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China is creating splits in the Western bloc

Lula da Silva, Brazil’s social democratic president, visited China last week
Issue 2851
President of China, Xi Jinping

President of China, Xi Jinping (Picture: Pete Souza)

US president Joe Biden welcomed Lula’s narrow victory over far right Jair Bolsonaro last October, but he can’t have liked what he said on his recent visit to China.  

In Shanghai Lula called for alternatives to the US dollar as the dominant world currency. He said, “Every night I ask myself why all countries have to base their trade on the dollar.”

In Beijing, he went further, “Our interests in the relationship with China are not just commercial. We have political interests, and we have interests in building a new geopolitics to change world governance by giving more representation to the United Nations.” 

He also proposed a mediating group of states, including China, to bring Russia and Ukraine to the negotiating table, and called on the US “to stop incentivising the war and start to talk about peace”.

Despite Lula’s denials, economics plays a big part here. As the Financial Times newspaper points out, “Bilateral trade has ballooned over the past decade to $150.4 billion last year, with China buying Brazil’s agricultural commodities and minerals and investing in the Latin American country’s large consumer market and infrastructure sector.”

Brazil is one of several big economies in the Global South that developed significant manufacturing industries in the course of the 20th century. But the global triumph of neoliberalism over the past 40 years forced them to remove the protection they had provided for their manufacturing sectors just as China was re-entering the world market. 

The result was deindustrialisation and a return to dependency on exporting food and raw materials, this time predominantly to China.

But China’s success in courting Brazil belongs to a much broader trend, which is that China is splitting the Western capitalist bloc

The Biden administration is trying to brigade its allies together, and is pressuring them to decouple—that is, to reduce their reliance on supply chains starting in China. But it isn’t working. So last week French president Emmanuel Macron also paid a state visit to China. To demonstrate European unity he brought along Ursula von der Leyen, president of the European Commission. This badly backfired. 

Chinese president Xi Jinping courted Macron, playing to his vanity, and cold-shouldered von der Leyen, who has been much more critical of China. Macron received a lot of flak from Nato ultra-loyalists for saying in an interview that Europe shouldn’t allow itself to be dragged into a US confrontation with China over Taiwan. 

Another visitor to Beijing, Germany’s belligerent Green foreign minister Annalena Baerbock, immediately made a speech widely described as “warning China over Taiwan”. This is a bit of a joke, given the chronic weakness of the German military. In any case Baerbock is out of line with the dominant position in the European ruling classes. Even von der Leyen says “it is neither viable—nor in Europe’s interest—to decouple from China.” 

Macron brought dozens of French business leaders with him. Investment in and trade with China is too important for German capitalism to support decoupling. In any case, very little decoupling has happened to date. Some big companies are shifting investments from China to other Asian industrial economies such as Vietnam and Malaysia. But manufacturing in these countries is heavily dependent on components produced in China. 

Apple has achieved its extraordinary success over the past two decades partly by building up a manufacturing complex in China whose size and expertise would be hard to do without.

Splitting the European Union is easy. George Bush did it over the Iraq War in 2003. Vladimir Putin did it over Georgia and Ukraine in 2008 and 2014. 

But China’s ability to divide the Western camp doesn’t just reflect skilful diplomatic manoeuvres and playing on interstate rivalries. It arises from the fact that China’s role as a producer of manufactured goods and consumer of raw materials makes it an indispensable economic partner. It will be very hard for the US to reverse this.

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