New Trade War?
Independent Chinese TV producer Li Jun said on NTD’s Chinese-language program “Pinnacle View” that Ms. Yellen’s focus during her visit to China was on issues regarding excess capacity and dumping at low prices. This subject is worth noting since after entering the World Trade Organization (WTO), China’s entire export strategy has been based on dumping at low prices, impacting industries globally. For instance, even Huawei’s products, which are perceived as high-tech, are priced 30 percent to 40 percent cheaper than competitors. Therefore, this strategy has been ongoing for quite some time.“Now, there may be some strategic considerations from the United States,” he said. “Since China is still using this dumping strategy to absorb excess capacity, the United States is seeking to stop it because it greatly affects the global industrial chain.”
Mr. Li pointed out that Ms. Yellen warned China against assisting Russia. Originally, the United States opposed China’s military support of Russia. This time, Ms. Yellen added that material support also should not be provided, or there would be serious consequences.
‘Socialist Enterprises’
Guo Jun, the editor-in-chief of The Epoch Times Hong Kong edition, explained on “Pinnacle View” why China tends to use extremely low prices to occupy markets.“Under capitalism, the goal of enterprises in Western countries is to profit, but socialism is different. The goal of the Chinese Communist Party (CCP) is not profit but to gain power. In China, the most important indicator of state-owned enterprises (SOEs) is not how much money they make but how large their scale is. The executives of SOEs are all officials with government ranks. Therefore, the basic characteristics of socialist enterprises determine the behavior of Chinese enterprises,” she said.
Ms. Guo also explained that when business owners profit under capitalism, they increase wages, resulting in expanded social consumption and improved standard of living. However, in China’s case, when enterprises do well, they invest more resources to expand their scale. Business owners have money, but workers’ wages do not increase much. Only the demand for resources and capital increases.
“So, China’s domestic consumption accounts for only 37 percent of GDP, while in most Western countries, it’s around 70 percent,” she said. “When Yellen went to China, she prescribed a solution to increase domestic consumption to the Chinese, which is sincere advice, but this is the logic of the United States, not the logic of the CCP.”
“The CCP also uses government subsidies to boost China’s exports. For example, the Chinese regime refunds the value-added tax, which accounts for at least 17 percent of the sales, as long as the products are exported. Most Chinese companies’ export profits are around 5 percent, so the 17 percent tax refund is quite tempting. This creates a business strategy of dumping at low prices for Chinese companies. Even if they sell at a loss, there will still be a 17 percent subsidy.”
Conflicting Worldviews
“The confrontation between the United States and China is inevitable,” Ms. Guo said. “One of the essences of socialism is statism, which is the economic confrontation between countries and governments. Its goal is mutual confrontation and struggle. This is unlike many democratic societies, where the goal of the state is to improve the quality of life of ordinary people.”The former Yugoslav communist political and Deputy Prime Minister Milovan Djilas, who later failed in power struggles and was imprisoned, wrote a famous book called “The New Class: An Analysis of the Communist System.” In this book, he talked about some characteristics of communist regimes. One of them is that all Leninist communist regimes have the basic economic goal of industrialization, and the ultimate goal is national competition to promote the communist movement.
Ms. Guo explained that the CCP’s conduct reflects what Mr. Djilas said. Through state support to expand enterprise scale for economic competition, China is destroying other countries’ industries to weaken them, and the CCP aims to extend its communist ideologies through economic influence.
“Djilas’ book is quite well-known in the West,” she said. “The current strategy by the United States is to prepare for a national competition. I view this as a long-term tactic, and this trend is unlikely to change.”
