Phil Mirzoev's blog

Sunday, July 8, 2012

Capitalism on the brink: China f...s the West, the West knows it but doesn't know what to do...

It's rather with a mix of sorrow and irritation that I'm forced to recognize that China f...s the West, getting her growth 'subsidized' by the West's accumulated achievements and potential. The West knows it but seems to be helpless so far. Even more I am terrified by this surgical, virtuoso precision and knowledge with which China does it amidst Western self-flattering complacent talks about instability and non-sustainability of Chinese economic development. This assertion most of all pertains to the Anglo-Saxon economies. It happens because, unlike the communist iron-walled USSR sunk in self-extolling myths and irrational avoidance of self-critical reflection, China spent enough time on studying diligently and pragmatically the real advantages and disadvantages of the modern (but very obsolete at that) capitalistic system, including the machinery of the financial and monetary systems, trade and free-market mechanics. Also it happens because the real competition of ideas and rational debate that takes place within the autocratic communist party in China seems to have outstripped the real political competition in so-called democratic 'multiparty' systems in the US, Great Britain and some other Western countries.
The result of this was that China armed itself with the best technical advantages of the existing system of relationships for her own needs and sought out the biggest and most terrible breaches in those seemingly unbreakable walls of capitalism to use them AGAIST this system to their benefit. And it's rather the latter than the former that contains the biggest parasitic element in China's policy of growth – exploiting the intrinsic inconsistencies of Western capitalism, rather than using free-market relationships inside (which of course helps China in no small measure too, but doesn't per se present much of a threat to the developed world in the West).
China perfectly figured out the main myths of the capitalism: 'democratic capitalism' and 'free-market capitalism', grasping the truth that capitalism as such doesn't have anything whatsoever either with democracy or with FREE-market, and relates directly to CAPITAL and, what is even more relevant and important, to CAPITAL CONCENTRATION. They adopted some part of those myths and left the rest for the West. Understanding the main realities and myths about capitalism, now China exploits all the intrinsic deficiencies of it and their malign consequences, including economic, social and political ones, to the best advantage and with a surgical precision and cold-bloodedness of a professional sniper too. These are some examples of those heavily exploited holes (holes the size of an elephant):

1. Trading. One of the deepest problem hailing directly from the myth of 'free-market capitalism': money as such equalizes the values of different products and industries belonging to completely different classes in qualitative terms, even mathematical sets of completely different orders. Money equalizes sets of values of different orders. This is heavily exploited by China which understands this only too well. In practise it means that the capitalistic 'free-market' can be productive only when money is used for exchange and comparison of the values belonging to similar sets, hence, between the entities that produce and trade the values belonging to similar sets. The system China-US shows very tellingly the asymmetry of the relationship caused by the money equalizing power: China trades the US consumer values ONLY (plastic spoons, rubber gloves and condoms, cooper wire and noodles etc), but in exchange gets values corresponding to the first and second derivative of consumer values production capacity (telecommunication technology, information technology, engineering services, etc). Same happens when the US hires a Chinese engineer and China hires an American engineer. Equalizing of the primary values with the derivatives (determining not the statics but the dynamics of the development) creates a terrible asymmetry and losing practically for nothing all those science and technological achievements that have been done and accumulated by American universities, engineers and scientists for decades, sometimes centuries. This happens because the corporate political capitalism, driven by and for the concentration of capital, not the fair competition, has nothing to do with the free-market and at a certain point of this capital concentration starts killing the very free-market and competition as fast as possible. For example Microsoft or Google or Intel supplying their technologies and services (infrastructural services) to China, couldn't care less about the decades – sometimes centuries – of effort and development applied by the best engineers, researchers and universities in the US (and more often than not financed by the state, that's by the taxpayer's money, especially in the time of the Cold War, and which were sold to corporations for peanuts or just given for free) because those corporations consider themselves the full owners of those technologies and the only thing they want is to get CASH for them NOW, no matter in China or in Belgium. They couldn't care less that the net result of their activity is 'exchange of condoms for computers' or stone age products for the 22nd century infrastructural and technological advancements. Historical examples include the technological jump of Russia at the time of Peter the Great, which was caused by Peter's buying technologies and engineering services from a handful of specialists from such European countries as Holland – technologies that had been developed in those countries for CENTURIES before and were given to medieval Russia in a matter of years (!!) (after which Russia immediately became and existential problem for Europe and continued to be that up to the collapse of the Soviet Union); Stalin's industrialization in Soviet Russia, when, despite all those Western embargoes, the Soviet government hired specialists from German and French corporations and institutions.
China, unlike the US, kept tightly in secret its achievements from the rest of the world, including the porcelain technology, which Britain had to develop on her own. This problem of equalizing power of money which gives such a huge parasitic possibility and opportunity to any underdeveloped country, could be masked by the fact that trading relationships between approximately equally developed countries could be quite productive, because the contributions of the partners inside each class of values are approximately equal on average. To put it simply, the US doesn't loose when it sells goods and services belonging to the class of values of high order (rearming technological base, changing the infrastructure etc) to Germany, because, on average, it gains the same amount of the same value class of assets in return from Germany. But not so in the case of China where the qualitative and fundamental difference between consumer items and high-tech, infrastructure-advancing and productivity-enhancing values is not reflected by the difference in prices, given by so called 'free' market.

