China now ruled by capitalist state

GLW #346 Wednesday, January 27, 1999 - 11:00
By Doug Lorimer

At its 18th congress on January 5-10, the Democratic Socialist Party adopted a document which concluded that China, like Russia and the other former Soviet republics (as well as the former "Communist"-ruled countries of Eastern Europe), is ruled by a capitalist state. The adoption of the document, entitled Theses on the Class Nature of the People's Republic of China, marked the conclusion of a 14-month discussion within the DSP on the class character of the Chinese state.

The discussion opened with a report to the October 1997 DSP national committee meeting, the party's highest decision-making body between congresses. The report reviewed the evolution of the Chinese economy and state since the ruling Chinese Communist Party (CPC) — the political apparatus of the privileged officials who constitute the commanding personnel of the Chinese state — had decided in late 1978 to begin expanding market relations within China's nationalised, planned economy.

It made the assessment that a hybrid economic system had come into being in China, with a rapidly expanding capitalist sector made up of private and quasi-private firms existing alongside the decomposing remnants of the socialised economy created in the early 1950s.

The 1997 report argued that, while the process of capitalist restoration in China was not yet complete, there was sufficient evidence to conclude that this process was the outcome of a conscious orientation by those who commanded political power in China and therefore China, like Russia and the former Soviet bloc countries, was ruled by a capitalist state.


The document discussed by the 1999 congress delegates restated this conclusion within the framework of the Marxist theory of the bureaucratically ruled post-capitalist societies. This theory, first developed by the Russian revolutionary Leon Trotsky, is most thoroughly presented in his 1936 book The Revolution Betrayed.

Trotsky argued that the Stalin regime represented a privileged caste of officials which had usurped political power from the Russian workers in order to protect and massively expand their access to scarce consumer goods and services. He warned that the monstrous growth of bureaucratic privileges, if left unchecked, would not be confined to the sphere of consumption.

The ruling bureaucracy, Trotsky wrote, "must inevitably seek supports for itself in property relations ... It is not enough to be the director of a [state] trust; it is necessary to be a stockholder. The victory of the bureaucracy in this decisive sphere would mean its conversion into a new possessing class."

At the time, Trotsky affirmed that the middle-class officials who made up the ruling Soviet bureaucracy "had not yet created social supports for its dominion in the form of special types of property". It still defended the nationalised, planned economy created by the workers' revolution in Russia in 1917-18 as the source of its power and income. In this aspect of its activity, he wrote, it remained a weapon of working-class state power.

However, the Stalinist bureaucracy's totalitarian methods of rule, which crushed any independent working-class political activity, blocked the workers' ability to check the development of pro-capitalist tendencies arising within the bureaucracy itself.

The DSP congress theses on China noted that Trotsky had believed that: "Without a victorious civil war against the Soviet workers the ruling bureaucratic caste could not overturn the property relations created by the proletarian social revolution of 1917-18 and convert itself into a new bourgeoisie."

This prognosis, the document argued, "was undoubtedly correct at a time, only 10 years after the October Revolution, when the generation that had actively participated in the social revolution still constituted the majority of the active forces of the Soviet proletariat. However, it was undermined by the political decimation of that generation in the mass terror of the late 1930s, and its replacement over the subsequent decades by a number of generations of workers whose identification with the social conquests of the revolution was severely eroded by the bureaucracy's abuse of state property in the interests of its own social parasitism."

When the ruling Soviet bureaucracy turned in the early 1990s toward the restoration of capitalism, it met little organised resistance from the mass of the workers.

Chinese Stalinism

The DSP congress theses noted that the overturning of capitalism in China in the early 1950s was carried out by mobilisations of the workers tightly controlled by the Stalinist-trained bureaucratic commanders of a victorious peasant army. The document pointed out that, as "with its Soviet counterpart under Stalin, the Chinese Stalinist bureaucracy exercised political power over the workers and peasants through a totalitarian system of arbitrary administrative command, rigid ideological control and a vast network of police repression of dissent operating behind the ceremonial facade of representative institutions".

