It’s helpful to think of it this way: most Chinese people see the Government (国家 lit. Country) including the head of state as the mediator between Capital (资本) and the People (人民). On the one hand, the Government relies on Capital as the driving force behind China’s tremendous economic growth, which then allows them to alleviate poverty and improve living standards; on the other hand, the People’s welfare has to be taken care of but is often dependent on the economy. The Government walks a fine line balancing the needs of both parties, and unfortunately for far too long in the past few decades, exploitation and corruption have been rampant. Many local officials establish their own fiefdoms and collaborate with capitalists to squeeze on the people. Things are changing, slowly, though.

I have written elsewhere that one of the main reasons behind this is that China, ironically, has been the best student of Chicago school neoclassical economics. I have another effort post on China’s monetary system that I haven’t finished writing yet, but the upshot here is that China still hasn’t fully assumed control of its monetary sovereignty and continues to create money based on the accumulation of foreign reserves (the yuan itself is soft-pegged to the dollar) and more recently, after the twin surplus era ended in 2014, re-financing through issuing various government debt instruments.

In other words, to create more yuan for the private sector, China needs to sell more stuff to foreigners to accumulate their foreign reserves, or to attract more foreign investments, or through issuance of various short, medium and long term government bonds to the private sector and collateralize their existing assets. It is not creating new money directly through central bank money creation (simply print new money).

To actually raise the wages of the citizens, China can simply create new money and inject it into the economy. This will, of course, end China’s export competitiveness as its labor cost becomes more expensive. The increased wages will instead strengthen its consumer base, allowing more spending to import from other countries. In turn, China will export its productive capacity to the rest of the Global South while it focuses on building high tech sector, delivering free healthcare, education, social welfare, public utilities to raise the living standards of its people (none of which is currently free, by the way).

But China isn’t ready to do that because it is still the most faithful believer in the neoliberal dogma. You have to balance the budget, deficit cannot go over 3%, foreign investment is good to get you out of the middle income trap etc. In other words, market socialism is about not violating the sanctity of the market principles.

And nobody - absolutely nobody, especially the “nothing is wrong with China’s economy” gang - has been able to convincingly argue on why China has to keep exporting cheap goods and services to Western countries in order to finance its own internal development. This argument may be convincing 20 years ago, but China already has the world’s largest productive capacity and more than adequate to provide for itself - yes the transition of a heavily export-oriented economic structure is not going to be easy, but please don’t tell me it cannot be done. It’s simply absurd to think that the world’s most industrialized country building hundreds of high speed rail lines have to keep depressing its wages to keep Western finance capital happy.