2. Ideological flaws. Second, and perhaps most important, reason why China f..s the West is China's understanding of the malign defectiveness of the Anglo-Saxon ideological class-based foundation and turning its parasitic features against it in the permanent situation where the Anglo Saxon DOESN'T WANT to recognize this defectiveness (even though perfectly understanding it), because the very fact of ideological recognition of it existentially threatens the ruling elites: China understands that free market is just a medium, not a driver, of economic progress, whereas the main driver is the interrelated infrastructural, scientific and technological development which is done by engineers, scientists, teachers, artists and the corresponding institutions like Universities, NOT by Rockefellers or Donalds Trumps by any means. Free market at a certain level helps to realize the potential given by this infrastructure.
What may be even more important is that China not only recognizes this simple truth, but also this truth in turn doesn't go against her overall ideology: human resource makes wealth, not the other way around, and free-market is just a medium that helps this, a medium that must be protected by state from 'relativistic influences and distortions' induced by 'supper strong capital concentration fields'. It allows China not only invest astronomic amounts of money into technology and education (mind, China is still a developing country), but also BUY Western specialists: engineers, scientists with their invaluable experience (paradoxically, now one can observe some 'reverse brain-drain' from the US into China). It allowed China to create monumental institutions and state mechanisms for developing infrastructure. Contrary to what happens in China, America doesn't recognizes this 'upper' classes of society – professors, engineers, scientists etc. Washington understands the importance of those, but the class-based and, even more class-lobbied, state ideology doesn't allow an official recognition of this truth, because the state itself serves the interests of those 'elites' who possesses the highest concentration of capital. Not only are those elites uninterested directly in creating and enhancing new and powerful independent mechanisms and institutions for state-powered investments into many research and technology development fields in which the US's lagging behind, but on the contrary they are interested in creating conditions and laws (especially in the field of patenting and intellectual property) which prevent competition on the part of small and medium research businesses. For example, scientists working on the green sources of energy are now of much greater importance for the US economy development than the owners of Exxon Mobile, but it's owners of Exxon Mobile who use their ultra-concentrated capital to hinder the former – not the other way around. China understands that huge concentration of capital in the hands of privately owned (hence privately motivated) quasi-monopolies makes them interested not in creating market and competition but in killing it, on the political level included. The Anglo-Saxon political capitalism doesn't serve the purposes of the free-market and fair competition, but the interests of a class of people in the hands of which are concentrated the greatest infrastructural resources and capital (hence, lobbying power). Capital owners are far from being infatuated with the idea that some independent powerful institutions would arise, which automatically gain political weight and the voice of scientists and engineers will become more influential in distribution of the state investments and the legislation process with all the ensuing consequences. It's a very difficult decision to make to recognize that universities are more important institutions for the US economy than banks, but the very RIGHT of such like decisions lays in the hands of banks, not in the hands of universities because of the power of concentration of capital.
Again, it's not that the structural problem of loss of industrial, technological and in some fields scientific competitiveness because of the underinvestment or defective investment model is not known to the political elites in the US or Great Britain, but it's just that the problem doesn't have a proper solution in the existing system of reference.
In the Cold War age the US channelled state investments into science and technology through the army – Pentagon to put it simply – and this 'squared the circle' allowing in essence to drive the progress 'socialisticly' in the capitalistic conditions through the state investments while at the same time sticking to the old mendacious ideology in the public eye (because superficially those investments were meant for army, which is designed for the defence of the backbone of the nation – corporations, not for engineers, researchers and universities, which were placed into the context of being subservient staff, like a kind of lackeys, temporary contractors belonging to an inferior class). In the Cold War age this was possible because, first, capital owners were afraid of the 'red infection' – simply put frightened to death of the external danger to their purses – and allowed the state to spend money on the army and keeping social development at an acceptable level; second, because, post-war civil industrialization and technological modernization didn't go against military development and needs which provided a sufficient synergy degree (now the situation is completely different: green and efficient sources of energy, bio-technology, medical equipment etc are not what the army is interested in; army is here not to heal but to kill).
On the contrary, China not only understands the paramount importance of education, science and technology as the main economic drivers in the 21th century, but has never had any ideological or political issues with this. She RECOGNIZES and PREACHES it ideologically plain and clear. Many engineers and specialists by China's invitation come from the US to take on the ultramodern infrastructural projects and give their invaluable experience and knowledge. China, unlike America, recognizes the huge value of American education and universities, so many Chinese go to the US, Britain, Canada etc. In order to get the quality of education they would never hope for in their country for decades, and return back to China to give this knowledge and help organize new universities (turning those decades into years) in China which have lately been cropping up there at a mind-blowing pace.
It's interesting also, that knowingly or unknowingly China exploits another very deep flaw of the capitalistic mythology, which implies that the main motivational driver of the productive and progress-causing forces is money. Paradoxically, those great progress-causing forces like scientists, engineers and teachers are not primarily interested in money: their professional quests and interests are such a deep part of their identity and quality of life, that on the material side they are rather interested in STABILITY and SUFFICENCY of their income, acceptability of living conditions and stability of the conditions for the continuation of the works and projects to which they dedicate their time and life. To put it simply, quite often an researcher won't immigrate from China to the US for a much bigger income if the stability of his life and work condition home are good, and, on the contrary, an American can easily go to China just because the kind of project he's is interested most is available there but not available home (though other projects quite beneficial in terms of wages are). So China gives a fair value to the intellectual and educational resources of the US, unlike the US itself, and use it to the best advantage possible. Unlike the US China recognizes (as has Germany done since at least the 1880s) that the value of science development cannot be made a hostage of capital-controlled market (not to be confused with the free market), because big corporate players are not only uninterested in those things, but also very often overtly against them.
The result of this is not only this phenomenal pace of China's technological and scientific development, but also successes in some fields, like green technology and renewable energy sources, which actually already now can put to shame 'high-tech ultra-developed America' (at the same time putting under threat America's future on this market).

