By Chris Slee
13, 2009 -- Links International Journal
of Socialist Renewal has published a number of articles on the Chinese Revolution
and the subsequent restoration of capitalism in China. This article aims to
give more detail on the current situation, including the Chinese government's
efforts to ameliorate some of the harmful effects of capitalism. But first I
will briefly recount the process of capitalist restoration.
Zedong died in 1976. By December 1978 Deng Xiaoping was in full control of the
Communist Party (CCP). He launched a series of economic changes, often referred
to as "market reforms".
the market reforms began, it was not immediately clear how far they would go. As
far as I am aware, there is no evidence that Deng was already committed to the
restoration of capitalism in December 1978. But in any case, the outcome did
not depend solely on the intentions of one person, but on the results of social
and political struggles.
the early stages, the reforms were similar to those carried out by the Russian
Bolsheviks during the period of the New Economic Policy in the 1920s -- i.e.
the use of market mechanisms to develop the economy, but with the state sector
remaining predominant in large-scale industry.
first step in the market reforms was to encourage peasants to sell produce from
their private plots on the free market. The next step was the introduction of
what was called the "responsibility system". Each peasant household
was allocated a certain amount of collectively owned land to farm. Each family
had to produce a certain amount of wheat, rice or other crops for the
collective. Whatever they produced above this amount they could keep for
themselves, sell to the state or sell on the free market.
the cities the responsibility system meant that individual factories became
responsible for their own profits and losses. If a factory could not make a
profit it could be forced to close.
companies were allowed to establish joint ventures with Chinese state and
collective enterprises. As the ``reform’’ process went further, some wholly
foreign-owned enterprises were established. Restrictions on the ability of
Chinese citizens to establish privately owned enterprises were progressively
economic zones" were established, where foreign capitalists were offered
cheap labour and land, low taxes and easy repatriation of profits. But soon
foreign capital was no longer confined to these zones, and began spreading
spread as bureaucrats increasingly strove to accumulate wealth for themselves
and their relatives and cronies in the context of an increase in private
ownership of the means of production. The bureaucrats began to start to turn
themselves into owners of capital.
The Beijing massacre
opposition to corruption -- and to the bureaucratic regime -- began to grow. In
1988-9 there was an upsurge of demands for freedom and democracy, and against
corruption. In April 1989 students protested in Beijing's Tienanmen Square. They
remained for more than a month and were joined by many non-students. The army
was ordered to remove the protesters, but the latter talked to the soldiers and
won many of them over. Hundreds of thousands of workers joined the protests.
the regime brought in new army units that used extreme violence to crush the
movement. A wave of repression followed.
my view the repression of the 1989 upsurge helped prepare the ground for
principle, a different outcome was possible. The relaxation of repression
during the 1980s, however limited and contradictory, created the potential for
moving in the direction of socialist democracy. The mass upsurge of students
and workers in 1989 was beginning to take China further in this direction. Unfortunately
this potential was crushed.
early 1992, Deng Xiaoping gave the go ahead for a policy of all-out
privatisation. He cited the example of Guangdong province, where privatisation
was most advanced, as an example for the whole of China to follow. The 14th
Communist Party congress later that year confirmed this perspective, adopting a
policy of creating what was termed a "socialist market economy". In
reality, it was a policy of creating a capitalist economy.
the 15th congress of the Communist Party in 1997 the policy was reaffirmed and
deepened. Jiang Zemin (the president of China at that time) declared that the CCP's
aim was the rapid privatisation of all small and most medium sized state-owned
China's economy today
privatisation of industry proceeded very rapidly during the 1990s, and
continued more slowly thereafter. The state sector's share of industrial
production fell from 100% in 1978 to 37.5% in 1999 and 31.6% in 2004. The
private sector's share was 62.1% in 2004, while the share of collectively owned
enterprises was 4.6%.
millions of Chinese workers are ruthlessly exploited by local and foreign
capital. Extremely long hours, physical punishment, fines and non-payment of
wages are amongst the abuses suffered by many Chinese workers.
