The class character of China Part 2: Changes in Chinese society as a result of “Reform and opening-up” is republishing with permission this important document by the Bolshevik Group South Korea. It can be downloaded from their website published as a pdf here or can be read on the website here.

As the Bolshevik Group state in their introduction:

“The issue of China, as it was the case for the Soviet Union before the capitalist counter-revolution, is the foremost subject of the revolution of this era. China, which has the world’s largest population, is the core target of the U.S.led imperialist camp. For this reason, China, along with the United States, is almost always a key player involved in various conflicts in the world. In this respect, the world working class, which is advancing to the revolution, must accurately understand social character of China and its political motives. Revolutionary and counter-revolutionary barricades are divided around this issue.”

Class-Conscious believes this document is important on shedding light on the class character of China. It outlines how China remains as a Deformed Workers State, that is a country with a socialised means of production despite the growth of a large capitalist sector over the last forty years. Ruled over by a Stalinist bureaucracy in the form of the CCP domestic and international class pressures generated by this hybrid economy. means that China is very much a society in transition and that its future is not settled. The analysis here is in line with the article written by Robert Montgomery “China: Capitalist, Socialist or “Weird Beast“.

Note: some additional images and minor editing have been added to the original article

We have published the article in two parts:
The class character of China Part 1: From the 1949 Revolution to the 1978 “Reform and Opening-up”
The class character of China Part 2: Changes in Chinese society as a result of “Reform and opening-up”

Part 2: Changes in Chinese society as a result of “Reform and opening-up”

About 40 years have passed since the Deng Xiaoping leadership came to power in 1978 and implemented the so-called ‘market opening-up’. The country which Deng Xiaoping lead was facing great challenges. Most of the means of production were nationalized, but the level of productivity was almost at the level of pre-capitalism.

The struggle against imperialism in colonial China was led by the Communist Party. With the defeat of the Kuomintang, a local imperialist puppet, the claws of imperialism embedded in China were pulled out. With the victory of the workers and peasants in the struggle against imperialism China followed in the footsteps of the Russian Revolution in breaking the imperialist chain at its weakest links.Thus, victory in the struggle for national liberation developed into a social revolution which abolished private ownership of the means of production in connection with the law of uneven and combined development in world history.

But the immediate problem was the inherited pre-capitalist level of productivity. Figuratively speaking, a family earned a huge cauldron through a desperate struggle yet there was just a bowl of rice to cook. The improvement of productivity was desperately required. Without more developed productivity the achievements of the victory of the anti-imperialism struggle and the abolishment of private ownership would soon face challenges and eventually a crisis of counterrevolution.

“This development of productive forces … is an absolutely necessary practical premise because without it want is merely made general, and with destitution the struggle for necessities and all the old filthy business would necessarily be reproduced.” (Marx, The German Ideology, 5. Development of the Productive Forces as a Material Premise of Communism)

The challenges the deformed Chinese workers state had to solve were immense. The objective conditions were very narrow, since socialist revolutions in the advanced capitalist countries have been delayed indefinitely. To make matters worse, the relationship with the Soviet Union was cut off. Under these conditions, China’s leadership adopted ‘market opening-up’, which was capitalistic concessions. Just like NEP (New economic policy) of Soviet Union which was a desperate measure to revive the economy torn by civil war, it was forced rather than selected. Forty years have passed since then, and China has changed dramatically during that process.

* * *

The specifics of economic history is not our focus here. The objective of this article is to examine the social characteristics of China. Thus now, 40 years passed after ‘market opening-up’, the points of this article are: how has China changed in that time? Is China a completely capitalist state as many people say, or does it  still have the characteristics of a workers state? And, considering the  class contradictions deepening in China today what lies ahead in the future and what attitude should the working class take in the developing clash.

After the 1st chapter of “From the 1949 Revolution to the 1978 “Reform and Opening-up”, the 2nd chapter is” Changes in Chinese society as a result of “reform and opening-up”. We examine those changes in order of 1. Growth of productivity 2. Growth of capitalistic forces 3. Dominant form of ownership.

1. Significant growth in productivity

For 40 years, China’s productivity development was remarkable because of ‘market opening-up’, which was a partial capitalistic concession. This development appears through figures such as ‘Gross Domestic Product(GDP), world 500 conglomerate, gold·dollar reserves, and poverty rate’.

1) Gross Domestic Product (GDP)

From 1978 to 2017, China’s real GDP grew by 9.5% annually. Meantime, nominal GDP per capita increased by about 155 times, from 385 yuan to 59660 yuan. (Bank of Korea, “China economy opening-up 40 years: Results and Prospects”).

This has greatly changed China’s position in the global economy. As shown in the table below, In 1978, when the share of global economic GDP in the U.S. and Japan, which were first and second at the time, was 27.7% and 11.8%, respectively, China was only 1.8%. However, in 2017, when the U.S. and Japan were 24% and 6%, respectively, China became 15.2%, dragging Japan down to become the world’s second-largest in terms of GDP.

In terms of GDP China overtook Japan in 2010. In 2020, it nearly caught up with the United States. In 2008, GDP of China was only 31% of that of United States, but in 2020, it was 71% of that of US.

Comparison with Korea and India

It is also interesting to compare China with Korea, which recorded remarkable economic growth to the point of being called the ‘miracle of the Han River,’ and India, a country with a vast territory and population comparable to that of China.

China’s average annual growth rate for 40 years between 1978 and 2017 was 9.5% annually. Meanwhile, Korea’s economic growth rate averaged 8.94% annually over the 40-year period from 1963 to 2003, when the five-year economic development plan was implemented. Between 1978 and 2017, which is the same comparative period as China, it was 6.48%. In this regard, China’s economic growth rate was faster than that of Korea, and during 1978-2017, China’s growth rate was about 1.5 times that of Korea.

Until the 1980s, there was no significant difference in income levels between China and India (June 2018, Economic Information Center). However, as of 2020, India’s per capita GDP is $1,883 and China’s is $10,160. India’s per capita GDP is less than one-fifth of China’s (Gross National Income per Country, KOSIS).

The difference between China and India may also be that unlike China, India has not been able to cut off the imperialist super-exploitation that has continued for the past two centuries.

According to the Indian Minister of Foreign Affairs:

India had two centuries of humiliation by the West in its predatory form it came to India in the mid-18th century. An economic study tried to estimate how much British took out of India, it ended up at a number of $45 trillion in today’s value,

S Jaishankar in the US, also estimates that Britain took close to $45 trillion from India in today’s value.

Economic Crisis and China

It is also meaningful to look at China’s growth rate during the major economic crisis when the economy fell sharply.

 As shown in the table, during the “IMF foreign exchange crisis, global financial crisis, and COVID-19 pandemic crisis”, the global economy fell sharply downward, recording 2.61%, –0.07%, and –4.40%, respectively.

However, during the same period, China recorded growth rates of 7.6% (1998), 9.4% (2009), and 2.3% (2020). Among them, the comparison in 2009 is significant. Immediately after the 2008 financial crisis, which was considered more serious than the Great Depression in the 1930s, when most countries, including the U.S., grew negatively, China alone grew nearly 10% (9.7% in 2008 and 9.4% in 2009) (KOTRA 2021).

2008 Great Depression

The 2008 financial crisis resulted in a bubble in U.S. real estate mortgage loans, also known as the “Subprime mortgage crisis.” Overproduction that exceeds profitable demand and predatory lending that employ clever private techniques called “advanced financial techniques” eventually collapsed beyond the limit. Several financial dinosaurs, including Lehman Brothers, went bankrupt, and the economy stopped. In two years, 73 million jobs were lost, and unemployment soared.

The panic has hit the United States and the poorer European ‘PIGS’ countries (Portugal, Italy, Greece, and Spain). There were frequent riots that raised fundamental questions about the system, including the ‘Occupy Wall Street’ in U.S. The “apocalypse of capitalism” was casually raised in the mouths of mainstream economists.

The current crisis will be bigger and longer than the Great Depression …Since the Lehman Brothers crisis in 2008, all governments have done is to turn private debt into government debt. We are in structural trouble at the moment. Some say ‘Capitalism is over.’ (Kang Man-soo, Kyunghyang Newspaper, June 15, 2012)

Passing on the cost to the working class

The U.S. government released $700 billion to save the banks on the brink of bankruptcy and printed $4.5 trillion over the next six years. Most of the money labeled “rescue” was used to revive financial asset owners by buying bad loans on Wall Street. At the peak of the financial food chain, $182 billion (approximately KRW 218 trillion when calculating the dollar as 1,200 Won) was invested in the American International Group (AIG), which oversees financial fraud. An investigation was carried out to blame for the financial meltdown. However, not a single Wall Street CEO, who was the main culprit, was arrested (BBC, September 15,2018). The investigation was only a cover to cool off the indignation of the working class.  

