Russia and China: Neither Capitalist nor Great Powers? (Part 2)



Capital Export – Myth and Reality




Imperialism is a stage of capitalism in which the export of capital, rather than that of commodities, becomes determinant.” This is a key statement in the argument of the PO/CRFI which the comrades distort as a feature of the world imperialist system into a caricatural criteria to characterize individual countries. But let us first continue with the quote:


Imperialist countries such as Germany, France and the Netherlands, plus the European Union as a whole and Japan are net capital exporters in terms of the foreign direct investment stock. On the other hand, Russia and China are net capital importers in terms of the foreign direct investment stock. Whereas the stock of the foreign direct investment of China is equal to 24 per cent of its GDP, its export of capital reaches only 12 per cent of its GDP. This percentage, for Russia, is respectively 30 per cent and 26 per cent, and this despite it being the unrivalled number one exporter of capital to the former Soviet republics, which demonstrates that it is also a net capital importer. A close scrutiny of both China and Russia shows that the character of their economies is defined not by the export of capital but by the export of commodities.


As he have already stated, the PO/CRFI’s method suffers from its complete lack of the dialectic of the law of uneven and combined development. From the general truth – that in the epoch of imperialism capital export becomes more important than commodity export – the comrades wrongly conclude that powers can be qualified as imperialist only if their capital export is substantially larger than their commodity export. However, this was never the method of Lenin and Trotsky and for good reason.


Japan, for example, was a backward Great Power with significant semi-feudal characteristics. By 1914, its capital export was still marginal with a share of only 0.1% of the global stock of outward foreign direct investment. [1] Nevertheless, Lenin and Trotsky considered it at that time as an imperialist state.


In Germany, certainly also an imperialist power at that time, capital export did not play a larger role than its commodity trade. And in the case of the United States we see a picture where commodity production and trade played a significantly larger role than its capital export.


To a certain degree the U.S. was at the beginning of the 20th century in a similar position like China has been in the past decade. It was a newcomer and its capital export lagged behind the established imperialist powers. Until 1914, US imperialism received more than double as much investment from foreign sources as U.S. nationals invested abroad. In the logic of the PO/CRFI, the U.S. in 1914 would not have qualified as an imperialist power. (See Table 2)




Table 2. Foreign Investment Position of the United States, 1914 (in billions of U.S. dollars) [2]


                                      U.S. investments abroad                                                     Foreign investments in U.S.                              


Total            Government          Private accounts                                   Total      Government          Private obligations


                      lending                  (Portfolio investments and                                 borrowings            (Portfolio investments and


                                                      Direct investments)                                                                              Direct investments)


3.5                 0                              3.5                                                          7.1          0.1                          7.0






Furthermore, the PO/CRFI’s approach ignores the fundamental fact that a significant role of a country in the world’s commodity trade can reflect simply the fact that it is an important homeland of capitalist value production. This, in turn, usually is an indicator of capitalist economic power.


Let us move further. In several cases, the PO/CRFI author uses inaccurate figures. For example, it is not true that China exports significantly less capital than it imports. While this was indeed the case in the early period of capitalist restoration, it is no longer the case. The figures from the annual UNCTAD World Investment Report, the most authoritative source in this field, demonstrate very clearly the rapid catch-up process of China in terms of capital export. In Table 3 we can see that China’s foreign investment has increased so much in the last decade that its outward FDI stock already equals its inward FDI stock today.




Table 3. China’s Foreign Direct Investment (in Million US-Dollars), 2000-2017 [3]


                FDI inward stock                                                                               FDI outward stock


2000                       2010                       2017                                       2000                       2010                       2017


193,348                 587,817                 1,490,933                              27,768                   317,211                 1,482,020






Germany is another example demonstrating the absurd character of the PO/CRFI argument that a country can not be imperialist if its capital export is not more important than its commodity export. It’s share in world merchandise exports is 8.4% (2017) while its share in global FDI outflows as well as stocks is significantly less (5.6% respectively 5.2% in the same year). [4] Following the undialectical PO/CRFI method, we could not characterize Germany as an imperialist Great Power.


