Contents "The internationalist proletarian" n.12
THE COMPETITIVE STRUGGLE IS DEVELOPING IN ALL DIRECTIONS
For convenience of exposition, in the following review, we will start with the trade war over energy sources and follow its development in a number of other fields.
Displacement of energy sources
The representatives of the first 20 world capitalist powers (G-20) "(...), meeting this weekend in New Delhi (India), have agreed to triple the capacity of renewable energies by the year 2030 (...) The agreement, however, does not include any reference to the gradual elimination of oil and gas following pressure from the producing countries and those most dependent on these energies." (Expansión, 11-9-2023).
As we explained in “Energy sources and capitalism” published in “The Internalist Proletarian” No.10 (page 12), the existence of the capitalist mercantile regime imposes that the displacement of fossil fuels takes place through an intense commercial war and, indeed, a real commercial battle is taking place on several sides: on the one hand, between the countries producing the old energy sources and their current consumers and, on the other hand, between the countries that seek to acquire the new energy sources and compete with each other.
The OPEC+ cuts
OPEC+ has agreed to maintain until the end of 2024 the cuts announced in April to put upward pressure on oil prices: "Saudi Arabia will maintain its voluntary reduction of one million barrels of oil per day until the end of December (...). Thus, its total production during the coming months will be around 9 million barrels per day (...). Russia, for its part, (...) will also extend until the end of the year the haircut of 300,000 barrels per day in its supply to world markets." (Expansión, 6-9-2023).
It must be said that, so far, the cuts have not been carried out in a homogeneous way: “According to data from OPEC's monthly bulletin, published yesterday, the cartel adjusted its pumping by 431,000 barrels of crude per day in May with respect to the previous month (a figure well below the agreed million) and raised it by 90,000 barrels in June, which means that the adjustment has remained at 341,000 barrels, barely a third of what was agreed. Saudi Arabia and the Persian Gulf countries have kept their part of the bargain, but not Iran, Iraq, African countries or Venezuela, which have raised their exports in recent months." (Expansión, 14-7-2023).
Despite internal contradictions within OPEC+, supply has been reduced at the same time that demand has increased due to the end of restrictions in China.
G-7 cap exceeded?
This situation has led to an increase in the price of oil above $90 per barrel and has allowed Russian oil to be sold above the ceiling imposed by the G-7: “Since February, there have been two caps on the sale of Russian refined fuels, one for higher value products at $100 a barrel and another for lower ones at $45. Argus Media Ltd., whose prices are central to the caps, says naphtha and fuel oil are trading above the lower cap, while diesel is trading above the higher one.
Of the products that are yet to breach the cap at Russia’s western ports, gasoil and gasoline are both approaching that ceiling. (…) Last month, Russia’s flagship Urals crude breached the price cap for the first time, offering a victory of sorts for Moscow which assembled a shadow fleet of ships big enough to transport its supplies to buyers while circumventing G-7 services” (Bloomberg, 2-8-2023). Again and again, we see that it is not the will of certain powers that imposes itself on the productive forces, but that it is the thrust of the productive forces that imposes itself on these wills.
US and Iran
For its part, the US is not in a position to compensate for the cutback with its own resources: “US oil production is 900,000 barrels below 2020 figures, with half as many wells operating as three years ago.” (Expansión, 16-8-2023).
This pushes the US to try to ease its relationship with Iran: “The US cleared the way for $6 billion in oil proceeds to be returned to Iran and agreed to release five Iranians as part of a secretly negotiated deal that will clear the way for five American citizens detained in Iran to return home. (…) US officials have privately acknowledged they’ve already begun to relax enforcement of sanctions on oil sales, allowing Tehran to boost production. Iran, which has some of the world’s largest oil and gas reserves, has been shipping the most crude to China in a decade in recent months.” (Bloomberg, 11-9-2023).
China, oil producer
China is not only buying massive (and discounted) oil from Middle Eastern countries, it is also expanding offshore oil production: “(…) from being a voracious oil consumer, it is becoming a major crude oil producer, thanks to the multi-billion dollar investments being made by its state-owned giants: CNPC, Sinopec and Cnooc. (...) the latest OPEC Monthly Oil Market Report shows that China has been producing an average of 4.56 million barrels of oil per day (bpd) in 2023.” (Banca y Negocios, 11-7-2023).
