Hung challenges much of the conventional wisdom about China's 'economic miracle' in an important and provocative essay in the current issue of New Left Review.

Far from being a brilliant success, Hung claims, the Chinese miracle has inbuilt flaws, particularly the dependence on the US.

'Despite all the talk of China's capacity to destroy the dollar's reserve currency status and construct a new global financial order, the [mainland] and its neighbours have few choices in the short term other than to sustain American economic dominance by extending more credit,' he argues.

Hung asserts that the rebalancing of the Chinese miracle to promote consumption rather than exports cannot be achieved without a large-scale redistribution of income to the rural-agricultural sector.

'This will not be possible, however, without breaking the coastal urban elite's grip on power,' he said.

He adds a strong nationalist strand to his argument, claiming: 'Unless 2there is a fundamental political realignment that shifts the balance of power from the coastal urban elite to forces that represent rural grassroots interests, China is likely to continue leading other Asian exporters in diligently serving - and being held hostage by - the US.

'The Anglo-Saxon establishment has recently become more respectful towards its Asian partners, inviting China to become a 'stakeholder' in a 'Chi-American' global order, or 'G2'. What they mean is that China should not rock the boat but should continue to maintain American economic dominance (in return, perhaps, for more consideration of Beijing's concerns over Tibet and Taiwan).'

Hung thinks he knows Washington's game plan. He says it is seeking 'to buy precious time to secure its command over emergent sectors of the world economy through debt-financed government investment in green technology and other innovations, and hence remake its ailing supremacy into a green hegemony. This seems to be exactly what the Obama administration is betting on as its long-term response to the global crisis and declining US power'.

He claims the 'East Asian economic miracle' was part of an American plan 'to create subordinate and prosperous bulwarks against communism in the Asia-Pacific region'.

When the Cold War ended, the increasingly prosperous East Asian tigers failed to break out of the orbit of US hegemony but were sucked and suckered into what they thought was a virtuous circle but now turns out to be a vicious one: earning safe US treasuries for their exports and fuelling greater American demand for their consumer goods, with more treasuries to pay for the twin US deficits.

China joined the party later but with immense enthusiasm, such that its export dependence on the US grew faster, further and greater than other East Asian countries.

Hung is dissatisfied by the two usual explanations for China's competitiveness in wage rates.

His figures show that Japanese manufacturing wage rates had already reached 55 per cent of US rates by 1975, that South Korean rates were at 55 per cent by 2000, and Taiwan's wages reached 30 per cent by 2005. But in China's case, wages have fluctuated since 1980 at between 2 per cent and 4 per cent of those in US manufacturing.

Some critics blame an undervalued and manipulated yuan, but Hung says that even if the yuan rose 20 to 30 per cent against the dollar, China would still be supercompetitive. Nor is the full explanation an unlimited supply of labour.

Hung says, 'an unlimited supply of labour is not a natural phenomenon given by China's population structure. Rather, it is a consequence of the government's rural-agricultural policies, which, intentionally or unintentionally, bankrupt the countryside and generate a continuous rural exodus'.

In the light of some sharp arguments and good documentation concerning the unholy alliance between the US and Chinese elites peddling the US treasury drugs, Hung's hope for a China-led new economic order tends to wishful thinking.

He claims: 'If China were to re-orient its developmental model and achieve greater balance between domestic consumption and exports, it could not only free itself from dependence on the collapsing US consumer market and addiction to risky US debt but also benefit manufacturers in other Asian economies that are eager to escape these dangers.

'More importantly, if other emerging economies were to pursue a similar reorientation and South-South trade were to deepen, then they could become one another's consumers, ushering in a new age of autonomous and equitable growth in the global South.'

Changing places

China could lead new world economic order, essay argues

Compared with US manufacturing wages, China's rate ranged up to: 4%