Meanwhile, the money printed in bulk by the Federal Reserve Bank does not have value in itself. Value is produced only through labor. That’s why the gap between the “nominal” value and the actual value represented by the huge currency printed by the U.S. Federal Bank had to be filled by the global working class, including the U.S. working class. In order to fill the vacuum of the value created by the capitalist government’s reckless printing of money, the working class had to bear double the pain of unemployment, increased working hours, inflation, and reduced social welfare spending. The capitalist class “rescued” capitalism again by peeling off the hide of the working class.

China’s crisis response

Meanwhile, the 2008 economic crisis also shocked China. China was called the factory of the world. China’s exports fell sharply as economic panic hit the U.S. and Europe, its main consumers. Then China also expanded its finances. It announced a $585 billion stimulus package. However, most of the money donated by the Chinese government was given to the real economy, including social infrastructure construction. China’s stimulus package was different from the U.S. method of mass-issuing of printed currency to rescue the capitalist class first, and to fill the vacuum in value created by it to the working class. In China it was as if the surplus grain accumulated in the warehouse was released in a drought— the Chinese government released the actual value accumulated by state-owned companies and state-owned banks. 

As a result, in 2009, when the United States — 4% of the world as a whole — falls to 0.1%, China recorded positive growth of 9.4% in 2009. China was also affected by the global panic, but the Chinese economy showed a very different movement from the profit-based economy for a small number of private capitalists.

GDP per capita

GDP per capita divided by population is also meaningful. Through this, a new story comes out.

In terms of GDP, China overtook Japan in 2010. In 2020, it nearly caught up with the United States. In 2008, GDP of China was only 31% of that of United States, but in 2020, it was 71% of that of US.

2) The world’s top 500 companies

Fortune, the longest-running international economic magazine established in the United States in 1929, announces the world’s top 500 companies every year. In 2021, 135 companies in China were among the top 500 companies. As shown in the table below, only 10 were on the list in 2000. However, in 2020, 20 years later, 124 companies rose and in 2021, a year later, 135 companies rose.

Meanwhile, at the same time, the number of US companies decreased from 179 in 2000 to 122 in 2021. With the number of companies in the top 500 companies, China overtook the U.S. by three in 2020, and the gap widened to 13 in 2021.

Of course, the U.S. still leads in total sales. In terms of sales by country, the U.S. is ahead of China. The total sales of the listed companies is $9.65 trillion, higher than that of China (8.92 trillion) in the United States (Edaily, August 3, 2021).”

In this case, it should also be considered that China’s population is about 4.4 times larger than that of the United States. Then, China’s per capita sales, limited to the top 500 companies, are only about one-fifth of that of the United States, similar to GDP.

3) Dollar and gold reserves

Money and currency are different. Money, such as gold, is a means of exchange for goods and at the same time a product of its own value. Currency however, which is a coin or bill issued by each country because of the convenience of distribution, does not have its own value. It is a certificate of exchange for goods of the same value, which is distributed under state guarantees. So, if more currency is issued than the actual exchange value, inflation, or the depreciation of the currency occurs. 

The same is true of the dollar, which stopped gold exchange in 1971. The U.S. dollar is a key currency used in most of the world’s commodity trading. The Federal Reserve Bank, a den of U.S. financial capital, uses the right to issue dollars to put the world’s real assets in its hands at a lower price than their actual value. In other words, if the Fed increases the issuance of dollars to lower the value of the dollar and then purchase overseas real assets with dollars that have fallen in value, they will purchase the real commodities cheaper than their actual value. This unfair trade continues because the U.S. is the superpower that won World War I and II, and still forces dollar circulation with its powerful economic, political and military power. Therefore, each country always has a certain amount of dollars for the purchase of essential goods such as oil. 

In this regard, “How many dollars and gold a country has” is a measure of the country’s economic power.

 According to the table below, as of 2021, China has the sixth largest gold in the world after the United States, Germany, Italy, France, and Russia. By the way, the dollar is overwhelmingly No. 1 with $3.33 trillion.

China’s dollar holdings

Considering that it was $212.2 billion in 2001 and $800 billion in 2005, China’s foreign exchange reserves were indeed very steep upward. This may be due to the continued increase in dollar-type direct investment in China, a cheap world factory, but above all, to a large trade surplus every year (China’s view of a surge in China’s foreign exchange reserves, KIEP, April 17, 2006).

As shown in the table below, China holds dollars mainly by buying U.S. government bonds.

The tyranny of the hegemonic currency of dollars

It is very disadvantageous to use or hold currency in dollars without investing in production or purchasing real assets. 

First, the value of the currency in reserve melts every year as much as inflation without doing anything. In addition, the U.S. Federal Reserve printed a formidable amount of dollars and poured them into the market after the 2008 economic crisis and after the March 2020 economic crisis. The rise in global property and other asset prices over the past few years and  the tsunami-like inflation is a consequence (see Capitalist World System on the brink of death).

Second, according to the previous KIEP, the difference between the investment return and the foreign exchange reserve’s annual return is about 2%. In other words, if China didn’t invest their currency in a profitable place and just hold it, it sits and loses 2% every year. If China’s foreign exchange reserves are calculated at about 3.3 trillion won, so it means that China suffers a loss of 66 billion dollars (82 trillion won) every year. 

Third, unlike gold, the dollar is a currency that relies on payment guarantees from the U.S. Federal Reserve Bank. So, if the relationship becomes extremely bad in the future, the dollars that China holds may turn into meaningless paper. This is the case in which U.S.-Centered Western imperialism froze Russia’s overseas dollar assets after the Ukrainian War (Yonhap News, March 1, 2022, Hankyung, May 25, 2022)

It is difficult to explain why China should hold such a huge amount of dollars at such a disadvantage. However, it is presumed to be due to the relationship between the two countries. In other words, ‘China has a significant trade surplus with the United States. If the relationship with the U.S. goes awry, it will hurt the Chinese economy. So they take a certain loss through holding the U.S. dollar.’ 

China’s losses will be a huge benefit to the United States, especially financial capitalists. Above all, U.S. is benefiting greatly from China serving as a dollar reservoir on such a huge scale. Otherwise, large-scale inflation would have hit the U.S. earlier than any other country due to large-scale currency dumping.

China’s gold reserves

China’s official gold reserves in 2020 are known to be 1948 tons. However, experts estimate that China actually has more than twice as much gold and more than Germany, the second-largest producer.

 “China has not revealed the exact amount of gold it has in order not to go against the U.S. sentiment. (Bloomberg, April 2015) According to Bloomberg Intelligence’s own tally, the People’s Bank of China’s gold reserves are about 3,510 tons, more than double the 1,054 tons it announced in April 2009. This is more than 3,384 tons of Germany, the world’s second-largest in WGC statistics. It is now estimated that the People’s Bank of China has much more gold than this. 

The U.S. Market Watch expects China’s gold reserves to be two to three times higher than the 1926 tons announced by the Chinese government. Currently, China is the largest producer of gold, producing 300 to 490 tons a year, equivalent to 11.5 to 18 percent of the world’s annual production of 2,700 tons. On the other hand, it is questionable whether the U.S. still has more than 8,000 tons of gold.” (Weekly Chosun, March 30, 2022)

In terms of gold, dollars, and U.S.-China relations, the above report has considerable probability.

In the wake of the war, U.S. and NATO imperialism imposed extreme economic sanctions on Russia. The Russian ruble was frozen. Nevertheless, the Russian economy is struggling, but it does not collapse. This is because Russia has real assets, namely gold and natural resources. Gold is the real power and master key of the economy. 

From the appearance of Russia, one can guess why China, which is also in the teeth of U.S. aggression is announcing a reduction in its gold reserves. This may be because China wants to hide that they are still building up their strength in front of a much stronger and more violent strongman. As Do Kwang-yanghoe means, “Hiding one’s abilities and waiting for the right time.”

4) Absolute poverty reduction

Last year, 2021 was the 100th anniversary of the founding of the Communist Party of China. In 2021, the Chinese government promoted the achievements of the Communist Party of China regime. Absolute poverty eradication was one of them.

“After many years of hard work…At the 100th anniversary of the Communist Party of China’s founding, it solemnly declared that China’s all-out war on poverty alleviation had won, and by the current standards, all 98.99 million rural poor were freed from poverty, and all 832 poor counties and 12.8 million poor villages completed their mission to eliminate absolute poverty. China has reduced poverty by more than 10 million per year for the last eight years…People who are out of poverty are no longer worried about eating and wearing, and compulsory education, basic medical care, and housing safety will be guaranteed. China has 

realized 770 million people have left poverty since reform and opening up under international poverty standards, which cost 1.9 dollars per day to the World Bank.” (Consul-General Wang Lu-shin: For the happiness of Chinese farmers, March 24, 2021)

On April 6, they released the “Encyclopedia on China’s Practice to Fight Human Poverty.” The encyclopedia explained the specific achievements, saying that poverty was nearly extinguished by the movement carried out in the eight years since Xi Jinping took office. It is a project targeting the absolutely poor population of “rural, women, the elderly, the disabled, and children” who have been alienated from the benefits of economic development, and has significantly improved living conditions such as medical care, housing, and education.

