American Pravda: China vs. America • 1h54m ▶

A Comprehensive Review of the Economic, Technological, and Military Factors

by Ron Unz

The New American Cold War Against China

Over the last year I gradually became familiar with Chas Freeman, one of America’s most distinguished professional diplomats and a longtime expert on China. Despite his illustrious career, he had rarely appeared anywhere in our mainstream media, but once I discovered his interviews on several YouTube channels, I was extremely impressed by the depth of his knowledge and analysis, so I published an article presenting his views.

In one of his public lectures, he suggested that America’s new Cold War against China had many similarities to our previous conflict against the USSR, except that this time we were playing the role of our old vanquished adversary, an analogy I had frequently expressed myself:

In international affairs, as in physics, for every action there is an equal and opposite reaction. Our actions have stimulated China to mirror, meet, and match our military hostility to it. We are now in an arms race with China, and it is far from clear that we are holding our own…

Despite China’s remarkable military buildup, Beijing has so far kept defense spending well below two percent of GDP. Meanwhile, cost control continues to elude the Pentagon. DoD has never passed an audit and is infamous for the waste, fraud, and mismanagement that result from its reliance on cost-plus procurement from the U.S. equivalent of profit-driven state-owned enterprises – military-industrial corporate bureaucracies whose revenues (and profits) come entirely from the government. The U.S. defense budget is out of control in terms of our ability to pay for it.

Four decades ago, the United States bankrupted the Soviet Union by forcing it to devote ever more of its economy to defense while neglecting the welfare of its citizens. Now we Americans are diverting ever more borrowed and taxpayer dollars to our military even as our human and physical infrastructure decays. In some ways, in relation to China, we are now in the position of the USSR in the Cold War. Our fiscal trajectory is injurious to the general welfare of Americans. That, along with our liberties, is, however, what our armed forces are meant to defend.

• Ambassador Chas Freeman on Our Cold War Against China
  Ron Unz • The Unz Review • December 9, 2024 • 7,500 Words

Around that same time, someone else brought to my attention some of the YouTube channels created by Westerners who documented their travels to various foreign lands including China, or those who had actually moved to that country and were living there. I was fascinated to discover the existence of such widespread sources of personal, first-hand information about the reality of life in that enormous country, including both its huge cities and its small rural villages. After spending a couple of days viewing dozens of such videos, I published an article presenting some of my conclusions:

• American Pravda: Propaganda-Hoaxes vs. Chinese Reality
  Ron Unz • The Unz Review • December 16, 2024 • 6,700 Words

A central point of that second article had been that China’s greatest resource was the large number of its highly-intelligent and well-educated citizens. As it happens, one such individual named Hua Bin had recently begun reading our website, and he left

• The Chinese Perspective
  Hua Bin • The Unz Review

In addition, I’m excerpting major portions of his posts and aggregating them for this article, while retaining all his original bolding and without correcting his very minor typos.

Comparing the Chinese and American Economies

Given his business background, it’s hardly surprising that a number of his posts focused on economic matters, and these included his first, debunking the myth of Chinese underconsumption that has become so widespread among hostile Western leaders and the mainstream media outlets that function as their echo chambers. He began by emphasizing that many of the largest expenses for American consumers simply didn’t exist in China:

Very importantly, Chinese consumers spend far less on big ticket service items – rental (China home ownership is over 90% compared with 60% in the US), healthcare (largely free or heavily subsidized), and education (free public education all the way through university and graduate school).

He went on to provide a long list of important comparison points, many of which would probably surprise even well-informed Americans.

It’s not just Chinese consumers spend less to get same, they actually consumer quite a lot given the nominal per capita GDP is less than 20% of US:

• China has the largest global retail goods sales, 20% larger than US, at dollar value without adjusting for purchasing power

• China auto sales was 30 million units in 2023 compared with 15 million in the US

• 13 million residential units were sold in China in 2023 (after 3 years’ negative growth) compared with 4 million sold in the US

• China accounts for 30% global luxury goods sales, even in economic downturn, 2X of US

• China is the largest outbound tourist country with 200 million outbound trips made a year

• China leads the world in sales of mobile phones, LED TV, home electronics, sporting goods and a lot of other consumer goods by a wide margin

• China consumers 1/3 of electricity generated in the world, reaching 8000 terrawatt hours last year compared with 4000 terrawatt hours for the US

