Deciphering China (Part III): Projects in dispute

By Claudio Katz, Links International Journal of Socialist Renewal

Abstract: China's status as capitalist or socialist will be determined by political struggles and popular battles. This dilemma is being processed within an intermediate formation with ruling classes that do not control state power. The country’s economic shifts have expressed conflicting interests rather than socialist continuities. Initial coexistence with the market differed from the later process of restoration.

Those who see a completed capitalist regression omit the fact that the fusion between the bourgeoisie and state functionaries has not been consummated. China’s socialist legacy is a major stumbling block to this integration, in a regime that is very different to any variety of state capitalism. There are various competing currents, including one for socialist renovation promoted by the New Left.

[Note by LINKS: This is the second article in a three-part series by Argentine Marxist Claudio Katz looking at China today and its role in world politics. Although originally published in 2020 (September 25), meaning it is somewhat dated in places, these articles largely maintain their relevance regarding debates on the left over China. Read Part I and Part II. Translation by Federico Fuentes with assistance from Richard Fidler. Original in Spanish here.]

There are solid grounds for characterising China as neither a capitalist nor a socialist regime. After several decades, an intermediate formation prevails with an undefined nature and marked by yet to be determined outcomes. The new capitalist class has not obtained control of the state, which remains in the hands of a political layer that is autonomous from the bourgeoisie.

This singular status of a bureaucratic formation can lead to various outcomes. One possible future path is the definitive consolidation of capitalism; another counterposed one is a return to the transition to socialism. Both paths will depend on external circumstances, political struggles and the actions of the popular movement. This view is shared by several approaches, inspired by convergent evaluations.

A thesis similar to our vision emphasises that the Chinese economy is not completely subordinated to the rules of profit, maintains strategic sectors in the hands of the state, guarantees control over capitals and is processing an unresolved dispute between pro-capitalist sectors and critics of this development. It highlights the continued predominance of the Communist Party over the neurological centres of the economy and explains high growth rates through the pre-eminence of public sector assets (Roberts, 2017, 2016a: 209-212, 2018, 2016b). This portrayal highlights the various features of a non-capitalist regime without providing a specific label for that system.

Current categories do not provide us with a satisfactory term to account for China’s model. Some scholars use the term “managerialism” to highlight the primacy of state functionaries in the management of the economy. They illustrate how managers command that development through supervision and partnerships with the capitalist sector (Duménil; Lévy, 2014, 2012).

Other thinkers propose combining the capitalist and socialist components of China’s scheme into a synthetic notion of “social-capitalism” (O'Hara, 2006). The difficulty in finding a suitable label derives from the unprecedented character of the current context. The categories used by Marxists between 1917 and 1989 – socialism, communism, bureaucratised workers’ state, bureaucratic collectivism – were contrasted with the liberal or Keynesian capitalism of the time and had in view the post-capitalist goal. This contrast lacks the clarity it had in the past.

What is important is not the name, but the characterisation of China’s regime. In China, there is a society with already constituted capitalist classes that do not exercise state power. As other analysts have highlighted, this combination depicts an unfinished restoration (Heller, 2020). This scenario places the country in a phase of variable transit between capitalism and socialism. Any historical location of China that disregards these two basic concepts lacks the necessary guidelines with which to evaluate its future.

Approaches that adopt these compasses place the debate within recognisable coordinates. The discussion is usually whether the reintroduction of capitalism in China would alter, cancel or facilitate the march towards socialism. Intermediate views do not endorse or justify this regression; instead they highlight both the limitations and the potentials of a reversal of this process.

Market socialism?

Numerous characterisations of China coincide in describing an intermediate formation but avoid this label. They disagree with placing it completely within the universe of socialism or capitalism, but choose to situate it in some sub-variant of these two main options. The main exponents of the first current identify the country with market socialism.

This view highlights China’s socialist nature as an emphatic reaction against the opposite view. It questions the “simplistic” and “naive” arguments that locate the country in the universe of capitalism (Guigue, 2018).

But this counterposition limits any analysis and does not provide answers to the complex profile of a socio-economic formation that never adopted finished forms of either of the systems in question. It went through periods of transition to socialism, and now of restoration of capitalism, without completing either of these options.

It is true that China differs qualitatively from large Western economies and that it does not face all the contradictions of capitalism (Lo Dic, 2016). But it has incorporated many of the tensions of this system and is beginning to export them to the rest of the world. It is not a financialised economy, nor a neoliberal one, but it must deal with overinvestment, overproduction and the search for markets for the surpluses generated in its industrial sector. These imbalances are nothing like the tensions of a socialist economy.

