July 27, 2015  to June 9, 2017                                    -1-


An Emerging Chinese Empire and its Threat to Capitalism with Cash and Strings attached.


China’s Economic Empire spearheaded by state capitalism spreads like wildfire around the world by buying insolvent companies, exploiting natural resources, building infrastructure and giving loans all over the world. With unlimited financial resources larger than IMF fund, China plays a dominating force in both the developed and developing world.

For the first 500 years after Ad 1000 world civilization was centered on stage of Asia. China was a leading player in the global stage of civilization by implementing urbanization program and an international trade, and Baghdad, capital of Iraq had the largest population with 1 million in the world. In the House of Wisdom in Iraq, all the books and publications related to the highlights of civilization of Greece, Persia and India were shelved, according to much historical research.

With the discovery of America by Christopher Columbus in 1492, the world civilization began to move into European continent. Renaissance Cultural revolution in Italy rapidly adopted the advanced culture Asian countries cultivated and transformed old culture into a new culture using science and technology imported from Asia. In England industrial revolution took place with a new economic theory “Wealth of Nations” that was published by Adam Smith in 1776. Self Interest through fair competition will make individual rich and by the “Invisible Hand” labor, capital and land were allocated in the most efficient way. Consumers maximize their utility, entrepreneurs maximize their profit and State on a limited role takes care of national security, individual life, and fair competition in the market. Free market doctrine stipulated in the Wealth of Nations insures an efficient allocation of resources, fair distribution of production. United States of America imported most of social customs from England and practiced the market oriented economic theory based upon the capitalism expounded in the Wealth of Nations of Adam Smith.

America became the most powerful nation in the world economically, militarily for 250 years

The capitalistic system in Western countries unexpectedly faced high unemployment rate, housing market collapse, Credit crisis, and economic crisis. Keynesian theories generated multiplier effect in investment and value of asset quadrupled with small amount loan and investment. The economic boom capitalistic society enjoyed began to shrink as result of shortage of effective demand, high unemployment rate, dampened aggregate demand and production scaled down. Lower economic growth rate began to cut down employment, investment, and reduction in investment lowered income and purchasing power, while tax rate going up to maintain budget. Reduced tax revenue caused deficit problems on the every level of


government-local, state and federal. Business suffers from lack of loan to expand project, government expenditure scaled down.

Economic recession in every sector of economy affects consumer’s purchasing power, business investment and government expenditures on education, defense, science projects, welfare and nation’s infra-structure. As the market system itself could not solve those problems, a new alternative system is wanted by the modern government.

Under these economic problems, the center of financial gravity is shifting from the West to an Asian Global super power. China is aggressively asserting its economic clout to win diplomatic allies, invest its vast wealth, promote its currency the renmin-bi as global reserve currency and secure much-needed natural resources from the global market. This is one of ways to spread China’s evolution. Chinese State capitalism is gradually satisfying most capitalistic nations in giving necessary loans and willingly build infrastructure of those countries  which are in badly need. Chinese government now controls oil and gas pipelines from Turkmenistan to China and from South Sudan to the Red Sea. Another pipeline, from the Indian Ocean to the Chinese city of Kunming, running through Myanmar, is scheduled to be completed soon and from Siberia to northern China has already been built. China also undertook huge hydroelectric projects like the Meroe Dam on the Nile in Sudan-the biggest Chinese engineering project in Africa- and Ecuador’s $22 billion Coca Codo Sinclair Dam, with $76 billion loan for oil refinery, and 15 mile underground tunnel to produce electricity to light more than 1/3 Equador. Major Chinese backed projects in Equator are bridge, waterworks, roads, wind power, hydroelectric power, oil drilling and mining. China has become the world’s leading exporter; it also surpassed the United States as the world’s biggest trading nation in 2012. And it became the leading trading partner of countries like Australia, Brazil and Chile as it seeks resources like iron ore, soybeans and copper. By buying mainly natural resources and food, China is ensuring that two of the country’s economic engines- urbanization and the export sector- are securely supplied with the needed resources. In Europe and North America, China increased more than $10 billion in European Union. In United States investment surged to$6.7 billion in 2012. China’s 33% of the total foreign investment of $630 went to Europe. Unlike the capitalistic nations, China made huge government support in export industries through hidden subsidies and cheap financing, and providing needed liquidity. It is reported that China increases foreign investment to $4 trillion, which  are its foreign currency reserve in 2020, according to NYT report on July 26,2015. With this economic power, Chinese state-owned firms enjoy a major advantage over competitors in global market. The unfairness of these situations is clearest in the steel and solar-panel industries, where China has gone from a net importer to the world’s largest producer and exporter in only a few years. It has been able to flood the market with products well below market price- consequently destroy industries and employment in the West and elsewhere. This is the real threat to the United States and other countries. The Chinese state-owned company concurrently manages the main cargo terminal in the biggest Greek port, Piraeus near Athens. In




