “I made this very clear to Mr. Churchill. From both the military and civil point of view, action at this time is premature.” The aristocracies of both Britain and France were obsessed to continue their empires post-war. FDR held them off, but Truman was strongly inclined to yield to them whenever doing so would be “anti-communist.” He was simply manipulable. He never really understood what FDR’s vision was of the post-war world, nor cared. In fact, on 29 August 1945, in a conversation between Madam Chiang Kai-shek and Truman, “Madame Chiang recalled that President Roosevelt had spoken of a trusteeship for Indo China, whereupon the President stated that there had been no discussion of a trusteeship for Indo China as far as he was concerned.” This far, just a month, into the Cold War (supposedly against communism instead of for forming an all-inclusive global U.S. empire) that he now was committed to, he still had never even thought about what FDR’s vision for the post-WW2 world had been. To Truman, communists personified evil: to him, they were psychopaths and demons — end of story.

By contrast, here was the reason why FDR strongly favored for existing colonies to become taken over, after the War, by the U.N. (which FDR had, since August 1941, been planning to be quite different from what Truman made it), as trusteeships of the U.N., on the road quickly to independence (and Chiang knew at least something about this but Truman either didn’t, or else lied to say he didn’t):

history.state.gov/historicaldocuments/frus1944v03/d708
Memorandum, President Roosevelt to the Secretary of State

FDR—Though a plutocrat by birth and acculturation, he was as decent and visionary as a bourgeois statesman can be.

January 24, 1944

I saw Halifax last week and told him quite frankly that it was perfectly true that I had, for over a year, expressed the opinion that Indo-China should not go back to France but that it should be administered by an international trusteeship. France has had the country — thirty million inhabitants — for nearly one hundred years, and the people are worse off than they were at the beginning. As a matter of interest, I am wholeheartedly supported in this view by Generalissimo Chiang Kai-shek and by Marshal Stalin. I see no reason to play in with the British Foreign Office in this matter. The only reason they seem to oppose it is that they fear the effect it would have on their own possessions and those of the Dutch. They have never liked the idea of trusteeship because it is, in some instances, aimed at future independence. This is true in the case of Indo-China. Each case must, of course, stand on its own feet, but the case of Indo-China is perfectly clear. France has milked it for one hundred years. The people of Indo-China are entitled to something better than that.
F[ranklin] D. R[oosevelt]]

Another sign of bad faith on the part of the United States against the Soviet Union — besides the Marshall Plan and Operation Gladio (both instituted by Truman) — seems to have been America’s public refusal to accept as being anything other than ‘communist tricks’ the repeated efforts by the Soviets to restore the U.S.-U.S.S.R. joint national-security cooperation that had existed prior to 25 July 1945. America’s responses to each of those Soviet initiatives were insults, instead of welcoming the Soviet proposals and working behind the scenes with them to obtain progress toward the type of world order that FDR had intended — a world order policed by the United Nations, not by the united imperialistic fascists. For example, on 19 September 1959 at the U.N. General Assembly, the Soviet Representative headlined “Declaration of the Soviet Government on General and Complete Disarmament” and presented a series of proposals including:

https://undocs.org/A/4219
“Declaration of the Soviet Government on General and Complete Disarmament”

September 19, 1959
P. 14:
The Soviet Government proposes that the programme of general and complete disarmament should be carried out within as short a time-limit as possible — within a period of four years.
The following measures are proposed for the first stage:
The reduction, under appropriate control, of the strength of the armed forces of the Union of Soviet Socialist Republics, the United States of America and the People’s Republic of China to the level of 1.7 million men, and of the United Kingdom and France to the level of 650,000 men;
The reduction of the armed forces of other states to levels to be agreed upon at a special session of the United Nations General Assembly or at a world conference on general and complete disarmament;
The reduction of the armaments and military equipment at the disposal of the armed forces of States to the extent necessary to ensure that the remaining quantity of armaments corresponds to the level fixed for the armed forces.
The following is proposed for the second stage:
The completion of the disbandment of the armed forces retained by States;
The elimination of all military bases in the territories of foreign States; troops and military personnel shall be withdrawn from the territories of foreign States to within their own national frontiers and shall be disbanded.
The following is for the third stage:
The destruction of all types of nuclear weapons and missiles;
The destruction of air force equipment;
The entry into force of the prohibition on the production, possession and storage of means of chemical and biological weapons in the possession of States shall be removed and destroyed under international supervision;
Scientific research for military purposes and the development of weapons and military equipment shall be prohibited;
War ministries, general staffs and all military and paramilitary establishments and organizations shall be abolished;
All military courses and training shall be terminated. States shall prohibit by law the military education of young people.
In accordance with their respective constitutional procedures, States shall enact legislation abolishing military service in all of its forms — compulsory, voluntary, by recruitment, and so forth. …
(4) Conclusion of a non-aggression pact between the member States of NATO and the member States of the Warsaw Treaty

Editor's Note: Reflect for a moment on the above. Here is a bold proposal that could have significantly altered the course of human history, for the better, and it was being tendered by the much demonised Stalin and the communist Soviet Union. Such ideas never came from the sanctimonious and ever duplicitous West.

The U.S. response came a few months later at the “Conference of the Ten Nation Committee on Disarmament”:
s3.amazonaws.com/unoda-web/documents/library/conf/TNCD-PV6.pdf
“Conference of the Ten Nation Committee on Disarmament”

22 March 1960
Final Verbatim Record of the Sixth Meeting
Held at the Palais des Nations, Geneva
P. 36:
Mr. Eaton (United States of America): I have no intention of entering into this discussion on foreign bases. I think the discussions that we have had here this morning have indicated that we shall run into political problems at the very earliest stage, problems on which earlier conferences have foundered. I would only say that the forces of my Government are only employed outside my own country and within my own country for the purpose of defending both ourselves and those of our allies who wish to be associated with us, who welcome our troops as a part of theirs and as a part of the allied defences, and for no other reason. Whenever the time comes when these troops need not be employed, for defensive purposes only, there need be no doubt in the mind of anyone here that those forces will be withdrawn.
s3.amazonaws.com/unoda-web/documents/library/conf/TNCD-PV46.pdf
“Conference of the Ten Nation Committee on Disarmament”
24 June 1960

Final Verbatim Record of the Forty-Sixth Meeting, Held at the Palais des Nations, Geneva, p. 4:
Mr. Nosek (Czechoslovakia): What did Mr. Eaton propose? He proposed the introduction of control measures. … exclusively with measures of control, that is with the old and well-known requirement of the United States — the introduction of control over armaments. Apparently with a view to misleading world public opinion, which requires a concrete discussion of general and complete disarmament, the United States representatives are beginning to prefer — for tactical reasons — to call those measures not “partial measures” but “initial steps” on the road to general and complete disarmament under effective international control.

b-ok.cc/book/5398150/073f73
“The United Nations and Space Security: Conflicting Mandates” p. 17:

This [obfuscation and evasion by the U.S. (which on p. 16 was referred to as merely “proposals directed towards the establishment of control without disarmament”)] ultimately led [on 28 June 1960] to the USSR, Bulgaria, Czechoslovakia, Poland and Romania not attending the 48th meeting of the Ten-Nation Committee, which signalled the end of these discussions in the Committee.