It is worth noting that even the oldest imperialist Great Powers contradict the criteria of PO/CRFI. Britain, the world’s oldest imperialist state, not only has a FDI stock of the same size like China. It also imports slightly more capital than it exports! According to the latest UNCTAD figures, Britain’s Inward FDI stock is $1,563,867 Mil. and its Outward FDI stock is $1,531,683. The same proportion between Inward and Outward FDI stock exists for the United States: $7,807,032 respectively $7,799,045. As we see, the whole PO/CRFI theory is based on nonsensical arguments, distortion of the Marxist theory and false figures!




Confusion on China’s Foreign Investments




Let us move to the next attempt of the PO/CRFI author to save their failing theory. “While 40% of Chinese direct capital export concentrates on the mining, oil and energy sectors, only 4% of it goes to manufacturing industry. China is one of the major customers of raw materials and energy and this demand emerges out of export-oriented production within the borders of China, that is, out of the impetus for the export of commodities. The determinant variable in China’s direct investments abroad is the national income of the country into which the Chinese capital is exported. Foreign investments of China target not cheap labor but large markets. Large markets mean more demand for Chinese goods, which demonstrates that the export of Chinese capital is an extension of its export of commodities and that this characteristic of the Chinese economy cannot be defined as an indicator of imperialism.


Again, one confusion follows the other. The author notes that China’s capital export has a focus on the mining, oil and energy sectors and suggests that this would be indicator for China’s non-imperialist character. (By the way, he makes a similar remark concerning Russia.) So what?! Can it be the case the PO/CRFI author is not aware that oil, gas and the whole energy sector is a crucial part of the capitalist world economy?


This is true not only for semi-colonial but also for imperialist countries. According to a recently published study, energy (and hence any price fluctuations of it) affects over 60% of the total production costs in France. [5] Among the top 10 companies on the Fortune Global 500 list of year 2018 six were operating in the energy sector (and two others in the automobile sector which is strongly affected by energy prices). The whole history of world capitalism is marked by the important role of the energy sector (one just has to remember the role of the oil barons in the U.S. history)!


Furthermore, have the PO/CRFI comrades forgotten that Lenin himself named the search for raw materials one of the five key characteristics of imperialism?! He wrote in his key essay on imperialism: We have to begin with as precise and full a definition of imperialism as possible. Imperialism is a specific historical stage of capitalism. Its specific character is threefold: imperialism is monopoly capitalism; parasitic, or decaying capitalism; moribund capitalism. The supplanting of free competition by monopoly is the fundamental economic feature, the quintessence of imperialism. Monopoly manifests itself in five principal forms: (…) (3) seizure of the sources of raw material by the trusts and the financial oligarchy…“ [6]


In short, we can not understand why the PO/CRFI author interprets China’s strong capital export in the energy sector as an indicator to disprove its imperialist character.


Let’s move ahead. The author claims. “Foreign investments of China target not cheap labor but large markets.” Really?! We have shown in past studies that China has become a leading investor in many semi-colonial countries. In 2010 China became the third-largest investor in Latin America behind the US and the Netherlands. [7] According to a study from McKinsey Chinese corporations already play a dominant role in Africa. About 10,000 Chinese corporations (90% of which are private capitalist firms) operate in Africa. They control about 12% of the continent’s total industrial production and about half of Africa’s internationally contracted construction market. In Africa, China is also a leader in “green field investment” (i.e., when a parent company begins a new venture by constructing new facilities outside of its home country); in 2015-16, China invested USD 38.4 billion (24% of total green field investment in Africa). [8] Furthermore, China is a leading foreign investor in many Asian countries.


Certainly, we do not deny that China’s corporations are interested in access to “large markets.” This seems to us a pretty common desire for capitalists – despite the fact that the PO/CRFI leaders want to convince us that capitalism still has not been restored in China! As far as we know, there are also many Western imperialist corporations which are interested in access to “large markets.


In fact, searching for raw materials, for new markets, etc. has always been a feature of imperialist monopolies as Lenin already explained in his book on imperialism.