According to the encyclopedia, the following achievements were made.

— Increase in average disposable income of rural poor: 6079 yuan (approximately 1.04 million won) as of 2013 → 125.88 million yuan (approximately 2.15 million won) as of 2020

— The compulsory education rate for children in poverty is 94.8%, and more than 99.9% of the poor are subscribed to China’s basic medical insurance, and the water supply rate is 83%

— China Women Development Program supports 10.21 million poor women’s education and technical training, 8.7 million women support government-funded mortgages, invest in women entrepreneurship programs, and provide free medical and emergency surgery costs to 192,000 women with cervical cancer and breast cancer

—Establishment of free medical counseling and care services for 36.89 million elderly people aged 60 or older living in poor areas

— The establishment of a living subsidy and care subsidy system for the severely disabled, providing benefits to 24 million people with disabilities, providing free rental housing to 1.785 million households with disabilities, hiring 80,000 education experts for disabled children, and training for disabled children

* * *

As seen in GDP, the biggest 500 world companies index, the dollar and gold holdings, and absolute poverty reduction, China’s economic power has rapidly increased over the past 40 years due to its “market opening-up” policy, and the majority of the population has escaped absolute poverty. 

At the same time, however, capitalist forces have also grown to a serious level in Chinese society.

12 June 2022

2. Dangerous growth of pro-capitalist forces in China

Capitalistic concessions’ of worker’s state

Increasing productivity is essential to provide the results of the revolution to the working people who participated in the revolution and to overcome the counter-revolution of imperialism. As Trotsky explains, this is the basis of Marxism:

“A socialist state even in America, on the basis of the most advanced capitalism, could not immediately provide everyone with as much as he needs, and would therefore be compelled to spur everyone to produce as much as possible. The duty of the stimulator in these circumstances naturally falls to the state, which in its turn cannot but resort, with various changes and mitigations, to the method of labor payment worked out by capitalism. It was in this sense that Marx wrote in 1875: “Bourgeois law…is inevitable in the first phase of the communist society, in that form in which it issues after long labor pains from capitalist society. Law can never be higher than the economic structure and the cultural development of society conditioned by that structure.” (The Revolution Betrayed, Chapter 3, Socialism and the State)  

To reiterate, the best way to improve productivity is socialist revolution in the advanced capitalist countries. This is the fastest way to aid the highest level of production technology to revolutions in underdeveloped countries such as Russia and China, and to go straight without detours toward the socialist world revolution.

However, in the reality that unfolds dialectically, and not abstractly, history rarely goes in straight lines.  It twists and turns. In real history, the subsequent revolution of advanced capitalist countries has been delayed a disappointingly long time after it occurred in the economically backward countries.

These historical conditions forced ‘capitalist concessions’ by the degenerated/deformed worker’s states. Those policies include the Soviet Union’s New Economic Policy (NEP), the opening of the market in earnest during Deng Xiaoping, Vietnam’s Doi Moi, and Cuba’s allowing private companies.

However, there’s nothing free in history. Capitalist concessions rapidly grow pro-capitalist forces in the system, without exception under any conditions. And the forces that have grown like that now threaten the survival of the worker’s state internally. The same is true of China’s ‘market opening-up’ over 40 years.

Lenin and Trotsky’s analysis of ‘capitalist concessions’

Lenin and Trotsky closely analyzed NEP experiments between 1921 and 1928. This is an essential theoretical framework for understanding the mechanism of the worker state’s ‘capitalist concession measures’.

In his speech at the last party congress he attended, Lenin said:

Here we have lived a year, with the state in our hands, and under the New Economic Policy has it operated our way? No. We don’t like to acknowledge this, but it hasn’t. And how has it operated? The machine isn’t going where we guide it, but where some illegal, or lawless, or God-knows-whence-derived speculators or private capitalistic businessmen, or both together, are guiding it. A machine doesn’t always travel just exactly the way, and it often travels just exactly not the way, that the man imagines who sits at the wheel.

And in the Platform of the Joint Opposition, 1927:

When Lenin said that the machine often goes where it is directed by forces hostile to us, he called our attention to two facts of supreme importance. First, that there exist in our society these forces hostile to our cause―the kulak, the Nepman, the bureaucrat ―availing themselves of our backwardness and our political mistakes, and relying upon the support of international capitalism. Second, the fact that these forces are so strong that they can push our governmental and economic machine in the wrong direction, and ultimately even attempt―at first in a concealed manner―to seize the wheel of the machine.

A certain growth of the hostile forces, the kulak, the Nepman, and the bureaucrat, is unavoidable under the New Economic Policy. You cannot destroy these forces by mere administrative order or by simple economic pressure. In introducing the NEP and carrying it through, we ourselves created a certain place for capitalistic relations in our country, and for a considerable time to come we still have to recognize them as inevitable.”-

Lenin and Trotsky explain that capitalist concessions inevitably grow pro-capitalist forces, that perfect control of them is difficult as long as concessions are carried out, and that the pro-capitalist forces will, in solidarity with international capitalism forces, start secretly but ultimately seek national power, so the revolutionaries of working class should respond to this threat with great alarm.

This analysis is also a very useful theoretical tool for understanding China today.

China’s Capitalist Concession

China has implemented a “capitalist concession policy” over the past 40 years. In it, pro-capitalist hostile forces have grown to a lethal level. Emerging capitalists from private companies grew and many of them became suddenly rich. The bureaucrats who colluded with them were corrupt. Among them, ‘billionaires (more than $1 billion in assets) have emerged. Imperial financial capital inserted its tentacles through the gap in market opening-up. In addition, public support for capitalist private ownership was mass-produced by allowing the sale of real estate usage rights. 

Pro-capitalist social forces are weaving capitalist networks into thousands of strands. Using the power of money, they are expanding their power and consolidating it again. It is still moving in secret with its head down. In the meantime, they are waiting for a day when the power relationship unfolds in their favor. When the day comes, they will rise up in unison, both inside and outside. On that day, they will try to take the wheel by pressing down on the neck of the workers state and shouting “freedom” or “democracy.” After taking the steering wheel, it will wield its power to seek a full revival of private ownership. “tāoguāngyǎnghuì” (Deng Xiaoping’s foreign policy stance: “Hiding one’s light under a bush”) is also the political motto of pro-capitalist forces who wait for the future under the Communist Party.

China’s Billionaires

The increase in Chinese ‘billionaires’ symbolizes the growth of pro-capitalist forces. Since 2016, China has become the country with the largest number of wealthy people, or “billionaires.” China was ranked as the country with more billionaires than the second to fourth-ranked countries (the United States, India, and the United Kingdom) combined. A total of 1,133 people in China have a net worth of more than $1 billion (about 1.21 trillion won), a third of the 3,381 global billionaires in 69 countries.…China outpaced the United States in terms of billionaires in 2016. Since then, the number of billionaires in the U.S. has increased by 30 percent and the number of billionaires in China has doubled.”(Chosun Newspaper, March 18, 2022)

* * *

The representative route that gave birth to the “tycoon” is, above all, the privatization of state-owned companies. As a result, the growth of pro-capitalist forces was laid, and pro-capitalist forces grew in various forms.

1) Privatization of the State-owned company

Deng Xiaoping’s leadership had opened the door to “market opening-up.” However, in 1978-1992, the first period of ‘market opening-up’, ownership was not even touched. It only allowed individual companies to pursue profits by giving up collective farming, which is not supported by mechanization, introducing a “farm production responsibility system” that gives autonomy to individual farmers, and separating ownership and management of state-owned companies. 

However, in 1993-2002, which is the second term of “market opening-up” the Communist Party of China boldly promoted “the theory of rich-first (be rich first).” He began to touch possession. The justification was to establish a “modern corporate system” with the core of separation between the government and businesses. Under the guidelines of “Hold the Big and Let the Small Go” (zhuā dà fànɡ xiǎo), the government began to organize the so-called “poor” state-owned enterprises (evaluation and implications of reform of Chinese state-owned enterprises, Foreign Economic Policy Research Institute, 2014). The move, called “privatization,” mainly targeted local companies or local state-owned companies or SOEs. It was a policy that not only management rights but also part of ownership were handed over to individuals. 

