In “Beijing to the rescue” (July 30), Claude Smadja quotes an imagined “unwritten social compact” to deliver economic well-being as some kind of legitimisation of holding on to power under the so-called “Mandate from Heaven” in Chinese tradition. But where was this social compact in the pre-Deng days, when not only China had no growth, but there was even large-scale starvation?
Economic growth in China from around 1980 to this day is the US’ creation for strategic reasons. To get China on its side for reasons concerning the Cold War, the US provided that country with factories complete with machinery and technology, hand-holding and supervision — and even a ready market for China’s products in the US and its allied countries. China only had to provide fully controlled low-cost labour.
This arrangement continued even after the Cold War ended because it suited both sides. Most low- to medium-priced goods in US, Japan and European supermarkets are manufactured in China. Not only do US corporations get a handsome share of the earnings from these goods, but China reinvests a large part of the proceeds in US bonds. This cosy arrangement is now under threat only because in the aftermath of the 2008 crash consumers in the US, Europe and Japan are de-leveraging their financial assets and buying less — a trend likely to continue for decades. So how can China rescue the world economy, especially when, as the author points out, the country will become old before it becomes rich?
Alok Sarkar Kolkata
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