In 2007 Socialism Today began a series of articles under the heading, ‘The China debate’, to discuss the complex character of the state and the economy in a society encompassing one-sixth of all humanity. Nearly 20 years later, with developments both within China and in its geopolitical role still a source of contention in the wider working-class movement, we are relaunching the series, starting with this contribution by PHILIP STOTT on China and the Marxist theory of the state.
“Sociological problems would certainly be simpler, if social phenomena had always a finished character”, wrote Leon Trotsky in The Revolution Betrayed: What Is The Soviet Union And Where Is It Going? “There is nothing more dangerous, however, than to throw out of reality, for the sake of logical completeness, elements which today violate your scheme and tomorrow may wholly overturn it… The scientific task, as well as the political, is not to give a finished definition to an unfinished process, but to follow all its stages, separate its progressive from its reactionary tendencies, expose their mutual relations, foresee possible variants of development, and find in this foresight a basis for action”.
Twenty-plus years ago, and continuing on and off for more than a decade, a debate in the Committee for a Workers International (CWI) – primarily between the International Secretariat (IS) and the then leadership of the former Swedish section – took place on China. This included public material published in the pages of Socialism Today and on the CWI website.
It was a debate that involved some very important questions, the root of which was the class character of the Chinese state. Had China undergone a transformation into a fully developed capitalist state, a position advocated by the Swedish leadership since around the year 2000. Or, as argued by the IS, was it a state in transition towards capitalism, but which had not yet reached the point where such a categorical definition could be arrived at?
In essence, the IS argued, China was a hybrid. This conclusion arose from the fact that a former, albeit highly bureaucratised, planned economy had been abandoned by the Chinese Communist Party (CCP) leadership in the late 1970s in favour of the introduction of capitalist relations into the economy. However, that process of transition was still underway by the 2000s, and indeed that the “transition is not, in our view, complete and may not develop in a straight line”.
In the end, there was a compromise agreement in the CWI to describe China as a “unique form of state capitalism”. The debate involved not only an assessment of the economic base of the Chinese state but also the class character of the CCP-led state apparatus that still dominates China to this day.
It is fair to say that the position of the former Swedish leadership – that China was a fully capitalist state – has been completely invalidated, not only by the informative debate at the time but by real-world events since. The rigid, undialectical, black and white categorical thinking of the group that split from the CWI in 2019 is evident on reading their current material on China, which is a caricature of genuine Marxism. There is nothing to learn from them today.
Nevertheless, it is worthwhile, almost two decades later, to re-examine the issue: what is the class character of China today? Do we need to make any alterations to the conclusions drawn by the CWI then and since? Not least given the phenomenal rise of China and the sharpened geopolitical clashes between it and the US that dominate the globe.
The 1949 revolution
The Chinese revolution of 1949 was a seismic, world-altering achievement by the oppressed Chinese masses under the leadership of Mao and the Red Army. The overthrow of the rotten landlord and capitalist elite ushered in the potential to transform the lives of hundreds of millions.
However, while the revolution of 1949 was a massive step forward, the working class did not play the key role in the process, unlike the defeated Chinese revolution of 1925-1927, which was led by the proletariat of Shanghai and Canton. Instead, in 1949, Mao’s Red Army, a peasant-based force, and after years of military struggle, overthrew the venal dictatorship of Chiang Kai-shek and, as part of the revolutionary process, drove Japanese imperialism out of China.
The People’s Republic of China (PRC) that emerged after the revolution was a state more akin to that of Stalin’s Soviet Union than the period of a relatively healthy workers’ state in Russia between 1917 and 1923. That conclusion does not negate the reality of the mass base of support for the PRC, particularly among the majority of poor peasants who were mobilised in support of the Red Army by promises of land reform.
A distorted revolutionary process saw China emerge as a bureaucratic planned economy – a deformed workers’ state – where nationalised industry and collectivised agriculture were the dominant forms of property relations. But it was deformed in that there was no workers’ democracy and no role for the working class in planning the economy. Rather, there was the rule of a privileged bureaucratic caste under Mao Zedong. Unlike in the early period after the Russian revolution of October 1917, where a form of workers’ democracy predominated through the Soviets and the Bolshevik government, there was never such a model in existence after the Chinese revolution.