Liquified Natural Gas
If the U.S. maintains a level of oil underproduction, this is not the case with LNG: “It already has seven large liquefaction plants, which export 13,000 million cubic feet per day. This year it will overtake Australia and Qatar to become the world's largest supplier. (...) Every year 1,830 ships with LNG pass through this channel, according to port authority figures. (...) Sabine Pass, which connects Sabine Lake with the Gulf of Mexico, is home to the largest LNG production plant in the United States and the second largest in the world. A behemoth of four pipelines and six liquefaction trains, each the size of a small airport terminal, producing a total of 30 million cubic tons of gas per year.” (El País, 3-7-2023).
Gas and European imperialism
With the increase in LNG supply and the redirection of energy flows, European imperialism has succeeded in obtaining low-cost gas supplies.: “The European Union's gas storage is already at 90% of its capacity, with several countries already close to 100% of the total, almost two and a half months before the legal deadline of November 1st (...) last year, since at this time the gas in storage was still at 76% of its maximum capacity (...) the European Union has been supplied with gas this season at a substantially lower price (up to 75% lower) than last summer, partly because of the less pressing need, partly because joint purchases have prevented some countries from competing with others for supply. (...) substantial supplies have also been achieved on this occasion in the eastern countries, including Ukraine.” (Expansión, 23-8-2023).
Business comparison (lithium vs. oil)
“Oil and gas major companies are stepping up their efforts to enter the lithium sector and diversify beyond fossil fuels.” (Expansión 02-07-2023) but the business prospects in the switch of extractive matter on which to base their social parasitism through ground rent is not comparable.: “even with optimistic growth and price assumptions, lithium could grow to $150 billion per year by 2030, compared to the current $2.6 trillion oil market, according to Financial Times estimates.” (Expansión 2-7-2023).
On the other hand, there is a general tendency for oil companies not to make major investments in existing facilities and for large companies to build energy self-supply plants.
Competition for investments in non-fossil energy sources
In the war between the capitalist powers trying to gain material independence from fossil fuels we have: the US Inflation Reduction Act, the EU Green Deal, the fourteenth Chinese five-year plan, the Japan Green Growth Strategy or the India Convervation Act, a planned investment deal of "more than one trillion euros on a global scale" (La Vanguardia, 10-9-2023).
The deployment of these plans, as can be seen, is not homogeneous, with Chinese capitalism having a clear lead: “55% of the world's installed renewable capacity in 2023 will come from China. Half of the world's electric cars are on the road in China. In addition, Beijing accounts for 60% of manufacturing technology in zero-emission sectors, creates millions of jobs and controls almost the entire battery supply value chain, with 74% of all lithium battery manufacturing” (La Vanguardia, 9-10-2023).
Chinese solar panels
One of the areas in which the predominance of Chinese capitalism is indisputable is the production of wafers for solar panels: “Chinese factories produce 75% of the world's panel wafers. The EU imported 84% of its installed solar modules between 2017 and 2021. The United States 77% and India 75%.” (La Vanguardia, 10-9-2023).
However, the most interesting phenomenon is the latent overproduction and falling prices resulting from excess production and production capacity: “Falling solar material prices have driven down costs along the supply chain in recent weeks, with silicon wafers seeing the largest discount. Top player Longi Green Energy Technology Co. lowered its wafer prices by as much as 27% last week, while peer TCL Zhonghuan Renewable Energy Technology Co. cut its quote by as much as 25%. (…) The “circuit breaker-style” price plunge is fundamentally due to the falling cost of key material polysilicon, according to a statement by China Silicon Industry Association. Solar wafer manufacturers have lowered operating rates because of weaker prices and excessive supply, with some at 60% to 70% of full capacity, it said.” (Bloomberg, 28-12-2022).
On the basis of this devaluation, China is not only flooding the solar panel market, it is flooding it with low-cost solar panels. The excess production capacity at the epicenter of the volcano results in overcrowding in the capillaries of the distribution network.
“Norwegian Crystals, producer of the ingots used in solar cells, had already filed for bankruptcy last month - the brief added - while Norsun, a solar company of equally Norwegian nationality, had announced this month the suspension of its production until the end of the year (...) European spending on solar energy components has risen from €6 billion in 2016 to more than €25 billion last year, bringing with it a superabundance of Chinese solar panels that are currently languishing in European warehouses.” (Expansión, 13-9-2023).
This is another example of something we have observed on previous occasions, which is that the expenditure or investment made by a capitalist power does not necessarily have repercussions for its own companies: the investment made in solar panels in the EU has basically benefited Chinese companies.
The volcano also spits out electric cars...
“China will overtake Japan as the world's largest car exporter this year. China, the world's largest car market, has built up an electric vehicle industry over the past 15 years that has cornered much of the world's battery supply chains (...), with increasingly fierce competition at home.” (Expansión, 5-9-2023).