Of course, this is quite different from the capitalist ‘privatization’ of handing over ownership altogether. It is a policy that hands over management rights held by the government to professional managers, allowing them to pursue profits, and own “part of the profits” privately.“

In a typical market economy, most companies are private companies. Companies owned and operated by the state or the public sector are limited to some special sectors, and the proportion of the national economy is not very large. On the other hand, China is in a transition period from a conventional socialist planned economy to a market economy, so there are not many private companies in a pure sense, and there are various types of companies mixed with sharing and private or state-run and private forms.” (Types of Chinese companies, LG Management Research Institute(중국 기업의 유형)

“In many areas, local governments still maintained stakes in local businesses, especially trying to run joint ventures with new private managers. In fact, the problem of determining what to classify as a privatized company among today’s Chinese township companies is bound to be very difficult. This is because local governments will hold about 20% to 50% of shares.”(China’s Economy: Transition and Growth, Chapter 12, Barry Norton, 2007)

‘Privatization’ in two ways and steps

Privatization proceeded in two stages. First, the stock in the company is split and distributed relatively evenly to the management and employees working in the company. This is termed the “Stock-sharing system”. After that, the shares distributed in such a way are bought at a low price by management who knows the company’s situation best and has connections with local governments. “Management Buyouts (MBO)”.

“After privatization, the governance structure of Chinese state-owned small and medium-sized enterprises appeared in various forms, the most common of which was the stock-sharing system, which relatively equitably owned corporate stocks by management and employees. For example, in Shandong Province, which promoted the fastest large-scale privatization in China, 210 companies chose the form of a stock merger in July 1994, which ended the first privatization, accounting for 77.2% of the number of privatized companies.

Since 1997, the second ownership reform has been promoted to expand management’s stake in privatized companies. In other words, management’s initiative in the company is secured through the Management Buyouts (MBO). Compared to the stock cooperation system, MBO has the advantage of solving incentives from the management class to achieve management normalization, so by the early 21st century, it gradually replaced the stock cooperation system and became the most common form of state-owned enterprise reform.”—A Study on the Reform and Policy of the Chinese Government and State-owned Enterprises and Private Enterprises (중국 정부와 국유기업 및 사영 기업의 개혁과 정책에 관한 연구), Kim Yoon-kwon

Soviet and Chinese Privatization

However, this method is almost similar to the method of complete privatization in the Soviet Union and Eastern Europe after the counter-revolution of the return to capitalism. This is likely not a coincidence. It is a known fact that American financial capital brains designed and directed the “privatization” of the Soviet Union and Eastern Europe. Jeffrey Sachs, a professor at Harvard University, is a representative figure. (‘Marxist Analysis of the Collapse of the Soviet Union(소련 붕괴에 대한 맑스주의적 분석)’, Bolshevik Group, 2015) 

Meanwhile, as China entered the second phase of “market opening-up,” a higher level of concessions were needed to gain “credit” in the global capitalist market, including joining the WTO, and to be specifically incorporated. And it is known that the Wall Street Advisory played a role in the process. The meeting between Zhu Rongji, the leading figure in China’s “market opening-up,” and Goldman Sachs, the head of the U.S. financial capital, between 1996~7 is a representative event (KBS’s Red Capitalism Part 2 “Communist Party on Wall Street”).

However, privatization of the Soviet Union and Eastern Europe and that of China were very different. First of all, the difference in character of political power is the most decisive. The Soviet Union and Eastern Europe proceeded after pro-capitalist factions overthrew the communist regime and secured loyalty from state violence organizations such as the military. However, China was led by the Communist Party of China without the movement of power. 

Second, the privatization of the Soviet Union and Eastern Europe was sweeping. But that in China was limited. While the central large-scale infrastructure industry remained in the form of state-owned, it was targeted at local companies, small local state-owned companies, or venture companies with unclear growth potential.

Third, the privatization of the Soviet Union and Eastern Europe was called ‘shock therapy’ and ‘big bang’ and pursued sweeping and rapid change. But China was gradual. Even after allowing individuals ownership of assets and profits (‘privatization’) the central or local governments still had considerable equity and influence over the enterprise.

Fourth, what is more stark is the result of privatization. The Soviet Union and Eastern Europe suffered hell for their people in the years following the capitalist counter-revolution, resulting in massive inflation more than 1000% and extreme unemployment. (Russia: A Capitalist Dystopia, IBT, 2002).

China also had a major social shock, including inflation of nearly 30% in 1989, but it was not comparable to the Soviet Union and Eastern Europe, and since then, rapid economic growth has led to significant improvement in life (『중국과 러시아의 경제체제개혁 비교연구』, 민족통일연구원).

As Barry Norton, a professor at California State University explains:

“The change in China was initiated by a group of Communist Party leaders. Older generations such as Deng Xiaoping and Chen Yun were the founding revolutionaries who contributed to the creation of a command economy. They gave tremendous credibility, justified the introduction of markets, and reduced opposition to the reform process. These leaders understood their own system well. They were well aware of the flaws and the tremendous challenges they faced, but they also had little incentive to overturn the system completely. The Communist Party leaders implemented a gradual reform strategy because they wanted to maintain control and limit the scope of destructive change.

The approach to the transition to a market economy was very different in Eastern Europe and Boris Yeltsin’s Russia. The main goal of reformers in those countries was to move as quickly as possible to a modern market economy. …they wanted to shake off the legacy of communism as soon as possible and start focusing on this model quickly…The strategy they followed was often called “Big Bang.” For reformers, it was very important to set free prices as soon as possible for the price system to work, and then move quickly to property rights reform, or privatization.”(Chinese Economy: Adaptation and Growth of the Market Economy, Barry Norton, 2018)

Bureaucratic ways and looting public assets

After the central government decided on “privatization,” called “zhuā dà fànɡ xiǎo (Hold the Big and Let the Small Go)” and “Guó tuì mín jìn (State Ownership on the front, Privatization on the back)” guidelines and goals for “privatization” were issued below. While “100 pilot companies” were selected, it was implemented in a performance-oriented bureaucratic manner rather than grasping the reality of the company. 

Then the assets shared by the whole society began to be looted. The best national assets have begun to fall into the hands of the so-called “skilled” good people. They were managers who were well aware of the company’s situation and at the same time had the ability to create good relationships with the Communist Party or local officials who had real power to “privatize.” And at the same time, a state official who had a strong relationship with his superiors became their partner, making it easy to hand over the proper assets to the manager. 

The speed and success of “privatization” now depended on how strong the relationship between central and local officials and businessmen was. “Guānxì,” which means connection, has become a keyword of Chinese understanding.

“As seen in the drivers of the reform, state-owned small and medium-sized enterprises were promoted by the local government of China. Local government leaders also aimed at improving the government’s financial situation, but they actively promoted reforms to maintain or enhance their political status by receiving good performance evaluations. Therefore, what local leaders were interested in first was the speed of maintaining and reforming social stability rather than the strategy of improving corporate management or reforming. In other words, it ends the ownership reform of state-owned enterprises while maintaining social stability within the deadline required by the higher government.

Therefore, local officials naturally prefer the main form of insider privatization: joint ownership of shares by management and employees, or MBO (acquisition by management). This is because privatization of outsiders is time-consuming and expensive, and there is a high rate and possibility that the employees are unemployed, which is likely to damage the interests of bureaucrats. So bureaucrats prefer to sell to management at a bargain price rather than corporate bankruptcy. This became an important factor in which the loss of state-owned assets became serious during the privatization process at a time when the legal system was insufficient and objective asset evaluation was difficult.”(A Study on the Reform and Policy of the Chinese Government and State-owned Enterprises and Private Enterprises(중국 정부와국유기업  사영 기업의 개혁과 정책에 관한 연구), Kim Yoon-kwon)

The age of ‘Nouveau Riche’

Public assets have fallen into the hands of “people of ability” at a cheap price. Unsurprisingly, some of them were passed on to state officials who cooperated to make things easier, such as documents forgery.

(Criticism of the sale of state-owned assets at a bargain price) Regarding the sale of state-owned enterprises, some raise concerns that the polarization of national wealth and the outflow of national wealth will intensify. 

Some economists point out that the loss of state-owned assets is occurring as the parties to the sale, especially local governments, and management, arbitrarily decide on prices.

“In China, where there is no climate of responsible management, it is difficult to expect improvement in management performance through private transfer of corporate ownership. In the absence of fair market rules and monitoring functions, It is claimed that looting of state-owned assets is widespread by information asymmetry and collusion” ( China’s State-owned Enterprise Reform Status and Prospects(중국의 국유기업 개혁 현황 및 전망), Bank of Korea 2006)

“In the process of privatizing a company, government interference in the process of evaluating its assets and determining the final sale price continues through close relationships with the management concerned …In the process of privatization, the government has no choice but to rely heavily on the management class due to the asymmetry of information on the actual management situation of the company. In this relationship, the management layer adjusts the evaluation results, sale prices, and finally privatization results for possible corporate assets to their advantage. (A Study on the Reform and Policy of the Chinese Government, State-owned Enterprises and Private Enterprises (중국 정부와 국유기업  사영기업의 개혁과 정책에 관한 연구), Kim Yoon-kwon)

The effect of the theory of rich-first, “Whoever become rich first,” came to be a full-fledged reality during this time. Suddenly, the nouveau riche who made a fortune appeared. They were among the private management group, who had transferred public assets such as land and companies, and bureaucrats who pocketed black money in the process.