The U.S. Government refused to discuss the Soviet Union’s proposal for all war-weaponry to be placed under U.N. command, and decision-making only by the U.N., to enforce only U.N. laws — no longer under the command of individual nations (such as by the U.S. regime’s “international-rules-based [i.e., not international-law-based] order.”

Who benefited from America’s refusal even to discuss what had been U.S. President FDR’s aim for the post-WW-II world? The beneficiaries are what Eisenhower when leaving office called the “military industrial complex,” and are basically America’s hundred largest military contractors, especially the owners of the largest weapons-manufacturing firms such as Lockheed. Ike had served them well, and then three days before leaving office warned the public about them so as not to be blamed (along with Truman) by historians, for having created it.

Meanwhile, the German industrialists (such as this) who were likeliest to have been the individuals who had funded Hitler’s rise to power, were let off scot-free at the Nuremberg Tribunals after the war was over. Furthermore, as Bishnu Pathak documented in his 21 September 2020 “Nuremberg Tribunal: A Precedent for Victor’s Justice”, those Tribunals were, even at the time, widely condemned even by the Chief Justice of the U.S. Supreme Court and by the chief U.S. Prosecutor at the Tribunals, as being a “sanctimonious fraud,” a “high-grade lynching party” and nothing more than victors’ ‘justice’, instead of any respectable precedent-setter for the U.N., but Truman and the other leaders of the victor-powers simply did not care — and the U.N. became built upon that acceptance of victors’ ‘justice’: no improvement. One cannot say whether FDR would have caved to that if he had not died first, but certainly the U.S. that followed after him has been the type of tyranny that he had always been scheming to prevent both for the U.S. and for the world.

Nuremberg defendants—The trials seemed to mete out some harsh justice but in reality the Anglo-Americans and the French did their best to save and incorporate Nazis into the global anti-communist crusade, the first "Cold War". This pattern of high-handed hypocrisy continues to this day, with consequences that have put the world on the brink of a nuclear Armageddon.

Furthermore, the OECD or Organization for Economic Cooperation and Development was set up in 1948 nominally in order ‘to stimulate economic progress and world trade,’ but actually to administer the Marshall Plan. The OECD was just another anti-Soviet U.S. organization, but, since the cash that it was distributing was going to Europe, its initial membership was those countries and it was headquartered in Paris, so as not to seem to be an extension from the U.S. Government. The organization changed its name to OECD in 1961 so as to hide from historians that it had previously been called the OEEC, which was clearly traceable to the Cold War. The CIA-edited and written Wikipedia says that “In 1948, the OECD originated as the Organisation for European Economic Co-operation (OEEC),[7] led by Robert Marjolin of France, to help administer the Marshall Plan (which was rejected by the Soviet Union and its satellite states).[8]” However, it wasn’t “rejected by” them, but instead rejected them — just like the Marshall Plan itself rejected them.

The 1989 masterpiece by Christopher Simpson, Blowback: The First Full Account of America's Recruitment of Nazis and Its Disastrous Effect on The cold war, Our Domestic and Foreign Policy, documented the U.S. regime’s comprehensive employment of ‘ex’-Nazis in order to assist its goal of conquering ‘communism’ but really Russia. Then, on 7April 2024, I headlined a supplementary account, “How & Why the UK, U.S., and Canada, Governments imported Nazis into Canada”, which I closed by saying: “And this is how it came to be that the pro-Nazi Ukrainians in Canada have been organized and effectively represented while the others (the non-Nazi Ukrainians) were suppressed; and, above all, how it came to be the case that America’s armaments-manufacturers and their NATO have thrived while coup-after-coup and invasion-after-invasion have continued to expand the U.S. empire up till the present moment.” All of this was an extension from Truman’s private decision on 25 July 1945, and its extension by Bush’s secret decision on 24 February 1990 to continue it even after communism in Russia would be ended in 1991. Furthermore, my 23 March 2024 “How Germany Is Still Controlled by Nazis” documented yet further, that as regards the anti-Russian aspect of Hitler’s nazism, there was no real change in Germany when the U.S. regime took it over from Hitler (and the rest of it from Gorbachev), other than the necessary cosmetic changes in the new unified Germany, which, of course, required outlawing any public displays of anti-Semitism (as-if Hitler had hated only Jews — Jews were instead his main hatred, but he also hated — and aimed to enslave — all Russians, and, indeed, all Slavs).

I especially recommend reading Christopher Simpson’s masterpiece, because it’s the best book yet done on the then and continuing fraudulence of the U.S. regime’s allegations that the comprehensive denazification of Germany’s Government, which FDR had been intending, and which was central to his planning for the post-WW2 world — and which all three of the Allies, FDR, Stalin, and Churchill, had supported — was carried out, instead of effectively aborted, by Truman and by Eisenhower (with Churchill’s support of aborting it), and by all successive U.S. Presidents and European stooges since then. The inside-the-book excerpts at the Amazon site for Simpson’s masterpiece, give a fair indication of the book, including its “Series Introduction,” by Mark Crispin Miller, which says that, “For over half a century, America’s vast literary culture has been disparately policed, and imperceptibly contained, by state and corporate entities well placed and perfectly equipped to wipe out wayward writings,” including the history that this book documents.

The U.S. Government’s National Archives and Records Administration (NARA) had very reluctantly commissioned it, with an obligation to publish it, but then refused to publish the work because NARA’s top official refused to allow it. The team of investigators, headed by the work’s author, Simpson, finally found a publisher for the work, which was then, and since, suppressed. On 13 November 2010, Eric Lichtblau, whose chaotic anecdotal narrative book The Nazi Next Door was to be published in 2015, was the New York Times reporter headlining “Nazis Were Given ‘Safe Haven’ in U.S., Report Says”, and the newspaper introduced it by saying that, “An internal history of the United States government’s Nazi-hunting operation provides gripping new evidence about some of the most notorious Nazi cases of the last three decades. The Justice Department kept the 600-page report secret for the last four years, releasing a heavily redacted version last month to a private research group that sued to force its release. A complete version was obtained by The New York Times.” The 600-page complete unredacted secret report, titled “The Office of Special Investigations: Striving for Accountability in the Aftermath of the Holocaust”, by Judy Feigin from the U.S. Department of Justice, and dated December 2006, was linked-to in the online version of the article, and it stated, flat-out, on its page 33, that “Congress’ overriding concern at the time was in helping refugees escape communist rule.” In other words: the U.S. Government’s ‘anti-communist’ (actually pro-U.S.-empire) obsession, ever since Truman took over, included assisting Nazis and their supporters to become “refugees” in America and in its (after WW2) colonies (‘allies’). And this has continued, likewise secretly, ever since U.S. President GHW Bush on 24 February 1990 started telling America’s European stooges to secretly continue the ‘Cold War’.

News 2739

If you approve of this article, please share it with your friends and kin.
Help us expand our reach. Defeat appalling hypocrisy. Lies cost countless lives.
We must act together to smash the VILE Western disinformation machine.
This is the Lying Machine that protects the greatest evil humanity has ever seen.
YOU know what we are talking about.

