Neoliberalism ‘with Chinese Characteristics’

mid-1990s on. Chinese businesses also invest overseas to secure

their position in foreign markets. Chinese television sets are now

being assembled in Hungary to assure access to the European mar-

ket and in North Carolina to assure access to the US. A Chinese

auto company plans to assemble cars and eventually build a factory

in Malaysia. Chinese companies are even investing in Paci

fic

region tourism to meet their own surging demand.

41

But in one respect the Chinese depart glaringly from the neolib-

eral template. China has massive labour surpluses, and if it is to

achieve social and political stability it must either absorb or vio-

lently repress that surplus. It can do the former only by debt-

financing infrastructural and fixed-capital formation projects on a

massive scale (

fixed-capital investment increased by 25 per cent in

2003). The danger lurks of a severe crisis of over-accumulation of

fixed capital (particularly in the built environment). Abundant

signs exist of excess production capacity (for example in auto-

mobile production and electronics) and a boom and bust cycle in

urban investments has already occurred. But all of this requires

that the Chinese state depart from neoliberal orthodoxy and act

like a Keynesian state. This requires that it maintain capital and

exchange rate controls. These are inconsistent with the global rules

of the IMF, the WTO, and the US Treasury. While China is

exempt from these rules as a transitional condition for WTO

membership, it cannot remain so in perpetuity. The enforcement

of capital 

flow controls is becoming increasingly difficult as Chi-

nese yuan seep across a highly porous border via Hong Kong and

Taiwan into the global economy. It is worthwhile recalling that one

of the conditions that broke up the whole Keynesian post-war

Bretton Woods system was the formation of a eurodollar market as

US dollars escaped the discipline of its own monetary authorities.

42

The Chinese are already well on their way to replicating that

problem, and their Keynesianism is correspondingly threatened.

The Chinese banking system, which is at the heart of the cur-

rent de

ficit financing, cannot currently withstand integration into

the global 

financial system because as much as half its loan port-

folio is non-performing. Fortunately, the Chinese have a balance of

payments surplus that can be applied, as we have already seen, to

wiping the banks’ slates clean. But it is at this point that the other

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