It is a mistake to place China in the sphere of market socialism because of the dazzling results it has achieved in terms of growth. Using such a developmentalist argument, one could also exalt the enormous development achieved by South Korea or other brutal Asian capitalist regimes.

The current identification of China with market socialism views continuities where there were ruptures. The market expansion of the 1980s and the privatisations of the 1990s are conceived as two moments of the same post-capitalist path. This presentation omits the qualitative difference that separates the expansion of the market within a planning model from the pre-eminence of profit, competition and exploitation.

The term “market socialism” could perhaps be applied to the first moment of this sequence, but not to the second. During this second period, a class of owners of large enterprises was forged, something that openly clashes with the egalitarian goals of socialism.

The presence of this capitalist sector does not express the simple extension of market management. It indicates a point of rupture or possible gestation of a “mixed economy”. The existence of multiple forms of ownership (public, provincial, communal, cooperative, private) is not the same as the existence of norms of privatisation. Chinese millionaires in the Fortune rankings are not participants in any socialist conglomerate.

Ignorance of these facts prevents us from assessing the meaning of the political struggles being waged in the country. These tensions do not only express the typical disputes for power between factions that the Western media portrays. Nor do they correspond to simple waves of cleaning out corrupt functionaries. Underlying these conflicts is a confrontation over whether to accelerate or contain capitalist restoration. It is difficult to understand the meaning of these clashes from the point of view of “market socialism”.

The analytical emphasis placed on contrasting the prosperous Asian model with its decadent Western counterpart often obscures the assessment of these internal Chinese tensions. It is absolutely true that without its socialist foundations, China would not have been able to eradicate poverty in such a gigantic country and in such a short period of time (Jabbour, 2020). Capitalism does not allow for improvements of this magnitude. But this extraordinary achievement was not obtained through a simple and uniform socialist management that went on to mutate over a period of 70 years. The initial revolutionary impulse laid the basis for later expansion that was not unambiguously or of exclusive benefit to the popular majorities.

The thesis of socialist continuity accepts all the changes implemented in China as necessary for the development of the productive forces. That expansion is aptly singled out as an essential condition to forging alternatives to capitalism (Andreani; Herrera, 2013).

But an undifferentiated and uncritical view of all the different periods the country has gone through omits the fact that there is more than one path for this development. High growth rates can be achieved by expanding the domestic market or through the New Silk Road, by supporting or restricting the rate of profit, by favouring or counteracting social inequality.

This development may entail an enormous market impact in the setting of prices and in the scale of private business. But once a certain barrier is crossed, this path ceases to constitute a detour on the path to socialism and becomes an opposite path of return to capitalism. If this disjunctive is not made explicit, capitalist restoration could simply consolidate itself through the self-propulsion generated by the rule of profit.

Some thinkers assume, with a certain crudeness or naivety, that some capitalist development will later allow for a return to the path towards socialism, as if such turns can be implemented with the ease of changing a minister. History provides overwhelming evidence of the fierce defence deployed by capitalists to protect their privileges. If they structurally entrench their class benefits, they will not renounce these when the bell of socialism rings at their gates.

Consummated capitalism?

At the opposite pole of the theoreticians of market socialism are the thinkers who diagnose a consummated restoration of capitalism. They consider that China has become just another piece on the global chessboard and that the social status of the new power is no different from that of its Western peers.

This vision is often presented in polemics against analysts who object to the characterisation of a completed and irreversible restoration of capitalism. The interpreters of such a restoration remark that “there is no turning back” from the definitive pre-eminence of the same system that prevails in the rest of the world (Sáenz, 2018).

The main economic argument used to evaluate this consolidation is the actuality of all the mechanisms of capitalism. It is said that in China the rules of exploitation, profit and competition prevail (Carcione, 2020), along with a labour market, private ownership of the means of production and competition between companies (Au Loong, 2018).

But does the absence of financialisation and neoliberalism not obstruct the full functioning of these norms? Do high levels of state regulation, restrictions on the movement of capital, public ownership of land, and official control over banks and strategic enterprises not influence the course of accumulation?

Theoreticians of a consummated capitalism relativise the presence of these limitations and do not explain why the controls that neoliberalism eradicated in the bulk of the planet persist in China. Privatisation, financial deregulation, trade liberalisation and labour flexibilisation were introduced to free capitalism from the obstacles to profit that the previous Keynesian model had placed in the way. This shift did not occur in China.

Those who believe that this nation has completely buried its previous trajectory also fail to clarify when the burial took place. The characterisation of this shift is key to defining the meaning assigned to the concept of capitalism or socialism.