The consequences of allowing privatization

Meanwhile, the negative consequences of allowing privatization and looting public assets had to be borne by the working people. Mass layoffs continued in the name of “management rationalization.” Social welfare benefits provided by hired state-owned companies have also disappeared. Naturally, the workers were indignant and resisted. Labor disputes have soared.

As shown in the table, the number of labor disputes has soared since the mid-1990s when “privatization” was realized extensively. The number of participants in labor disputes in 2003 was nearly five times higher than in 1996.

“the State advances while the Private sector retreats”

This surge in labor disputes has raised the level of social unrest. Like the gums without teeth, the foundation of Communist rule shook from its roots. Then there was a slight change of direction. In 2005, the Fifth Central Committee of the Communist Party of China announced that it had abolished the theory of rich-first that “anyone should be rich first” and adopted the theory of “Let’s all live well together” (Jungang Newspaper, October 12, 2005 중앙일보 2005년 10월 12일).

From the existing “private sector advances while State sector retreats“ of encouraging private ownership rather than state ownership, it has shifted to “the State advances while the Private sector retreats” to “restore the part of state ownership.”

“The Chinese government has pushed for nationalization of the “National Retirement Policy” since 2004 due to increased corruption and the loss of state-owned assets and massive layoffs during the privatization process, which has continued since the late 1990s.”(Contents and Limitations of China’s State-owned Enterprise Reform 중국 국유기업 개혁의 내용과 그 한계점, Korea Labor Institute, March 2012)

Perhaps because of its effectiveness, as shown in the table above, the number of disputes and the number of participants decreased significantly over the next few years.

Spilled ‘privatization’

However, once the water of ‘privatization’ had been spilled, albeit partially and restrictively it quickly became irreversible, and it spread by wetting Chinese society based on the 1949 revolution like ink. Meanwhile, the Chinese Communist Party bureaucracy is parasitic on the gains of the Chinese revolution and has not been a revolutionary party for a long time, has neither the will to undo privatization, not more importantly, the ability.

“But in a Chinese situation that lacks the rule of law, the MBO causes the loss of assets and serious corruption problems of state-owned enterprises. As the situation became serious, the State Council promulgated related policies consecutively in 2003 and 2005, putting the brakes on privatization that resulted in the loss of state-owned assets. However, even now, insider privatization is the most common form in the provinces.”(A Study on the Reform and Policy of the Chinese Government and State-owned Enterprises and Private Enterprises 중국 정부와 국유기업 및 사영 기업의 개혁과 정책에 관한 연구, Kim Yoon-kwon)

* * *

The way the means of production are owned is the key to determining the social character of a state. In the mid to late 1990s, the privatization of assets was allowed even if it was partial and limited. But that laid the groundwork for pro-capitalist forces such as “billionaires” to grow. The dam that was being built up caused cracks. 

So far, we have looked at the basic factors of allowing privatization and privatization of state-owned companies. Now let’s look at some of the derivative factors of pro-capitalist power growth: The growth of new industries such as high technology and IT, the pro-capitalist factions within the Communist Party, allowing the sale of real estate licenses and popular privatization supporters, and imperial financial capital infiltrating China.

2) ‘Billionaires’ in new industries such as high technology and IT

Increasing productivity is China’s life and death state project. The Chinese government fully supported the high-tech sector. The combination of three factors, “challenging and capable individuals, government support and foreign investors with high technology,” has risen to the rapidly growing Chinese economy. In the process, companies that exploded in size appeared. Baidu Alibaba Tencent and others, called BAT, are the leaders, while Huawei Xiaomi Lenovo DJI Pinduoduo Wahaha also fall into this category.

It is not easy to accurately grasp the ownership structure of all start-ups. However, it is widely known that the government played a big role in the start-up and growth of most startups.

The government has incentivized startups to take ownership of about 20 percent to encourage the startup. In the early days, it was nothing, but the explosive growth of Chinese industries and start-ups over the past two to thirty years has now become a tremendous asset.

Lenovo, the world’s No. 1 company in the PC sector, is a case in point. 

“The group of executives who founded Lenovo made a clear contribution to the success of these hurtful companies. There was some hesitation, but this group of managers was allowed to take 20% of the company’s shares into the founder’s shares. The desire to foster China’s high-tech industry and emulate a centralized corporate environment such as Silicon Valley played an important role, and many new technology companies were allowed to distribute some of their shares to managers who participated in the foundation.”(Chinese Economy: Transition and Growth, Barry Norton)

In the second edition published 10 years later, Barry Norton explains more specifically the cases of Lenovo and its startups:

“A typical early example of a hybrid company is the Legend Computer, later called Lenovo. Founded in 1984 by the Computer Science Institute of the Chinese Academy of Sciences, Legend began as a resale of foreign computers and gradually entered the assembly stage.……Based on this stage, Legend boldly moved to acquire IBM’s personal computer division in late 2004. As part of the acquisition, Lenovo received significant investment from U.S. private equity firms, which became strategic partners. The new consolidated company was then listed on the Hong Kong Stock Exchange. The shares are 36 percent owned by the original company, the Beijing Legend Company (which is sufficient to maintain control), and the Chinese Academy of Sciences maintains a third of its stake in the Beijing Legend.……Like Lenovo, major information technology companies in China such as TCL, Founder, ZTE, Datang, and SMIC can be characterized as mixed companies. They have substantial public and private ownership interests, a complex history, and links to foreign countries.

……the combination of these unique opportunities has attracted challenging owner managers who are somehow trying to find a way to bring these elements together and create a successful company. Today, mixed companies can be observed in various sectors of the Chinese economy. In many cases, a mixed form is a company originally established by a founder working for a government agency. His employer would have initially provided him with capital and given him time and space to start a business. As the environment was liberalized in the 1990s, many managers took control of the company, while the government maintained a minority ownership stake. For example, Wahaha Beverage is a large consumer goods company headquartered in Hangzhou and dominated by charismatic owner entrepreneur Zongqingu. However, the city government, where the company was established, maintains a 46 percent ownership stake in the company, reflecting the origin of the company’s separation from local schools. Such companies are sometimes classified as “private” companies, which means they are privately owned, but are ambiguous about the formal ownership structure. The largest private company is Huawei, which is precisely employee-owned.”

China’s ‘Billionaires’

The start-ups grew vertically in the environment of a huge number of highly educated workers, cheap wages of about one-fifth of Korea, modern industrial infrastructure created by state-owned enterprises, and a domestic market with 1.4 billion consumers. With the growth of businesses, founders became ‘billionaires’.

The start-ups grew vertically in the environment of a huge number of highly educated workers, cheap wages of about one-fifth of Korea, modern industrial infrastructure created by state-owned enterprises, and a domestic market with 1.4 billion consumers. With the growth of businesses, founders became ‘billionaires’.

However, the lives of Chinese ‘billionaires’ are not stable unlike the rich in the U.S. and South Korea. In particular, startups have been under pressure since President Xi Jinping emphasized “live well together.” Some people lie flat and donate tens of trillion yuan, orretire at an early age:

“With the recent retirement of so-called second-generation private entrepreneurs, many people are beginning to wonder if the Chinese government is taking over private companies. Most recently, Legend’s chairman Liu Chuanzhi stepped down. Legend is the parent group of Lenovo, which acquired IBM’s PC division. Just before that, Tencent’s Chairman Ma Hua-teng retired, and just before that, Alibaba’s Chairman Ma Yun retired. Before Chairman Ma Yun, Baidu founder Li Yanhong retired, so the founders of all three so-called BAT companies disappeared.”(Chinese private enterprise suffering era 중국민영기업수난시대, Dr. Beijing, September 2019)

“Big Tech fell flat on its knees. After advocating “joint wealth (living well together)” that pressured companies to distribute, President Xi pointed out the barbaric growth of Big Tech in August 2021 and ordered them to obey the party’s guidance. As the party deeply intervened in corporate management, Big Tech heads withdrew from management at a young age in their 30s and 40s. Founder Huang Zheng, founder of Pinduoduo (e-commerce), founder of Byte Dance (video and news platform) Zhang Yiming, founder of Jingdong Liu Qiangdong, and founder of Kwai Seo (video platform) Su Hua have stepped down from the management front. The companies also contributed tens of trillion won in our money.”—Chosun Newspaper 조선일보, May 26, 2022

From the standpoint of these private business billionaires, this situation in which the communist regime is clutching its leash will never be pleasant.