• China has surpassed the US in per capita daily calorie and protein intake

• Chinese life expectancy is 78.6 compared with 77.5 in the US, when 18% of US GDP is in the healthcare sector and 7% in China

• Chinese graduates over 5 million STEM college students a year verse 800,000 in the US

• Chinese total household debt is $11 trillion vs $17.8 trillion in the US

• Chinese total household savings is $2 trillion vs. $911 billion in the US

• According to the Federal Reserve, 40% Americans cannot cover with $400 unexpected expense. I don’t know any comparable number for the Chinese

Based on data, I think it’s safe to argue Chinese consumers don’t underspend compared with global average or even over-consumption countries like the US. They certainly have a bigger cushion in the form of savings and much less indebted.

He freely admitted that one difficulty that China currently faced was finding suitable employment for large numbers of its college-educated youths, who are unwilling to work in the factories as so many of their parents had done. Therefore:

…there are 30 million unfilled manufacturing jobs in the country. As a result, China has the world’s highest adoption of robotics – 50% of all robots sold in the world is in China.

Meanwhile, American society has solved this same problem by providing an enormous number of highly-paid service jobs, but it’s unclear whether most of these actually create any net value for our society and our economy:

The US does produce a lot more service industry jobs (80% GDP) vs. China (55%). There is clearly more bankers, lawyers, accountants, consultants, insurance agents, PR specialists, stock brokers, computer programmers, real estate agents, health workers in the US. As a result, the average American consumes a lot more services offered by these professions. China produces more (manufacturing GDP at 32% GDP) than US (10%). Therefore, Chinese consumers buy a lot and the country also exports a lot.

A second myth that Hua addressed in a November post was that of Chinese “overcapacity.” But this actually amounted to a euphemistic Western way of admitting that its own business enterprises could not compete with those of China. Such accusations were often coupled with complaints that many Chinese businesses are state-owned rather than private.

However, as he pointed out, this criticism seemed logically inconsistent. America’s reigning neoliberal dogma had always maintained that government-owned enterprises were inherently inefficient and uncompetitive, so denouncing China for having many such state-owned enterprises that were successfully outcompeting private Western corporations merely demonstrated the bankruptcy of that ideological framework.

Instead, he argued that the ultimate ownership structure of such companies mattered less than whether the marketplace in which they operated was sufficiently competitive, and in many sectors such widespread competition was far more the case in China than in America:

While there is a mix of different types of ownerships (including fully foreign-owned like Tesla) in China, major players in these industries in the US are entirely privately owned.

In all these fields, China is pulling ahead or improving faster than the US for a critical reason – the marketplaces are simply more competitive in China. Ownership simply has no effect on enterprise/industry competitiveness.

In the electric automative sector, the US has one big player Tesla while China has BYD, Cherry, Great Wall, Nio, Xpeng, Li, Huawei, Xiaomi, and dozens more as well as Tesla.

In mobile phones, the US has one single player Apple while China has Huawei, Xiaomi, Honor, Vivo, Oppo, and also Apple and Samsung.

In ecommerce, the US has Amazon (with eBay at a distant No 2 with a fraction of Amazon’s market share) while China has Alibaba, JD, PDD, Douyin/TikTok Shopping and also Amazon and eBay (before they pulled out after losing the competition). Same is true for almost all other critical industries.

The secret of economic success is NOT ownership but rather the presence of competition (i.e. market). Competition leads to intense pressure to innovate, improve quality, and reduce costs. It leads to an expansion of capacity and scale as businesses try to compete and win. It leads to true meritocracy – i.e. may the best player win.

On the other hand, lack of competition leads to monopoly and stagnation as the players underinvest, pursue barriers against competition, and raise margins/prices. You can do an industry by industry analysis for US businesses and find out the level of concentration (thus lack of competition) very easily.

I would argue China is a far more market-oriented economy than the US in most industries. This is the underlying reason for China’s competitiveness and the so-called “overcapacity”. The US attempts to undermine China’s competitiveness will get nowhere because the Chinese do not buy into its self-serving “neoliberal” economic policies.