Neo-Nazi ideology has become one of the main protagonists of political and social life in Ukraine since the 2014 coup d'état. And that's a fact.

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The views expressed herein are solely those of the author and may or may not reflect those of The Greanville Post. However, we do think they are important enough to be transmitted to a wider audience.

Since the overpaid media shills will never risk their careers to report the truth, the world must rely on citizen journalists to provide the facts that explain reality.

Unfortunately, most people take this site for granted.
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ALL CAPTIONS AND PULL QUOTES BY THE EDITORS NOT THE AUTHORS

China’s Economy: Doing Well or Big Trouble Ahead?

Please make sure these dispatches reach as many readers as possible. Share with kin, friends and workmates and ask them to do likewise.

Jeff J. Brown

EDITOR'S NOTE
F.W. Engdahl, a widely respected geopolitical analyst, recently wrote an essay offering a gloomy view of China's near economic future. Engdahl was forecasting something like a serious recession or even an economic implosion. Since many progressive people around the globe pin their hopes on China and Russia to build a peaceful, multipolar, and genuinely democratic order, one that would show conclusively the superiority of socialism over predatory neoliberalism, Engdahl's piece caused a great deal of confusion and consternation. Fortunately, our senior editor, Jeff J. Brown (who also happens to be the editor-in-chief of the China Rising blog, and also founder of the new Seek Truth From Fact Foundation) is a highly qualified expert on Chinese and Asian questions in general, and has written several books on the subject, also saw the Engdahl forecast and prepared a comment. Both views can be found below. It should be noted that alarms about the "real estate bubble collapse" have been around for a while. The US news program 60 Minutes (CBS) produced a segment, highly critical, of course, 10 years ago. (See appendix) While the debate may continue, we hope this page will help to clarify some of the urgent concerns expressed by some of our readers and associates. Meantime, our special thanks to our colleague Regis Tremblay, himself a veteran anti-imperialist/peace activist, for bringing this topic to our attention.
—PG

Why China Can’t Pull the World Out of a New Great Depression
By William Engdahl | First run on 16 May, 2023

Empty mall. Maybe the customers will come, maybe not, but the use value is always there.

Over the past two decades since China was admitted into the WTO, its national industrial base has made unprecedented strides to emerge as the world’s leading economic producer in many major areas. The academic debates over whether China’s GDP is larger than that of the USA are misplaced. GDP is largely worthless as a measure of a real economy. When measured in real physical economic production, China has left the USA and everyone else in the dust. Therefore, the future course of industrial production in China is vital to the future of the world economy. Globalization of the world economy made it so.

Steel production is still the single best indicator of a growing real economy. In 2021, China produced more that twelve times the tonnage steel as the USA, over one billion tons. The USA, once world leader, managed a piddly 86 million tons. In tons of coal, China produces some 50% of world total coal. She controls 70% of world rare earth mining and over 90% of its processing, thanks to bizarre US policy actions going back several decades. China today is far the world’s largest motor vehicle producer, almost three times the size of the US at 27 million units annually, one third of world total in 2022. China is by far the largest producer of the essential cement for construction, and is the world’s leading aluminum producer. At 40 million tons in 2022, this compares to not even one million tons in the USA. It is also the world’s largest copper consumer. The list goes on.

This is merely to suggest how essential the economy of China has been to world economic growth over the past two decades. A mere four decades ago China was insignificant in world real economic terms. So, if China goes into deep economic contraction, the effect this time will be global. And this is just what is now underway. Important to note, the contraction began well before the severe three-years of China’s zero covid lockdown. Simply put, China since the so-called Great Financial Crisis of 2008 managed to create a financial bubble the size of which the world has never before experienced. That bubble began to deflate, beginning in real estate, around 2019. The scale is systemic and is only beginning.

Colossal Deleveraging and Hidden Debt

A huge problem with China’s economic model over the past two decades has been the fact that it has been a debt-based finance model massively concentrated on real estate speculation beyond what the economy can digest.

Fully 25 to 30% of the total Chinese GDP is from real estate investment in homes, apartments, offices. That’s significant. The problem is that real estate, especially apartments in China, for more than two decades, appeared to be a guaranteed money maker for owners as well as builders and banks and above all, local government officials. Prices rose annually in the double digits, sometimes by 20%. Millions of middle-class Chinese bought not just one, but two or more apartments, using the second as investment for future retirement. China’s land is owned by the Communist Party, at the local level. It is leased long-term to construction firms who then borrow to build.

Here it gets murky. For CP local government officials, revenue from local real estate land leasing and their infrastructure projects is their major revenue source. Until now municipal property taxes are forbidden despite a huge pressure from local officials.

In the months of 2018 and 2019 China real estate prices peaked. Since then, they have been in a prolonged decline. China has a unique and very abuse-prone real estate model. Typically, a buyer must pre-pay the full purchase price when a developer has merely begun the construction. “Buy today as the price will be even more tomorrow” was the mantra. He takes a mortgage, usually from local banks, to do that. If the builder does not complete on time, the buyer must still pay their mortgage. Even if the developer goes bankrupt as is now happening, leaving abandoned unfinished housing behind. No other country uses that model. Typically, in Western countries a small deposit on a home to reserve until completion is enough. The mortgage comes when the property is finished. Not in China.

So long as China home prices were constantly rising, it seemingly worked and the home market expanded. When that price inflation stopped, for a variety of reasons, and exacerbated by the ultra-severe covid lockdowns, what was then a colossal real estate bubble began to implode. According to economist Robert Pettis at Beijing University, “Since the beginning of the property crisis in September and October 2021, property prices have declined in more than two-thirds of China’s seventy largest cities (and probably all of the smaller ones), while, more importantly, sales of new apartments this year (2022) have collapsed.” [1][i]

The major turn took place in 2021 with the default of China Evergrande Group on its dollar bonds. It was then the world’s most indebted real estate conglomerate with debts of well over $300 billion. In 2018 Evergrande was deemed, “the most valuable real estate group in the world,” according to Wikipedia. That was on paper. By time of default, it also owned theme parks, an EV auto company, resorts and enough land to house 10 million people. Until Beijing refused to bailout Evergrande, in a belated bid to cool the bubble, Chinese lenders had made loans based on the assumption that large borrowers would be bailed out—Too Big To Fail. Beijing learned all the wrong lessons from US banks after Lehman Bros.

