In 2007 the conservative English historian Niall Ferguson and co-author Moritz Schularick wrote an article entitled 'Chimerica' and the Global Asset Market Boom, in International Finance, 10:3. A new text by Hung Ho-Fung gives a lot more depth to their analysis.

With a touch of British humor, Ferguson and Schularick described the bi-continental unit constituted by circular capital flows - and one-way deliveries of manufactured goods - between China and America. They correctly identified the global boom as being underwritten by the reinvestment of Chinese manufacturing profits into American treasury bonds, therefore giving the Fed the ability to maintain the artificially low interest rates that provided cheap capital for investment at home and abroad - fueling the US real-estate boom in particular. The article is mainly devoted to an analysis of the circular capital flow, dissipating the commonly held ideas that the trade imbalance is merely caused by the overvaluation of the renminbi or by the supposed high savings of Chinese households. The title had enormous critical and satirical potential, but what the authors ultimately emphasized was the extremely high productivity of Chinese workers per unit of invested capital, without any further details on the political factors underlying that high productivity. The piece suggested that this state of affairs might last a long time, and seemed written as a "buy" recommendation for investors at the height of the boom - a recommendation tempered with considerations tacked on at the end, after early news of the subprime crisis.

Now, in an article published in the New Left Review 60, Nov-Dec 2009, Hung Ho-Fung has written a far more insightful piece entitled America's Head Servant? The PRC’s Dilemma in the Global Crisis. This text is fully geopolitical. It shows how East Asian development happened in a Cold War context shaped by American strategic interests, which included, decisively, the choice to open US markets to east Asian producers, thus stimulating industrial development. An illuminating series of graphs and tables shows the increasingly export-led nature of East Asian development, the centrality of the US market for these exports, and the stagnating (or in China's case, radically declining) share of consumption as a percentage of GDP. Also shown is the way the entire East Asian productive network has come to center, quite recently, on China as the site of assembly of finished products and the direct exporter to the West. Of course, Hung Ho-Fung details the way that Chinese manufacturing profits are plowed back into American Treasuries. But the main point of the article is to show how the extremely low Chinese manufacturing wages represent a consistent and deliberate pattern of exploitation of the country's rural population by the coastal elites. The cycle of continuous industrial development for export to America and Europe and continuous investment of the profit back into America has the effect of keeping wages suppressed, internal consumption and inflation low, and export prices cheap - thus maintaining the subjugation of the rural Chinese that come to work in the coastal cities (for more details on the rural/urban relation, see my text One World One Dream). In other words, "Chimerica" is the creation of both Chinese and US elites, and the crisis does not seem to be changing this in any way. To maintain their own advantage, the coastal classes accept the position of "America's Head Servant," organizing the entire flow of manufactured goods from East Asia to the West. And thus the American, or rather "West Chimerican" working class remains delocalized to the East, while the lingering former working class in the US continues to be pauperized and put massively into prison. Hung Ho-Fung's conclusions are these:

"Unless there 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 ‘ChiAmerican’ global order, or ‘G2’. What they mean is that China should not rock the boat, but should continue to help maintain American economic dominance (in return, perhaps, for more consideration of Beijing’s concerns over Tibet and Taiwan). This would enable Washington 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 American power.

"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 equally eager to escape these dangers. More importantly, if other emerging economies were to pursue a similar re-orientation 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. Until that happens, however, a recentring of global capitalism from West to East and from North to South in the aftermath of the global crisis remains little more than wishful thinking."

Given the current asset boom fueled by a new "carry trade" from the low-interest American dollar to the rest of the world - as described in an important article by Nouriel Roubini - wishful thinking is pretty far out of the picture. In other words: Until the class basis of power in East Asia shifts, the delusions of Chimerica will continue to shape world development in its present disastrous direction.