The severe consequences of such lack of market competition in America was most obviously apparent in the military sector. Thus, despite our gargantuan military spending, we have been completely unable to match Russia’s far smaller economy in producing the munitions being expended in the Ukraine war:

One interesting manifestation of the US problem with its monopolistic private sector is its inability to keep up weapons production to support the Ukraine war. Its military industrial complex is plagued with undercapacity, high cost, and low efficiency despite having the world’s largest military budget (by an enormous margin). The consolidation of the vaulted military-industrial complex into 5 giants has led to a lack of competition and accountability in most parts of the defence acquisition system. It has led to undercapacity and extreme high costs (of course high margins).

Today while these private defence contractors boast the highest revenue and market cap globally, the US cannot even produce sufficient basic ammunitions such as 155′ artillery shells let alone missiles, warships, fighters and other sophisticated weapons at scale. If the US cannot outcompete production against Russia, what is its chance against China, the world’s largest industrial powerhouse? China’s “overcapacity” issue is indeed a nightmare for the US.

A couple of days later, Hua published a post focusing on the GDP comparisons between China and the U.S. made by Western media outlets. These have always heavily favored the latter country, but he suggested that some of them were highly misleading.

First, he argued that the Chinese government had been entirely correct in bursting the country’s huge real estate bubble. By contrast, the American government had allowed its own similar housing bubble to grow unchecked prior to 2008, ultimately resulting in the devastating financial collapse of that year. He also supported the deliberate shift away from consumer tech and the deflation of the stock market bubble, policies that he argued had been beneficial despite their very negative portrayal in Western media:

However, the reality is that bursting the overpriced and over-leveraged real estate bubble is a necessity and arguably long overdue; consumer tech is absorbing too much resources and leading to short-sighted oligarchies and unsustainable wealth disparity; and the stock market is never a reliable indicator of either overall Chinese economic performance or individual business performance anyways. BYD, the EV maker, now trades lower than 5 years ago despite the fact it dethroned Tesla as the global EV leader in early 2024 and its sales have grown severalfold.

He went on to note that the headline GDP figures seized upon by Western media outlets failed to consider numerous crucial elements:

Ignoring the obvious difference in nominal market exchange GDP vs. Purchasing Power Parity GDP which puts the size of Chinese economy a third bigger than the US already, I have focused only on nominal GDP comparison for simplicity.

Here are some interesting factoids I uncovered (everything can be referenced from sources such as Statista, US Bureau of Economic Analysis, China National Bureau of Statistics):

1. Imputations: this refers to “economic output” that is NOT traded in the marketplace but assigned a value in GDP calculation. One example is the imputed rental of owner-occupied housing, which estimate how much rent you would have to pay if your own house was rented to you. This value is included in the reported GDP in the US. Another example is the treatment of employer-provided health insurance, which estimates how much health insurance you would pay yourself if it was not provided by employer. Again, this imputation is included in GDP calculation in the US.

As of 2023, such imputations account for $4 trillion in US GDP (round 14% of total).

In China, imputation to GDP is ZERO because China doesn’t recognize the concept of imputed/implied economic output in its statistics compilation. Too bad your house is not assigned an arbitrary “productive value” once you buy it in China

2. Construction: in the US, construction contributes to 4% GDP (roughly $1.1 trillion) while in China, construction contributes to 7% GDP (roughly $1.2 trillion). However, China pours the same amount of concrete in 3 years as the US did in the last century. China imported $128 billion worth of iron ore in 2022 and US imported $1.15 billion in 2021. China produced 1.34 billion tons of steel in 2022 vs. 97 million tons by the US in the same year. China built 45,000 km high speed rail in the past decade and US built none.

Considering all the ports, highways, bridges, apartment buildings China builds every year vs. the US, the almost identical construction value in GDP seems laughable.

This shows the non-sense of comparing US GDP vs China.

3. Professional services: services such as law, accounting, tax, insurance, marketing, etc. account for 13% US GDP ($3.5 trillion) while it accounts for 3% Chinese GDP ($0.5 trillion). There are 1.33 million lawyers in the US vs. 650,000 in China; 1.65 million accountants and auditors in the US vs. 300,000 in China; 59,000 CFAs in the US vs. 4,000 in China. 20,000 lobbyists are registered in Washington DC alone while China has no such profession. And of course, the pay for these jobs is much better in the US, ergo the higher GDP value. There are definitely more lawsuits, insurance transactions, annual tax auditing, and congressional lobbying happening in the US vs China. But it is unclear how that translates into national power.