2005 China had become the world's third-biggest recipient of foreign
investment. In that year, the flow of foreign direct investment into China was
US$72 billion, which was exceeded only by Britain and the United States,
according to OECD figures. Transnational corporations increasingly used China
as a base for producing goods for sale on the world market. The transnational
corporations (and the South Korean, Taiwanese and Hong Kong contractors who do
much of their dirty work) were attracted by the huge reserve army of labour
created by the displacement of peasants from the land, and of workers from
state-owned factories that have cut their workforce or closed down altogether. They
were also attracted by the total absence of unions in many enterprises, and the
tameness of the All-China Federation of Trade Unions where it existed.
destroyed China's social welfare system. A range of services such as health,
housing and others had been provided to workers via their workplace. The loss
of state- and collective-sector jobs meant the loss of these services.
result of all these changes was a vast increase in economic inequality. The GINI
index, a statistical measure of inequality, rose dramatically -- from 0.16 in
1979 to 0.389 in 1995, 0.417 in 2000 and 0.45 in 2001. This compared with a
world average of 0.40. In other words, China was more unequal than most of the
world's countries, including the United States (0.42) and Japan (0.28).
then the level of inequality is believed to have increased further. "The
ranks of China's US dollar billionaires have swell from three to 130 in just
five years", according to The Age's
China correspondent John Garnaut .
Strong state sector
economy is now essentially capitalist, as indicated by the privatisation of the
bulk of the means of production, and the conversion of labour power into a
commodity. Workers can only survive by selling their labour power to an
the most extreme ideologues of neoliberalism (both in China and elsewhere) are
not satisfied with the degree of privatisation that has occurred so far. State-owned
enterprises remain dominant in certain strategic industrial sectors, such as
iron and steel, electricity and telecommunications, and in the banking sector. The
neoliberals want more complete privatisation, and unfettered access to all
areas of the economy for local and foreign capital.
Chinese Communist Party has up to now resisted these pressures. A strong state
sector helps China maintain a degree of independence from the imperialist
powers. It has also helped China to recover from the effects of the global
financial crisis which began in 2008.
initial impact of the crisis was severe. Tens of millions of workers lost their
jobs, particularly in the export-oriented manufacturing industries. But the
Chinese government was able to stimulate the economy by ordering state-owned
enterprises to spend money, and state-owned banks to lend money. This caused
the resumption of rapid economic growth in 2009.
of the spending was wasteful and/or environmentally destructive. Many of the
export-oriented industries remain in a depressed state. Nevertheless, China can
claim to have survived the economic crisis relatively well, due to its
comparatively strong state sector.
continued existence of a strong state sector does not make China socialist. In
the past, many capitalist countries have had a significant sector of
state-owned enterprises. Most of these have been privatised since the rise of
neoliberalism. (Australian examples include the Commonwealth Bank, Telstra,
global financial crisis seems to have brought the privatisation drive to a halt
in China for the time being. There have even been some instances of private
companies being replaced by state enterprises.
Garnaut says (rather melodramatically) that Wang Jun, the governor of China's
Shanxi province, "is in the process of smashing the private mining
industry and feeding the carcasses to big state-owned companies".  Wang
Jun has nationalised private coal mines in the province as part of a safety
campaign following massive mining accidents. Garnaut, while acknowledging that
safety is a real issue, claims that the main goal is to improve the efficiency
of coal mining, given China's growing demand for coal.
this is the case, it is not unprecedented in the history of capitalism. State
ownership of key industries can sometimes be beneficial for the functioning of
the capitalist system as a whole. The British government nationalised the coal
mines after the World War II. This did not mean that Britain had become
socialist. Similarly, China's economy remains fundamentally capitalist, despite
some cases of re-nationalisation in the wake of the global financial crisis.
have been fighting back against the attacks on their job security, living
standards and working conditions. There have been thousands of strikes and
protests by Chinese workers, as well as numerous protests by peasants against
land seizures by local governments and property developers. There have also
been protests against pollution and environmental destruction, as well as
protests by ethnic minorities against discrimination.
to Ching Kwan Lee and Mark Selden: "Nationwide, the Ministry of Public
Security recorded 8,700 collective disturbances in 1993, rising to 11,000 and
32,000 in 1995 and 1999 respectively. In 2003, three million people were
involved in 58,000 incidents, rising to 74,000 in 2004 and 87,000 in
both under Mao and under Deng, caused many Chinese people to become
disillusioned with socialism. In particular, many students who became Red
Guards during the Cultural Revolution, and who later realised that they had
been manipulated by Mao, turned not only against Maoism but against Marxism.