Germany China is buying strategic assets and major companies like Volvo and Putzmeister. Chinese state-owned company helps Greenland by allowing China National Petroleum Corporation to extract oil, while China Railway builds basic infrastructure.

In Canada, China got an approval for building Keystone Pipeline project that president Obama refused to do to secure an export market for Canadian crude oil reserve. Canadian government also approved  the takeover of the Canadian energy giant Nexen by the Chinese state owned firm Cnooc at the price of $15.1 billion, which is the China’s largest foreign investment.

In Australia, China’s total investment surpassed $50 billion including heavy investment in mining industry.

Faced with economic recession, struggling European companies like Volvo quickly welcomed Chinese partners who has financial power to take over. In total loans to foreign countries China gave out more loans than the World Bank in 2009 and 2010. $40 billion to Venezuela, $8 billion to Turkmenistan, totaling $110 billion, which is made by China Development Bank and Export-Import Bank. It is threatening to know that Chinese oil company acquired big stake in oil operations in the 12 different countries: in Cameron, Canada, Kazakhstan, Kyrgyzstan, Iraq, Nigeria, Seo Tonre, Primipe, Sudan, Uganda, The U.S. and Venezuela. Since 2005, China landed $471 billion in construction contracts with money tied to broad lending agreements. China’s share of foreign investment during 2005-2013 are  as follows; 12% in Venezuela , 57 % in Equador,  70% Sierra Leone , 53% in Niger, 83% in Zimbabwe, 38% in Iraq, 79% in Afghanistan. The total China’s foreign investment in 2013 was $86.3 billion. The seamy side of China’s global investment projects is no guarantee of more production and clearance of wide spread pollution, risk of workers. Without more production the refinery project could be a white elephant to Ecuador. China may be playing with defense and offense in its expansion of imperialism.

As China becomes a global player and a fierce competitor in American European markets, its political system and state capitalist ideology pose a dangerous threat to the political freedom, fair competition, the rule of law, that were the value of the American founding father and the value of Western Economic prosperity.

The state capitalism combined with market supply and demand function may solve the high global unemployment, global shortage of  investment loan, financial crisis, and economic crisis, with which the global economy is struggling to solve.  That market economy cannot solve itself those economic woes draws keen attention from every capitalistic nations in the world. If it does not, Chinese socialism may arise as an alternative to the 250 year old capitalism. It might



pose a very dangerous threat to the democratic value system. Chinese economic Empire, State capitalism may dominate our value, civilization and way of life.  People, who have been accustomed to the capitalistic, democratic way of life, would be better off with the new wave of Chinese evolution ? How true is of what Karl Marx prognosticated that capitalism is digging its own graveyard if it does not generate reproduction?  The economic power of China is well manifested in the economic statics: GDP $ 12 trillion, foreign exchange reserve $4 trillion, population amounts to 1.4 billion. Lower Debt to GDP ration as 212 % vs 310% of Japan, 243 % of France, 196% of UK. 46% of the world total luxury goods are purchased by Chinese. Total number of auto purchases  per year amounts to 38 million cars, while US purchased 17 million cars. In terms of size of land China is 96 times larger than South Korea, reportedly population is  28 times larger than Korean population.

Is it a turning point in our civilization for the next 500 years, going back to 1,000 years ago when China was a dragon?


Dr.Hubert Hojae Lee

President, Korean American Foundation USA (www.kafusanj.com)

Chairman, Benjamin Hubert International Group

1st Vice president of KWVA Chapter 202

Director, the Global Mugunghwa Forum, North America