Some thinkers consider that the restoration has been an ascending process since the end of the ’70s, that has counted with the approval of the entire leadership. That is why they highlight the consequent bourgeoisification of the ruling strata (Laufer, 2020). They consider the Deng era, the privatisation phase and the Xi Jinping equilibrium as different moments of one single process.

But this view ignores the qualitative difference between a model of market management within the framework of planning, a model based on the expansion of capitalist property and a third model that limits this expansion. The importance of these distinctions goes beyond any evaluation of China and involves the general project of socialism. The Asian example is precisely of interest for considering this future.

Those who indiscriminately reject all the economic policies of recent decades implicitly object to the reintroduction of the market. They fail to realise that such management was compatible with Lenin’s New Economic Policy (NEP) in the 1920’s and that it is unavoidable for any post-capitalist project in underdeveloped countries. Or was the opposite model of compulsive and centralised planning of the USSR in 1950-60 better?

The debate on China among Marxists is not merely descriptive. It demands opinions on these alternatives in order to make explicit the socialist economic project conceived by each analyst.

No merger between bourgeoisie and state functionaries

The theoreticians of consummated capitalist restoration consider that this was achieved through the great driving force of the state. They believe the leaders of the previous system drove the restoration, transforming the old cream of the Communist Party into the new elite of capitalism (Carcione, 2020).

But this view registers commonalities where differences prevail. The new bourgeois class and the bureaucracy controlling the state continue to be two differentiated sectors. The former has not captured power and the latter has not transformed itself into a simple group of enriched owners.

The continuity of this distinction does not negate the fact that several millionaires occupy high ranking posts or that the families of many hierarchs exhibit an ultra-comfortable standard of living. What interests us conceptually is not calculations of wealth, but the objective role played by each sector in a socio-economic formation.

What distinguishes China from Russia or Eastern Europe is the continuing gap between the structure of society and the state that keeps the capitalist class removed from control of political power. That gap might dissipate over time, but this has not yet happened. Those who believe that the merger has already been consummated accept the contrast between the trajectory followed by China and the defunct "socialist bloc" but do not draw any conclusions from that contrast.

They also underline the seriousness of the contemporary capitalist crisis and emphasise the historical limitations of this system. But they avoid asking how a social regime in decline has been able to expand with such ease and intensity in the most populated country in the world. It is not very logical to emphasise the objective asphyxia faced by Western capitalism and describe, without any amazement, how this same system flourishes in the largest Asian nation.

The presentation of China’s growth as a result of a functional coupling with global capitalism illustrates only one side of the coin. The country achieved its extraordinary development as a combined effect of socialist foundations, state regulations and restrictions on financialisation. The growing influx of capitalism did not curb that expansion, but it did introduce major imbalances of overinvestment, overproduction and inequality.

It is highly controversial to assume that capitalism has penetrated China without any hindrances under the conscious command of the Communist Party. A reasoning inspired by the ironies of history is required to imagine that restoration advances in a natural manner along this highly unusual path. It does not seem very sensible to consider that the texts of Marx, Lenin or Mao are being used to implement a system that these writings repudiated. More logical is what happened in Russia and Eastern Europe, where capitalism was praised by incinerating those books. The permanence of Marxism as official literature in China illustrates the obvious: the restoration is not complete and faces resistance.

Struggle, repression and legacy

The thesis of a complete restoration of capitalism attributes this result to a historical defeat of the working class. It considers that this regression took hold at the end of the 80’s with Tiananmen, was consolidated with the large layoffs in state enterprises during the 90’s and was definitively reinforced with a dictatorial political system (Au Loong, 2016). This vision is consistent with the assumption that capitalism advances through increasing rates of exploitation and losses of social conquests.

But that diagnosis clashes with the countless evidence of wage improvements, poverty reduction and expansion of consumption. Enormous economic growth has been accompanied by an enormous increase in inequality, but without the social tragedy that prevails in countries under neoliberal management. General living conditions in the country have followed a very different course from, for example, that observed in Latin America.

These advances do not depict the merits of capitalism’s return. They illustrate the social strength of workers and the impact of their actual or potential demands. In the past two decades, a new proletariat has emerged, with expressions of resistance and a high capacity to assert its demands.

The theorists of a completed restoration describe these protests as the “worst nightmare” of the bureaucracy (Yunes, 2018). They register the significant capacity exhibited by workers to impose their rights (Hernández, 2016).

These reports indicate that company managers and senior officials act with caution in the face of potential resistance by the working class. Such behaviour adds another argument in favour of the thesis of an incomplete capitalist restoration.