3. Economic flaws. Anglo-Saxon capitalism doesn't differentiate between 'bad', parasitic business entities and processes, which don't generate but kill the market and competition, which don't create new resources and methods allowing to use new resources, which appropriate the limited existing resources and prevent development of the new ones, and 'good' entities and processes – those companies which are competitive in nature in a given set of conditions and create new markets and products with limitations only placed by consumer demand. Capitalism also doesn't recognize the difference (though perfectly understands it) between the private quasi-monopolistic financial institutions with the privilege to emit money and debt in practically unlimited quantities and use it in speculative distortions of the markets in their own favour and businesses who are intrinsically competitive and create new types of values and new markets without any money-emitting power, being 'taxed' by those financial institutions. But China does recognize this difference. Huge structure-forming banks are core part of the financial infrastructure and parasitically tax anyone for the 'oxygen pipe' – one for all - whereas car producers or hamburger bakers make the final consumer items, which intrinsically cannot be monopolized and are always exposed to competition. The same goes for the bloated resource quasi-monopolies, whose main concern is not creating new resources, new ideas and methods of replacing the old resources with the new ones, but grabbing and retaining resources (not necessarily developing them, rather the opposite), using all the political lobbying power in hand, and prevent anyone else from doing this. In this sense Anglo-Saxon capitalism doesn't make any distinction between innovators like Google, or car producers like Hyundai, and Chevron for example.
But China recognizes and exploits this difference in their state-arbitrated market economy not only directly for their direct purposes but also against the Anglo-Saxon model. China has no problems about selling consumer items, cervices or industrial consumables nor does she have any problems with the concept of free market and competition in the sectors producing those. BUT as to the attitude to resource sector it's a completely different story. China state is in no hurry to sell its resources without a serious measure of control (good example is the latest decision to seriously cut down on the export of rare earths, which caused so much concern in the US particularly) as is she in no hurry to loosen its tight grip on the big resource corporations which are in essence quasi-state-owned companies in China. She – China – is also in no mood to step on the same rake as many other countries have stepped before (like Argentina, Russia, Indonesia, South Africa and many many other countries): granting and/or selling foreign 'investors' rights and concessions for huge resource deposits. They excellently understand that it's not a matter of special talent, competition and creativity of a particular owner running a big resource mammoth without any problems with profits and economic viability if the resources mined do have currently a serious intrinsic value and the technology and infrastructure is already there, which has been very well demonstrated by Norwegian, Sweden, French and other resource state-controlled corporations, but it's rather a matter of proper competition organized 'from above' for the managers who want to perform their duties most effectively, or for CONTRACTORS – paying for exploring and engineering services and businesses, which are competitive without the charity of giving away the resource base itself – that's the idea. The only difference between Norwegian Statoil and American Exxon Mobil or British BP is the amount of money that is taken out of the proceeds and distributed among the pockets of some people whose main merits have nothing to do with the special entrepreneurial creative powers but are related only and only to their sitting on a huge resource base while holding a huge working capital in hands – millions of people around the world can do this with no worse economic performance (that's not to say that, e.g. Rockefeller's talents weren't of essence more than a hundred years ago at the time the market and infrastructure in oil sector were just being born and competitive in nature – at the moment of inception – that was more than a century ago; business which was good and competitive a century ago can be parasitic and market-killing today). They also perfectly understand that, as again was tellingly demonstrated by very similar situations in many developing countries, that those resources and resources deposits which don't have currently a high value and, what is more important, don't have proper infrastructure and technology to be developed, more often than not are of NO INTEREST whatsoever to those 'creative free-market foreign investors', and even when they are, such investors buy such resources only and only to sit on their hands, waiting for the right historical moment just in order to limit the access to them by other exploring companies (including the states who made the mistake or the crime of selling those lands and deposits) beforehand.
On the other hand, China actively exploits this huge defect of the West's equalizing truly competitive, new products/services creating business ('good' business) and 'bad' business using capital and political power concentration to compete in grabbing some vital resources limited in quantity from the very start (instead of creating them). China's state opted for a proactive approach in buying up as many resource deposits abroad all over the globe as possible, including North America (especially Canada), Australia, Latin America, Africa etc, and investing in the development of those 'pies'. No cause to reproach them for this, because it's the West itself that equalized the resource mining and high added-value service and productive business, and China never said that. Interestingly, in doing this China combines exploitation of both: political and economic flaws of the West's capitalistic mythology, because Chinese state has no qualms about... yes, POLITICAL LOBBYING for their resource purchases in other countries at the highest level using all the financial and political power of the Chinese state, which is quite OK, because lobbying is something Anglo-Saxon economies are very proud of and use it to virtually close the very question of state corruption and state betrayal of the nation's interests (or, to be more accurate, people's interests, because lately, it seems, the term nation in the democratic West has become a full synonym of state or the commonwealth of corporations and state). This approach not only solves the resource problems of China's economy, but also helps avoid any harmful activity of their own resource companies directed at inhibiting on purpose any progress in the green and renewable energy production sector – inhibition which is right now taking place on a large scale in the US, Canada, Australia and a number of other Western, predominantly Anglo-Saxon, developed countries.
