CHINA: a congress of capitalists

by Pete Brown
(from Communist Voice #15, October 25, 1997)

. The Communist Party of China held its 15th Congress in mid-September. This was a congress of capitalists. It was not a congress of communists, of working class revolutionaries striving to build a classless society. It was a congress of state-capitalist bureaucrats striving to find new sources of capital so they can better compete in world trade with other capitalist powers. The main decisions taken at this congress involved the rapid transition from state-capitalist forms of ownership to private-market forms, from a system of state ownership to a system of stock markets and shareholding of enterprises. Leaders of the CPC freely recognize that this will maintain the class divisions that already exist in China, and in fact that these class divisions will be intensified. It was a congress upholding and extending the sacred banner of Deng Xiaoping Theory, whose most famous slogan is "It is glorious to get rich!"

. Clearly this was a congress that had nothing to do with Marxism. Yet, strange to say, the leaders of the CPC still insist that their revisions of Dengism are in fact updatings of Marxism. They call privatization of firms, the selling of stock, etc. the "socialization" of ownership -- as if putting capital in charge of production is somehow equivalent to putting the working class in charge! This is total gobbledygook, and is recognized as such by most observers. (1)

. But the Western media follow a duplicitous line on China. When it comes to reporting something regarded as a success, e. g. , the construction boom in Shanghai, they hail the wonders of capitalism and the wisdom of China's bourgeois leaders. But when it comes to reporting on the sweatshops, on convict and slave labor, on the suppression of dissent and the denial of basic democratic rights -- suddenly then capitalism is forgotten about, and China's leaders are criticized for their "communist tyranny". And this confusion-mongering is propped up by various so-called Marxist groups who insist that China must be some kind of socialist country, despite all the evidence to the contrary. So in battling revisionism and trying to re-establish the theoretical foundations of Marxism, it is important to clarify the nature of the Chinese regime.

Large-scale privatization

. The major result of the 15th Congress is the call for privatization of most state-owned firms, with the remainder being merged and downsized. Presently, there are about 300,000 state-owned economic enterprises in China; these employ over 100,000,000 workers, about 60% of the urban working class. Under the new plan, all but about 3,000 of these will be privatized. The ones remaining in state hands will be the major producers of basic industrial goods -- steel, for example. These will be merged and formed into giant conglomerates along the lines of South Korean chaebols or Japanese zaibatsu.

, While tens of thousands of small state-owned firms are being privatized, at the same time their credit from state banks will be curtailed. They will no longer have easy access to loans to buy equipment or raw materials, meet payrolls, etc. They will have to pay their own way, in the capitalist sense; and those that don't will close their doors, bankrupt.

. Finding new sources of capital can take various forms. Many state-owned firms are being offered for sale to their own employees. The workers can purchase these firms through an employee-stock-ownership plan; in many cases, in fact, the workers are compelled to do so, on pain of losing their jobs. Shares of stock are also being offered for sale to capitalist investors from China, Hong Kong, and foreign countries. The newly private firms are also encouraged to seek loans from banks and investors based in other countries.

. While the chaebol conglomerates will remain largely in state hands, they too will seek partial financing from other investors. They will issue shares of stock and look for loans from other sources besides China's state banks.

. All in all, the economic policy agreed upon at the CPC's 15th Congress is similar to what's been going on in the U. S. the last couple of decades: privatizing and downsizing. The new private-capitalist forms will bring about a closer integration of the Chinese economy with world capitalist markets and make it easier for China to join the World Trade Organization (a prime goal of China's leaders). So in a sense, what's going on in China is just typical capitalist reindustrialization. What's different about it is, for one thing, the scale involved: tens of thousands of firms employing tens of millions of workers.

. Secondly, what makes China different from, say, Russia or Poland is that the transition to private-market capitalism is taking place under the aegis, and with the continued political dominance, of the Communist Party. This has some so-called Marxists confused to the point where they insist on calling China a socialist country, when they might hesitate to say the same of Russia or Poland. But the difference between these countries is just a matter of degree, and of detail. Poland's "shock therapy" rush to privatization took place at first under the rule of Lech Walesa's Solidarity. But it was the capitalist-style policies of the "communist" party, in the 1980's, that opened the door to Solidarity in the first place. Furthermore, after reorganizing themselves as the Democratic Left Alliance (SLD), the revamped "communists" came into power again for four years, 1993-97. And during their administration the SLD continued the same sort of market reforms that Solidarity did, continued to push ahead with privatization, and brought Poland into NATO. Recently the SLD lost its parliamentary majority (though its former leader is still president of Poland); but their leaders continue to swear allegiance, as a loyal opposition party, to the principles of free-market economy and NATO. (2)

. Similarly with Russia: the revamped "communist" party there, under Zhuganov, does not have major policy differences with President Yeltsin, under whom privatization is taking place. And for that matter, having a "communist" party in control during the 1970's and 1980's did not mean that Russia was socialist then, either; but at that time the ruling party was still clinging to state-capitalist forms.