3) A pro-capitalist faction within the bureaucracy

Privilege and corruption

After the privatization of state-owned enterprises, the power of state bureaucrats was further expanded and strengthened. The government officials hold the power ‘to sell state-owned enterprises to the private sector, to license start-ups and supervise their operations, and to acquire land at low prices and sell its usage right at high prices.’

The absence of worker democracy had blocked the air. On top of that, when a humid environment of allowing capitalist privatization was created, mold rose here and there. Corruption was rampant. Rats gnawing on the country’s barn were infested. The surplus labor of the working people flowed into them in large quantities through the bottom hole of the warehouse. The loss of social communities from corruption amounted to 13 to 16% of GDP.

“Economic losses and consumer welfare losses created by four major types of corruption in the late 1990s accounted for 13.2 to 16.8 percent of GDP. The corruption cases of officials now open to the public are only a small percentage of the corruption that is prevalent throughout China. For example, the scale of corruption cases dealt with in domestic courts in 1999 is only two-thousandth of GDP.”(Professor Huang Kang of Tsinghua University, “China’s Corruption Problems and Economic Development in the Late 1990s 1990년대 후반중국의 부패문제와 경제발전“)

As corruption prevailed, a rotten smell that pricked the peoples nose rose everywhere. The Gu Junshan incident in 2015 is a typical example. Gu Junshan, who was in charge ofmilitary, supply, and welfare of the People’s Liberation Army, raked in property by asking real estate developers to pay rebates in the process of selling military land in charge of real estate management and infrastructure construction. The assets collected amounted to “30 billion yuan (about 5.4492 trillion won).” What’s surprising is that this was not the pinnacle of the corrupt food chain. Gu Junshan was sentenced to death but was suspended for two years. It was due to the contribution to the investigation of “the bigger tiger” of corrupt officials, such as Zhou Yongkang, a ninth-ranked member of the Politburo Standing Committee.

On June 11, 2015, Zhou Yongkang was convicted of bribery, abuse of power and the intentional disclosure of state secrets He was sentenced to life in prison

Inheritance of privileges

The power of the Stalinist bureaucracy in China is inherited. And that power is sometimes replaced by the power of capital. In 2014, the Kyunghyang Newspaper reported offshore tax evasion by China’s top elite family using foreign tax havens through joint coverage with the International Consortium of Investigative Journalists (ICIJ).

This report should not be believed as it is. The International Consortium of Investigative Journalists (ICIJ) is a pro-American organization based in Washington, D.C., and it is quite possible that the influence of U.S. imperialism was involved. Specific facts need to be weighed. However, the Chinese government itself acknowledges that the status and power of the first generation of the revolution are inherited by descendants and that it is being replaced by the power of capital again.

Pro-capitalist faction within the bureaucracy

They form pro-bourgeois factions within the Communist Party of China and the country. These pro-capitalist bureaucratic factions cannot yet rebel against the entire 1949 revolutionary system. They don’t have that much power yet. Thus, sometimes they are caught in corruption investigations, and some are sentenced to life imprisonment or death penalty.

However, as capitalist relations in China grow, their network is also becoming stronger. In this process, they are awakening their pro-capitalist identity. In the future, pro-capitalist factions within these bureaucracies will resist another of the bureaucracy’s personalities of defense of past revolutions and state-owned assets to protect their wealth and status. Furthermore, the resistance will develop into a struggle to overthrow the Communist regime and capitalize the entire society. They are responding inside and outside and on the other hand, looking for the Chinese version of Yeltsin, waiting for the time to ripen.

4) Allowing the sale of real estate usage rights and supporters of public privatization

Land System and Its Changes in China

China’s land system is still governed by the public ownership system. Legally, privately owned land and housing do not exist, and only the right to use is recognized.

“Land, which is the most important material foundation for economic activities, follows a strict public ownership system. The state’s “reasonable” use of land comes before various private property rights established on the land. With the enactment of the Real Rights Act in March 2007, the possibility of an “extension” after the expiration date of the land use right was opened, but this is a story for usage right which is strictly a separate from ownership.”—LG Management Research Institute LG경영연구원, 2010

However, after the “market opening-up,” special economic zones allowed the sale of usage rights to invite capitalist companies and gradually expanded their scope. In particular, usagerights sales have become common since the mid-1990s, the second period of “reform and opening-up” in which the “privatization” project was in full swing. The abolition of the housing distribution system in 1998 was a significant turning point.

“China’s housing distribution system, which has been maintained for the past 50 years, will be abolished in the second half of the year. “In order to revitalize the economy, it is urgent to expand social infrastructure and boost the housing construction economy,” the State Council of China said on the 22nd. “From the second half of this year, we will ban housing distribution in cities across the country and not rent all new houses.”Through this, we plan to encourage households distributed to buy homes, he said.”—Korea Economy 한국경제, April 22, 1998

Consequential Points of Sale and Extension of Land and Housing Usage Rights

Land is still state owned, but the possibility of the sale and extension of the right to use is not a simple matter. This is because the right to use land and housing becomes a bridge to private ownership, and mass-produces a large number of social members who support private ownership.

Land ownership is said to be strictly in the state, but the contradiction will be sharply revealed when the right to use expires. Both of the following articles point to the problem.

“Buying land from the government is buying ‘land use rights’ to real estate owned by the government. The period of use is 70 years for residential use, 50 years for industry, science, education, etc., and 40 years for commercial use.Housing use lasts up to 70 years, and many buildings built after the reform and opening in 1978 are starting to exceed the 35 years of use, which is half the time.What happens when the land license period expires?…”When the right to use land expires, ownership of land use rights, other buildings, and other attachments is acquired free of charge by the state. The land user shall return the right to use the land and shall register the cancellation in accordance with the procedures prescribed by law.”

So will the Chinese government take back real estate when it really expires in China?”―China’s Real Estate System 중국의 부동산 시스템, Dr. Beijing, September 2019

“Personalization of land or public ownership of land… China at the crossroad/Now China’s politics and economy are both moving towards privatization. This reality is that China denies itself the legitimacy of the socialist revolution and land reform. The automatic extension of residential land stipulated in the Civil Code of China is likely to flow into the everydayizationof land privileges unless other measures are taken.”—Pressian 프레시안, June 8, 2020

A Surge in real estate prices

As the Chinese industry expanded, real estate prices such as land and housing soared. Special economic zones such as Hainan Province and Guangdong Province and large cities such as Shanghai and Beijing took the lead. As of 2021, housing prices in Shenzhen, where financial and IT companies are located, are “90,049 yuan (about 16.14 million won) per square meter.”

First-line real estate (Beijing, Shenzhen, Guangzhou, Shanghai, etc.) has risen nearly tenfold over the past decade. In the case of Shenzhen, it means that 100 square meter apartments bought for 150 million won in the early 2000s are now about 1.5 billion won.

Mass production of private ownership supporters

As a result, on the one hand, the tycoons (people who become suddenly rich) and the “counter-tycoon”(people who become suddenly poor) on the other appeared. The wealthy, who are children of parents with social status and wealth, are employed by state-run companies or start-up industries, or do business, become owners of large city housing such as apartments.

“Who’s buying Shenzhen real estate, China’s No. 1 house price?/ This is because most of them are “new kěn lǎo zú.” In other words, they buy houses with financial support from their parents. But the ‘new’ kěn lǎo zú are a little different. They have relatively good universities, decent jobs, and are well versed in finance, investment, etc.”(JoongAng Newspaper, August 14, 2021)

According to the principle, land is state-owned, so as the expiration date of the housing expires, the price will plummet and converge to zero, like consumables such as clothes, shoes, and automobiles. In addition, when the expiration date is up, ‘according to the law,’ the state will demand a return.

In that case, will homebuyers be willing to return hundreds of millions of assets? They will be demanding an extension of the right to use them in the future. They will risk their life. And the case is already emerging. And the Chinese authorities allowed the extension. The extension of the right to use will be like ‘occupancy’, and it will gradually resemble ownership. It will eventually result in substantial private ownership. In large cities, tens of millions to hundreds of millions of people have become supporters of private ownership.

Because of this, the so-called “one-family one-home system” claimed by some left-wing and labor organizations can never be a socialist demand.

5) Imperial Financial Capital Extends Its Tentacles to China

Since Mao Tse-tung invited U.S. President Nixon to China in 1972, the distance between China and the U.S. has quickly become close. Along with the United States, it defined the Soviet Union as a common enemy and became an ally. China has faithfully implemented the Soviet Union blockade joint front. After Deng Xiaoping took power in 1978 and the “market opening-up” policy, the relationship between the two countries took a new leap forward and became closer.