China also actively exploits the huge African and Latin American resource base with the same lobbying power in the exceedingly benign conditions caused by the fact that the developing countries in the above regions opted for the capitalistic form of existence and oligarchic political structure and culture (but unlike the US they fell initially down the potential well of a self-robbing, ever lagging poverty out of which they will not be able to get until the Second Coming if they don't change this form). But the West doesn't actively exploit that resource base because 1. resource companies don't want to invest into infrastructure (roads, ports, terminals, communications and other basic infrastructural elements critically important for their business) and into social development of the heavily underdeveloped regions (educating and training locals to create the qualified workforce in the regions; creating schools, health, housing, infrastructure which doesn't directly relate to their business) – they are intrinsically not inclined to bear such costs and responsibilities 2. lately it's become a general tendency for huge resource quasi-monopolies not to invest actively in the buildup of the production volumes, because in essence they have turned into speculators in the wake of and with the nod of financial institutions: they just keep up their resource base and production at a relatively stable level, understanding that in the short and mid term holding back the production growth will give them more profit than actually building it up – but such is the management and ownership structure of those resource behemoths that they are interested only in short term things (unlike, maybe, what was the case half a century ago, which is also directly to do with the crisis of Anglo-Saxon capitalism and its turning into an outright form of parasitism) 3. even if and when Western governments understand the long term importance of such developments and investments (and they certainly do), they just don't have any power to prompt those corporations to do anything above what's whispered by Adam Smith's 'invisible hand of the market'.
On the contrary, China has an integrated socio-economic approach and virtually aims for converting those regions partly into Chinese affiliates at all levels, understanding and recognizing that long-term investments in human resource and infrastructure are the main drivers of that invisible but highly influenced hand of the market. More to the point, unlike the West that has been Africa and Latin America (though to lesser degree) and still continues to do so, China with its integrated policy continues by leaps and bounds to build up the most precious and effective resource – TRUST and REPUTATION in those regions: political trust and reputation, business trust and reputation and last but maybe most important CULTURAL trust and reputation. They are not COLONIZERS in this sense and they are not seen in this way, because from the very first their approach implies a kind of mutual development at all levels. This resource – trust and reputation – is the most effective and liberal puppeteer of that invisible hand of the market, which doesn't restrict but gives more freedom to it. The West had enough time to straighten its ways with Africa but it hasn't used a damn bit of that time and chance, because it's never been in conformity with the will of the Anglo-Saxon main puppeteer of the hand of the 'free-market' – CONCENTRATION OF CAPITAL in a miniscule number of independent quasi-monopolistic entities, especially if it comes to the mineral and energy resource sector.
Again, it's not that the West doesn't understand that it's being f...d on this front too – of course it does, but the system within which state is a sort of concubine of gigantic profit-driven private corporations with common realized interests, just cannot offer anything effective. One could ask why then socialistic free-market country Sweden would not be interested in investing in African resources in the same way as China is? Only and only because Sweden, having left behind Anglo-Saxon economies long ago, is going to STOP USING oil AT ALL by no later than the year 2020 (!!) - because countries like Sweden in particular and Scandinavia in general - are already in the 22nd century in terms of their development unlike many so-called developed countries who keep one foot in the 19th and one still in the 20th.
At the same time China is in no hurry to let foreign investors into its market – financial investors and resource investors, and those who under the cover of being 'free market creative businessmen' are indeed financial or resource investors. China is in no mood to demonstrate on herself the consequences of another capitalistic myth, that dealt such a terrible blow to a whole bunch of developing 'newly capitalistic' countries (in Latin America, in Asia, in Eastern Europe especially, in Russia) slowing their development by many decades: a stupid myth that opening doors unreservedly to foreign capital helps bring economy to another qualitative level, bring in an enormous corpus of technological knowledge and expertise and accelerate its development. In those countries many 'ready-made' manufacturing and mining assets were snapped up by those investors without further investing a single penny in their development just because those assets gave profit at once at the expense of cheap, tax abatements, the state of being undervalued etc, or those, so called investors, invested in highly automated assembly Lego-type shops and plants with no more than one year pay-off period as a form of import (to avoid paying import taxes on the finished articles such cars, washing machines etc) – note, that was the best case, the worst being a deliberate suffocation of the bought assets done just in order to correct the trajectory of the invisible hand of the market, or, as in the aforementioned case of resource deposits and lands, freeze any development of those mineral assets. The damage done to a great many developing countries specifically by foreign financial investors is mentioned below in the section on the financial flaws.
On the other hand many of those developing countries, who at some stage recognized the absolute necessity for their state to plan and invest in the main sectors of economy at the infrastructural level the hard-won savings of their nations, demonstrated dramatic success, like Brazil in her agricultural sector or China in her industry.
Again, as was mentioned above (see section 2 on ideological barriers), it's not that the developed capitalist countries don't know or understand that the state investments and direct participation in infrastructural and scientific development play a decisive and most important role in determining economic development trajectory for huge periods ahead, but the IDEOLOGICAL GROUNDS (and sometimes cultural) just prevent those countries from final recognition of this fact ONCE AND FOR ALL, because such recognition would automatically give rise to redefining state's ROLE and RESPONSIBILITIES – ONCE AND FOR ALL, which in turn would entail the obvious irreversible consequences for the ruling classes or so called elites.
Another point is about the China's wages, internal consumption and the exports. Nowadays one may too often hear from many pundits in the West all kinds of hollow mixture of critiques, complaint and lecturing advice about the ostensible export dependency of the Chinese economy and its excessively restrained inner consumption. The only element of truth to this ranting anxiety is that China is really very diligent in her effort to control and keep the right balance between exports, incoming hard currency flows and the volume of the consumers appetites, imports and currency outflow. And she does it very carefully exactly from the position of a very good understanding of the dialectics of the free-market economy development. China really puts constraints on the volume of the inner consumption and stimulates the exports, and couldn't do any wiser in her circumstances (needless to remind, that such super successful developed non-Anglo-Saxon economies like Korea, Japan, Scandinavia, Germany etc use this lever to the fullest too though in their position some kind of ethical justifications could really be required unlike developing China).