, Continued one-party rule by the CPC does not make China a socialist country, even if this party calls itself "communist". All it means is that China's capitalist rulers are following the model of South Korea when it was dominated by one party, or of Taiwan or Singapore (or the Philippines under Marcos). These countries too followed the path of a market capitalist economy combined with a one-party dictatorship. (Another example is Mexico, where politics up until recently was dominated by one party, the PRI. And another example is Indonesia, where Suharto's party crushes the life out of any genuine opposition. ) But there is nothing socialist about such a system. Singapore, like China, suppresses religious freedom; this makes it a dictatorship, but not a working class dictatorship, in which freedom of religion would be a basic principle (as well as freedom of atheism and the promotion of secular, scientific culture). Again like China, Singapore suppresses national minorities; this makes it a reactionary bourgeois-nationalist state, not any kind of proletarian state (in which internationalism would be a basic principle). And in all these countries workers' attempts to build independent class-struggle organization has been fiercely suppressed. The ruling parties in these countries sometimes call themselves "revolutionary," "socialist" or even "communist", but that doesn't make their regime any kind of workers' state.

Differing classes:
1. what privatization means to the workers

. What will happen to Chinese workers in the newly privatized firms? First off, they are going to face an intense productivity drive. As President Jiang Zemin declares, they are going to need a "new level of discipline. " The firms they work for must now perform at high levels of profitability, without support from state banks; and their products are expected to be of world-class quality in order to sell in competitive markets. While sweating to perform such quality work at close to the world's lowest wages, many workers will also be expected to sacrifice their life's savings to recapitalize their employer. At the same time, it's expected that the government will demand new taxes to bail out the insolvent Chinese banking system (more on this below).

. What sort of working conditions workers will face can be guessed at by looking at conditions in China's "special economic zones", where experiments in private-market capitalism have been tried out since the 1980's. There, a typical arrangement is for workers to live in dormitories right on the factory premises in conditions reminiscent of England's Industrial Revolution in the early 1800's.

. All these delights -- harsh exploitation, extremely low wages, no trade union representation, with all their "extra" money going back to their employers or the government -- await the workers of privatized firms. But what about the workers whose firms declare bankruptcy -- and there may be tens of millions of such workers? For them, there is nothing but poverty. China has no social safety net at all. In the past, in the state-capitalist system, workers received certain benefits such as health insurance, housing, and childcare. But these were organized and paid for by their employer, the individual enterprise they worked for. Outside of that there was no nationwide system of social security.

. Well, at least workers usually had a social safety net they could rely on, because the state enterprises provided steady employment. But now it is expected that many thousands of these enterprises will close. As they do, they will take with them workers' pensions, health benefits, insurance plans, housing payments, and seniority. Now, President Jiang has talked about setting up a new nationwide social security system to replace the old enterprise-based system. But no doubt this will take some years to set in place; and in the meantime, many workers will no doubt be left out in the cold, as happened in Russia and Poland.

2. what privatization means to the bosses

. For factory managers and Communist Party cadre, privatization will also bring an era of greater insecurity for some. But the more privileged sections will no doubt find their feet again, and in fact will use this situation to enrich themselves. This is, after all, the social base that is supporting President Jiang's privatization plan. For them privatization means transforming the enterprises they have been running into private firms that they can now have total control over. In practice many of the cadre have already jumped the gun and privatized firms themselves, with the nominal state property being transformed into their own private property. In new stock-ownership plans they are given the lion's share of the enterprises they head.

. The more irresponsible, corrupt cadre simply sell off their enterprises, abscond with the company funds and leave their workers saddled with the firm's debts. A Western economist calls this "privatizing assets while socializing losses. " The government estimates that some 12% of state assets have already been privatized in this way, and "that figure is probably far too low." (3)But even the more responsible cadre use this period to cut out a new life for themselves as Western-style entrepreneurs bent on exploiting their workers as much as possible.