It came out that Evergrande had created a colossal Ponzi fraud over the years. They were not unique. Following a speculative property boom after 2010, poorly-regulated local governments across China turned increasingly to real estate to boost income and fulfill the Beijing GDP growth targets, a de facto monetary version of Soviet central planning. Inflating local real estate values was a way of meeting local GDP targets. Local officials were given their share of annual GDP contribution to be met. Real estate became the ideal vehicle to meet GDP targets and generate local revenues. As long as prices were rising, banks and increasingly unregulated local “shadow banks” joined in the “win-win” bonanza. According to the South China Morning Post, by 2020 and the start of covid severe lockdowns, land sales and real estate taxes’ contribution to local government fiscal revenue reached a peak of 37.6 per cent. [1][ii]

The Evergrande partial default set off a panic in China real estate that officials desperately, and unsuccessfully, have tried to control. It was merely the first major casualty in what is a systemic meltdown. Beijing authorities imposed sharp limits on real estate lending in a vain attempt to contain the implosion, the so-called Three Red Lines. That made the implosion of the property bubble worse. In 2022 China new home sales plunged 22% over 2021. As of February 2023, China home prices had fallen for 16 straight months. Sales by the country’s top 100 developers last year were only 60% of 2021 levels. Land sales, which typically account for more than 40% of local government revenue, have collapsed. [1][iii]

Empty Houses and unemployment rising

Until the bubble began to burst in 2022 with the Evergrande default, Chinese real estate prices had risen several times higher, relative to household income, than in the USA. More alarming, two decades of rampant price inflation had created literal ghost cities and millions of empty apartments. As of 2021 an estimated 65 million apartments in China were empty, enough to house the French nation. [1][iv] This was a result of two decades or more of municipalities and developers building beyond actual demand, as citizens bought for investment, not living. One estimate is that between one-fifth and one-quarter of the total China housing stock, especially in more desirable cities, was owned by speculative buyers who had no intention of living in them or renting them out. In Chinese culture, a used apartment is considered unattractive.[1][v] With falling prices, these homes become unpayable.

The unprecedented 3-year covid lockdowns that ended abruptly last December did not help matters. Thousands of foreign manufacturers including Apple, Foxconn, Samsung and Sony, have begun to leave China for other locations in Asia or even Mexico, fueling a growing unemployment crisis which feeds the housing crisis in a self-feeding cycle.

As a result of this slow-motion implosion across China, for the first time since the great expansion unemployment is becoming very serious. This March, youth unemployment officially was over 20%. Millions of recent university graduates are unable to find work and Beijing has begun to send them to work in the rural countryside, reminiscent of the Mao era. This bodes ill for future home sales. A contracting bubble has a vicious dynamic.

Until about the time of the 2008 Beijing Olympics, real estate investment was largely productive. It filled a huge deficit in quality housing as a new middle class grew more affluent. After about 2010 that began to shift to bubble status as millions of middle-class and rich Chinese began to buy second and even third homes for pure speculation as prices were rising in double digits. The degree of central supervision of local government finances was loose.

Over recent years, to avoid central clampdown by Beijing authorities fearful of a new debt bubble imploding, local governments, often with hidden collusion from the giant state banks, created a non-bank economy, “shadow banks,” all off-balance sheet. As one result, despite actions by Beijing regulators to control the property meltdown and prevent contagion, total debt, public and private, in China by February 2023 according to Bloomberg reached an alarming 280% of GDP. [1][vi]

Commodity.com reports total state debt of China in 2023 is more than $9.4 trillion. But that excluded local government financing vehicles (LGFVs). Chinese local governments rely on off-balance sheet LGFVs to raise funds for local public construction—housing, high-speed rails, ports, airports. The debts of all these LGFVs are estimated to be roughly $27 trillion more. The official figure for total state debt also excluded debt of state banks and state companies, which is also clearly considerable, but unpublished. That total debt is also without the unknown size of local shadow banks which China’s National Institute of Finance and Development in 2018 estimated at some $6 trillion more. The result of all these omissions is a headline figure meant to reassure Western financial markets that China has manageable public and private debt. It doesn’t. All told, very roughly we can calculate a mammoth debt accumulation of well more than $42 trillion, a staggering sum for an economy which only three decades ago was at a level of an underdeveloped economy. [1][vii]

A major vehicle used to finance local budgets is unguaranteed and largely unregulated municipal investment bonds. Unlike traditional municipal debt in western countries, the Chinese local LGFVs are not able to use tax revenues to fund their bond interest or principal payments. So, local governments would tap into a growing housing market by leasing their long-term land to developers to fund their bond payments. This created a system where a sustained fall in housing construction, sales and prices now creates a systemic threat. This is now underway across China. In just two decades China has created the world’s second largest corporate debt market behind the USA, and far the most of that is in unregulated municipal bond debt.

As a result of this unique mixing of local governmental fiscal policies with local housing markets, a substantial drop in housing or land prices has greatly increased the risk level of local government default on its debts. In July 2022 Zunyi City in Guizhou defaulted on a major bond, leading to a collapse of the entire unregulated local bond market, as local bond issuance collapsed by 85% after that. The bonds were a way to refinance local debt and that channel now is all but closed, despite Beijing liquidity injections early 2023. Investors were mostly local ordinary Chinese seeking to earn on savings. This past April officials of Guiyang, also in Guizhou, told Beijing it was unable to finance its debts accumulated over a decade in construction projects including housing. [1][viii] This opens the next phase of debt implosion. Several China municipalities reportedly have been slashing wages, cutting transportation services and reducing fuel subsidies in a desperate bid to avoid default.

National Security redefined

Transparency of financial data has always been a problem in China. Thirty years ago the country had no developed financial markets. So long as the economy was expanding however, it was not a priority. Now it is, but too late.

A signal of how severe the situation is becoming, the Beijing authorities have begun to limit release of local and corporate financial data to foreign firms, calling it a “national security” issue.

This May, Dalian Wanda Group, another major Chinese real estate conglomerate with investments in US cinema chains, Australian real estate and beyond, revealed talks with its major bankers to restructure huge debts amid a liquidity crisis. The UK Financial Times on May 9 reported that hopes of a post-covid China recovery are vanishing: “Chinese iron ore prices dropped to their lowest levels in five months, as weak demand adds to evidence that the country’s economic rebound from tough coronavirus lockdowns may be faltering… the optimism and activity that followed the end of lockdown have waned, leading to a ‘collapse’ in the steel market.”

This all means the prospect of the Chinese economy being a growth locomotive to lift the rest of the world from looming depression is virtually nil at this point. The massive Belt and Road Initiative is mired in hundreds of billions of dollars in loans to countries unable to service the debt, as world interest rates rise and growth stalls. Attempts to boost domestic China growth by relying on a consumer boom are doomed presently for obvious reasons noted, as is the call by Xi Jinping to make 5G, AI and such technologies the basis of a new boom, as US sanctions greatly hamper China IT advances.

Endnotes:

[i] Michael Pettis, What’s in Store for China’s Mortgage Market?, August 12, 2022,

https://carnegieendowment.org/chinafinancialmarkets/87664

[ii] Luna Sun, China cracks down on ‘characteristic towns’ that misused land, real estate while racking up massive debt, 6 November, 2021, https://www.scmp.com/economy/china-economy/article/3155055/china-cracks-down-characteristic-towns-misused-land-real

[1][iii] Laura He, China s property crash is prompting banks to offer mortgages to 70 year olds, February 20, 2023 https://edition.cnn.com/2023/02/17/economy/china-mortgage-age-95-property-market-intl-hnk/index.html

[1][iv] Lina Batarags, China has at least 65 million empty homes — enough to house the population of France. It offers a glimpse into the country's massive housing-market problem, Business Insider, October 14, 2021,https://www.businessinsider.com/china-empty-homes-real-estate-evergrande-housing-market-problem-2021-10 .