Anyway, does the PO/CRFI author seriously want to suggest that Chinese capitalists are not exploiting cheap labor force in these countries?! Who is working in all those enterprises? True, some Chinese corporations bring their own labor force but this is hardly the case for the majority of foreign investments!




What is the Character of China’s and Russia’s State-Owned Corporations?




Let’s deal with the next argument of PO/CRFI. The comrades are forced to admit “that finance-capital, characteristic of the age of imperialism, exists in Russia and China.” But they make an important relativization which supposedly undermines the thesis that China and Russia are imperialist states: “However, almost all of those companies are either state-owned corporations or joint-stock companies in which the state is the main share-holder.


Three petroleum and natural gas giants, Gasprom, Lukoil and Rosneft, and two publicly traded national banks, Sberbank and VTB Bank, are the Russian companies which are amongst the world’s biggest 500 companies list. China, on the other hand, enters the list as one of the leading countries, with approximately 20 companies in the top 500 list. Thus, if we add the increasing stock market activity in both China and Russia to the increasing importance of the banks’ capital, we can easily say that finance-capital, characteristic of the age of imperialism, exists in Russia and China. However, almost all of those companies are either state-owned corporations or joint-stock companies in which the state is the main share-holder. The only private Chinese company which made it to the list is the Hong-Kong based Noble Group, which is in fact a British company founded by a big coal trader named Richard Elman. The reason why those companies are among the top 500 in the world is not the developed capitalism of China and Russia, but Russian leadership in natural resources and China’s huge market due to the fact that it has the biggest population in the world


We note in passing that, unfortunately, the comrades don’t recognize the irony implied in this statement: despite admitting the existence of finance capital, the PO/CRFI insists that capitalism still has not been restored in these countries! But unintended self-mockery is certainly not the biggest misfortune of the comrades! In fact, the PO/CRFI’s assertion reveals that it is unaware of Lenin’s thesis of “state monopoly capitalism”. In his theory of imperialism, Lenin stated that advanced capitalism, in the age of its decline, is increasingly characterized by a central role of the state. This results in the increasing role of state (or partly state) corporations, indirect state intervention in the economy, etc.


The question of the state is now acquiring particular importance both in theory and in practical politics. The imperialist war has immensely accelerated and intensified the process of transformation of monopoly capitalism into state-monopoly capitalism.[9]


It is a widespread myth of neoliberalism to claim that state-owned corporations could not operate profitable. As we have demonstrated in past studies, China’s state-owned enterprises underwent massive restructuring, mass lay-offs, abolishing of social benefits so that, as a result, the majority of them make profit since years. And the Western capitalists themselves have to admit this implicitly when they include numerous state or semi-state owned corporations in the annual Global Fortune 500 list.




[1] UNCTAD: World Investment Report 1994, p. 131

[2] Mira Wilkins: The History of Foreign Investment in the United States, 1914–1945, Harvard University Press, Cambridge 2004, p. 64

[3] UNCTAD: World Investment Report 2018, p. 189

[4] See WTO: World Trade Statistical Review 2018, p. 122 respectively UNCTAD: World Investment Report 2018, p. 184 and 188.

[5] Henri Safa: The Impact of Energy on Global Economy, in: International Journal of Energy Economics and Policy, Vol. 7(2017), No. 2, p. 294.

[6] V. I. Lenin: Imperialism and the Split in Socialism (1916); in: CW Vol. 23, pp. 105-106 [Emphases in the original]

[7] Miguel Perez Ludeña: Adapting to the Latin American experience; in: EAST ASIA FORUM QUARTERLY, Vol.4 No.2 April–June 2012, p. 13

[8] Irene Yuan Sun, Kartik Jayaram, Omid Kassiri: Dance of the lions and dragons. How are Africa and China engaging, and how will the partnership evolve? McKinsey & Company, June 2017, p. 10 and pp. 29-30

[9] V. I. Lenin: The State and Revolution. The Marxist Theory of the State and the Tasks of the Proletariat in the Revolution (1917); in: LCW Vol. 25, p.387