The exacerbated competition in the interior is due to “The mismatch between Chinese factory production and local demand (...) The result has been a "massive overcapacity" in the number of vehicles produced in factories across the country, according to (...) Chrysler's former head in China (...). "We have a surplus of 25 million units that are not being used," he explains.” (Expansión, 14-9-2023).
This productive overcapacity that SATURATES the local market is the basis for the FLOODING of the world market. Examples: on the one hand, "about one fifth of all EVs sold in Europe are manufactured in China (...)" (Expansión, 14-9-2023), on the other hand: “Ford Motor Co. Executive Chairman Bill Ford Jr. said the US is “not quite yet ready” to compete with China in the production of electric vehicles.” (Bloomberg, 18-6-2023).
And it is not a mere flood of excess goods either, but goods that are already highly competitive in terms of price and will become even more so because of their overproduction: "the Chinese EV industry was three to five years ahead of foreign automakers in terms of technology and scale, and up to 10 years ahead in terms of cost advantage." (Expansión, 14-9-2023).
The European bourgeoisie is studying the possibility of sheltering behind a tariff wall, as the American one has, but we are witnessing the same phenomenon (in the opposite direction, but equally unstoppable) already reflected in the Manifesto of the Communist Party: “The cheap prices of commodities are the heavy artillery with which it batters down all Chinese walls, with which it forces the barbarians’ intensely obstinate hatred of foreigners to capitulate”.
The war for semiconductors
Global demand for semiconductors continues to cool, compared to the over-demand generated by the cyclical shortage following the production slowdown in 2020. This is reflected in the drop in South Korean exports affected by both price cuts and unit volumes.
Relations between South Korea and China have gone back and forth, with statements of "de-risking" the former's economy in relation to the latter, followed by immediate statements by the South Korean foreign minister talking about resuming dialogue. The economic interdependence is too strong.
For its part, European imperialism, especially lagging behind in this field, "(...) yesterday definitively approved the European Chip Law, with which the European Union seeks to double its semiconductor production to cover 20% of world manufacturing (...), the law will have 3.3 billion euros from the European budget." (Expansión, 12-7-2023). Although wishes are one thing and what the material reality allows will be another, they have managed to attract TSMC to "invest 10,000 million euros in a semiconductor megafactory in Dresden, in eastern Germany, the Asian group's first one in Europe." (Expansión, 9-8-2023).
Meanwhile, the US continues in its attempts to limit Chinese development in semiconductors, announcing new investment bans in China's strategic sectors. The first reaction has been a massive purchase: "Baidu, ByteDance, Tencent and Alibaba have placed $1 billion orders to buy about 100,000 A800 processors from the US chipmaker, which should be delivered this year, according to several people familiar with the matter. Chinese groups have also bought other graphic processing units (GPUs) valued at $4 billion." (Expansión, 11-8-2023).
But the inevitable result of these sanctions is precisely the development of the technological capabilities that they are intended to limit: ”Huawei (…) moved into chip production last year and is receiving an estimated $30 billion in state funding from the government and its home town of Shenzhen, according to the Washington-based Semiconductor Industry Association. It’s acquired at least two existing plants and is building at least three others, (...) The leading association of global chip companies is warning that Huawei Technologies Co. is building a collection of secret semiconductor-fabrication facilities across China, a shadow manufacturing network that would let the blacklisted company skirt US sanctions and further the nation’s technology ambitions (...) Chinese companies are largely allowed to buy older-generation chipmaking equipment, machines that use 28-nanometer technology or above. But blacklisted companies like Huawei are prohibited from such purchases without a license and those exceptions are rare. (...) The SIA estimates there are at least 23 fabrication facilities in the works in the country with planned investments of more than $100 billion by 2030, according to the presentation. By 2029 or 2030, China is on track to have more than half the industry’s global capacity in oldergeneration semiconductors, those made with 28-nm or 45-nm technology, the group said." (Bloomberg, 23-08-2023).
And that's not all, ten Republican congressmen were tearing their hair out in despair in a letter “(…) after Huawei launched a new phone using highly advanced technology the US has been trying to keep out of China’s hands. The phone, which uses a made-in-China 7-nanometer chip that appears to rely on US technology (…). Huawei and SMIC, the Chinese company that produced the chip, are both already subject to partial US sanctions.” (Bloomberg, 14-09-2023).
This has led representatives of the affected industrial sector within the US to continue to oppose sanctions against China:
“The chief executive officers of Intel Corp., Qualcomm Inc. and Nvidia Corp. are planning to lobby against extending restrictions on the sale to China of certain chips and the equipment to manufacture the semiconductors (...) The companies have argued that being cut off from their largest market will harm their ability to spend on advancing their technology and ultimately undermine US leadership.” (Bloomberg, 14-07-2023).