China understands (no worse that her Western developed partners do, without recognizing it) that the free-market condition alone will NEVER reduce the dynamic gap in development between her and the developed countries as well as never carry her into this category – the one of the developed countries. On the contrary, what little money (per capita) may be possessed by the wide masses of Chinese population would permanently go down the never-ending drain of consumption (including consumption of the Western consumer items) instead of infrastructural and technological investment and will keep China in the limbo of a world contractor, kind of mega dollar shop, for ever (just as is the case with decades of stagnation and poverty of other permanently developing countries), because of the never-ending dependence on Western high-tech products and technologies. China consumer stimulates with his demand not only Chinese producers, but the Western exporters of the consumer products, which takes away from the money that could be spent on catching-up with the West. China understands that to bring herself to the same level and field of competition with Western developed countries she needs to overcome a huge potential threshold – threshold of technology and infrastructure – and make up a hell of a lot of leeway to make the notion of 'fair competition' with the developed world a bit closer to anything having the real sense, meaning, and, fairness for that matter. That means, that Chinese government must direct as much money in technological, infrastructural and educational investment as possible, and save as much currency from unnecessary spending as possible, because it's precisely currency reserves and capabilities that China needs to buy the most important services, technologies and products from the West that can bring her to a qualitatively different level of economic development and power. And that's precisely what China does full steam ahead. Of course it doesn't mean that a certain growth of consumer buying power doesn't help or that AFTER China has become a member of the rich countries club (the richness of which is defined first and foremost by enormous self-sustaining technological development and huge infrastructural resources) it won't be beneficial for her to have a consumer based model of economy – but that's a completely different story.
Huge amounts of natural resources required for an revolutionary industrialization of China are a very important factor too of course, because in a situation when the means of production still have a low efficiency and productivity, China (as well as many other developed countries) needs some extra leverage (including keeping low wages) to subsidize exactly the transition of its industry and infrastructure from the present resource-inefficient state to an efficient competitive state. Catching-up with the past – Victorian industrialization – must be packed all in one with the 20th and 20th century industrial modernization and technological rearmament.
All this gassing on the part of many pundits about excessive export-dependance of Chinese economy is completely ungrounded and, sometimes intentionally, confuses the cause and effect: it's not because of China's incapacity to augment the level of private incomes and consumption that China's export is so high, but rather on the contrary, the other way around: it's because China intentionally tries to keep the export to internal consumption ratio as high as possible to gain as much currency power and room of manoeuvre in terms investments (that require buying those resources that still cannot be produced in China by reason of her qualitatively insufficient technological development) as possible. In the world crisis 'officially' started in 2008 and continuing up to the present day China has very well demonstrated its excellent ability to boost the inner consumption and spending at will just as the need arises (and that was the case then – that need did arise – because of the nose-dive of Western, especially American, demand). Also, very characteristically, the share of China's economic growth pertaining to her export is small and continues to go down from year to year.
Again, to recap the above, no free-market on earth as such is capable of providing a technological and infrastructural revolution in China as well as in any other developing country for that matter in the present conditions (when we already have the developed world saturated with the highest productivity industrial means possible), and before the technological and infrastructural equalizing takes place all those talks about 'fairness' of investment and labour markets in the context of trading exchange between China and the West will have not much more sense than talks about fair competition between Auschwitz labour camp and the main consumers of its produce. They are not in the equal or 'fair' position in the first place, and this dynamically retained gap and status-quot cannot naturally change at any time and for an arbitrary long time in the future without a non-equilibrium, catching-up investment process boosted by the state.

4. Judicial flaws, especially INTELLECTUAL PROPERTY LAWS, which, even by recognition of some of the big corporate players like Google, nowadays serve the purpose of killing the market and stifling competition at all levels: small business, individual entrepreneurs, inventors etc. The whole system of intellectual property rights by the end of the 20th century had become a huge club and firewall all in one in the hands of the huge soft, electronic, bio, pharmaceutical, chemical, resource and such like corporations in the West, that helps them kill the competition and the development of the markets even in the most inherently competitive areas. China knows this (as does the West) and exploits this. It's possible that a century ago the patent law helped the Write brothers – inventors and engineers – to create their own Wright air company and helped the Italian inventor Marconi start his own radio company etc, but that was a century ago. Now the intellectual laws are lobbied and invented by the capital concentrators – huge corporations – precisely for the opposite purpose: to prevent those drivers of progress – engineers, researchers, inventors (or their free community) – from inventing and creation as much as possible (not even steal those inventions and ideas, but sometimes just KILL, because the killing of competition in the present conditions is a simple, more predictable and reliable way of supporting the status quo). Even when this creating process (like, for example, in the case of free Linux-based applications) cannot be stopped, those laws can prevent their spreading and wider use. The degree of ethical absurdity of those laws have reached an unimaginable level, where they turned into a branch of criminal law (or repressive apparatus prescriptions) which is based not only on the presumption of guilt without any right of defence, and where anyone who independently, owing to his tests and experiments, decided to use parsley in the process of the cooking of pizza would be considered a thief (without the right of defence) if just a year before another guy in another corner of the earth had used parsley in pizza-like pastry... Amazing! The main criteria of this new type of criminal law is not an established and proved fact of a theft beyond reasonable doubts, but the POSSIBILITY of a reduction in the profit of corporations who use, or, more often than not, just hold a patent (never tried before in practice) for, a number of processes into which their lawyers on paper put parsley, celery, cardamon and what not! Of course, the sphere of ideas in the non-resource related products and services is, at first glance, naturally invulnerable to monopolization and parasitism, but the real life (not fiction) proves this judgement completely wrong: capitalism in the 21th century easily demonstrates that even an ocean can be packed into one pipe with one valve and one controller – 'Adam Smith's strict market hand'.
