Socialist Party Australia - China's interest in the North Korean crisis

By Greg Bradshaw, Melbourne City branch SP

China is crucial in the disarmament of North Korea, and it goes well beyond the fact that it is North Korea’s only international partner able to coordinate negotiations. But the interests of the Beijing bureaucracy are a far cry from the interests of its suffering people-and from the repressed people of North Korea.

North Korea: A Deformed Workers’ State
As a precondition for diplomatic negotiations over the stand-off, Kim Jong-Il, leader of North Korea, had demanded nothing short of bilateral talks with the US. The US, showing their own brinkmanship over the issue, agreed only to multilateral talks. Despite the formality of bilateral discussions to be held amongst the framework of meetings (to save face for the North), the US got their way. However, this capitulation was not due to Pyongyang conceding- it was the result of strong-arm tactics by their allies in China.
The reasons for NK’s submissiveness to Chinese foreign policy are not hard to find. The DPRK (Democratic People’s Republic of Korea) is on brink of collapse, and now relies on food and oil aid by China for its day to day survival. The economy was originally nationalised and a clone regime of Stalinist Russia and Eastern Europe established. Capitalism and landlordism were abolished- but a brutal dictatorship ruled politically. It was a ‘deformed’ workers’ state.
Before the 1970’s with the influx of heavy industry from the USSR, NK had a stronger economy than the South. But as the more complex elements of planned economy in a capitalist global economy started to arise, the incompetence of an undemocratic bureaucracy became evident. That is to say, as the economy became more advanced, the bureaucracy around Stalin found it increasingly difficult to manage without the democratic check of the masses).
As Leon Trotsky explained in The Revolution Betrayed, democracy for a planned economy is like oxygen for the body - it will flourish and be healthy with it, but will deform and fail without. The policies of Kim Jong-Il and his late father, Kim Il-Sung, is that of ‘Juche’- which is essentially economic isolation and strong nationalism (linked to cult-like adoration of the ‘Great Leader’).
This ‘socialism in one state’ rhetoric has led NK’s Gross Domestic Product to shrink by 1/3 since 1991. To counter this shrinkage, last July Kim Jong-Il implemented rushed market reforms by freeing prices and legalising the burgeoning Black Market. But such hasty and crude measures only added soaring inflation to an already dying economy. The dynasty can do little to slow the inevitable.
Their once powerful heavy industry machinery is now sold for scrap metal, as there is no electricity to power it. Since the early 1990’s it is estimated that over 2 million North Koreans have starved to death due to such conditions. It is estimated that out of a population of 22 million, half are malnourished, and 7 million dependent on foreign food donors and the UN.
It is for these very reasons that the regime needs to threaten rich capitalist nations such as the US, South Korea and Japan in ways like the current crisis. They are attempting to hold on to their crumbling power by winning some form of economic concessions, and prevent their overthrow by the working class of NK. The regime is terrified that it will be attacked by the US and it sees its nuclear programme as its only bargaining chip.