So important is investment in China for U.S. technology companies that memory chip maker Micron Technology Inc, despite being partially vetoed by the Chinese government in May, announced in June a $602 million investment in its chip packaging plant in China.
The US tariff war with China
The current ruling faction of the US bourgeoisie has made a diplomatic bid to regain positions, the most recent staging of which is its return to UNESCO, trying to rectify the policy carried out in the opposite direction by the previous ruling faction.
However, in terms of economic policy, and more specifically on the issue of tariffs, it has maintained the continuity with the previous ruling faction, a fact recognized by the architect of the tariffs on the Republican side: “Biden “essentially adopted the Trump trade policy”.” (Bloomberg, 26-06-2023). This is because this action is imposed by the relative strength (or rather weakness) of US industry in comparison with the degree of development of the productive forces in Asia.
And yet the US cannot carry out this policy of containment against the AVALANCHE of commodities coming from the VOLCANO OF PRODUCTION, without falling into multiple internal contradictions, without greatly damaging its own enterprises, in a completely interdependent capitalist world in which the "WORLD MARKET" of which the Manifesto of the Communist Party spoke has developed to become inappealably world-wide.
The visits of political representatives of the US bourgeoisie to China follow one after the other: the Secretary of State (Blinken) in June, the Secretary of the Treasury (Yellen) in July, the former Secretary of State (Kerry) also in July, the Secretary of Commerce (Raimondo) in August... Precisely to prepare for this last visit, the US lifted the sanctions on 27 Chinese companies.
Also H. Kissinger (sent in the seventies to reach agreements between the US and China) has been received by the Chinese President, as de facto representative of the sector of the US bourgeoisie which does not want to confront China in a war in which they have all the numbers to be the losing side.
The response of Chinese imperialism
The main response of Chinese imperialism has been to continue to gain ground on the basis of the low cost of its commodities and to try to develop the technologies to which it saw limited access.
But increasingly it is beginning to feint to respond by blocking the sale of certain products or access to certain raw materials. We have already seen the veto of certain Micron chips, it had previously sanctioned some U.S. weapon companies and more recently: "China announced that as of August 1st, neither gallium metal or germanium - materials that are essential for the manufacture of semiconductors - nor more than a dozen of their derivatives can be exported without specific permission from the authorities to 'protect national security’.” (Expansión, 10-7-2023).
The contradictions of the EU with respect to China
EU imperialism has for some time now taken note that it cannot develop alongside Chinese imperialism without clashing with it, and from "strategic partner" in 2019 it was qualified in 2021 as "systemic rival".
The EU is trying to compete with China in Latin America: "the European Global Gateway program, focused on digitalization and energy, will allocate until 2027 more than 45 billion euros in investments in Latin America and the Caribbean (...) a compendium of more than 130 projects." (Expansión, 18-7-2023).
But the EU is not a granitic bloc and its different members have different degrees of relationship or dependence with China. Nor do the European bourgeoisies see clearly that embracing the U.S. will get them anywhere.
Shortly after the visit to China (see "The Internationalist Proletarian" No. 11, page 23), the French president declared: "The trap for Europe would be to be caught in the imbalances of the world and in crises which are not ours (...) If there is an acceleration of the inflammation of the duopoly, we will have neither the time nor the means to finance our strategic autonomy and we will become vassals, when we can be a third pole if we have a few years to build it (...) We do not want to enter into a logic of bloc to bloc." (El País, 12-04-2023).
For its part, the German bourgeoisie is in the following situation: "China is already Germany's first commercial partner (...) BMW opened an extension of its factory in Shenyang, in the northeast of the country, at the beginning of the year; Audi is building a plant for electric vehicles in China; the chemical company BASF inaugurated in September the first phase of its new factory in that country". (La Vanguardia, 25-10-2022).
"The chief executive of Mercedes-Benz (...) told the German daily Bild am Sonntag a month ago that cutting ties with China 'would be unthinkable for almost the entire German industry'. And that 'the major players in the world economy (Europe, the United States and China) are so closely intertwined that it makes no sense to withdraw from China'." (La Vanguardia, 14-5-2023).
The point is that the trade balance between China and the EU is increasingly unbalanced: "In 2022, EU exports of goods to China barely changed, standing at €230 billion, while imports rose to €626 billion, more than 20% of the bloc's total." (Expansión, 8-8-2023).
Germany had authorized Cosco's entry into the port of Hamburg, but eventually blocked it: “Chinese companies already have stakes in ports of at least 10 member states, which potentially provides Beijing with access to sensitive information on the flow of European goods.” (Bloomberg, 19-06-2023).