became admirers of the West, and saw capitalism as the only alternative to a
tyrannical regime claiming to be communist. Neoliberalism gained ground amongst
others were disturbed by the ruthless exploitation of the workers under
"free market" policies, as well as by the chaotic nature of
capitalism, as exemplified by the Asian economic crisis of the late 1990s, and
by the 2008 global financial crisis. This led to the rise of the "new
left", a group of intellectuals critical of neoliberal policies.
government allows a certain degree of freedom for discussion of these issues,
although being too critical of the government can still be risky. Discussion of the oppression of national
minorities such as the Tibetans and the Uighurs is particularly risky.
response to the rise in popular struggles, the CCP leadership has often used
violent repression. But it has also made some concessions to mass discontent. After
previously placing the main emphasis on "efficiency", the CCP began to
talk more about "social justice" as a pillar of a "harmonious
society". It has made efforts to build a new social welfare system to
replace that which was destroyed. It has also introduced new labour laws, and
has encouraged the All-China Federation of Trade Unions to unionise the private
sector, including foreign companies.
Rebuilding the social safety
to the "market reforms", people had job security and a basic social
welfare system provided through the workplace -- a system known as the
"iron rice bowl". Shaoguang Wang, from the Chinese University of Hong
Kong, notes that: "communes and brigades in rural areas and work-units in
urban areas were not only economic entities but also social and political
entities. They offered job opportunities to their members and paid them without
much difference, and also provided them and their dependents with various
social benefits such as nurseries, kindergartens, schools, healthcare, pensions
and funeral services. This included financial assistance to the disabled and
the families of members who had died."
situation lasted until the mid-1980s. As the market reforms deepened,
workplaces shed their responsibility for social welfare. According to Wang,
"When rural villages and urban enterprises were gradually extricated from
their social responsibilities, evolving into pure economic entities, villagers
and employees lost pensions, healthcare and welfare benefits, and had to spend
money buying them". 
the turn of the century, the government began to rebuild the social safety net
in areas such as health care, education and pensions.
the victory of the communists in 1949, China's health indicators were amongst
the worst in the world, with a life expectancy of about 35 years. By the late
1970s this had been raised to 68 years.
after the onset of the market reforms, there was little further progress,
despite rapid economic growth and scientific and technical advance. From 1980
to 1998 China's life expectancy rose by only two years, a lesser growth rate
than the world average. According to Shaoguang Wang, "As reform deepened,
market ideology steadily infiltrated the health sector, becoming the effective
guiding principle of health reform... China's healthcare system became one of
the most commercialised in the world." Individuals were expected to
pay for health care, which had previously been largely financed by a
combination of funding from the government and the workplace (factories,
offices in urban areas, communes in rural areas). In rural areas, the breakup
of the communes and the decline in government support led to the collapse of
the rural Cooperative Medical System. The number of villages covered by the CMS
decreased from 90% in 1979 to 5% in 1985.
urban areas, the decline was not quite as dramatic, but by the end of 2003 only
half of urban residents were covered by some health insurance scheme. Migrant
workers were excluded from the schemes that existed.
Wang comments that: "The marketisation of health was particularly
detrimental to the well-being of the poor. While the rich could now enjoy
first-class medical care of international standards, the poor were often forced
to endure minor health problems and put off dealing with major health
2000 there was the beginning of a change in policy. The government's share of
health-care spending began to increase a little after a long period of decline.
The government also began a drive to increase the proportion of the population
covered by various health insurance schemes. Schemes for employees require
contributions from both employers and workers. There are also schemes for other
urban residents, and a new rural cooperative medical system, funded by
contributions from members and from central and local governments.
are being made to include migrant workers in health insurance schemes. The
number participating had reached 31.3 million by the end of 2007 (which meant
that most migrant workers were still not covered at that time).