China’s motives for disarmament
China has previously stood by the DPRK in order to protect its regional security. As US forces began to win a series of key battles during the Korean War, it became a distinct possibility that the US could occupy the whole peninsula. China, fearing the US war machine indefinitely stationed at their border, saw it necessary to send in troops. They lost over a million men during the course of the war, and have always felt a historical military linkage.
However, soon after the end of the Korean War, any claims of defending the revolution became mere rhetoric to feed the people of China and NK as the tasks of ‘nation building’ and ‘national security’ came to the fore. For that, all notions of democracy were dismissed by the bureaucracies as unaffordable luxuries. More importantly, the bureaucracy of the Soviet Union would not have tolerated any healthy workers’ states, lest they serve as an example for political revolution in their countries.
The existence of a ‘nuisance’ NK was always considered to be a great benefit by the Beijing regime and was seen as a ‘buffer state’ between them and the US.
Furthermore, holding the world’s third largest land army as an ally - at 1.3 million troops and 4.7 million reservists - was of no disadvantage either. With the constant threat of the Cold War turning hot, the Stalinist states were more than happy to have this military-based nation as a powerful partner.
But while trying to win the diplomatic friendship of capitalist economies and not aggravate a rampant US unilateralism, the unpredictable nature of NK is not in the good books of its regional partner China - at least for the time being. The latest attempt by Kim Jong-Il to restart NK’s nuclear weapons programme - this time using enriched uranium acquired off Pakistan – sets up a number of dangerous problems for China.
China itself is a known proliferator of nuclear weapons technology, including to such states as Pakistan, Iraq and NK itself. But, it seems, it is only recently that Beijing has concluded that the small gains of nuclear proliferation, including those of monetary, diplomatic and agitational, are outweighed by the extent they threaten other interests.
To this end, China has publicly stated that it will not allow NK to use its land, airspace, or territorial waters to transport materials or technology regarding weapons of mass destruction. Earlier this year (over what is believed to be over the same dispute), a refusal of passage led to the temporary stoppage of a crucial oil pipe from China to NK, displaying a serious intention by Beijing on the issue.
The situation has already sparked debate in China’s historical enemy and mortal strategic competitor Japan as to the future of its armed forces. Since the end of World War 2 in 1945, Japan has been constitutionally unable to hold any type of army- it only has the Japanese Self-Defence Force, with the power to defend Japan from attack. While the Japanese Prime Minister Junichiro Koizumi already wishes to deploy troops in Iraq (to win US kudos in a period of Japanese financial crisis), the situation in Korea has given some hawks in Japan even more impetus in their calls for a standing army.
Another murmur from inside Japan is a call for the creation of a Japanese nuclear weapons programme in the face of the Korean crisis and ‘global terrorism’. Not surprisingly, China has been more than happy with a demilitarised, non-nuclear Japan. So China is quickly trying to diffuse NK nuclear ambitions to prevent a North East Asian arms race, in which Beijing has no doubt that Japan would quickly take the lead. Such a race would lead to huge instability in the region, and a massive decline in investment.
It is unlikely, but the crisis over Pyongyang’s claims to wanting to obtain a nuclear arsenal could provoke a costly war- one that China may inevitably become involved in. It is not surprising then that Beijing favours the ‘carrot over the stick’. They do not want to test alliances, military or otherwise, that they are not sure they are willing to uphold.
It is estimated that such a war, even non-nuclear, would lead to a death toll of a million people (with around 100,000 US casualties), and cost the US around US$100 billion (A$155) in military expenditure. Disruption to regional commerce would cost, at conservative estimates, upwards of US$1 trillion.
Furthermore, a unified Korea is the last thing China wants right now. As one leading global economist pointed out: “the nightmare scenario for global investors is the collapse of NK and its forcible assimilation into the South.” With the cost of reunification estimated at US$3.2 trillion dollars (equivalent to 7 years South Korea’s GDP!), the SK economy would be sent into a catastrophic recession. Such an event would dwarf the Asian Crisis of 1997.
The disparity between the North Korean (GDP US$15 billion) and South Korean (US$500 billion) economies is five times what they were in Germany pre-1989, and the South’s exports are 100 times that of the North’s (US$2 billion). Unification would release a flood of refugees from NK, further destabilising all of North East Asia during an already destabilised period.
Of key concern to the ruling Chinese Communist Party (CCP) is the risk of the world viewing the demise of its Stalinist sister-state- particularly the people of China. As the Australian Financial Review pointed out, “China does not want a democratic unified Korea on its doorstep lest it incite ideas of ideological change.” The primary factor in the economic reforms towards a form of capitalism in China is based on a need for improvement in basic living standards to placate the masses. It is a need to reform from above to prevent revolution from below.

China’s Economic interests
With an almost untapped consumer market at around 1.3 billion people, and wages equally as low as nearly anywhere on the planet, it is unsurprising that China is doing so well in the global capitalist economy. Despite the world economic downturn, GDP growth has been steady for two years now around an incredible 8%.
Its economic relationship with the US is major to this success. Yearly, China runs a US$500 billion (A$778 billion) trade surplus (from mostly exports) to the US, while importing at a smaller deficit from smaller regional Asian economies. It runs the world’s largest trade surplus with the US, with foreign funded companies holding now about 50% of China’s booming export sector, controlling 5.1% of world trade.
Soon, China will overtake Japan as the world’s 3rd largest economy.
China is also the largest foreign direct investment recipient in the world. By keeping working class wages low in China, there has been a rise in the Chinese middle classes, with money to spend on consumer goods. This small capital is also providing them with the opportunity to invest even more, and with the cleaning up of bad debts by the major Chinese banks, it has opened the way to new public share offerings - particularly outside China.
The cheap labour and cheap exports also has the effect of deflating the world’s capitalist economies. In the long run this exploited working class will awaken and shake the ‘Communist’ Party to its foundations.
With the US dollar still the world’s strongest currency, China has ‘pegged’ their yuan dollar to the greenback. The exchange has been roughly US$1 to 8.28 yuan since 1994. Linked directly to the low wages, pegging such a quickly growing economic strength has led to the undervaluation of China’s yuan, which creates further imbalances in the global trading system.
But due to its economic victories, especially with the US, China has accumulated a reserve of US$350 billion. This, with continued pegging to the greenback and continued low wages, will hold them in a strong financial position in the world market- especially due to the weaknesses of the yen and the euro due to structural quagmires.
This makes US economic ties all the more pivotal, and we are seeing the consequences of this in the diplomatic hospitality being shown to them by negotiations host China. Leading economists expect to see a Chinese move to a fully liberalised trade system within the decade, and their recent membership of the WTO seems testament to that.
The aim of the CCP is to prevent an East European-style collapse and instead they hope for a slow restoration of capitalism. They look to the old South Korean model: a political dictatorship working hand in glove with capitalist corporations and multi-nationals.
Beijing’s interests in the crisis in NK are just that- the interests of the elite CCP: the corrupt gangsters that control China. More than anything else, China’s foreign policy under the new President Hu Jintao is to support their regional security interests, while maintaining their newfound close economic ties with key foreign trading partners.
The interests of all the leaders involved in the crisis, be it NK, SK, Japan, Russia, the US or China, are completely at odds with the interests of the ordinary people of those countries. The task is to strengthen or rebuild workers’ organisations in the region with a genuine socialist and internationalist approach.
For a socialist federation of the region! For workers’ unity, not capitalist/Stalinist conflict and war!