[1][v] Michael Pettis, What Does Evergrande Meltdown Mean for China?, September, 20, 2021,https://carnegieendowment.org/chinafinancialmarkets/85391

[1][vi] Bloomberg, China’s Debt-to-GDP Ratio Rises to Record 279.7% on Credit Boom, 8 May, 2023,https://www.bloomberg.com/news/articles/2023-05-08/china-s-debt-to-gdp-ratio-rises-to-record-279-7-on-credit-boom#xj4y7vzkg

[1][vii] Commodity.com, China’s National Debt Clock: What’s the Current Figure (and What’s Included), May 12, 2023,

https://commodity.com/data/china/debt-clock/

[1][viii] The Economist, China’s local-debt crisis is about to get nasty, May 4, 2023,https://www.economist.com/finance-and-economics/2023/05/04/chinas-local-debt-crisis-is-about-to-get-nasty

ABOUT THE AUTHOR(s)

Frederick William Engdahl (born August 9, 1944) is an American writer based in Germany. He identifies himself as an "economic researcher, historian and freelance journalist." Born in Minneapolis, Minnesota, United States, Engdahl is the son of F. William Engdahl Sr., and Ruth Aalund (b. Rishoff). Engdahl grew up in Texasand earned a degree in politics from Princeton University in 1966 (BA) followed by graduate study in comparative economics at the University of Stockholm from 1969 to 1970. He then worked as an economist and freelance journalist in New York and in Europe.

Commentary by Jeff J. Brown

I actually subscribed to F. William Engdahl, so I had already seen this and read this article. He usually does really excellent work, but sometimes he really gets off down a rabbit hole. And this is definitely one. A deep rabbit hole. Unless you go to China and see China, and see how it works and see how the economy is working and experience it internally, and understand how the government works, how the real estate market works, how the banks work, how the insurance companies work, how the infrastructure [is set up, it's hard to understand what's really happening].

It's too easy for people like Engdahl to think that China is just like the United States or Europe, and it's not. The land is all people-owned. The banks are all people-owned. The insurance companies are all people-owned. Much of the large scale industry is all people-owned. So plus you have a much more honest, caring government that's actually trying to help the people instead of trying to kill it [or bamboozle it]. It's just also wrongheaded. China's debt is absolutely a fraction of what it is for the United States and Europe. And so that is a non issue. I cover this all the time. Evergrande. It's a blessing for the people of China that Evergrande went belly up. What's going to happen is China—Baba Beijing—my name for the chinese government... The leadership will move in. They will take it into receivership. They will strip out the useful assets that can be put into state owned companies, and the investors are going to get the shaft. And that includes overseas investors. And also know that's just the way it is. The thousands of people who had apartments that were not finished or whatever, Baba Beijing will make sure that those apartments are finished. They will find diligent partners to finish those apartments. They will keep the citizens whole, and the investors are going to take the hit, be they Chinese, which is most of them, or overseas. So that's the way it works.

I was just there in May for an entire month. I was there in most of the month of the end of September and most of October. And you just have to see it to believe it. And I don't think he's ever been there, and he's just wrong on so many accounts. And I don't have time to go through line by line, but I just want to give you this overview and to see that when you own the land, when you own the banks, when the people own the land, the banks, the insurance companies, the major industries, all the public infrastructure, and you have an honest, hardworking, Confucian government committed [the results are much different].

Mao Zedong served the people. Of course, there's some corruption and they're cleaning it up. They put millions of, they punished millions of people in the last ten years. Some have even been executed for high financial crimes. Thousands are in jail. So they are kicking ass and taking names. And you just spend one day walking around anywhere in China, and the place is humping, bumping, hopping, going, moving, producing. You can just feel the economic energy when you're in China. And it has got the fastest growing economy. Big economy. Well, maybe India might be a little bit bigger this year, but it's the biggest economy in the world in PPP terms, and I'm not worried about it at all. And I'm sorry that Engdahl published this.

More to read about China's real estate sector:

https://chinarising.puntopress.com/2022/11/21/chinas-real-estate-sector-is-a-bursting-bubble-collapse-here-we-come-really-china-rising-radio-sinoland-221121/

On China supposedly going to implode with debt:

https://chinarising.puntopress.com/2023/09/16/china-is-going-to-collapse-not-really-heres-why-it-cannot-happen-china-rising-radio-sinoland-230916/

(Jan. 30, 2024)

APPENDIX
(CBS News)

China's real estate bubble

CBS News
China's economy has become the second largest in the world, but its rapid growth may have created the largest housing bubble in history. Lesley Stahl reports.

“He who is not angry when there is just cause for anger is immoral. Why? Because anger looks to the good of justice. And if you can live amid injustice without anger, you are immoral as well as unjust.”
— Thomas Aquinas

ABOUT JEFF BROWN

Jeff J. Brown is a geopolitical analyst, journalist, lecturer and the author of The China Trilogy. It consists of 44 Days Backpacking in China - The Middle Kingdom in the 21st Century, with the United States, Europe and the Fate of the World in Its Looking Glass (2013); Punto Press released China Rising - Capitalist Roads, Socialist Destinations (2016); and for Badak Merah, Jeff authored China Is Communist, Dammit! – Dawn of the Red Dynasty (2017).
Jeff can be reached at China Rising, jeff@brownlanglois.com, Facebook, Twitter and Wechat/Whatsapp: +86-13823544196.

• For Jeff J Brown’s Books, Radio Sinoland & social media outlets be sure to check this page on his special blog CHINA RISING RADIO SINOLAND

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The Cultural Revolution’s Success. (Part 2)

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Godfree Roberts
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Deng Xiaoping—the capitalist "pragmatist" roader

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Mao's and Xi's opinions of the CR

With his educational reforms underway, Mao next addressed peasants’ health:

Tell the Ministry of Public Health that it only works for fifteen percent of the population and that this fifteen percent is mainly composed of urban gentlemen, while the broad masses of the peasants get no medical treatment: they have no doctors and they have no medicine. The Ministry is not a Ministry of Public Health for the people, so why not change its name to the Ministry of Urban Health, of Gentlemen’s Health, or even to the Ministry of Urban Gentlemen’s Health? The methods of medical examination and treatment currently used by hospitals are not at all appropriate for the countryside and the way doctors are trained only benefits the cities. Yet in China over five hundred million of our people are peasants. Medical education must be reformed. It will be enough to give three years’ training to graduates from higher primary schools. They can then study and raise their standards, mainly through practice. If this kind of doctor is sent down to the countryside–even if they haven’t much talent–they will be better than the current quacks and witch doctors, and the villagers can afford to keep them”.

His Rural Cooperative Medical System trained Barefoot Doctors – who lived in their villages all their lives and were available day and night – to administer vaccinations, demonstrate correct handling of pesticides, introduce new sanitation methods and, by teaching nutrition and child care, cut infant and maternal mortality in half. Urban doctors, now required to tour the countryside, provided free treatment and trained promising barefoot doctors at urban hospitals. By the end of 1976, every village in China had a clinic and the death rate had fallen by 18%. Thanks to the US National Institutes of Health, A Barefoot Doctor’s Manual is still in print.