Workers' rights and unionisation
2007 a new labour contract law was adopted by the National Peoples Congress. This
requires employers to give workers a written contract, and puts some
restrictions on the right to hire and fire. A conciliation and arbitration
system was also established to hear complaints by workers against their
new laws were of some benefit to many workers. But a significant proportion of
workers did not benefit, because their employers failed to comply with the
laws. And for many workers the benefits of the new laws were soon swept away by
the global economic crisis of 2008. Twenty million migrant workers were laid
off, and employers took the opportunity to lower the pay and conditions of
those who remained.
2006 the All-China Federation of Trade Unions launched a drive to unionise
foreign companies, and succeeded with many, including Wal-Mart, which is very
hostile to unions.
charge that the ACFTU is more concerned with controlling workers than
organising them to fight for their rights. It is often described as a
"yellow union". It does not encourage strikes. However it does
challenge blatant violations of China's labour laws by employers through legal
used radical anti-imperialist rhetoric in the 1960s, but swung to an openly
pro-imperialist foreign policy in the 1970s. US Secretary of State Henry
Kissinger visited China in 1971. During the same year, China supported the
reactionary side in conflicts in Sri Lanka, Bangladesh and Sudan. US president
Richard Nixon consolidated the relationship by visiting China in 1972, and
China continued to take reactionary positions on foreign policy questions,
justifying it with the claim that the Soviet Union was the main enemy.
pro-imperialist policy was continued by Deng Xiaoping. One of the worst
examples was the Chinese invasion of Vietnam in 1979.
then China has moved away from its close political alliance with US
imperialism. Today China has good relations with the revolutionary governments
of Cuba and Venezuela, as well as with other Third World governments, such as
Iran, that are in conflict with the US.
my view China today can be described as a bourgeois nationalist regime. Its
economy is capitalist, but the government is relatively independent of the
should be noted however that China still has close economic links with
imperialism. China keeps its foreign exchange reserves in US dollars, propping
up the US currency.
The need for socialism
the partial reversal of some neoliberal policies, China remains a highly unequal
society, where workers are ruthlessly exploited and lack job security. The air
and water are extremely polluted. Despite significant investment in renewable
energy, the use of fossil fuels continues to expand, and China is now the
world's biggest producer of greenhouse gases. Minorities such as the Tibetans
and Uighurs continue to be oppressed. Freedom of speech continues to be
struggle for genuine socialism remains necessary.
[Chris Slee is a member of the Democratic Socialist Perspective, a
Marxist organisation affiliated to the Socialist Alliance of Australia.]
1. See for example: China: Socialist revolution and Capitalist Restoration by Chris
Slee; and articles by Pierre Rousset, Graham Milner, John Riddell and others.
articles in Direct Action, various
editions between April and June 1989, for detailed descriptions of these
events. (Direct Action was the
newspaper of the Democratic Socialist Party.) See also http://links.org.au/node/1083.
from retired researcher Sun Xuewen, quoted by Eva Cheng in Green Left Weekly #695, January 24, 2007, http://www.greenleft.org.au/2007/695/36092.
Numerous examples are given in the book China's
Workers Under Assault: the Exploitation of Labor in a Globalizing Economy
by Anita Chan (East Gate: New York, 2001).
Sun Xuewen, op. cit.
John Garnaut, The Age, October 14,
John Garnaut, The Age, November 2,
Ching Kwan Lee and Mark Selden: "Inequality and Its Enemies in
Revolutionary and Reform China", Economic
and Political Weekly, December 27, 2008, p.35. Lee and Selden are US-based
for example Isobel Hilton's report of police raids on the Open Constitution
Initiative in Beijing (Green Left
discussion list #65808). The OCI is a group that had represented Tibetan
prisoners, and had produced an analysis of the 2008 uprising in Tibet which
blamed decades of bungled government policy.
Shaoguang Wang, "Double movement in China", Economic and Political Weekly, December 27, 2008, p.51-52.
Wang, op cit, p. 52.
Wang, op cit, p. 55.
op cit, p. 56.
Wang, op cit, p. 56.
Wang, op cit, p. 57.
See graph, Wang, op. cit., p. 56.
Wang, op. cit., p. 57.
See Wall Street Journal, October 13,
2006: ``China to press more firms to unionize’’, by Mei Fong.
Anita Chan, op cit, gives many examples of this.