Background: Deng Xiaoping Theory

. China's first major moves to privatization began in the late 1970's, when Deng Xiaoping took over control of the government and launched the privatization of agriculture. Collective agriculture was abandoned, and China's rural communes were broken up. Today the state retains formal ownership of land, but the land is leased to anyone with the wherewithal (i. e. , capital) to farm it. Peasants are free to give up their traditional right to farm certain land if they want to (i.e., if they are broke and can no longer make a living at farming), while others are free to take over as much land as possible and use it in typically capitalist methods of farming -- by hiring labor.The result has been a rapid and vast social differentiation in rural areas.

. Previously, land reform had eliminated the old landlord class, and then collective agriculture was established nationwide in China by the mid-1950's. This transformed the old countryside and brought major progress for the peasants. But as each collective was on its own, there was differentiation among them. It was not a system of "egalitarian communism", as Western bourgeois commentators (who exaggerate everything) call it. There was differentiation among the collectives, as each of them sank or swam on their own.

. But really massive differentiation and the driving of millions of poor peasants into the cities began with Deng's reforms. Some peasants have gotten rich -- and some of them rich not just by Chinese standards, but rich by American standards. This is the sort of result trumpeted in Western bourgeois reports. But at the same time it has meant the impoverishment of tens of millions of other peasants. Poor peasants with small amounts of land cannot compete against large farms on a capitalist grain market. The peasants just barely scrape by with subsistence farming, or (in many cases) they give up and go to the cities in search of work. In the decade from the mid-1980's to the mid-90's, approximately 100 million peasants came off the land and flooded China's cities looking for employment. This is a vast, extremely rapid urbanization which dwarfs the urbanization that occurred, say, in the United States after World War II. In the last 20 years, agriculture's share of the Chinese work force has fallen from over 70% to about 50%. (4)

. But in principle there is nothing new about this phenomenon. It is the same kind of capitalist development that occurred in England, the U. S. , Germany, etc. The bulk of the peasantry is transformed into a landless proletariat, a class of workers who must sell their labor in order to stay alive. For these workers there is no social safety net to assist them. In many cases, in fact, in China today it is illegal for people to even move into a city, and they run the risk of arrest and deportation back to the rural area. Nonetheless they come flooding in, getting around official restrictions by bribes and by local capitalists' demand for labor.

. So the first result of Deng's modernization plan was a massive differentiation among the peasantry. As private capitalism took off, some peasants got rich while many went broke. Then, to try and relieve pressure on the cities, in the 1980's Deng launched his new idea: industrializing the countryside. Well-off peasants were encouraged to set up private manufacturing firms. This was trumpeted by the Chinese government as a brilliant revolutionary idea. But it is simply another traditional method of capitalist development. In fact, in England the beginnings of textile industry were in the rural areas. It was only when industry reached a certain size that it began taking hold in urban areas such as Manchester and Birmingham. The exploitation of rural landless workers by rural capitalists is supposed to be kinder and gentler than forcing proletarians to look for work in the cities, but in practice working conditions are generally worse, and the pay lower. The rich, "successful" peasants are quite happy to exploit their neighbors in ways that allow them to compete successfully against urban capitalists. There are reports of isolated villages, barely accessible by motorcar, in which a class of rural entrepreneurs drives around the village in German luxury cars, watches the latest TV shows on their satellite-dish TVs, and wears the latest Western fashions imported from Paris; and this wealth is generated by employing impoverished peasants in factories where the workers put in 14-hour shifts. (5)

Privatizing state industry -- why now?

. The CPC's 15th Congress sanctioned the further development of Deng Xiaoping Theory, extending it from the rural to urban areas, from agriculture to industry. But why now? The Chinese leaders know that this process involves enormous risks, as it may fragment their political system or may lead to revolts of workers. Despite the risks, however, they are bent on carrying through the program now. Why?

. Economic necessity is pushing them. The financial structure of the Chinese economy is teetering. China's large state banks, which account for 90% of banking assets, have become seriously overextended through the practice of granting easy loans to state-owned enterprises. In China's state-capitalist system, each enterprise was supposed to be self-supporting and profitable on its own. But when state enterprises needed capital, loans from state banks were usually easily available even if the firms they lent to were not turning a profit. The result is that today "China's banking system is insolvent; its bad debts exceed its capital." (6)

. In some respects this crisis of capital is not peculiar to China; it faces all of the developing countries of East Asia. These countries have all seen rapid growth in recent years, and investment capital has been flowing in. But within the past year a capital shortage has manifested itself. The investment bubble has burst, and now Thailand, Malaysia and Indonesia are canceling major projects such as dams and airports. They've also been forced to devalue their currencies.(7)Chinese leaders were able to rein in inflation within the last couple years, but now they must generate some investment funds if they want their capitalist expansion to continue.This requires being very hard-nosed about financial accounting and granting loans to enterprises.From now on enterprises must prove they can make it in the capitalist world; if not, they will be forced into bankruptcy or merged into other, more successful firms (and downsized in the process).

