From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Wed Jun 14 2006 - 10:34:16 EDT
Have people seen the astonishing rate at which constant capital
is accumulating in China. Provisional figures for the first ¼ of the year
indicate that about 50% of gdp is going in fixed capital formation.
Figures for capital stock are not given in the China Statistical Yearbook,
but they can be infered from published data on investment. \cite{li:2003}
has
estimated time series for the relative growth of capital stock and the
labour force
in China up to 1998
Year Capital Per Worker
in 1978 Yuan
1958 1350
1978 3537
1998 12537
It can be seen that the trend rate of growth of capital stock was higher
than that for the labour supply (Li's data gives what Marx called the 'mass
of capital' employed per worker
since it measures capital in constant 1978 prices. This rise in the mass
of capital need not imply a rise in the organic composition of capital,
since the amount of capital invested as wages may have gone up
comparably).
Since 1998 the rate of capital formation has accelerated. In 1998 37% of GDP
was going
as capital investment, by 2004 that had fisen to 44\%.
In the first four months of 2006, investment was 1800 Billion Yuan against a
total
value of industrial output of 2461 Billion Yuan for the same period. Thus
investment
comprised an extraordinary 73% of industrial output.
The rate of growth of industrial out put was 17\%. This is a remarkable rate
of growth
of output by any measure, but a declining return on capital is evident.
In 2004 capital formation was had grown by a factor of 10.1 over 15 years,
national income
had grown by a factor of 8.2. Higher rates of investment were not brining
proportionate
growth in the value of output. By 2006, to maintain that annual growth rate
of 17% in output,
capital investment was having to grow at an annual rate of 30%.
China's rate of capital formation can not go much higher.
China's rapid growth incidentally verifies Kalecki's thesis that
investment is self financing. As the rate of investment has risen
so too have the profits necessary to fund it. The role of foreign capital
and of state appropriations as sources of funds has shrunk.
As the Chinese economy exhausts its supplies of peasant labour, the
widespread but relatively isolated labour militancy of today can be
expected to coalese into a powerful trades union movement. Real wages
have been rising fast already, and this will continue. The very rapid
high share of profits being accumulated will depress the proportional
rate of return on capital. The profitability margin attracting capital
from Europe to China will then become less marked. Faced with declining
rates of return at home Chinese firms will look abroad for investment
opportunities in the comming decade. The Chinese purchase of IBMs PC
division, and of the remains of the UK car industry are early harbingers.
China's trade surpluses mean that it is already in a position to be
a substantial capital exporter.
The process that occured with Britain in the 1880s or Japan from the 1980s
onwards as
these countries labour reserves were used up, shows us what to expect.
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