China’s political and economic needs have drawn closer to American imperialist financial capital under the conditions of disconnection with the Soviet Union, isolation, and backward productivity. In the meantime, the tentacles of U.S. financial capital have spread throughout China’s politics and economy, taking root, combining with China’s capitalist elements, and forming a tight network of relations.

Communist Party of China and ‘Wall Street’

KBS documentary “Red Capitalism Part 2: The Communist Party on Wall Street”, which aired on July 1, 2021, explains the strong relationship and history formed between the Communist Party of China and the U.S. imperialist financial capital: ‘China needed economic cooperation with the global capitalist system. To this end, they sought cooperation from Wall Street in the United States, and Goldman Sachs, one of the leading financial capital players in the United States, became the window.’

The nature and breadth of this relationship can be guessed by looking at the personnel and organizations involved.

The Chinese side

-Wang Qishan: Born in 1948, from Deng Xiaoping to the current Xi Jinping administration, Vice President of China from 2018

-Zhou Yongkang: Born in 1942, Goldman Sachs invited him to Texas in 1998 when he was minister of land, led China Petroleum & Chemical Corporation (SINOPEC) to be privatized and listed on the New York Stock Exchange, ninth in power as Secretary of the Central Committee on Political and Legal Affairs of the Communist Party of China(2007-2012), and sentenced to life imprisonment for corruption in 2014

– Zhu Rongji: Born in 1928, Prime Minister under Jiang Zemin, conductor of ‘market opening’ during WTO accession

– Jiang Zemin: Born in 1926. Mayor of Shanghai in 1985, General Secretary after Tiananmen Square incident, President of China 1993-2003

The U.S. side

-Henry Paulson: CEO Goldman Sachs, China’s 70+ visits, U.S. Treasury Secretary George W. Bush administration,

-Robert Zoellick: Under the Bush administration, U.S. Undersecretary of State, Goldman Sachs International Adviser, World Bank President, led the publishing process of “2030 China: Building a Modern, Harmonious and Creative Society”

-George Herbert Walker IV: George H.W. Bush’s nephew, Goldman Sachs executive, arranged a meeting with Zhou Yongkang and Goldman Sachs

-George H.W. Bush: Texas Oil Businessman, 1974 China Liaison Office Director, 1976 CIA Director, 1989-1993 President, George W. Bush’s father

-George W. Bush: 1946–, oil businessman, President of the United States 2001–2009

In the mid-1990s, when the second stage of “market opening-up” was in full swing, China got advice on “privatization” from Goldman Sachs. And it would have helped a lot to escape the foreign exchange crisis that swept East Asia and join the WTO in 2001.

In the early 2000s, it would have been a reward to privatize the large flesh of China Telecom and SINOPEC Group Corporation which dominated all of China, and to list it on the New York Stock Exchange. Since then, the honeymoon between U.S. financial capital and those in power of the Communist Party of China has intensified.

“This is how full-fledged cooperation begins for the common interests of China and Wall Street. Since then, Goldman Sachs has cooperated deeply with China’s power group, including issuing $5 billion bonds by Chinese railway, the IPO of Beijing-Shanghai Railway, the IPO of Beijing-Shanghai Railway, and the Tang Shuangning family from the People’s Bank of China. Henry Paulson later became U.S. Treasury Secretary. Later, Jiang Zemin’s grandson, Zhang Ziqing, also worked for JP Morgan.”-The Quadrangle of Icebergs: Selfish Global Finance Companies 빙산의 4각: 이기적인 글로벌 금융회사들, Dr. Beijing, 29 August 2020, Washington Post, 19 August 2013)

Investment of imperialist capital in China

After China’s entry into the WTO, overseas financial capital’s investment in China has been brisk. The new promising industry, which rose to the fast-industrial Chinese economy, was the main investment destination.

China, which has a high level of education, low wages, and well-maintained industrial infrastructure, is called the world’s factory. China accounts for about 30 percent of the world’s manufacturing industry. “The added value of Chinese manufacturing in 2019 was $3.8 trillion, accounting for 27% of the world. It was followed by the U.S. with $2.3 trillion, 57% of China’s. Japan, ranked third, recorded $1 trillion (Global Economic 글로벌이코노믹, April 5, 2022).”

Western and Japanese capital have built factories in China to produce their products. Consignment production of Apple, the world’s largest IT company, is a case in point. Foxconn, a Taiwanese company, manufactures iPhones and iPads on consignment at its Chinese factory. The number of employees increases or decreases depending on the economy, but about a million.

Pegatron factory in Shanghai which makes Iphones for Apple.

Imperialist financial capital has invested in Chinese start-ups such as Tencent and Alibaba and is enjoying a huge amount of income. Tencent’s major shareholder is South Africa’s Naspers, which has benefited thousands of times its investment.

“Who owns the most shares in Tencent, China`s largest Internet company? If you thought it was the Chinese government, that’s a wrong. The answer is “Naspers,” a South African media company that owns 33.3 percent of Tencent. The current chairman of the National Spurs, then CEO, saw the growth potential of China’s Internet market, and invested $32 million (about 34.6 billion won) in Tencent in 2001 to earn 46.5 percent of the stake. The company’s $32 million stake in Tencent has jumped more than 5,400 times its value, increasing to $173.7 billion (about 188 trillion won).”—Korea Economy 한국경제, March 12, 2018

Alibaba’s major shareholder is not Ma Yun, whom we know well. Son Masayoshi(Son Jung-eui), a Japanese businessman. He also made 4,000 times the profit from investing in 2000.

“What drew a lot of attention from Alibaba`s listing is that Alibaba`s largest shareholder is Japan`s Softbank, not its founder Ma Yun. In the early days of Alibaba, President Son Jung-eui decided to invest five minutes after meeting Chairman Ma Yun and investing $20 million in Alibaba in 2000, holding 32.4% of Alibaba’s shares. As a result, the 20 billion won invested at the time increased more than 4,000 times to 80 trillion won, and Sohn’s personal assets also increased to more than 17 trillion won, making him the richest person in Japan.”—IT Cultural Center IT문화원, October 9, 2014

The familiar name “Carlisle” also stands out. Carlisle is one of the world’s top three private equity funds. Carlisle was one of the U.S. financial capital that “picked up” assets that plunged after entering Korea in the face of the foreign exchange crisis. Carlisle acquired KorAm Bank in 2000 and earned 800 billion won in trading profits in four years. In China, they also put in straws of excess profits.

“Carlisle Group acquired 85 percent stake in China’s largest heavy equipment maker, Seogong Machinery, and acquired management rights of China’s third-largest insurer, Pacific Insurance Co., for $4.1 billion”—Bank of Korea’s Results and Prospects for China’s State-owned Enterprise Reform 중국의 국유기업 개혁 추진 성과와 전망, 2006

The economic influence of Tencent, Baidu, and Alibaba, which gave birth to Chinese billionaires, does not end in itself. They are reinvesting in dozens to hundreds of Chinese companies, respectively, using octopus-based methods. In this way, imperial financial capital is expanding its influence and putting its tentacles deep into Chinese society.

A joint report by the World Bank and the State Council of China

In 2013, an interesting report related to China was published, “2030 China: For the Construction of a Modern, Harmonious and Creative Society”. In commemoration of the 30th anniversary of World Bank cooperation with China, a study was launched in 2010 and published in 2013.

The content is also significant, but first of all, the subject of publication is more significant. It is a joint study by the World Bank and the State Council of the People’s Republic of China. As you know, the World Bank, along with the IMF, is a den of US-centric imperialist financial capital. Colony loan sharking is the main business. And the State Council is China’s key state body in charge of the administration. At the time of the report’s release, the World Bank president was Robert Zoellick, who was previously introduced, and the prime ministers of the State Council were Wen Jiabao and Li Keqiang.

The report presents the hazy title of “building a modern, harmonious and creative society’ as China’s goal. And for it, the report suggest, “China must change its policy and institutional framework.”

“First, rethinking the role of the state and the private sector to encourage increased competition in the economy. Second, encouraging innovation and adopting an open innovation system with links to global research and development networks. Third, looking to green development as a significant new growth opportunity. Fourth, promoting equality of opportunity and social protection for all. Fifth, strengthening the fiscal system and improving fiscal sustainability. Sixth, ensuring that China, as an international stakeholder, continues its integration with global markets.”

Six plausible proposals are made with euphemisms that slightly hide their intentions, but the keys are “reducing the role of the state, promoting competition according to capitalist market logic, supporting the private sector, and integrating with the global market.” In other words, it is to become more capitalist politically and economically.

Its contents are described in more detail in the Executive Summary.