But China (China in particular and Asia in general) couldn't care more and that's one more weak spot she uses to pouch 'forbidden ideas', engineers and inventors from the West, giving them 'an off-shore zone'. Again they exploit the myth of capitalism that material wealth is the main creative motivator, proving that for an inventor, scientist or engineer the tragedy of losing his 'child idea' or project is often much bigger in the 21th century than the problems of the sheer size of his income and materially successful career. Maybe some phone companies (especially smaller ones) have some problems in America in using the free Linux-based platform Android, because corporations like Microsoft now are trying to charge free users for the free open system developed by themselves, using the intimidation and racketeering of law suits (even if those suits are often doomed to fail, the capital of Microsoft and the law makes it beneficial and absolutely void of risk to start them and use them as a threat), but not in China! And not in Asia as a whole. They couldn't care less. While those behemoths try to guard their pie (or pipe) in America in order to more effectively parasitise the American users and inventors, China continues to use and support those technologies to the fullest.

5. Financial flaws. As was already mentioned above, China gained a full understanding of the super-power of CAPITAL CONCETRATION and its central place in classic capitalistic models and economic relations between the same. This allows China to direct this power in its most destructive and ugly forms at those very capitalistic countries to pursue her goals and derive benefits to the detriment of the latter: financial strength allows China's state to lobby directly her interests through corporations and political institutions using capital. For example, China knows that Western corporations like Yahoo or Google or Microsoft will come, share technology, improve infrastructure and create a new system of Internet censorship and control without any long songs about democracy if they are PAID ENOUGH (just like Hitler in the 30s knew that Britain and America would fight not with Germany but for German orders, because all those democratic values can be easily traded for a good deal of money – the direct result of contradiction between democracy and capitalism). China knows that while America bleats something highly moral about autocracy in Burma she can go on with her mono-partied political model as long as it wants inasmuch as America's financially is dependent on China. China knows that despite the pathetic Europe's spouting about Belarus autocracy European leaders will be dumber than a fish about her, while crawling on their belly to her to ask MONEY for their ass-saving plans about the economic crisis in the EU. China knows that while the West likes to belch out high-flown speeches about authoritarian Syria or Iran, they will continue to shake hands with the authoritarian military aggressor Russia, kiss and hug well-proved terrorists like Qaddafi (as they did before revolution in Libya), befriend King of Bahrain and 'ass-lick' thoroughly many other 'friendly' (but no less bloody for that) dictators – even when they don't have to be so openly loving towards them – because their Western INTERESTS stand well above democratic values and then name of those interests is CAPITAL, short term, NOW. China knows and uses these holes full steam ahead with developed capitalistic countries like Canada, the US, Australia etc, as well as with those developing countries in Latin America, Africa, Asia who, once having considered a big privilege for themselves to pursue the 'American model' have never been able to stop this hot pursuit afterwards, having fallen into an infinitely deep pit-fall. Simply put, China considers that she can buy them all whole for the benefit of her export interests, her resource investments abroad, her direct financial interests etc. Yeah, that works!And will likely work in the foreseeable future!
Second, China very diligently does one very simple thing haling directly from her understanding of the paramount importance of capital concentration in using foreign capitalism: ACCUMULATION AND CONCETRATION OF CAPITAL – that's what China's been doing pretty long and extremely successfully in all possible senses. Yeaaah here we talk about China's HUGE CURRENCY RESEVES and FOREIGN CREDIT accumulated by China, that's the part of Western external debt, especially that of the US. Starting from a certain point in the recent past many developing countries in Asia and some in Latin America very clearly realized the absolute evil of the endless loans from and accumulation of debt to Western governments and the West-dominated financial institutions like IMF, and the first among them being China. They clearly grasped the vicious dynamics of and intentions behind this process: Western capital can parasitise arbitrarily long the developing economies while restraining their development (the latter, apparently, being the first priority) on its own conditions thank to the exponential growth of debt onus and draining of the capital back to the coffers of the West because of the lobbying by means of those loans of preferential terms for Western exporters and corrupted use of the money (again, not only because of 'natural corruption', but because of the conditions that give rise to the embezzlement and drain of that money). Examples of this were plenty in Africa, Asia, Latin America. But this very principle – using high capital concentration to gain money without producing anything and wielding political and economic influence over other, much poorer and backward, nations – could be used the other way around – it is a double-edged sword so to speak. Those countries, China included, understood that it would be better for them 'to eat grass' and 'swell with hunger' than to take a single penny from the West, die but save save and save... and then turn the tables on the Western usurers. So turn the tables China did! Now those huge reserves of dollars has become an iron-clad guarantee for China's normal economic development because 1. Chinese state now can independently and, what's important, reasonably in terms of sustainable development of the whole national economy finance the import of really necessary goods and services 2. Chinese state can loan money to other countries 3. the whole Asian region seems to have scrambled out of this black hole of the never-ending dependence on Western loans in hard currency, so that the development of the whole of Asia became decoupled from the West. Many other powerful levers and advantages have been won by Asia in general and China in particular ranging from prestige and reputation to credit ratings and political clout on the international stage.