A similar contradiction is experienced by the European bourgeoisie in the field of new generation communication systems. Despite the fact that several European governments have banned Huawei's access to their networks, within the EU framework it has been equally materializing: "Huawei's participation in multiple sensitive projects, ranging from artificial intelligence to 6G and cloud computing, (...) Huawei has participated in 11 projects in the framework of the emblematic Horizon Europe research and innovation program, receiving up to 14% of the funding for a total of 3.89 million euros. Huawei has stated that it has participated in more than 30 programs under the EU's emblematic R&D framework since 2007.” (Expansión, 15-6-2023).
Developments in the aeronautical sector
The Paris Air Show was held at the end of June: "At the meeting, business deals worth some 150 billion euros were signed, a figure that serves to secure the future of the industry and highlights its expansionary phase." (Expansión, 1-7-2023).
The US bourgeoisie quantifies the business forecast in the aeronautical sector as follows: "Boeing said yesterday that the expected demand for commercial airplanes in the world for the next 20 years will amount to 42,600 units. This will imply sales of eight trillion dollars (7.3 trillion euros) and a turnover for commercial services of 3.5 trillion euros." (Expansión, 20-6-2023).
The question is who will take the lion's share of this business, considering that the increase in air traffic will not be homogeneous on a global scale: "Chinese air traffic is expected to grow by more than 5% per year, 50% faster than the world average. Chinese airlines will account for more than 20% of total global demand, according to Airbus estimates." (Expansión, 31-5-2023).
Let's take a look at the following data. At the immediate level, in the last major contract auction: "Airbus (...) signed contracts for more than 800 aircraft with different airlines. The order for 500 A320 family aircraft with the Indian low cost carrier IndiGo (...) stood out above all, as did the macro order for 250 units of different models with Air India" (Expansión, 1-7-2023) and Boeing, for its part, signed 360 contracts, most of which were with "Air India, which, as with Airbus, will acquire 250 single-aisle aircrafts from Boeing." (Expansión, 1-7-2023).
Until now, the third largest operating manufacturer was Brazil's Embraer, which, although far behind the big two, had "a world share of 29% in passenger aircraft of less than 150 seats with its range of E-Jets. Embraer is also a major player in business jets, present in the small and medium ranges, and has an interesting activity in defense. And finally, it is developing an electric aircraft for urban transportation." (Expansión, 12-9-2023).
But it is precisely Chinese capitalism that has managed to produce its first commercial aircraft of its own manufacture, with the consequent impact this will have on the evolution of orders: "(...) first commercial flight of the domestically produced C919 airliner. It bodes well for future sales of the aircraft. Beijing expects it to challenge the duopoly of Airbus and Boeing. The state-owned Commercial Aviation Corp of China has taken 15 years to bring this 164-seat aircraft into service (...) No Chinese airline has bought a Boeing commercial airliner in six years (...) Chinese airlines have placed record orders for Airbus aircraft. Now, instead, they will order more and more CACC aircraft. State-backed China Eastern Airlines has a number of C919 deliveries scheduled for this year. CACC accumulates orders from local customers exceeding 1,200 aircraft." (Expansión, 31-5-2023).
As we have seen at the beginning, Indian capitalism's eagerness to buy aircraft is the driving force behind the more than 800 and 360 Airbus and Boeing orders respectively. The Chinese market alone accumulates 1,200 orders, the same order of magnitude, with a greater prospect of increase. And that's not counting the fact that Airbus' own aircraft are starting to be built in China: “Airbus SE is preparing to ship a jetliner built in China (…) for the first time.” (Bloomberg, 13-06-2023).
There is also an expansion of Chinese airlines on all connections from Europe to Asia. The reason? "Community airlines cannot fly over the Eurasian country, a limitation that Chinese airlines do not suffer. A hypothetical Iberia scheduled flight between Madrid and Shanghai would take two hours longer than the same connection of a Chinese rival, which would be much more competitive as it would have to use less fuel and less staffing requirements." (Expansión, 22-6-2023).
It is significant that one result of the "isolation" of Russia by European capitalism is to isolate the isolators. European airlines are cut off from one of the most important connections because they cannot fly over Russian airspace. Once again: “Only rarely does what has been desired happen... all the clashes of the innumerable individual wills and actions lead to a state of affairs which is absolutely analogous to that prevailing in the unconscious nature. The objectives of the actions are desired, but the results produced by these actions are not the desired ones, or, as soon as they seem to correspond to the desired objective, they actually have consequences different than those desired...” (F. Engels, quoted at “The individual as a puppet in history”, 1953).