The Little Red Book

Finally, Mao turned to politics, insisting that true democracy requires financial equality, “For democracy to work for the betterment of all, all must be empowered and there can be no privileged class”. In the manual of his advice on democratic activism, The Little Red Book, he told them how to go about it:

Pay attention to uniting and working with comrades who differ with you. This should be borne in mind both in the localities and in the army and applies to relations with people outside the Party. We have come together from every corner of the country and should be good at uniting in our work not only with comrades who hold the same views as we but also with those who hold different views.
Guard against arrogance. For anyone in a leading position, this is a matter of principle and an important condition for maintaining unity. Even those who have made no serious mistakes and have achieved very great success in their work should not be arrogant. In the political life of our people, how should right be distinguished from wrong in one’s words and actions?
On the basis of the principles of our Constitution, the will of the overwhelming majority of our people and the common political positions which have been proclaimed on various occasions by our political parties and groups, we consider that, broadly speaking, the criteria should be as follows:
Words and actions should help to unite, and not divide, the people of our various nationalities.
They should be beneficial, and not harmful, to socialist transformation and socialist construction.
They should help to consolidate, and not undermine or weaken, the people’s democratic dictatorship.
They should help to consolidate, and not undermine or weaken, democratic centralism.
They should help to strengthen, and not discard or weaken, the leadership of the Communist Party.
They should be beneficial, not harmful, to international socialist unity and the unity of the peace-loving people of the world. It is necessary to criticize people’s shortcomings but, in doing so, we must truly take the stand of the people and speak out of wholehearted eagerness to protect and educate them.
To treat comrades like enemies is to take the stance of the enemy.

New rules for the ruling class

Officials who remained at their post spent the next ten years living in ordinary houses, sending their children to local schools and bicycling to work. Peasants elected village leaders who worked in the fields for three hundred days a year and county officials who spent two hundred days working beside them.

To dramatize their empowerment, Mao promoted peasant ‘Red expert,’ Chen Yonggu, to Minister of Agriculture. Chen spread best practices through cooperative networks and The New York Times, reported⁠ the 1974 visit of American agronomists, quoting Nobelist Norman Borlaug, “You had to look hard to find a bad field. Everything was green and nice everywhere we traveled. I felt the progress had been much more remarkable than I expected”.

Plant geneticist and father of the Green Revolution, Sterling Wortman, the delegation’s leader, described the rice crop, “Really first rate. There was just field after field that was as good as anything you can see. They’re all being brought up to the level of skills of the best people. They all share the available inputs”. Wortman’s Green Revolution was just then lowering world grain prices, destroying millions of small farms, ruining farmers and communities throughout the developing world, causing millions of suicides and creating vast shanty towns that persist in to this day.

Mao compared this misguided development to the USSR’s centralized model of industrialization which, during its development dash, had located gigantic cement and fertilizer plants in cities and built expensive highways to deliver their products to the countryside. China, Mao insisted, would build small plants locally, save money and create local jobs. The peasants would exploit use the surplus labor created by Wortman’s technology to man local industrial enterprises and learn skills without leaving their communities.

Teams constructed 1,500 chemical fertilizer plants and thousands of farm machinery factories and the economy grew 58% during the decade, faster than Germany’s and Japan’s development phases.

Journalist Sidney Rittenberg recalled the transformation in their collective consciousness, “Nobody locked their doors. The banks–there was a local bank branch on many, many corners–the door was wide open, the currency was stacked up on the table in plain sight of the door, there were no guards and they never had a bank robbery. Never”.

The Arts

Rural participation in the arts rose. Short stories, poetry, paintings and sculpture, music and dance flowered and, in place of old court dramas, revolutionary works in opera and ballet–some of which have entered the international canon–emphasized workers’ and peasants’ resistance to oppression. In a play from the time, If I Were Genuine, a peasant youth disguises himself as a general’s son to get privileged treatment, free theatre tickets and an apartment from officials hoping to win the general’s favor. Arrested, he refused to admit guilt, saying that his only fault was not having a real general for a father because, if his father were a general, everything he did would have been legitimate. The play was produced uncensored on TV and became a national favorite.

Mobo Gao describes⁠ the impact on peasant culture, “The rural villagers, for the first time, organized theater troupes and put on performances that incorporated the contents and structure of the eight model Peking operas with local language and music. The villagers not only entertained themselves but also learned how to read and write by getting into the texts and plays. And they organized sports meets and held matches with other villages. All these activities gave the villagers an opportunity to meet, communicate, fall in love, and gave them a sense of discipline and organization and created a public sphere where meetings and communications went beyond the traditional household and village clans. This had never happened before and has never happened since”.

In response to peasants’ demands, Mao suspended college entrance examinations and called for high school graduates to work at least two years in a factory, the countryside or the army to become eligible for college entrance. In 1973 the academic test was dropped and students were selected by fellow workers and peasants based on their work performance and, later, graduates were required to return to serve the communities that had sent them.

Revolution’s end

China did not have the luxury of endless social experimentation, and government officials did not have superhuman endurance. The grievances and antagonisms Mao’s reforms unleashed often took on lives of their own and many eruptions were local, with groups making demands in apparently unrelated contexts, including millennial clan quarrels. Some rebels began questioning the existing political order and the combination of disorder caused by mass activism below and leadership power conflicts above created a genuine political crisis that Mao decided to tactfully neutralize and resolutely resolve.

Counterrevolution

Upon Mao’s death Deng Xiaoping, scion of an elite family, dissolved the communes, clinics, and schools and, despite fierce resistance, forced peasants back to small producers’ status.

His Reform and Opening, says Orville Schell, “Rammed Chinese society into reverse gear, stampeding the country into a form of unregulated capitalism that made the US and Europe seem almost socialist by comparison”. A new generation of illiterate peasants, particularly women, emerged. Life expectancy fell as poverty, prostitution, drug trafficking and addiction, the sale of women and children, petty crime, organized crime, official corruption, pollution, racketeering, and profiteering returned. Mao’s frazzled successors set about destroying most of the Cultural Revolution’s gains, says Dongping Han:...

In 1966, when the Cultural Revolution started, there were many illiterate people in my village. My mother never went to school and my father had learned how to read and write simple words by attending night school in his factory. My elder sister had only three years of primary school education. In my neighborhood, many children who were a few years older than I either never went to school or dropped out after one or two years of primary school. Not many people finished primary school, and only a few went as far as junior high school in my village. During the educational reforms of the Cultural Revolution, my village set up its own primary school and hired its own teachers. Every child in the village could go to the village school free of charge. My village also set up a junior middle school with six other villages. Every child could go to this joint village middle school free of charge and without passing any examinations. The commune that included my village set up two high schools. About 70 percent of school-age children in the commune went to these high schools free of charge and without passing any screening tests. All my siblings except my elder sister, who was four years older than I, were able to finish high school. At the time we did not feel this was extraordinary at all. Most people took going to high school for granted. Upon graduation from high school, I went back to my village like everybody else, and worked on the collective farm for one year and then worked in the village factory for three more years before going to college in the spring of 1978.

While I was in college the Cultural Revolution, together with its educational reform, was denounced by the government. Deng Xiaoping, the paramount Chinese leader then, said that schools should be like schools. The implication was: the rural schools set up during the Cultural Revolution educational reforms were not like real schools..