Impressive economic growth rates, industrialisation and the introduction of the ‘iron rice bowl’ – guaranteed job security, housing, healthcare and pensions underpinned by the planned economy – were real material gains for the working class and the poor. But they came at the unnecessary cost of bureaucratic and arbitrary rule, repression, and forced collectivisation of agriculture. Zig-zags in economic policy were marked. Targets dictated by the CCP leaders were introduced that took no account of the backward and agrarian nature of the economy. Significant decentralisation in the economy was evident, with the provinces and local CCP bureaucracy able to set prices and control some state-owned enterprises.
The ‘Great Leap Forward’ (1958-1962) was an attempt to overcome the agrarian and backward nature of the Chinese economy through rapid and forced industrialisation and was a catastrophe, resulting in the deaths of tens of millions as a result of famine. The ‘Great Proletarian Cultural Revolution’ (1966-76) in which two million people lost their lives, was, at root, an inter-bureaucratic civil war that included a mass purging of sections of the bureaucracy by Mao, whose position had been undermined by the failures of the Great Leap Forward.
The fact that by 1976, after Mao’s death, 80% of the population still lived in rural areas and agriculture still employed 70% of the labour force was a testament to the failures of the industrialisation targets for the economy.
Reform and opening up
Deng Xiaoping, who came to dominate the leadership after Mao, began to introduce market reforms in the late 1970s. The opening of economic zones for capitalist development on the eastern coast of China was an attempt to modernise the productive forces by attracting foreign direct investment while maintaining the dominance of the nationalised economy.
The Tiananmen Square uprising of 1989 and its brutal repression, alongside the collapse of the Soviet Union and the Stalinist states across Eastern Europe later that year and into 1990, saw the CCP leadership draw the conclusion that a more decisive turn towards capitalism was necessary to ensure its survival.
Soon after his assumption of power Xi Jinping, reflecting the outlook of the CCP leadership, posed the question in 2013: “Why did the Soviet Union disintegrate? Why did the Communist Party of the Soviet Union fall from power? An important reason was that the struggle in the field of ideology was extremely intense, completely negating the history of the Soviet Union, negating the history of the Communist Party of the Soviet Union, negating Lenin, negating Stalin, creating historical nihilism and confused thinking. Party organs at all levels had lost their functions, the military was no longer under Party leadership. In the end, the Communist Party of the Soviet Union, a great party, was scattered, the Soviet Union, a great socialist country, disintegrated. This is a cautionary tale!”
In other words, the CCP were not going to accept the disintegration of the party and their rule, unlike their equivalents in the ex-Soviet Union and Eastern Europe. Their motivation has always been their own survival as a ruling elite. For decades after 1949, they relied on and defended the planned economy and the reforms it allowed them to carry out, which ensured its survival and support among the working class and the poor.
Their adaptation towards the introduction of the market was, over time, a conclusion they drew, largely empirically, in an effort to overcome stagnation and the relative economic backwardness of China. By allowing the opening up of China to foreign direct investment, and later sponsoring the creation of a Chinese capitalist class, they hoped to advance the economy though access to modern capitalist techniques, science and industry.
The justification for the actions of the CCP leadership was to protect and save its rule by abandoning the planned economy and turning to the more advanced productive forces available from Western capitalism.
A long NEP?
This process towards capitalism became known, and still is, by the CCP leadership, as ‘socialism with Chinese characteristics’. Are there comparisons to be made with the New Economic Policy (NEP) introduced by the Bolshevik government in Russia from 1921? As Trotsky commented in 1935: “Without historical analogies we cannot learn from history. But the analogy must be concrete; behind the traits of resemblance, we must not overlook the traits of dissimilarity”.
The NEP was a concession, a retreat, by the Bolsheviks in the face of an isolated workers’ state after the defeat of the German revolution, suffering civil war (1918-21), famine, the collapse of the productive forces and the threat of capitalist restoration. After the policy of military communism ended in 1921, a turn was made by the Bolshevik leadership to ‘legalise the market’. In essence, the NEP allowed for the realisation of currency, trade and transactions, in other words, capitalist forms of exchange to develop more widely in the economy. Crucially, the need to get food to the cities from the villages and farmers who were effectively going on strike was required. “To mend economic relations with the rural districts was undoubtedly the most critical and urgent task of the NEP”, wrote Trotsky.
As Trotsky commented in his book The Revolution Betrayed: “Lenin explained the necessity of restoring the market by the existence in the country of millions of isolated peasant enterprises, unaccustomed to define their economic relations with the outside world except through trade”.
However, there were real dangers in this approach. Trotsky argued that the consequences of NEP included: “Between the kulak and the petty home craftsman there appeared, as though from under the earth, the middleman… The rising tide of capitalism was visible everywhere. Thinking people saw plainly that a revolution in the forms of property does not solve the problem of socialism, but only raises it”.
In essence, NEP was an attempt to overcome the difficulties facing an isolated and largely still agrarian workers’ state. It also, as a consequence of its introduction, coincided with and contributed to the strengthening of the political counter-revolution that was taking place as a result of the increasing bureaucratisation of the state.
Trotsky exposed NEP as resulting in a shift in the class balance of forces within Russia. “Retarding industrialisation and striking a blow at the general mass of the peasants, this policy of banking on the well-to-do farmer revealed unequivocally inside of two years, 1924-26, its political consequences. It brought about an extraordinary increase of self-consciousness in the petty bourgeoisie of both city and village, a capture by them of many of the lower Soviets, an increase of the power and self-confidence of the bureaucracy, a growing pressure upon the workers, and the complete suppression of party and Soviet democracy”.
The NEP was abruptly abandoned in 1928 by Stalin, who had supported the kulaks becoming rich up to the day before, and who by then had consolidated his position in the vanguard of the bureaucratic degeneration of the Bolshevik party and the revolution itself. Stalin, still basing himself on the state-controlled sectors of the economy, eventually feared the challenge to his rule from the strengthened kulak and merchant layers in society who had strengthened their social base as a result of NEP. Something Trotsky and the Left Opposition had been warning of for years.
However, the Bolsheviks’ turn to NEP was an attempt to defend the October 1917 revolution, to buy time for the victory of the proletarian revolution in the West. It was done through open discussion among the leadership of the Bolshevik party and its ranks, and in the Soviets themselves.
Trotsky summarised the position thus: “The utopian hopes of the epoch of military communism came in later for a cruel, and in many respects just, criticism. The theoretical mistake of the ruling party remains inexplicable, however, only if you leave out of account the fact that all calculations at that time were based on the hope of an early victory of the revolution in the West. It was considered self-evident that the victorious German proletariat would supply Soviet Russia, on credit against future food and raw materials, not only with machines and articles of manufacture, but also with tens of thousands of highly skilled workers, engineers and organisers… It can be said with certainty, however, that even in that happy event it would still have been necessary to renounce the direct state distribution of products in favour of the methods of commerce”.
This last sentence is important. Given the economic backwardness of Russia at the time of the revolution there was no possibility of simply skipping over its low level of economic development towards socialism in one go, even if the German and world revolution had been successful. The workers’ state that was founded in Russia after October 1917 would, by necessity, have been a transitional stage towards socialism. The “methods of commerce”, in other words, capitalist forms of distribution and exchange, would still be utilised until Russia had raised the productivity of labour and developed the productive forces to a point when socialism could have been achieved. Albeit one where the workers’ state had nationalised the majority of the economy, developed a plan for the economy and introduced a state monopoly of foreign trade etc.
The CCP regime had an entirely different aim: to preserve its bureaucratic rule at all costs, amid stagnation and the fear of its own potential removal at a later stage. The trauma and costs of the Cultural Revolution had possibly also weakened the confidence of the CCP leaders in their own leadership of society. In that sense, the description of the turn to the market by the CCP leadership as a Chinese form of the NEP can be arrived at only if understood from the polar opposite motivation to that of Lenin, Trotsky and a narrow core of Bolsheviks.
Rise of China
Nevertheless, the turn by the CCP-led state to the market marked a decisive turning point. The use of foreign multinational investment, and then the development of a Chinese capitalist class, has played a role in China emerging as the second largest economy in the world. From 80% of the population living in the rural areas of China in the late 1970s to today, with 68% living in the urban centres just 50 years later, is an expression of its colossal economic advance, based as it has been on the exploitation of the labour power of around 700 million-plus workers in China today.
The turn towards capitalist relations, the ‘reform and opening up’ process, cannot explain that development on its own, however. Today, in no other capitalist state in the world would such an economic advance be possible in such a short space of time. India is sometimes cited as an analogous example, but there is no comparison in terms of the overall levels of industrialisation and impact on the world economy. Therefore, the question has to be posed: what other factors were involved?
The decisive factor in China’s rise was the mobilisation of the CCP-led state machine, which has effectively led and guided the rise of China over this phase of its development over the past five decades. Never at any stage in the process did the regime seek to hand over either political power to the growing indigenous capitalist class, nor did they relinquish their own role in the strategic ‘planning’ of the economy. Unlike for example, the leadership of the CP in the events that took place in the Soviet Union in 1990 after its collapse and the capitalist restoration process that rapidly followed.
Another factor in China’s rise was the blind hubris of US imperialism that went along with China’s entry into the WTO in 2001. They also encouraged the investment of hundreds of billions of dollars by US multinationals into China, seeing it as an opportunity to boost its economic interests through the huge pool of cheap labour available. Believing that the CCP-led state would be happy to remain a conveyor belt for US capitalism in consumer goods.
If anything, the CCP has, since 2018, increased its role in the economy to a significant degree. “According to leading analysis firm Fitch Ratings, the number of acquisitions by Chinese state-owned enterprises of A-share private companies (Chinese companies listed on the Shanghai Stock Exchange or Shenzhen Stock Exchange and traded in yuan) increased from six in 2017 and 18 in 2018 to 50 in each of 2019 and 2020. It seems many of the acquisitions within that post-2018 increase are private enterprises that fell into financial difficulties and were then acquired by local-government-affiliated investment funds”. (Nippon.com)
The power of state-owned enterprises in the economy in general, and the large number of cases where they take over private enterprises completely, is also a feature. By 2021, state-owned companies accounted for one-in-four of all A-share listed companies, approximately 50% of market capitalisation, two-thirds of sales, and 75% of profits.
Up until the subprime housing collapse in the US and the Great Recession that followed, China’s private sector consistently grew in scale and scope; however, since the early 2010s, and particularly since the Made in China five-year plans were announced covering 2015-2025, there has been a greater resurgence of the state sector. This trend is often referred to as ‘state advance, private retreat’ (guojin mintui): 71% of Chinese companies listed in the Fortune 500 list in 2022, and 84% by asset size were state-owned companies.
Defending scientific socialism?
This opening up of the planned economy to capitalist relations has been defended by successive CCP leaders as necessary to advance the “primary stage of socialism for a long time. As we focus on the road of socialism with Chinese characteristics, we must also keep the lofty ideal of communism in mind”.
Xi Jinping, in the same speech to the Third Plenum of the CCP in 2013, said: “In recent years commentators both at home and abroad have questioned whether the road pursued by China is truly socialist. Some have called our road ‘Social Capitalism’, others ‘State Capitalism’, and yet others ‘Technocratic Capitalism’. These are all completely wrong. We respond that Socialism with Chinese Characteristics is socialism, by which we mean that despite reform, we adhere to the socialist road”.
He went on: “The basic economic system in which public ownership is the mainstay and a variety of auxiliary ownership systems develop alongside. These goals embody the basic principles of scientific socialism under our current historical conditions”.
The CCP are far from defending scientific socialism and a workers’ democracy; something that would require not only the nationalisation of the major sectors of the economy, something which does not fully exist in China anyway, but crucially, workers’ control and management as part of a democratic socialist plan. Alongside the removal of the bureaucracy and the establishment of a genuine workers’ state without privileges.
However, Xi’s argument from 2013 that the basic economy in China involves public ownership and a variety of auxiliary forms of ownership is perhaps not far off an accurate description of the reality today. Following on from the increasing state intervention and funding of the drive to advance the new industries of solar, wind, robotics, electric vehicles, AI and advanced semiconductors over the last decade, has the balance of the Chinese economy shifted back in the direction of state control and, to a degree, the retardation of the capitalist sector? What is certain is that the ability of the Chinese Communist Party to harness and direct investment into technologies at unprecedented speed and scale makes it a unique case internationally.
One of the crucial points made by the IS in the discussion with the former Swedish section was that “there can be significant twists and turns in the situation. It cannot be ruled out that, in the coming period of world economic crisis, the state will once again take over privately-owned corporations and some previously privatised companies threatened with collapse”. (Lynn Walsh, Socialism Today No.122, October 2008).
Is that not exactly what has happened since? Not least the massive state intervention in the form of a stimulus package by the CCP into the economy after 2008 – the largest in world history – to offset the effects of the crisis on China. Moreover, it is also an accurate summary of the actions taken by the regime over the last decade as it has increasingly used the state to advance China up the value chain of the world economy to become world leaders in some key industries. (See How China moved up the value chain on the CWI website).
Class character of the state
At the very least, these actions underline the character of China as a hybrid entity – a state that stands with at least one foot in the deformed workers’ state category, which was created post the 1949 revolution, and the other foot in the camp of capitalism, which currently is the dominant form of economic relations in the country and which accounts for 60% of China’s GDP. But more precision is required on that score.
The Maoist state created after the victorious Chinese revolution of 1949 is to a large degree still intact in China today. The dominance of the CCP over society is clearly illustrated by its control over the state machine – including the People’s Liberation Army, who were banned from holding economic interests in 1998 – the media and through the 100 million-strong membership of the CCP, which acts like a conveyor belt for the decisions and ideology of the party leadership into society. A peculiar form of Marxism and Chinese nationalism, the dominant ideas of the CCP leadership still today defend their conceptions of ‘socialism’ and ‘communism’.
CCP branches prevail in both private and foreign-owned companies to ensure the instructions of the party are carried out at management level. In 2017, the CCP revealed that 70% of non-state-owned enterprises had established Party branches, and about 74,000 enterprises with foreign capital, or 70% of the total, had branches, mainly in joint ventures.
As the CCP declaration indicates: “Party, government, military, civilian, and academic; east, west, south, north, and centre, the Party leads everything”. This is so far removed from the workings of a traditional capitalist economy as to be almost unrecognisable.
Today, it is correct to argue that state capitalism is the dominant form of economic activity in China, and that the regime intends to continue with this for ‘generations’ to come. However, that doesn’t mean that it will not strike blows against the Chinese capitalist class, as has been done on many occasions. The CCP-led state machine itself stands over society, and while basing itself on capitalist relations, it can and does play an independent role of balancing between the classes – the proletariat of China – in whose interests they claim to rule – and that of the capitalist class – on whom they depend economically.
In the book review for Socialism Today for the April 2007 edition (issue No.108) that launched the China debate series, Peter Taaffe wrote: “Marx also developed the idea of the ‘Bonapartist’ state which, while it ultimately represents the dominant class in society, can, under certain conditions – for instance, where there is a class deadlock – play a relatively ‘independent’ role, only defending the dominant class ultimately and not without sometimes striking blows against the class it ostensibly ‘represents’. Moreover, in societies less economically developed, particularly in conditions of extreme cultural backwardness, this Bonapartist character of the state can, at least for a period, play a mediating role, sometimes appearing ‘neutral’ in arbitrating between the classes and only coming down on one side, sometimes after a considerable historical period, when one of the contending economic forces and classes or groups it represents is clearly in the ascendancy”.
Is it not the case currently that the state in China is playing a role analogous to this? Moreover, its future direction can include further encroachments into the domain of the capitalists, further lurches towards increased state control and nationalisation of industries.
Particularly in the wake of a new world economic downturn, the bursting of the AI bubble and other crisis events, including the possibility of military conflict with the US, the CCP could be driven to take even more decisive action against capitalist interests in China. This is particularly the case if they were faced with a political challenge from sections of the capitalist class in China.
Class pressures and splits
The CCP’s relationship to the 700 million-plus strong proletariat is also another major factor in their considerations. Zig-zagging between concessions and repression, ultimately, the bureaucracy will do all they can to prevent a challenge to their rule by the Chinese working class. It is vital that an independent class policy is pursued by genuine Marxists that has no illusions in the CCP.
The CCP are also not a monolith. Splits in the ruling party, reflecting the different class pressures, from both the capitalist class – to open up the economy further and demands for direct participation in political decisions – and from the working class – for the establishment of independent trade unions, the right to organise their own parties and for democratic rights – are inevitable.
It is possible that the CCP – or a section of it – could move in the future towards reimposing a centralised planned economy when faced, perhaps, with a combination of a world crisis and a mass movement of the Chinese working class, or with a political challenge from sections of the capitalist class itself seeking to overthrow the CCP from its dominant position.
By basing themselves in a distorted way on the demands of workers – and not without a split in the CCP – a turn towards state control is a perspective that cannot be ruled out. At the same time, another section of the bureaucracy could also turn towards the capitalist class and seek to champion its rights and demands for full political power over China.
During the period of the NEP in Russia, there were significant divisions opened up among the Bolsheviks. Trotsky describes the crystallisation of a right wing, the centrists and a left wing during that period. Only its left wing, represented by Trotsky and the Left Opposition, defended a consistent and coherent line in defence of industrialisation though state planning and workers’ democracy, including developing a programme for collectivisation of the land.
“The prognosis of the Bolshevik-Leninists (more correctly, the ‘optimum variant’ of their prognosis) was confirmed completely… Development of the productive forces proceeded not by way of restoration of private property but on the basis of socialisation, by way of planned management”. (Leon Trotsky, The Workers State, Thermidor and Bonapartism, 1935).
Stalin and others were prepared to allow the development of the market long after it became a threat to the existence of the planned economy on which they rested. They only acted to end it after their own rule was under threat through an overturn in the economic relations by rising capitalist elements.
Trotsky also commented on Stalin and the bureaucracy that by 1935 “the domestic policies have turned toward the market and the ‘well-to-do’ collective farmer… Involved here is essentially the return to the old organic course (staking all on the Kulak, alliance with the Kuomintang, the Anglo-Russian Committee, etc) but on a much larger scale and under immeasurably more onerous conditions”.
The CCP leaders have much more in common with Stalin and the right wing of the Bolsheviks, who looked to and encouraged the development of the market to overcome economic backwardness and isolation, rather than base themselves on the potential of workers’ control and management and a socialist planned economy.
Is it not the case that characterising China as a hybrid – part capitalist, in that its economy is based overwhelmingly on capitalist relations with a significant degree of state ownership, and part a deformed workers’ state, in that the CCP-led state machine dominating society remains largely intact from the post-1949 revolution – is more accurate than simply describing it as a “unique form of state capitalism”?
Such a characterisation, of course, must recognise that a state that is trying to regulate competing class interests, both of the bourgeoisie in China and globally and of the proletariat, cannot last forever.
Ultimately, either the CCP state is overthrown by the working class, or it loses its power to the rising capitalist class with the support of foreign capitalist powers. However, the Bonapartist character of the Chinese state has given it a certain ability to balance between the two dominant classes in society for the last 50 years, both basing itself on those class forces while at the same time striking blows against both in order to defend its own rule.
In that sense, the Chinese state is unique in world history. There is not an easy classification in which it can be put. It is certainly not a regime that currently bases itself on a planned economy and nationalisation of the means of production. But nor can it be put into the category of a state capitalist economy overseen by a bourgeois state apparatus.
Such a quandary brings to mind the explanation of Trotsky when he argued: “Some objects are confined easily within boundaries according to logical classification, others present difficulties: they can be put here or there, but within a stricter relationship – nowhere. While provoking the indignation of systematisers, such transitional forms are exceptionally interesting to dialecticians, for they smash the limited boundaries of classification, revealing the real connections and consecutiveness of a living process”. (Trotsky’s Notebooks 1933-1935: Writings on Lenin, Dialectics, and Evolutionism)
A discussion on the class character of the Chinese state is a vital component not only of perspectives but also in guiding the drawing up of a political programme for China. A correct assessment is therefore essential for Marxists, not least in being able to orientate correctly to the developing revolutionary upheaval that China will experience as the working class finds a road to the real ideas of socialism and a genuine workers’ democracy.