5. Foreign investment in China does not preclude its being an imperialist country!

It is often argued that China can’t possibly be an imperialist country because foreign imperialist countries such as the United States have investments in China and are exploiting it! The idea seems to be that you must either be the victim of imperialism or the country doing the victimizing, but that you can’t be both!

Since the beginning of modern capitalist imperialism well over a century ago, the imperialist powers have always exported goods to each other’s countries; have always purchased or set up factories in each other’s countries; and have always exported capital to each other’s countries, and have thus always exploited each other’s working class. In fact, the largest part of their export of capital is actually to other imperialist countries (even if this is not usually the most profitable part). And this has especially been true for those countries which did not have a lot of colonies themselves. Moreover, the percentage of what is known as “cross investment” in each other’s economies by the imperialist powers has generally increased over time.[1]

In talking about the export of capital, in 1916 Lenin said:

“How is this capital invested abroad distributed among the various countries? Where is it invested? Only an approximate answer can be given to this question, but one sufficient to throw light on certain general relations and connections of modern imperialism.

“The principle spheres of investment of British capital are the British colonies, which are very large also in America (for example, Canada) not to mention Asia, etc. In this case, enormous exports of capital are bound up most closely with vast colonies of the importance of which for imperialism we shall speak later. In the case of France the situation is different. French capital exports are invested mainly in Europe, primarily in Russia (at least ten billion francs). This is mainly loan capital, government loans and not investments in industrial undertakings. Unlike British colonial imperialism, French imperialism might be termed usury imperialism. In the case of Germany, we have a third type; colonies are inconsiderable, and German capital invested abroad is divided almost evenly between Europe and America.” —Lenin[2]

Thus even in the period before World War I a considerable part of the export of capital from imperialist countries was to other advanced capitalist and imperialist countries![3] After World War I this trend intensified.[4] And after World War II this trend intensified vastly more. World War II destroyed a tremendous amount of productive capital in Europe and Asia, and this opened up the possibility for the export of capital to those countries on a much greater scale. By far the largest target for the export of U.S. capital after that war was none other than the major imperialist countries of Europe (i.e., to Germany, Britain, France and Italy)!

And has the fact that the U.S. and other countries have exported huge amounts of capital to those countries in any way prevented them from being imperialist countries themselves? Certainly not! In the very same way, the fact that the U.S. and other imperialist countries now export capital to China, and set up factories there, in no way shows that China is not also now a major capitalist-imperialist country.

What single country has been the greatest destination for the export of capital? In recent decades, up through 2011, it was none other than the United States itself![5] We take it for granted that no one would use this fact to conclude that the U.S. is not an imperialist country.

Moreover, while other imperialist countries export capital to China (and to each other), China in turn also exports capital to those countries. And substantial amounts of it, too. In fact in 2012 about one-third of China’s foreign investment was to the advanced capitalist countries of Europe.[6] China’s investment in Europe has hugely increased in part because of the continuing economic crisis there, which opens up opportunities for China and necessities for financially strapped European companies and countries.[7] In addition China exports a great deal of capital to the U.S., Canada, Australia, and other advanced capitalist countries. In total, about two-thirds of China’s outward direct investment in 2012 went to these rich countries, up from just a tenth in 2002.[8] (We will talk more about this later.)

Another point to consider is that while “inward foreign direct investment” (IFDI) into China, and outward FDI (OFDI) from China to other countries, are both still growing, the rates of growth of OFDI are now much higher than the rates of growth of IFDI. That is, the trend is now for the ratio of outward bound investment to inward bound investment to increase. In the first 4 months of 2013, for example, inward FDI into China increased by only 1.21% (as compared to a year earlier), while outward FDI from China to other countries increased by 27% over the same period.[9]

[1] For the increase in this percentage of cross investment up through the 1960s see: Michael Barratt Brown, “The Economics of Imperialism” (Penguin: 1974), esp. pp. 207-8. “[T]he direction of U.S. investment is not now so much to ex-colonial or under-developed lands as to other industrially developed states. This is true for all the main capital-exporting countries…. About a half of all their capital exports went to each other in the 1960s.”

[2] Lenin, “Imperialism, the Highest Stage of Capitalism: A Popular Outline”, (Peking: FLP, 1975 (1916)), pp. 75-76.

[3] In another place Lenin notes, in criticizing Sokolnikov for his view that the export of capital always results in superprofits: “It is difficult to accept as correct the statement on superprofits and new countries since capital has also been exported from Germany to Italy, from France to Switzerland, etc. Under imperialism, capital has begun to be exported to the old countries as well, and not for superprofits alone.” [From “Revision of the Party Programme” (Oct. 6-8, 1917), in “Lenin on Imperialism and Imperialists” (Moscow: Progress, 1973), p. 129.]

[4] In the volume New Data for V. I. Lenin’s ‘Imperialism, the Highest Stage of Capitalism’, published by International Publishers in the late 1930s, we find:

Important changes in the direction of capital exports. First of all, Russia has dropped out as a sphere of investment and as a source of super-profit. Secondly, Germany has now entered the list of countries which import capital. The technically and economically most advanced country in Europe has now become a source of super-profit obtained from capital exports.” [p. 293]

[5] In 2012, for the first time, and mostly because of a big drop in FDI going into the U.S. that year, China surpassed the U.S. as the favorite target for foreign direct investment. (Data sources will be provided in a later footnote.)

[6] Heriberto Araújo and Juan Pablo Cardenal, “China’s Economic Empire”, New York Times, June 1, 2013. Online at: http://www.nytimes.com/2013/06/02/opinion/sunday/chinas-economic-empire.html?nl=todaysheadlines&emc=edit_th_20130602 It is true, however, that this is a recent new trend, in part brought about by the recent aggravation of financial problems within the Euro zone.

[7] Europe is coming to depend more and more on China to help bail it out of its crisis, not only in severely depressed countries like Greece and Spain, but even elsewhere. For example, the Chinese auto giant Dongfeng has just agreed to purchase part of the ailing French automaker PSA Peugeot Citroën for $1.1 billion. [San Francisco Chronicle, Feb. 20, 2014, p. C-2.]

[8] “China’s outward investment: The Second Wave”, Economist, Oct. 26, 2013, pp. 72-73.

[9] Richard Silk, “Investment Into China Flattens”, Wall Street Journal, May 16, 2013, online at: http://online.wsj.com/article/SB10001424127887324767004578486181643410080.html