Ten years later, in 1986, while teaching at Zhengzhou University, I was involved in a research project in rural Henan with a group of American historians and political scientists. The presence of foreigners in a rural village attracted a big crowd of children of different ages. Out of curiosity I asked some children to read some newspaper headlines. One after another they shook their heads. I thought they were simply shy, but other children explained that they were not in school. To my dismay, it was the same story everywhere that we went. I asked people why this happened. They told me that since the collectives were broken up and land was divided among individual households village schools were no longer free. Some families could not afford to send their children to school. Others needed their children to help in the fields. Girls were among the first to be sacrificed, as they were assigned to household chores and to take care of younger siblings: their parents were more reluctant to invest in their futures than in those of their brothers.

Rural children’s loss of educational opportunities shocked me and forced me to think. The government attributed the lack of educational opportunities to the poverty of Chinese rural areas. However, I reached a different conclusion. It was not poverty that deprived the rural children of educational opportunities. Poverty is only a relative term. Why were the children of villagers able to finish high school during the Cultural Revolution? China’s rural areas were poorer then than now.

Cautiously, and skeptically, I began to appreciate the significance of rural educational reforms during the Cultural Revolution. I myself am a product of these reforms. As an educator I found it hard to remain indifferent to the sad consequences of the condemnation of the rural educational reform of the Cultural Revolution years. I asked myself many questions and decided to study the issue. However, I could not do the research in China then because the Chinese government did not allow research related to the Cultural Revolution.

In 1990, I came to study in the History Department at the University of Vermont for my master’s degree. I decided to write my thesis on the Cultural Revolution. I felt that there was a need to go beneath the surface structure of the events that occurred at that time. After I entered the doctoral program in political science at Brandeis University I was able to return to China a number of times to research in depth the evolution and consequences of educational policy in the country where I grew up. As I began to investigate the education reforms of the Cultural Revolution, I came to understand that they were integrally linked with a comprehensive program of rural development. I broadened the scope of my study to include the changes in rural political culture and efforts to advance agriculture and develop rural industry that were initiated during the Cultural Revolution decade. I conclude, based on the evidence I present in this book, that educational reform, changes in political culture and rural economic development were closely linked. –The Unknown Cultural Revolution: Life and Change in a Chinese Village.

Years later, at the height of a government campaign to delegitimize the Cultural Revolution, 75% of survey respondents confessed to feeling nostalgia for those heady days. Even President Xi, whose family suffered more than most, would only say, “It was emotional. It was a mood. When the ideals of the Cultural Revolution couldn’t be realized, it proved an illusion”.

Asked later about which accomplishments he was proudest of, Mao answered, “The war, of course, and the Cultural Revolution”.

Postscript

The CIA’s operational analysis of its Tiananmen Square campaign attributed its failure to spark violence to ‘the difficulty of mobilizing young activists in the desired direction due to lack of strong polarizations in Chinese society’.

Chinese analysts attributed the lack of strong polarizations in Chinese society to Mao’s ten-year Cultural Revolution, because it taught everyone how to deal with strong polarizations in Chinese society.

ABOUT GODFREE ROBERTS

I've been visiting China since 1967 and following its rising fortunes ever since. After receiving my doctorate from UMass, Amherst, I moved to Chiang Mai, Thailand, an hour from the Chinese border, and began trying to understand the country's phenomenal success. The result is a book, "Why China Leads the World: Talent at the Top, Data in the Middle, Democracy at the Bottom," the only book in English that explains why China works so well, and why 95% of Chinese think it's heading in the right direction. 'Talent at the Top' means that only the brightest, most honest and idealistic people are admitted to politics–a policy they have not changed in 2200 years. 'Data in the Middle' means that every policy is tested, implemented, tracked, and optimized based on terabytes of data. The PRC is the world's largest consumer of public surveys. 'Democracy at the Bottom' means that ordinary people have the last say on everything. 3,000 honest amateurs from across the country assemble twice a year to check the stats and sign off on new legislation. Policies need a minimum of 66% popular support to become law. That's why 95% of Chinese say the country is on the right track.

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The Successful Cultural Revolution (Part 1)

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Mao, the incorruptible colossus that kicked off the Cultural Revolution.

First run Nov 21, 2023

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—Mark Twain.

Godfree Roberts

Earlier, I claimed that Mao did more good and less harm than anyone in history and, in an essay on the ‘great famine,’ we saw how he saved millions from death by starvation, despite the US grain embargo. This two-part essay focuses on Mao’s last decade and on his Cultural Revolution, which taught everyone to read, write, argue and vote and ended Mark Twains’ ‘deaths from hunger, cold, insult, cruelty and heartbreak’ for five hundred million forgotten people.

Birth of a Revolution

1 nobles during the French Revolution and still celebrate the occasion annually. Yet though the Chinese killed no elite² (they were all back in office by 1975) during the Cultural Revolution, they nevertheless achieved their goals and staged the first top-down, peaceful revolution in history and the only successful one of the 1960s.

Mao Zedong.

In 1957, eight years after the revolution ended, Mao warned colleagues that mere socialist transformation would not end China’s social contradictions: “There are people who seem to think that, as state power has been won, they can sleep soundly, unworried, and play the tyrant at will. But the masses will oppose such persons, throw stones at them and beat them with their hoes, which will, I think, serve them right and please me immensely. Moreover, sometimes fighting is the only way to solve a problem. The people have good reason to remove bureaucrats from office.. I say it is fine to remove them, they ought to be removed, the Communist Party needs to learn a lesson. If students and workers take to the streets you comrades should regard it as a good thing.. Workers should be allowed to strike and the masses to hold demonstrations. Processions and demonstrations are provided for in our Constitution and, when the Constitution is revised, I suggest the freedom to strike be added so that the workers are explicitly permitted to strike”.

André Malraux. “Victory is the mother of all illusions.. Humanity left to its own devices does not necessarily re-establish capitalism, but it does re-establish inequality. The forces tending towards the creation of a new class are powerful”.

The danger

The greatest danger, he said, was a political leadership that turned its back on socialism, bourgeois elements who produced a new bureaucratic class that he attributed to China’s Stalinist bureaucratic hierarchy, a new exploiting class fashioned from a ‘bourgeois bureaucratic class sucking the workers’ blood’.

He reminded colleagues of ‘peasant rebellions, when frustrations burst forth in emotional storms in which hatreds, resentments and a sense of hopeless desperation break through social restraints in an overwhelming surge’.

But no-one listened, nothing changed so he concluded that the problem was cultural: the ancient tradition of privileged officials and submissive, deferential peasants was to blame and this status quo needed changing–a job for which Mao was uniquely qualified.

Robert Payne, who knew him, explained in 1948, “Mao holds all the arts of China in his hands. Lenin had neither the learning nor the inclination to assume the role of transformer of culture. Mao, far more widely read and with a comparative subtlety of mind, has clearly determined to accept the position thrust on him and no one can foresee the changes in the basic structure of Chinese culture which will derive ultimately from his will.”

Guilty Secret

Chungwu Kung,

China was a people’s democratic dictatorship in theory only; in practice, political and cultural power was held by scholarly and bureaucratic intellectuals who commanded vast influence and prestige.

The Revolution had changed little beyond ownership of farmers’ tiny plots, which in any case remained subject to the vicissitudes of weather and fortune.