But all this doesn't mean on any account that China decided to adopt capitalistic financial system. Quite the contrary: Chinese state perfectly understood that Western unconstrained banking system in overdrive will continue to print and loan money, but, this time, for their own nations, driving their own nations into debt and killing a lot of useful sectors of economy with so called 'bad money'. This again stems from the same vicious flaw of capitalism, which was mentioned before: it doesn't differentiate between 'good business' – intrinsically competitive, creating new products out of nothing and enlarging markets – and 'bad' businesses which are intrinsically interested in limiting or even stifling the market because of its monopolistic nature, or monopolization induced by huge CAPITAL CONCETRATION or combination thereof. And a capitalistic state intrinsically doesn't recognize its role and responsibility of being an independent arbiter and guarantor for the straightening-out of those distortions. Now many eminent economists recognize the role of China in the current economic crisis in the West, to which we see no end. This happened not only because Chinese industrial machine was able to consistently absorb a huge portion of the money printed by Western banks in exchange for cheap and competitive goods, but also because China, in turn, doesn't have the same financial capitalism that would allow her to go on a spending spree of a scale unseen in history. Besides, a large part of Chinese savings (state and independent) have been going (and still going) in the form of loans to the West – as private investments as well as the state ones (in the form of US treasures, bonds etc) so the situation is deeply asymmetrical. That's how China turned the tables on the usurers – using critical and ugly flaws of financial political capitalism, that's how China has swapped places with the West and became the creditor threatening to stifle the development of the latter in favour of her own progress for an uncertainly long period of time.
Generally China doesn't let in financial investors in the manner Western capitalistic countries do it, especially speculative 'investors'. In recent history huge short-term influxes and outflows of speculative money have demonstrated enough their destructive and disruptive power on many Asian nations (Korea, India etc), who were naive enough to believe in the malignant capitalist demagoguery equalizing 'good investments' in the development and creation of economy and new market and parasitic speculative sponging based on using excessive CAPITAL CONCENTRATION to artificially correct the 'invisible hand' of the market and take away part of the already existing value of the economy. Private huge banks – the core of the existing financial political capitalism – don't exist in China as such, but the state-controlled banking system do (not very much different from what one can see in socialistic Sweden) and on a technical level works quite in the same way as the private ones in some functions. As was mentioned before the understanding of the parasitic, monopolistic and absolutely uncompetitive nature of banks as the main pillars of the financial political capitalism (not to be confused with the industrial stage of capitalism) is nowhere better than in China. The exclusive privilege to 'print' or create money (hence debt) multiplied by the privilege to use in unlimited volumes this created money power for speculative purposes (as well as the money credited by natural persons and real economy businesses) held by a limited bunch of super-giant financial quasi-monopolies united by common, consciously understood interests and the already ultrahigh capital concentration means the parasitic force of astronomic proportions unleashed – especially within a system in which such institutions are almost by definition the main shareholders and owners of the state itself. Needless to say that all that such institutions typify is the complete and ugly antipode of the free-market, fair competition and possibility-driven creation.
As ever China took the right and useful, predominantly technical, part from the idea of financial credit institutions and left the rotten one for the West (again, if one is to exclude some formations like free-market socialistic Scandinavia from this notion): they created a banking system for controlling the creation and inflow of money according to the short and long term economic and market requirements and financing the economy, whereas neutering all the rest – fully independent commercial self-governance, any POLITICAL independent involvement and lobbying power, uncontrolled money creation and using held and created capital for the purposes of pure speculation. Banks in China cannot and may not be political entities (or entities with huge political power, no matter formal or informal) independent of the state, not to mention the apex ones. If the banking system according to its very exclusive functions and granted powers is above all other economic freely competing entities it must be accordingly put aside from those 'equal' relations and burdened with the very exclusive responsibilities and accountability to and control by the nation and the state. State must be an arbiter and guarantor, or else why is it needed in the first place? To guard the chosen few from the nation as it happens in some 'democratish' countries?
Now China, having comfortably lain back, observes the self-eating frenzy in overdrive in Western Anglo-Saxon economies, calmly smiling to themselves and capitalizing on it to the fullest using precisely the same financial capitalism's weapons against the capitalism itself in the West as they were used against her and hundreds of developing countries. For China it suffice just to beckon to any of those Western cash-oozing giants, like HSBC bank, to have them briskly coming jumping to her knee under any conditions, only to have at least some limited access to the Chinese market and invest, all be it indirectly, in the Chinese economy. But those investments are not speculative and and are done only and only under the direct control and dictates of the Chinese state. That's the way how China not only uses her own capital, but easily harnesses Western banks for her purposes, and reasonably and creatively too rather than parasitically and destructively as it's done by the West itself. Does Western HSBC work for the benefit of China and to the detriment the very West? Possibly.

