Abstract
This chapter outlines the contours of this emergent state capitalist SOA and probes its growth dynamics and crisis-tendencies. I begin by examining in more detail the kinds of state-led investment and the evolution of China’s combined development in an era of the resurgence of the Keynesian-Fordist state sector. I examine the recent history of the corporate sector to demonstrate how the state has encroached upon the private economy for both political and economic reasons. This encroachment, I argue, both represents China’s first serious attempt at infant industry-style industrial policy along the lines of prior East Asian developers, and simultaneously a risky Keynesian-Fordist attempt at ramping up investment, independent of demand, to stimulate growth and productivity. I then go on to explain why so much of the bout of state-financed stimulus in infrastructure after 2008 found its way, alongside the overproduction of heavy goods, into real estate investment. This risks what Harvey (2016) refers to as a ‘switching crisis’: whereby investments flow from the productive manufacturing sector into unproductive speculation on the built environment, deferring—but ultimately heightening—the crisis which has built up in the real economy over preceding years.
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Notes
- 1.
Though the flood of lending surging through the economy has also resulted in the emergence of a shadow banking sector which increasingly targets small, private firms with high interest rate loans (Tsai 2015). This explosion of underground lending is no surprise given the quantity of renminbi printed since 2008, and despite a regulatory crackdown in 2018 was estimated at over US$8tn in 2019.
- 2.
Interestingly, Harvey (2012, 60) has been among the more perceptive Western geographers to have considered the China’s contemporary urbanisation drive, though he does not mobilise his own concept of a switching crisis to do so. He does observe that the ‘speculative scale of the Chinese development seems to be of an entirely different order than anything before in human history’.
- 3.
Christophers (2011, 1352), in perhaps the most scrupulous deployment of Harvey’s theory to date (see also King 1989; Beauregard 1994) warns that looking for definitive empirical verification of the theory may be too demanding, because of the complexity of accurate empirical measurement of intersectoral value transfers and fictitious capital formation. He suggests two empirical strategies which should at least be strongly indicative that the process is at work: First, an empirical measurement of the relative significance of investment in the built environment compared with investment in productive activities (data which I consider sufficiently available in the Chinese case), and second, the propensity of institutional investors to switch their portfolios from manufacturing investment to real estate investment. Since systematic evidence of this latter type is not readily available in the Chinese case, we must rely largely on the first, supplemented by more general observations which we would expect to accord with a disproportionate flow of investment into the built environment where returns seem increasingly unlikely to materialise in the long-run.
- 4.
Land remains state owned, but land-use rights were separated from ownership in 1988, and the dynamic of financially struggling local governments turning over rural land for urban usage was entrenched thereafter as early as 1994 with shifts in the taxation regime. Initially, land development was mostly for industrial usage, since the system of dormitory migrant labour (where factories provide accommodation) required minimal residential construction. It was only during the late 1990s that an urban property market was established—by transferring ownership of the bulk of all housing from the state to previous tenants.
- 5.
- 6.
It is possible that China is nearing the end of its liquid forex reserves (which amounted to a total of US$4tn in 2015), since it is believed that many bank loans are capitalized against the remainder, making it impossible—or at least highly dangerous—to deploy them in service of the yuan in the face of further capital flight. If this is the case then any further capital flight would be hard to stem, since controls cannot be made watertight, and it would be impossible to continue purchasing renminbi with dollars to maintain the value of the yuan.
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Rolf, S. (2021). The State Resurgent. In: China’s Uneven and Combined Development. Studies in the Political Economy of Public Policy. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-55559-7_7
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