[OPE-L] Accumulation in China

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  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}

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






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

value of industrial output of 2461 Billion Yuan for the same period. Thus

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

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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