The same assessment extends to the characterisation of the political regime. It is clear that China does not have a socialist democracy. That goal is far from being achieved and there is ample evidence of unacceptable restrictions on democratic rights. But theoreticians of a full restoration do not limit themselves to stating or criticising this fact. They postulate the existence of a brutal dictatorship that operates through barbaric rules and with bloody consequences. They consider that such a system is analogous to the tyranny defeated by the socialist revolution (the Kuomintang) or the terrifying Korean military junta of 1961-1987 (Au Loong, 2016).

In this view, China not only suffers from the return of capitalism, but also a regression to the political tragedy of the first half of the 20th century. The country is seen as under the control of a ruthless ruling class that subjugates the dispossessed through a political system analogous to the pre-modern forms used by emperors and mandarins.

But it is very difficult to reconcile these descriptions with the modernisation that the country has undergone and the consequent complexity of its socio-political structure. If the image of a merely destructive capitalism contrasts with the advances in the standard of living, then the presentation of a tyrant in command of 1.5 billion people also does not fit with the variety of political trends present in China. This context is imperceptible for viewpoints tied to a conventional reasoning of counterposing totalitarianisms with democracies (Mobo, 2019).

The presentation of China as a simple capitalist dictatorship also presupposes that the socialist legacy has been completely demolished. It holds that this tradition has been deeply discredited within the framework of a nationalist turn by the intelligentsia and political apathy of the youth (Au Loong, 2016).

But this vision clashes with the emergence of new leftist trends and with the continued weight of Marxism. This current of thought maintains greater vivacity in China than in its traditional centres in Europe. This fact is not irrelevant and indicates a much more promising scenario than the one presented by pessimistic diagnoses.

A transitory state capitalism?

Capitalist restoration has not been completed, but it is an ongoing tendency that could come to fruition through certain decisive episodes. China’s replacement of the West in the command of globalisation would constitute one of these triggers. It is unwise to assume that a bureaucratic formation will take the helm of world capitalism without fully exercising the rules of profit, competition and exploitation. Its capture of world leadership under the current prevailing rules would not be another milestone in China’s historical renaissance. It would constitute a turning point towards the definitive consolidation of capitalism.

Another variant of this path was verified in the moments of greatest euphoria of “Chinamerica”. At the zenith of that association, some analysts conceived that the monumental Asian assets of the United States would become properties of the Eastern giant. They assumed that large US companies would fall under the control of Chinese partners or managers. They believed that this conversion could constitute the first step towards the formation of a much discussed but non-existent transnational ruling class.

In fact, the realisation of this process was aborted by imperialist harassment initiated by Obama and reinforced by Trump. This ramping up of aggression gave rise to Xi Jinping’s defensive reaction and a change in the overall scenario. The context of amicable globalisation has been replaced by an enduring framework of tensions.

The outcome of this confrontation is uncertain. It may open up avenues for China’s capitalist internationalisation, with its companies competing more intensely for profits, markets and shares of surplus value. But it may also lead to geopolitical clashes, economic depressions and popular protests, which some thinkers identify with the debut of a post-capitalist scenario (Dierckxsens; Formento; Piqueras, 2018). China’s current intermediate formation, with its wealthy classes, its state regulation and its official Marxist rhetoric, will redefine its profile in the coming period.

The transitional status of this socio-economic formation is highlighted by many thinkers. In the absence of a more adequate label, some use the term “state capitalism” to typify the regime. They resort to this concept to highlight the role of the state at the helm of the economy in setting all the parameters and constraints on accumulation (Brenner, 2019).

But it is precisely for this reason that the term is inadequate. State capitalism obviously presupposes that capitalism already reigns supreme in society and in the state apparatus. That it operates through this latter organism to enforce the fulfilment of investment, accumulation and development goals that the ruling class seeks. This was the dynamic that prevailed in Japan, for example.

What distinguishes China from that precedent was the pre-existence of a socialist revolution, which cut off an initial trajectory of capitalism. This socialist component was absent in all the versions that state capitalism adopted throughout the 20th century.

That uniqueness is registered by another approach, which uses the same concept to highlight that China will resume the path to socialism (Amin, 2013). It suggests that state capitalism constitutes a step towards that goal. It also implies that forms of regulated capitalism are indispensable for the gradual gestation of an egalitarian society. But it is very difficult to imagine how socialism will emerge from a sequence of capitalisms of different forms. The thesis of an intermediate status avoids these inconveniences.

Confrontation of interests and agendas

China is not a uniform, silenced and subdued society. Within the Communist Party itself, millions of people coexist, debating proposals and positions via different channels.