Luan time

Mao proposed giving five hundred million peasants education, democracy, justice and dignity. He would direct their frustration ‘outward, through the force of ideology expressed in a political slogan, breaking the shackles of repression through study and converting their thought into creative action’. Then one Spring morning in 1966 he became the only national leader in history to overthrow his own government when he told startled colleagues, “I firmly believe that a few months of chaos, luan, will be mostly for the good”.

A discussion rally.

Since the Party controlled the means of production and everyone owned their land, he said, violence would be unnecessary. He proposed an exclusively cultural revolution and encouraged students to stir things up and Shanghai university students founded the Red Guard movement in response. After a few months of chaos, Mao met with Red Guard leaders and told them factional conflicts had to stop. “The masses don’t like civil wars.. The people are unhappy, the workers are unhappy, the peasants are unhappy. The Beijing residents are unhappy, the students in most schools are unhappy.”

Maurice Meisner, “The old bureaucracy, in a desperate effort to save itself, expended its last financial resources bribing workers into political passivity, appeasing them and buying time for political maneuvering”. The Central Intelligence Agency reported⁠:

While it would be too much to say that the cultural revolution has followed a precise master plan–there have been too many tactical adjustments and shifts along the way–it is clear that Mao envisaged two distinct phases from the start: destructive and constructive.

The Red Guards were Mao’s vanguard during the destructive phase but proved to be a woefully defective instrument during the constructive phase. Mao’s disillusionment with the Red Guards became apparent after their dismal, self-seeking performance during the initial ‘power-seizures’ of early 1967 and was intensified by their indiscriminate internecine warfare during the following summer. Time and again, Mao ordered the young students to rectify themselves voluntarily. They did not do so, thereby confirming in Mao’s mind his assessment of the negative qualities of China’s intellectuals.

As early as 1939, Mao had written that the sole criterion by which to judge whether or not a youth is revolutionary is if he is ‘willing to integrate himself with the broad masses of workers and peasants and does so in practice’. The Red Guards had not been willing to do so. Thus, Mao replaced them with a new vanguard–the working class–when he decided that the time had come to start building and consolidating his new revolutionary order, and he forcibly dispatched the young intellectuals [China’s current president and prime minister among them] to rural areas by the hundreds of thousands for further ‘revolutionary purification’”.

After reading posters denouncing his parents, Yang Xiguang, son of a senior cadre, sought sympathy from his family’s housekeeper. The woman, who had behaved submissively towards them for many years, told him that she completely approved of their downfall, said her submission had been feigned, that Yang’s parents had exploited her all along, and that the city’s housekeepers were organizing their own rebel group. “I felt my world turned upside down. Lots of common people had smiled at me before the Cultural Revolution for being the son of a big shot but I now felt it had only been pretense.. I suddenly recognized the keenness of the contradiction, that those at the bottom actually hated those at the top”.

A Program of Revolutionary Rebellion

Social discontent – rooted in workers’ material lives – was real. Workers’ productivity had increased by 250% since 1957 and the cost of living had increased by 10% but their incomes were 5% lower. Their protests about wages, benefits and work conditions expressed a yearning for human dignity and democratic control over socioeconomic life. One temporary worker recalled, “We were simply inferior. In the factory, if people didn’t know your name, they would just call you linshi gong [temporary worker], which sounded contemptuous. Therefore the word linshi gong was a taboo among us. We would rather call one another lin xiong or ‘temporary brothers’”.

A Program of Revolutionary Rebellion, by the Mao Zedong Thought Association of Hundreds of Millions of Peasants in Dong’an (in rural Hunan, Mao’s ancestral home) complained about heavy tax burdens and excessive labor levies and listed their demands

Peasants must enjoy genuine political and economic freedom.
Their rights should not be violated, and illegal and abusive practices, such as tying up, beating, denunciation, and deception, must be abolished.
Peasants should receive the same political treatment as workers, cadres, and technical professionals.
As long as peasants have done a good job in collective production, their income derived from sideline production (such as cultivating private plots, raising pigs, chickens, and ducks, and embroidery) should not be vilified as capitalist.
Peasants who become ill must be covered by the public health-care system in the same way in which cadres and state workers are. No matter how seriously ill a state worker becomes, all possible means will be tried to bring him back, and all expenses will be covered by the government. When a peasant gets seriously ill, however, if the treatment would cost several hundred yuan, then the patient’s fate would be to wait for death. The peasants’ well-being enjoys no guarantee. Such a system is patently unjust.
A nationwide movement that would “lessen burdens of the peasants, enhance their economic and political status, thoroughly lift them out of poverty, . . . overthrow the unjust social system, turn an inverted history on its own head, and struggle for the complete victory of hundreds of millions of peasants.

In the Country

With the youngsters now back in the classroom or sent down to a farm, Mao placed his faith in his own class. “The peasants are clear-sighted. Who is bad and who is not, who is the worst and who is not quite so vicious, who deserves severe punishment and who deserves to be let off lightly: the peasants keep clear accounts and very seldom has the punishment exceeded the crime”. He charged them to narrow the ‘three differences’ between mental and manual work workers and peasants, city and countryside – and establish ‘three-in-one production teams’ of workers, technicians and specialists to raise productivity through participative innovation. Donping Han tells what happened next:

I grew up in Jimo, a Chinese village. In 1966, there were many illiterate people in my village. The Cultural Revolution weakened professionalsʼ control of education and allowed workers and peasants to have more say in their children’s education. Peasants were allowed to run their own village schools. A village would build its own primary school with local materials, hire its own teachers and provide free access to all children in the village. Several villages would pool their resources to build a free middle school for all peasant children, then the local commune would open free high schools for them. There were 1,050 villages in Jimo County and every village set up a primary school. All the rural children were able to go to school free.

Before the Cultural Revolution there were only seven middle schools in Jimo County, which had a population of 750,000. Now the number of middle schools increased to 249 and all primary school graduates could attend them free of charge, without passing tests. In the previous seventeen years 1,500 people graduated from the only high school in Jimo County and half went to college and never came back and Jimo was unable to train a single high school graduate for each village in the County. Now, every commune had three high schools. When I graduated from middle school in 1972, only 70 per cent of my classmates could enter high school. When my younger sister graduated in 1973, all her classmates could go to high school. By the end of the Cultural Revolution, in 1976, there were 100 high school graduates in my village and 12,000 in my commune.

The expansion of education during the Cultural Revolution years was unprecedented in Chinese history. It profoundly transformed the Chinese people and society. As the people became more educated, they became more empowered in both political and economic activities. In response to peasants’ demands, Mao next suspended college entrance examinations and called for high school graduates to work at least two years in a factory, the countryside, or the army to become eligible for college entrance. In 1973 the academic test was dropped and students were selected by fellow workers and peasants based on their work performance and, later, graduates were required to return to serve the communities that had sent them.

Part 2

If you’ve subscribed, this time next week you’ll automatically receive the conclusion, including Mao’s own assessments of the Cultural Revolution – and Xi Jinping’s.

Notes
1 The names of ‘notables’ executed are on file in French archives.

2 There are references to firefights between Red Guard factions who got their hands on PLA rifles but, if they happened, they were small scale and incidental to the Cultural Revolution.

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