Sunday, May 11, 2008

We have seen this China before.

And it ended in 100 years of revolution.

by StFerdIII



Before 1842 the Chinese were not interested in Western products. They viewed the West as a collection of inferior barbarians unable to produce quality products, with the small exception of mechanical toys like clocks and water pieces. China was a manufacturing super-power pre 1842. When the West did open up China to European imports after the 'Opium' war of 1839-42, the ancient Chinese state collapsed into a 100 years of revolution and civil war. Could the same happen again? Might China revisit its past ?

China is certainly not as monolithic nor as powerful as the media might imagine. China is made up of regions with different economies, social structures and cultures. In this sense China today is not that different than China was in 1800 or 1840. In 1800 China was the manufacturing capital of the world producing 33% of total world manufacture – juxtaposed against England's 2 %. China had long produced high quality products desired by world markets including silk, porcelain, textiles, perfumes, household goods and refined products based on advanced processing of silver and gold.

China's mining industry in 1800 employed millions. Hundreds of thousands more worked in an advanced banking and financial sector. In agriculture the Chinese used modern techniques such as nutrient building; crop rotations, multi-harvests in one year; and complex irrigation schemes. It was not until the British and Americans discovered and perfected the steam engine that machines would supplant Chinese labor in productivity and quality:

“Asian agriculture [in 1800] was producing harvests twenty times the amount of seed planted, while Europe harvests were only eight or less. The Asians were growing rice, and rice took nutrients from water rather than soil. Asians were not leaving land lie fallow as were the Europeans. And farmers in China were impressing visitors from Europe by their ability to get as many as three harvests a year from the same plot of land.” [link]

China probably had 300 million or more people in 1800. To the casual observer it appeared to be a busy, wealthy and unified political entity with a long and cherished historical record. It was however far weaker than its impressive agriculture and industrial output might have suggested.

The English had occupied and controlled most of India by 1839 and had set up hegemony over Burma to protect Indian trade routes. The economic giant of East Asia – China – was a logical destination point for British ambitions and lust for profits. Yet the Chinese being the world's superpower in industrial and agriculture output saw little benefit in engaging in trade with England and India. The Chinese market was closed. It was the Opium War which changed China forever.

There was one product that the Chinese did covet and that was the opiate drug. Millions of Chinese, probably 20 million or so, used opium regularly to escape the harsh reality of peasant life, or the penury of living in a large Chinese city as a lowly day laborer, or to stimulate the bored existence of the wealthy. The entire primitive army, not yet modernised was addicted. Yet the British could only sell opium through a managed trade relationship, one which was price controlled and limited profits:

“The trade relationships were organized into the so called "Canton Trade System", since only the port of Canton was opened for foreign trade. Having reached Canton, the Western merchants could only deal with a group of government appointed merchants called "Gong Hang" ("officially authorized firms") which had a monopoly on the trade with the West. The volume of the trade and the prices as well as the personal activities of Western merchants were also regulated...”
[link]

Thanks to managed trade English merchants were denied access to the Chinese market and the excessive profits that opium would naturally command. Chinese arrogance and hubris that their Kingdom was the center of the world was about to come crashing down thanks to the addiction by millions of Chinese to opium.

In order to eradicate the drug problem the Chinese state forbade any use of opium. Trade was stopped, opium boxes were opened and destroyed and English merchants forced out of Canton. The English reacted by declaring war and China was doomed. The Opium war was about more than the exportation of an addictive plant, it was about forcing China to submit itself to European dominance.

The war lasted only 3 years and ended in disaster for the Chinese. The British with some European allies, 7.000 miles from their home bases, were able to rather decisively destroy Chinese forces and force the Chinese government into a surrender. The terms of the surrender were to have lasting effects on China. In essence the Chinese were forced to hand over trading privileges, lower tariffs from 65% to 5% on imported products, hand over customs revenue to the English and their allies, and give up territory such as Hong Kong, Macau, and Canton to the Western powers. China was forced to recognise the superiority of the West. It was a grand humiliation.

After the Opium war foreign trade flourished and it caused severed dislocations in China. Inflation rose rapidly as the trade deficit with the West reached unprecedented levels, and the government was unable to maintain a strong currency. Social chaos enveloped regions as the political and economic system of the ruling Manchu dynasty became weak in the face of Western military, economic and political pressure. China's ancient millenia old socio-economic structure was ripped apart. The result would be 100 years of hot and cold revolution.

As poverty and confusion mounted the Chinese began to search for solutions to bring power and glory back to the Middle Kingdom. For the first time in history Chinese intellectuals began to study Western countries and ideas. Imported Western technologies and industries changed the Chinese economy. New and theoretically democratic political systems were discussed in Chinese universities and cafes – all of them based on Western concepts. Modes of Western dress, capitalist ideas, and social mores transformed Chinese society. China was modernizing but it was still China.

In order to stem social upheaval the Chinese tried to end the 'Opium' war treaties and get out from under the power of the Europeans. In 1856, Chinese treaty infractions led to the 'Second Opium War'. In 1860, additional new treaties gave the foreigners even more power. Forty years later further humiliation came in 1900, when foreign powers entered China to put down the 'Boxer' rebellion and demanded that the Chinese pay huge fees to induce them to leave. China had become in effect, a direct European colony.

Inevitably China's old imperial structure collapsed in 1911. New competitors moved in as China transitioned from an empire to a republic. American and Japanese companies began to replace the British in the China trade. It was only during World War II with the Japanese occupying most of China that the US and England finally revoked past treaties and obligations. This was done essentially to keep China as an ally in the fight against Japan. But by that time the latent power of Communism was soon to replace the dying republic.

Today the situation is in some ways similar. Western globalisation and its attendant wealth and superiority has forced open China's economy. Japanese and American firms dominate the re-export trade. Fully 50% or more of exported manufacture is for US, European or Japanese intra-company transfers or exports controlled by Western firms. China runs a huge trade deficit in services, consulting and finance with the West. And like post 1842, China is undergoing a tremendous change in society, mores, orientation, and culture. In some ways China is becoming a state dominated by Western interests.

Could China again dissolve into internal chaos for 100 years as it did post 1842 ? The last experiment ended up with the fascist totalitarianism of communism – a cataclysm which butchered 60 million people and retarded China's development by 3 generations. Now perversely it is the Communists who are opening up to Western economy and cultural influences. Could they follow the old Manchu dynasty and the first republic?

Nobody knows. But one thing is certain. When economies are opened up and trade is created, domestic culture, society and power structures will change. It is not a question of when China will experience a new revolution. It is a matter of time before we find out what social structure will replace that of the failed dogma of communism. China's long march to join the modern world continues. It remains to be seen how bloody its future will be.