6. Political and diplomatic flaws.
It's possible that one of the main political as well as ideological flaws that's intentionally as well as unwittingly exploited by China to the fullest against the West is the terrible myth called 'democratic capitalism', China knowing better than anybody else that there's little more in common between those notions than between blood donors and vampires. China exploits in a number of way the intrinsic conflict between democracy and capitalism in her favour, being herself an authoritarian country and dealing a terrible reputational, ideological and image-related blows to the Western 'semi-democracies' and democratic ideals which in the end could be the most consequential, long-lasting and hard-to-treat damage to the West which itself has lost too much time without choosing once and for all what it wants best – capitalism or democracy. This is a really sad development indeed. In practice the exploitation of the above flaw by China manifest itself in a number of ways, such as:
As was mentioned above, China state uses capital as a lobbying power A) to gain economic and technological advantages, acquire assets in the Western countries in the fields where those gains and assets are dubious to say the least in terms of longer term interests of the respective Western nations and their democracies B) silence and keep Western governments away from saying to much about Chinese human rights record and bad autocratic practices, which also sends a very detrimental image-related and ideological message to the developing world: 'Give us a break, all their democratic principles and values aren't worth a rusty farthing, all of them can be bought and traded, cos it's CAPITAL that is the real language of their elites, not real democratic values'. It's not only to fill the gap of decades of economic development that China beckons Microsoft or Yahoo to come and share their technology and establish a new infrastructural environment, but also to use the state-of-the-art methods happily and readily supplied by those corporations to control their population and strengthen the power of autocratic regime. So, simply put, China proves the whole world (willingly or unwillingly) that 'democratic values' are just an extra premium, and capital allows you to use those so called democracies to strengthen your autocracy and tighten your grip on your ownership of human's rights. Actually, on this front, China's interaction with the West just adds to a number of other examples (like Western policy in the Middle East, Africa, Middle Asia and Latin America) which increasingly attests that the West actually not only uninterested in the true propagation of democratic mechanisms and reforms in autocratic developing countries but, on the condition that those states are stable, poor, friendly and dependent, try hard to restrain those nations from any true democratic transition precisely because their poverty and economic underdevelopment and dependence gives enough comfort to Western corporations and owners of capitals (who are in no mood to sustain more of international competition and pay more for resources supplied very often by those poor nations).
Another front on which China deals a huge blow to the image, credibility and reputation of Western semi-democracies is her interaction with other developing countries. As was said before, China is very fast and effectively builds up its presence in and relations with other developing countries and whole regions: in Africa, Latin America and Asia. It proves on the practical level that her economic interests (very often connected with resource exploration and supply) are not against the social and infrastructural development of those regions (see the section 'economic flaws'). Western corporations were and are interested only in skimming the cream (more often than not at the expense of ecological damage of 'Nuremberg-requiring' proportions) and couldn't care less about long term economic and social development of those regions. China's main (intentional and unintentional) message is: “hey, look what those Western highly principled, preachy democracies did to you through their capital-driven corporations in addition to what they had done to you before during the colonization period! They just robbed you, anchoring your poverty for ever and making you dependent still more; after bribing your governments and getting easy profit through getting easy resources they packed up and got away as soon as possible without any major investment and settling long term relationships mutually beneficial for both states. Look at what those miners did in Africa, look at what their oil companies did in Latin America etc! But we, socialistic China, are going to have a long relationship with huge investment in your infrastructure, human potential, employment market, and exploring difficult resources. We are going develop your employment market and teach your labour force, we are going to tighten the cultural connection. We are going to take you on a long mutually beneficial journey with the work on all fronts. And don't forget, unlike those 'democracy custodians', those 'human-rights preachers' we've never been involved in any colonization in the first place. So look, try, compare and chose!”. That's a terrible blow aimed at the image of Western countries, because it works not only at the political level, but at the cultural and social level.' It's not America's starving little Cuban people with its ruthless sanctions for decades in the name of democracy that adds to the image of the West and its democratic ideals in the eyes of the Cubans, but it's definitely China's now coming to Cuba with its investment that ruthlessly ruins that image and gives some free-market possibilities and knowledge to the people of Cuba.
Another very important kind of damage that China is inflicting on the image and credibility of democracy in general is done unwillingly by her success against the backdrop of failure of many non-autocratic capitalistic plutocracies and oligarchies which are advertized or carry a stamp of approval as 'true and good democracies' by the West – like Mexico or Pakistan, or South Africa or Greece or India and many many other countries. China, again, intentionally or unintentionally, proves in the eyes of many, that, all those newly-made capitalistic plutocracies masked with some outward attributes (like elections once per four years and a couple of political parties) as democracies, in essence give 90% of ordinary people fewer freedoms, fewer possibilities, less real competition, less entrepreneurial economic participation than the autocratic communist-ruled China. Especially well this could be seen in the neighboring India which has continued to drag miserably behind China in terms of economic development and even economic disparity for a very long time. Neither Indian state nor the newly born Indian owners of capital (as usual doubling as the owners of the state itself) are interested in the real quality-changing investment in infrastructural development of the country, urbanization, technological development, to say nothing about the development of the social institutions, investment in the realization of the social potential, health, education and standards of living. After some primary distribution of the capital and power the situation in India became pretty much frozen. India was no match for China, isn't and won't be as long as its political capital-based structure doesn't change and the state will give the first priority to investment in the human resource instead of serving the interest of politically independent capital-concentrators. But, as ever, the problem is that the political power is already in the hands of those capital owners. So the Indian problems have only started like in many other countries who chose in the past one of the most dangerous myths: 'democratic capitalism' instead of democracy.

Anglo-Saxon democracies and their peoples ought to choose once and for all what they need: democratic capitalism or democracy, free-market or free-market capitalism, investment in human development for creation of quality of life or protection of capital for compensation for and containment of human dissatisfaction.
Learn long and hard from Sweden and Finland and other Scandinavian countries of the 22nd century – Germany is a worse but still quite a worthy example too.

See also on the similar topics:

EU tribulations have political, not economic roots: no democracy - no legitimacy
ECB starts printing money big time: nightmares come true!
Greece will fail without euro? Just another cynical myth?
How can the eurozone be saved by all these summits in the longer term?
Occupy Wall Street is just the tip of the iceberg: social pact of the US is through 
Don't be afraid of the word 'socialism' in the 21th century, it can be helpful
Yes, Bradley Manning and Assange deserve the Nobel prize possibly more than Obama does!
A few words about the EU: good idea, but in reality a big fraud
Tax-cuts reduce employment: it's an old conservative myth!
The US has a hopelessly out-of-date political system: reform urgently needed
Some extra about the moral political crisis in the Western semi-democracies