Marxism: a clarion call to the oppressed

. What is the response of the Chinese masses to the CPC's new policies? First of all, when it comes to concrete measures, the masses are not fooled and are not passive. Numerous reports of peasant uprisings have filtered out of China in the last few years. Poor peasants often petition the government for relief from oppressive and unfair taxes, for example; and when met with repression, the peasants sometimes respond with violent mass demonstrations. And now reports of workers' strikes and other forms of resistance are beginning to come through. For example, earlier this year thousands of workers in Nanchong, Sichuan province, paraded through the streets demanding back pay. Industrial disputes are spreading rapidly even by official reports.

. So the laboring masses are pretty much aware of what is happening to them, on a spontaneous economic level, and who is to blame. But in fighting it they face severe repression from a government that makes it a habit to jail people for decades for merely speaking out about repression, for example, or merely suggesting the need for independent trade unions. And for more serious "crimes", such as actually organizing militant street demonstrations, the government doesn't shrink from executing people, as they did in the aftermath of the Tiananmen Square massacres. The Chinese government executes more people than all other countries combined, and although once in awhile some bureaucrat gets a harsh sentence for corruption, the vast majority of those executed are small fry who cannot afford the bribes necessary to get off.(8)

. So on the one hand, the masses face severe repression. And on the other hand, much confusion is spread among the masses about communism and the role of the Communist Party. During the earlier part of this century the Chinese laboring masses carried out a gigantic revolution under the leadership of the CPC, and its prestige remains high among many working people for that reason. The fact that today the CPC has nothing to do with the ideals of communism, that today it is simply a party led by millionaire capitalist exploiters, is hard for some people to understand and accept, despite their everyday experience with this exploitation.

. Some critics of the present-day Chinese regime harken back to the days of Mao. But Maoism doesn't provide an answer either. The Chinese economic and political system under Mao was first patterned after the Soviet revisionist model. In fact, Mao never had a clear analysis of what was wrong with Soviet state capitalism, so the Cultural Revolution didn't solve this problem and collapsed. Then, in the last few years of his life, Mao veered rightward again. There is much more in common between Deng's views and Mao's than the Maoists would like to admit.

. Strengthening the Chinese masses' resistance to capitalist exploitation and raising it to a higher level requires basing that struggle squarely on Marxism, the theory of class struggle. This will require many difficult struggles on the part of worker activists to break from the CPC and its stooge organizations, to build independent revolutionary organizations, and to thoroughly repudiate revisionist ideologies such as Mao Zedong Thought and Deng Xiaoping Theory. This will bring new light to the masses' spontaneous struggles and gather their energy into a new revolutionary upsurge. This is what is necessary to sweep away the capitalists and revisionists and bring about a genuine system of socialism for the first time in China.


(1) See, for example, "To Deplore Capitalism Isn't Always to Fight It", article by Roger Cohen in the New York Times of Sept. 21, 1997. (Return to text.)

(2) "Polish Ex-Communists Vow Constructive Opposition", article by Marcin Grajewski for Reuters, and distributed via CNN News on the internet, Oct. 14, 1997. (Text)

(3) "China's Next Steps" in The Economist of Sept. 13-19, p. 24. (Text)

(4) "Weakness Seen in China's Economic Boom", article by Edward A. Gargan in the New York Times of Sept. 19, 1997. (Text)

(5) See pp. 110-113 of the book China Wakes: The Struggle for the Soul of a Rising Power, by Nicholas D. Kristoff and Sheryl Wudunn (Vintage Books, 1995). (Text)

(6) "China's Next Steps" in The Economist of Sept. 13-19, p. 26. (Text)

(7) "Rubin Says Asia Deficits May Spur a U. S. Backlash", article by David E. Sanger in the New York Times of Sept. 21, 1997. (Text)

(8) Of course most of those executed are being punished for ordinary social crimes. But political dissidents -- especially those of a working class background -- are also sometimes killed. And as reported by ABC News on Oct. 15, 1997, the government makes a big profit selling the organs of executed prisoners in an assembly-line procedure to ailing Western bourgeois. A kidney transplant, for example, costs $46,000. So there are probably some fatcat bourgeois strolling around New York with the kidneys of Chinese activists keeping them alive. Is this the way a socialist government would operate? (Text)

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