The mass terror of the 1960s "Cultural Revolution" had shattered the confidence of China's intellectuals, workers, peasants and large numbers of lower-level state and Communist Party functionaries in the possibility that social progress could be achieved through "building socialism".

Beginning in 1978, the Chinese Stalinist regime began to introduce more and more market relations into the bureaucratically administered state economy. From the mid-198Os, the Beijing authorities turned a blind eye to government officials and the managers of state enterprises in the southern coastal provinces of China, in particular Guangdong, using state assets to set up private and quasi-private businesses, often in partnership with Hong Kong and Taiwanese capitalist investors.

In a speech to the Beijing delegates attending the 15th Chinese CP congress in September 1997, Premier Li Peng explained that there had been two key changes in the regime's economic policy after the 1966-76 Cultural Revolution. The first was what he called the "important decision to take economic development as the centre of the party's basic line".

This was an allusion to the December 1978 central committee plenum, at which the supporters of the CPC's pre-Cultural Revolution general secretary, Deng Xiaoping, were returned to key leadership positions within the state apparatus.

Li described the decision "to take economic development as the centre of the party's basic line" as "the first great step in the emancipation of the mind". That is, it was the first step towards freeing the bureaucracy from Mao's ultra-Stalinist policy of "putting politics in command", (i.e., of subordinating economic development to the totalitarian utopia of securing vocal support from every individual citizen for every pronouncement by the deified autocratic leader of the regime).

According to Li, the second great change in the orientation of the regime was signalled by Deng Xiaoping in his highly publicised tour of southern China in January-February 1992.

During the tour Deng singled out for special praise the economic dynamism of Guangdong province, the most marketised in China at the time. In 1992, only 35% of industrial production in Guangdong came from state-owned enterprises, 27% from quasi-private, so-called collectively owned enterprises, and 38% from privately owned firms. By 1992 Hong Kong capitalists employed 3 million manufacturing workers in Guangdong, compared with only 680,000 workers in Hong Kong itself.


In praising Guangdong's economic performance as a model for the rest of the country, Deng was giving his approval to the "entrepreneurial" practices of the province's government officials.

An example of such "entrepreneurship" was provided in a September 1991 Associated Press report of how a "Mr Yuan Lisong" used his official position to enrich himself by privatising state wealth. According to the AP dispatch, Yuan, a 48-year-old CPC member, was the deputy mayor of Dongguan City, one of the hottest centres of foreign investment in Guangdong province. He was also the managing director of the Fook Man Development Company, a Hong Kong-based firm with millions in the bank. He also sat on the board of three other Hong Kong-based companies, and was part-owner of a 500-room hotel in Los Angeles.

In his speech to the 15th CPC congress, Li stated that Deng's 1992 remarks praising the "entrepreneurial" activities of Guangdong provincial officials "resulted in China's moves to establish a socialist market economy as a goal in economic restructuring suggested by the 14th national party congress later that year".

At the 14th CPC congress in September 1992, the ruling circles of the Chinese state made it clear to all state officials that they should work toward creating a "socialist market economy" like the one in Guangdong province; that is, a capitalist economy in which the most politically influential capitalists are members of the ruling CPC bureaucracy.

This turn in the regime's orientation, the DSP theses argued, signalled a qualitative change in the class nature of the Chinese state. From tolerating the transformation of bureaucrats into capitalists in certain regions of China as a by-product of the state's attempts to correct the failings of the bureaucratically planned economy, in 1992 the Chinese state's policy switched to one of approval of the transformation of bureaucrats into capitalists across the country.

The state power these bureaucrats command ceased to be used to restrict the growth of capitalist tendencies and defend, in however inadequate a manner, the social gains of the socialist revolution. Instead, it became an instrument for the dismantling of these social gains and the restoration of capitalism in China.

The DSP congress document on China will be published in a forthcoming issue of Links magazine (see advertisement on page 16).

[Doug Lorimer is a member of the national executive of the DSP.]

From GLW issue 346