this post was submitted on 06 Jul 2025
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I don't think this is correct either. China does engage in the M-C-M' cycle and thus there is surplus value being extracted in China, by private capitalists and by the state too. The main reason why China is different than the rest of the world is that private capitalists hold no political power. Unfortunately, China does not exist in a vacuum and still has to accumulate foreign USD reserves to achieve political goals outside China, like the belt and road policy.
There is surplus value extracted in some cases, there is break-even in some cases, and there are losses in some cases. But the state can run at a deficit indefinitely, because you can’t run out of the currency that you’re the issuer of. Any renminbi that the Chinese state receives basically ceases to exist. Taxes & fees payed to the currency issuer pay for nothing. Any money the state spends is basically created on the spot. Taxes and fees serve several purposes, but none of them are to fund the state.
Somewhat similarly, when private banks[^1] make loans, they create the money out of thin air. Every time a loan payment is made, the principal ceases to exist, and the bank pockets the interest. Once the loan is paid off, all the money that had been created has been destroyed.
Foreign currency is a different matter, since China can’t will them into existence.
[^1]: Specifically, private banks that the sovereign state has authorized to do this.
I found a YouTube link in your comment. Here are links to the same video on alternative frontends that protect your privacy: