The transformation of China

Pioneer, Hong Kong

Since the later half of the l990’s, despite the political and economic situation of China has been conspicuously different from that of the USSR and Eastern Europe, capitalist restoration has also occurred in China as the case in the latter countries.


The CCP, having overthrown the KMT regime and founded the PRC, had, since the middle of the l950’s, always claimed the Chinese state a socialist state or a state of proletarian dictatorship. However, not only that socialism was far from being materialized, the Chinese working class itself had never once held power. The Chinese working masses had never even enjoyed the political liberty enjoyed by workers in capitalist democratic countries. Revolutionary Marxists (Trotskyists) recognized the then China as a bureaucratically deformed workers’ state, just on the ground that the CCP bureaucratic regime have liquidated the landlord class and the bourgeoisie, and established a system of state-owned property and planned economy which is essential to the dictatorship of the proletariat, and that in this sense, the CCP regime served the working class, just as the case that the degenerated Soviet regime (Stalinist regime) maintained the system of state-owned property and planned economy. Such deformed workers’ state could be defined as a kind of functional workers’ state. However, by the l980’s, the ‘reform and open-door policy’ primarily designed by Deng Xiaoping became progressively broadened in scope and deepened in its content, so that the state property and planned economy system was no longer protected and promoted by the state, but progressively weakened and eventually destroyed. Meanwhile capitalist firms were allowed to reappear and enjoyed increasingly greater governmental connivance and encouragement. At this point, the question of ‘whom the state is serving’ became a big question. The above trend continued to develop until the end of the l980’s, when it was crystal clear that the function of the state now was no longer the protection and promotion of state- owned property and planned economy, but rather the promotion of capitalist restoration. Therefore, at this point revolutionary socialists should have grasped the fact that China was no longer a workers’ state, but rather a bourgeois state, and the CCP no longer a workers’ bureaucracy, but a bourgeois bureaucracy.1


The regenerated Chinese private capitalist enterprises operated initially under the names of either individual or collective business. Prior to the reform of l978, even individual business was severely restricted legally and practically, and according to the constitution, must be “guided step by step onto the socialist collectivization road”. In 1982 and 1988 the constitution was twice amended, so as to explicitly permit the long-term growth of private capitalist economy.2 A state which engaged itself in the long term development of capitalist economy while at the same time denied the working class all democratic rights, could not have been a workers’ state in any sense. In such a state the working class could only be an oppressed and exploited class, i.e., a subjugated class. Society such as this could not have been a transitional society from capitalism towards socialism. Therefore, when China amended its constitution in l988, it signified that the class nature of the state machinery had changed, and that a bourgeois state had already been restored. As to the fact that the state owned enterprises (SOEs) still had a heavy weight, this could not repudiate the fact that the state regime and the socio-economic system had undergone fundamental changes. As a matter of fact, the SOEs have been increasingly run in accordance to the law of market, and as such have operated to pursue profit. They have also increasingly turned into stock companies, absorbing more and more private capital and foreign capital, and compete to make their shares go public.3


Since l990’s, the growth rates of the registered capital of Chinese private and foreign enterprises have invariably been considerably higher than that of the SOEs: for private enterprises, the ratio is more than 4 to 1; for foreign enterprises, more than 2 to 1. The sum total of their capital has now exceeded the SOEs’, with foreign capital having a lion share of 80%. As to the public financial situation , China now has 300 billions US dollars of foreign debt and nearly 500 billions RMB domestic debt (equivalent to 60 billion US$). On the other hand, private saving amounts to 8 trillion RMB (one trillion US$), indicating the huge potential of private capital. More than half of the private saving is owned by the middle and higher-ranking officials and their families, which numbers 1.31 million (0.1% of the population). They owned more than 80% of the 87 billions of US dollars of household foreign currency saving. The growth of the regenerated bourgeoisie has been directly around the nucleus of this bureaucratic bourgeoisie. The power of its monopoly and the scale of its corruption far exceed those of the bureaucratic bourgeoisie of the KMT in the past. Capitalists who have no roots in the bureaucracy can hardly exist without the latter’s permission and protection. The idea of promoting, under the CCP’s regime, the quick formation of a civil society independent to the state bureaucracy is pure utopia.


The main reason for the prominent success of the Chinese economic growth in the past 20 years lies in the fact that the CCP has been able to maintain its dictatorial rule and as such has sufficiently guaranteed Capital with freedom to exploit in this most populated country in the world, and that this service meets the current needs of the development of globalization. It is by no means the success of any course of  socialism. Neither is it the guarantee of sustainable development of the Chinese economy. On the contrary, the so-called deflation has continued for several years, and greater economic crisis is looming. The sharpening of social contradictions has compelled even official academics to sound the alarm in the strongest note. The appeal for social justice is gathering strength. However, the CCP oligarchs provide no practical measures in halting the worsening of situation of the working people. They only seek to increase the social weight of the middle layers of income so as to consolidate their own rule. Yet many sociology academics explicitly point to facts that speak against the intention of the CCP : polarization has been accelerating; the middle layers are declining rapidly; and there is no prospect that the trend may reverse. The peasants find it more and more difficult to survive by tilling their fields, and millions flood to the cities to work as min-gong (migrant workers without permanent residential rights), either to be especially cruelly exploited or to become lumpen proletarians. Permanent city dwellers who are extremely poor has now reached 20 million, according to official figures. Prior to the reform, the Gini coefficient of China ranked one of the worlds lowest, now it ranks one of the highest. All the horrible things in capitalist society are now particularly acute in China. Gigantic social disruption may blow out at any time. Will it develop into revolution, or will it merely degenerate into purely destructive unrest? The answer will very much depend on whether a forceful revolutionary leadership will be formed in time. For the moment, the efforts for building such a leadership are still in the most primitive stage and extremely vulnerable. One of the preconditions for accomplishing this task lies in people’s understanding that all the ugly phenomena in the present Chinese society have nothing to do with socialism, they are consequences of the CCP’s complete betrayal of working people and socialism.


In the international scene, China no longer represents anti-imperialism forces, nor is it anti-capitalism. Rather, it has become a late coming but powerful competitor among the dependent third world countries. After the Sept 11 event the position adopted by China on so-called anti-terrorism war further illustrates this point. The remaining occasion when Chinese government can align with other third world states in defiance of imperialism is when they maintain in unison that western criteria for human rights simply do not fit the third world.

18th January 2003




1 The so-called “reform and open-door policy” initiated towards the end of l978 was at first mainly confined to the following measures: the raising of prices of agricultural products; changing the ratio of industrial investment in favor of consumer goods at the expense of heavy industry; allowing the rebirth of individual and small collective business; allowing larger autonomy for SOEs and provincial and local governments; allowing rusticated city youth to return; the rehabilitation of big numbers of intellectuals and cadres who were unjustly charged as ‘rightists’; permitting them to practice their professions again; stressing the value of school education again; relaxing thought control, particularly academic exchanges with the west; increasing foreign trade; prioritizing the absorption of FDI and foreign high-tech , etc. All these measures did improve the lives of the people without breaching the principle of planned economy. Indeed, the CCP reiterated its commitment to planned economy in the course of reform.  After initial success in political and economic results, the CCP started, first in deeds, to identify market economy as the sole high way to develop the economy, and increasingly became explicit in carrying out this line. In the beginning, it still tabooed the term market economy, and only talked of developing ‘commodity economy’, while alleging that commodity economy is quite different from market economy. In October l984, the CCP officially announced that planned economy and commodity economy were equally important, and appealed to the public to throw away the traditional idea of seeing the two as opposite to each other. In practice the government policy had been implementing a ‘double-track’ economic regime, where central economic plan only took care of large SOEs and a few categories of strategic goods, leaving the rest of the economy to be regulated by market, or managed by provincial government. Even strategic goods, which were supposed to be regulated by planning, had double-track prices, one determined by government and the other by market. Those SOEs which were still under the control of the central plan, could freely trade their excess products in the market after fulfilling their production plan. Meanwhile, two currencies --- RMB and foreign currency notes--- circulated simultaneously. Special economic zones, under heavy subsidies by central government, were founded and were entirely put under market regulation. A number of cities were also opened to foreign investment. To this must be added that the number of enterprises and of kinds of goods controlled by planning was decided to be kept constant or diminishing. Thus a market economy naturally flourished in high speed , while the function of economic planning was increasingly weakened. Taking advantage of the double-track economy, the bureaucrats and their relatives enrich themselves remarkably both by legal and illegal means (for instance, buying large quantity of controlled goods at low official prices and then selling them at high market prices; or acquired handsome commission through helping businessmen to get in contact with officials etc) The enormous money thus accumulated in a short time became the main source of the rebirth of private capital. As reflection of such phenomenon, terms like ‘guan dao’ (official speculators), ‘guan xi xue’ (connectionology , the “science”of developing connections with people in power) became fashion. From l985 onwards, such things became rampant, and was one of the important factors which contributed to the outbreak of the l989 democratic movement.


2 In l982, the constitution was amended so as to permit the permanent existence of individual businesses , recognizing them as a legal supplement to publicly owned economy, explicitly stated that their interests to be protected. Soon private capital experienced extensive growth under the name of individual and collective (mainly rural and township)businesses. Eventually in l988 the constitution was again amended, and in the relevant clause it was explicitly stipulated that ‘the state permits private economy to exist and develop within the law. Private economy is a supplement to the socialist publicly owned economy. The state protects the legal rights and interests of private economy, and exercises guidance,supervision and regulation over it.’ The so-called private economy referred to here in this clause is capitalist enterprises. Now the attitude of the state towards the capitalist enterprises was the very opposite as stipulated in the l954 constitution, which read: “The state adopts policies of utilizing, restricting, and transforming towards the capitalist enterprises …….. progressively substitute public ownership by the whole people for the capitalist ownership’ Now, by contrast, China had definitely taken the course of long-term development of capitalist economy.


3 From thereon, especially after Deng made his hard-lined speech to push for ‘reform’ during his l992 tour to the south, capitalist restoration in China accelerated, and soon this real change was reflected in further amendments to the constitution. In l993 and l999, the constitution was twice amended. The clause on planned economy was abolished, on the other hand the following new clauses were added, which stipulated that China shall in the long term remain at the so- called ‘socialist preliminary stage’; that ‘a socialist market economy shall be developed’; that ‘varied kinds of ownership shall grow simultaneously’, and ‘a regime of distribution shall be upheld, where side by side to the major mode of distribution according to one’s labor, varied modes of distribution shall coexist.’All those who have a knowledge of Marxist economics should have no difficulty in identifying the genuine nature of this economic system, which the bureaucracy tried hard to conceal with outrageous lies, and is precisely capitalism. Both the daily experiences of Chinese workers, and the direct observations with open eyes and honesty, coincide with the above conclusion. China’s final accession to WTO in 2001 further implies that the world bourgeoisie has now officially recognized China’s economy being a part of the capitalist system.