4. Manufacturing and services: 38% of Chinese GDP comes from manufacturing and 55% from services. In the US, 11% and 88% respectively. Very literally, China is a much more productive force of “hard goods” while US is a post-industrial economy tilted overwhelmingly as a “soft goods” producer. If the day comes for a hot war between the two countries, China is far better prepared for a hard power confrontation.

As an example of the ridiculous factors behind these misleading Western GDP statistics, he pointed out some of the items that the British had chosen to include in their own GDP:

A side note, I also ran across some less wholesome facts when doing research on the subject. I refer to a Financial Times report just for a laugh. In 2014, UK started to include prostitution and illegal drugs in its GDP reporting to the tune of 10 billion pounds a year. This raised the reported UK GDP by 5% in an effort to help the government raise its debt ceiling.

To derive at this number, the statistics bureau had to make some assumptions: “The ONS breakdown estimates that each of the UK’s estimated 60,879 prostitutes took about 25 clients a week in 2009, at an average rate of £67.16. It also estimates that the UK had 38,000 heroin users, while sales of the drug amounted to £754m with a street price of £37 a gram.”

Thus, Western economists have adopted a bizarre framework in which rising levels of crime contribute to the official economic measure of national prosperity.

I strongly agreed with all of his arguments, and his telling point about how the service sector of an economy can be easily manipulated is one that I have previously emphasized as well. Certainly many service industries are absolutely legitimate, necessary, and valuable in a modern economy. But that sector can also be artificially inflated without limit by including the output of individuals who spend their days trading meme stocks or crypto currencies back-and-forth, or who hire each other as diversity-coaches. So I think it is quite enlightening to exclude services and compare the two economies by focusing entirely upon the productive portion of the GDP.

Moreover, although he conservatively relied upon nominal exchange rates in comparing the two GDPs, most analysts agree that the use of Purchasing Power Parity (PPP) statistics is much more realistic. If we combine these two approaches, the disparity between the real productive GDP of the two countries turns out to be enormous.

Some of the industrial statistics I cited in a December article were eye-opening:

But automobiles are the world’s largest industrial sector, with manufacturing and sales together totaling nearly $10 trillion per year, almost twice that of any other. And the following month the Times published a chart showing the actual trajectory of China’s auto exports compared with that of other countries, and the former had now reached a level roughly six times greater than that of the U.S.

Coal mining is also one of the world’s largest industries, and China’s production is more than five times greater than our own, while Chinese steel production is almost thirteen times larger. The American agricultural sector is one of our main national strengths, but Chinese farmers grow three times as much wheat as we do. According to Pentagon estimates, China’s current ship-building capacity is a staggering 232 times greater than our own.

Obviously America still dominates some other important sectors of production, with our innovative fracking technology allowing us to produce several times as much oil and natural gas as does China. But if we consult the aggregate economic statistics provided by the CIA World Factbook or other international organizations, we find that the total size of China’s real productive economy—perhaps the most reliable measure of global economic power—is already more than three times larger than that of the U.S. and also growing much more rapidly. Indeed, according to that important economic metric, China now easily outweighs the combined total of the entire American-led bloc—the United States, the rest of the Anglosphere, the European Union, and Japan—an astonishing achievement, and something very different from what most casual readers of the Times might assume.

In a more recent post, Hua discussed the assassination of the United Healthcare CEO and the shocking degree of popular support the killing attracted, an extreme example of the widespread outrage produced by some of the corporate business policies permitted by our government.

United Healthcare is in the news these days after its CEO was killed by a gunman in New York. The words Delay, Deny, and Depose were inscribed on the bullet casing.

Clearly the killing was motivated by a grievance against the company and the industry in general.

United Healthcare stands out as a particularly vicious player in one of the most despised industries in the US. It has an industry leading claim denial rate of 32%. It uses AI to process most claims and has an astounding 90% error rate (I wonder what they used to train such an AI system – a database of anti-social psychopath precedents:).

The company has no doubt ruined countless lives and families. One commentator on YouTube pointed out, hilariously, that this is a killing with millions of potential suspects. 77,000 smile and celebration emojis were posted on United Healthcare’s Facebook page announcing the death of its CEO before the page was taken down. And the sentiment expressed about the incident has been overwhelmingly sympathetic to the killer.

He suggested that this is merely a symptom of the disastrous consequences of American neoliberal economic policies run amok:

What does this incident say about the state of healthcare business in the US, the largest industry representing 18% GDP? What does it say about the general state of the shareholder capitalism and corpocracy in the country?

This calls in mind the recent scandal involving Boeing and the quality problems with its aircrafts. Can consumers have faith in businesses that put profit ahead of safety and the welfare of its customers?

The list of such corporate malfeasance is long and varied. Many once household names suffer massive negative public image problem and a collapse of consumer trust.

One fundamental reason behind this zero-sum game played by corporations against their own customers is the drive for profit, all under the philosophy of so called shareholder value maximization.

This goes hand-in-hand with the fundamentalist neoliberal free market dictates advocated by the University of Chicago school of economics led by Milton Friedman since the 1980s.

– Deregulation – instead of government providing oversight on businesses so that they adhere to basic rules of consumer protection and product safety, the government delegates such oversight to the businesses they are supposed to regulate. A case in point is Boeing, who issues its own airworthiness certification on behalf of FAA. Similarly, most healthcare legislations are written by lobbyists working for healthcare insurers and big pharm on the Capitol.

– Privatization – according to the same free-market economic philosophies, governments in the west have pursued aggressive privatization of public services and infrastructure with disastrous results – higher prices, poorer services, job losses. The US government has privatized basic state functions such as prison system and war fighting (e.g. Blackwater mercenaries). The UK government privatized Thames Water, the water utility for greater London, which has led to increased water prices, poorer water quality, lack of maintenance and a variety of other issues for its 13 million customers.

Exasperating the situation, private equity is running rampant buying up low-cost housing, nursing homes, medical practices, etc. The highly leveraged buyouts and takeovers have directly contributed to increasing cost of living and reduced services in affected businesses. These malpractices are well documented in Brendan Ballou’s book Plunder: Private Equity’s Plan to Pillage America.

– Profit obsession – as stock price becomes the sole criteria to evaluate business performance, executives are focused on cost cutting, outsourcing, and financial engineering (loading up debt or share buybacks) to improve the bottom line.

One good example of this profit obsession that will really hurt the country at some point is the military industrial complex in the US. As the defence industry is privately owned in the US, companies are effectively organized as a cartel with 5 top defence contractors taking up 90% market share. There is little motivation to compete on costs as profit is guaranteed in a cost plus procurement system.

These defence companies produce overengineered systems that are extremely expensive and take a long time to produce. The military industrial complex has become, in effect, a money laundering scheme to enrich the companies and the politicians at the expense of taxpayers.

As a result, despite having a military budget bigger than the next 10 countries combined, the US cannot even produce enough ammunition for its proxy war against Russia in Ukraine, barely the high intensity war it needs to fight with China or Russia directly.

This profit obsession has also led to the kind of management practices as with the railway operators. They have reduced the number of workers per train, increased the railcar length and weight, cut back on maintenance and safety measures and implemented so-called precision scheduled railroading (basically maximizing the hours worked by the staff).

The direct result is repeated rail accidents like the derailment in East Palestine, Ohio. The US reports 10,000 railway accidents per year, which makes it the worst performing rail safety country in the world behind India.

– Weak leadership – the profit focus of US shareholder capitalism has directly led to the rise of professional managers with background as bean counters rather than engineers or technologists, who barely understand the products of their own companies.

As the goals of businesses have increasingly become purely financial, financial engineers are becoming CEOs rather than real engineers. This is what happened to once iconic companies like GE, Intel, and Boeing which all have such financially-oriented CEOs preceding their decline. This phenomenon is well documented in David Gelles’ book The Man Who Broke Capitalism – How Jack Welch Gutted the Heartland and Crushed the Soul of Corporate America.

---

Go paid at the $5 a month level, and we will send you both the PDF and e-Pub versions of “Government” - The Biggest Scam in History… Exposed! and a coupon code for 10% off anything in the Government-Scam.com/Store.

Go paid at the $50 a year level, and we will send you a free paperback edition of Etienne’s book “Government” - The Biggest Scam in History… Exposed! OR a 64GB Liberator flash drive if you live in the US. If you are international, we will give you a $10 credit towards shipping if you agree to pay the remainder.

Support us at the $250 Founding Member Level and get a signed high-resolution hardcover of “Government” + Liberator flash drive + Larken Rose’s The Most Dangerous Superstition + Art of Liberty Foundation Stickers delivered anywhere in the world. Our only option for signed copies besides catching Etienne @ an event.