The discrepancies that surfaced during the pandemic are an indicator of these clashes. In this emergency, different associations that do not belong to the hegemonic party acted in coordination with the ruling party. It is important to be aware of these activities to overcome the stereotypes disseminated by the media in their presentation of a society enslaved to the mandates of an autocracy (Prashad, 2020).

The United States is not evaluated using the same barometer. Overlooked is the fact that a bipartisan dictatorship of a single elite reigns in that country, periodically exchanging the presidential helm between Democratic and Republican exponents. This manipulation does not prevent the existence of a multifaceted scenario of political tendencies of various types. The same (or greater) diversity prevails in China.

The thesis of Asian monolithism contrasts sharply with a simple listing of the country’s political currents. One analyst distinguishes six significant strands. Neoliberals propose expanding privatisation, reducing the welfare state and repealing minimum wage laws. Democratic socialists advocate a mixed economy managed through multi-party political forms. The New Left defends public enterprises, questions insertion in globalisation and rejects inequality. The millenarists adopt the ideals of Confucius to postulate a reorganisation of the country along ethical lines. Some Marxists call for combining efficiency standards with altruistic ideals, while their traditionalist colleagues pursue Mao’s ideas of prioritising the defence of the country and the continuity of state-owned enterprises (Enfu, 2012).

This portrait suggests a diversity that is not perceptible through the blinkers of bourgeois institutionalism. It refutes the image of homogeneity in a nation that is home to one-sixth of the world’s population. It is not the cultural gap or the language barrier that prevents contact with this reality. The obstruction derives from a prejudice that contrasts Asian authoritarianism with flourishing Western diversity.

In recent years, thinkers more familiar with Chinese political life have highlighted the intense confrontation between the neoliberal and anti-liberal currents. They described a struggle between supporters of globalist free trade and promoters of state regulation (Amin, 2013).

But a more interesting process is developing around the so-called New Left. This current emerged in the mid-1990s, questioning privatisation projects and postulating income redistribution through a path of modernisation that differs from the capitalist road (Ban Wang; Jie Lu, 2012).

The New Left denounces the fetishism of growth, defends the social security system and condemns amnesia of China’s revolutionary heritage. It supports collective action and considers that Tiananmen was a rebellion against corruption and injustice (Keucheyan, 2010: 177-185).

Supporters of this current also object to the angelic gaze of Confucian cultists (Rofel, 2012). They criticise depoliticisation and encourage popular protests (Wang Hui, 2015). They promote, moreover, a reappraisal of the Cultural Revolution that seeks to move away from the prevailing demonisation and questions the unilateral emphasis on negative facets of that episode (Mobo, 2019).

An evaluation of Maoism is one of the main issues in debate among the New Left. Some analysts highlight the existence of several currents inherited from Mao. One current with weight in the official structures prioritises national defence in the face of US aggression. Another, that is developing outside this sphere, favours the autonomous organisation of trade unions (Qian Ben-li, 2019).

The New Left calls for a renewal of the socialist project, in confrontation with the presupposition of suitability (or inevitability) of a capitalist stage. It considers that the establishment of this system would entail dire consequences and deploys an intense battle against the culture of commodification (Lin Chun 2013:197-215).

The exponents of this viewpoint denounce the imbalances introduced by capitalism while recognising improvements in standard of living and the complexity created with the gestation of a new urban middle class (Lin Chun 2009).

They object to the primacy assigned to external expansion, stressing that China does not need to transform itself into a world power nor act as a beacon of free trade; rather it should prioritise the backlog of pending improvements in the domestic sphere (Lin Chun 2019). They point out that instead of compromising the economy with risky foreign investments, it would be better to channel surplus savings into local circuits of investment to revitalise state-owned enterprises and increase social spending.

This orientation favours domestic economic activity, seeking a reconciliation between socialism and the market (Lin Chun 2009). Externally, it promotes a return to the anti-imperialist ideas that the country encouraged before moulding itself to the euphoria of globalism (Lin Chun 2019).

This program of the New Left is consistent with a diagnosis of limited capitalist restoration in China. The definitive implantation of that system can be contained through a counterposed path of socialist renewal based on popular protagonism.

What is at stake is a confrontation of interests. The debate over the capitalist, socialist or intermediate nature of China is not an academic controversy about how to classify a new power. It synthesises different views and proposals for the country that will define the evolution of the global situation.

Claudio Katz is an economist, CONICET researcher, professor at the University of Buenos Aires, and member of Economists of the Left. His web page is


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