“First, implement structural reforms to strengthen the foundations for a market basedeconomy by redefining the role of government; reforming and restructuring state enterprises and banks; developing the private sector; promoting competition; and deepening reforms in the land, labor, and financial markets. As an economy approaches the technology frontier and exhausts the potential for acquiring and applying technology from abroad, the role of the government and its relationship to markets and the private sector needs to change fundamentally. While providing relatively fewer “tangible” public goods and services directly, the g overnment will need to provide more intangible public goods and services like systems, rules, and policies, which increase production efficiency, promote competition, facilitate specialization, enhance the efficiency of resource allocation, protect the environment, and reduce risks and uncertainties.”

It is no stranger at all for the World Bank to insist on “the dismantlement and privatization of Chinese state-owned companies, the marketization of the financial sector, the reduction of the government, that is, the dissolution of the Communist Party and the establishment of a capitalist government.” Imperial financial capital should ‘fairly’ want the dissolution of the state-owned system through the counter-revolution of capitalism. The problem is that China’s State Council is standing side by side with the World Bank.

The duality of Bureaucratic Groups and Xi Jinping’s Government

Now, the Xi Jinping administration does not seem to be moving as reported in 2013. It is acting as if it is trying to control capitalist pressure by emphasizing “state first, privatization back” and “be wealthy together” But that is not because Xi Jinping is the head of the working class. Bureaucratic groups are under double pressure. In other words, they defend their own power-based state-owned system on the one hand, and on the other hand, they tend to privatize privileges (power and wealth), that is, pro-capitalism. This pressure appears to be the duality of the workers’ national bureaucracy.

Now, the Xi Jinping administration is “temporarily” under pressure from the former for the stability of the Communist Party’s power and acting as a branch that expresses the pressure in a policy manner.

* * *

As we have seen so far, pro-capitalist forces have grown to a dangerous level in China. The policy of allowing private ownership was laid down, and on top of it, “explosively-grown startups and billionaires, pro-capitalist factions within bureaucracy, popular private ownership supporters promoted by home ownership, and imperial financial capital related to China.”

They are still looking for a leader of the capitalist counter-revolution who will represent their voices most sharply and boldly, although they are still feeling the disadvantage of the power. The ideal model they are looking for is Yeltsin, who overthrew Soviet power in August 1991. As a result, they already have guidelines for action. It should be seen that the network of role-sharing has also been closely formed in a fairly completed form.

They will begin with a vague cry of “Democracy! Freedom!” against the corrupt and incompetent Communist regime. And then they will move toward a clear goal of “Down with the communist regime! Market Freedom! Total capitalism!” They want intact capitalist power. After overthrowing the current Communist regime, which is based on deformed but labor-oriented ownership, and taking over state power, the power will first dissolve the state-owned system and restore bourgeois private ownership completely.

In the reverse order of proletariat dictatorship, which is “Proletariat first nationalizes the means of production after it takes state power (State and Revolution).”

3. China’s Property Relationship: Still Dominant State Ownership System

  Summary and Conclusion of II-3

The delay of the world revolution and low levels of productivity plagued modern China, which was founded by 1949 revolution. For decades, China has experienced intense pains. As a result, ‘capitalist concessions’ were forced.

China’s productivity has grown significantly due to the capitalist concession policy called “Reform and Opening-up.” As the widespread poverty was almost resolved, the living standard of the working people improved remarkably. However, during that period, pro-capitalist forces in China have grown significantly, including “emerging capitalists, pro-capitalist factions in bureaucrats, a large number of people who tasted the sweetness of capitalism, and imperialist finance capital that penetrated China.” As a result, The charater of Chinese worker’s state was greatly eroded in quantity. This time, society is leaning to the right and in danger of a capitalist counter-revolution.

However, the social character of modern China, formed by the Russian Revolution in 1917 and the Chinese Revolution in 1949, has not yet changed qualitatively. China is still a state-owned political and economic system.

We examine the point through ‘national core industries, finance system, overseas investment, and comparison of public enterprises by country’.

1) The proportion of the nationalization of key industries

China’s key industries such as ‘electricity, communication, road, railway, port, construction and transportation,’ strategic industries such as ‘oil, aerospace and military,’ and financial industries such as ‘bank, securities, and insurance’ are all owned by the state.

SGCC is the largest electric company in the world

“Through reforms over the past 30 years, state-owned enterprises have experienced numerous changes. However, state-owned companies have enjoyed many privileges by taking advantage of their special status in the Chinese economy, thereby forming a monopoly status. In particular, state-owned companies have used their existing superior status to operate exclusively in industries that occupy important positions in the national economy, such as oil, natural gas, telecommunications, electricity, tobacco, coal, aviation, finance, and insurance. Currently, most of the major companies in China’s monopoly industry are central state-owned companies, and the combination of natural and administrative monopolies is hindering the technological progress and innovation of the industry.”—Contents and limitations of reform of state-owned enterprises in China 중국 국유기업 개혁의 내용과 그 한계점, International

‘State Ownership dominates the Chinese economy’

It is indisputable that China’s core industry is state-owned. However, the evaluation of the proportion of state ownership varies slightly depending on the researcher’s standard and evaluation year. However, almost all studies acknowledge that “state ownership dominates the Chinese economy,” with only slightly different specific figures.

Korea Institute of Taxation and Finance 2010,

“Total operating income of state-owned enterprises in 2009 was 24.2 trillion yuan, up 5.5% year-on-year, and the proportion to total GDP was about 71.1%”—Chinese state-owned enterprise reform research report 중국 국유기업 개혁 연구 보고서, Korea Tax and Finance, June 2010

Bank of Korea in 2014,

“In 2013, the total sales of Chinese state-owned companies were about 47 trillion yuan, reaching 82.1 percent of GDP (56.6 trillion yuan).…Most large companies, including 82 state-owned companies in the world’s top 500 companies, are state-owned companies”—Status and Prospects of China’s State-owned Enterprise Reform 중국의 국유기업 개혁 현황 및 전망, Bank of Korea, November 2014

Bank of Korea in 2017,

Labor Brief, March 2012

“China’s state-owned enterprises play a pivotal role in major industries with land and financial support: total assets (131.7 trillion yuan) and total sales (45.9 trillion yuan) of state-owned enterprises recorded 177.0% and 61.7% of GDP, respectively”—China’s economic structure and institutional changes and constraints 중국경제 구조 및 제도변화와 제약요인, Bank of Korea, August 2017

JoongAng Newspaper 2019,

“The GDP of socialist China should be viewed differently from that of the West. In China, state-owned companies account for 63% of GDP. Western companies aim to maximize profits, but Chinese state-owned companies aim not to maximize profits but to expand the welfare of the people.”—Why is China calm despite the lowest growth in 27 years, 중앙일보, November 27, 2019

As such, according to research institutes and research years, the proportion of GDP in sales of Chinese state-owned companies is at least 61.7% (the Bank of Korea 2017) to a maximum of 82.1% (the Bank of Korea 2014). This shows that China can never be put in the basket of capitalism.

Typical capitalist countries, the United States and the United Kingdom, are in very contrast to this. According to the Bank of Korea above in 2017, the total assets and total sales of Chinese state-owned companies are 177% and 61.7% of GDP, respectively. However, the total assets of US public corporations are 2% of GDP, and the total sales of the UK are 1.56% of GDP (Korea Tax Research Institute, May 2010).

The Growth of State-Owned Enterprises

With the dramatic growth of the Chinese economy, the size of state-owned enterprises has also grown even more. “Since the launch of the National Self-Defense Commission in 2003, the total assets of state-owned companies in 2017 have doubled to 160.5 trillion yuan (about 2.73 won) over the past five years (Understanding of reform of state-owned companies in China 중국 국유기업 개혁에 대한 이해, KB Financial Group Management Research Institute, April 2018).”

Percentage of state-owned enterprises in the top 500/100

When abbreviated to the top 500 companies, the nature of state ownership is more clearly expressed.

“The number of state-owned and government-invested companies out of China’s top 500 companies was 331, accounting for 66 percent of the total number of companies, and operating income was 22.93 trillion yuan, accounting for 85 percent of the total.”—Contents and limitations of reform of state-owned enterprises in China 중국 국유기업 개혁의 내용과 그 한계점, International Labor Brief, March 2012

Going to the top 100 companies, it becomes dramatically clearer. State-owned enterprises account for nearly 90 percent of sales.

2) Nationalization of the financial sector such as the Banks

The term ‘financial’ here is not what Marxist science calls ‘finance capital as an economic entity in the imperial era that combines industrial and bank capital that appears in the monopoly stage of advanced capitalist countries.’ However, it refers to the industrial sector in charge of ‘banking, securities, insurance, etc.’ and ‘distribution of monetary goods(capital).’

Money, represented by gold and silver, is an universal equivalent of goods. In other words, money can purchase all goods, and it is a medium that measures the amount of value of all products. Therefore, except for one-time and exceptional barter, both producers and consumers can establish economic relationships only through money. All economic players want money. All economic activities are done through money. So money is the starting and ending point of economic activity.

Thus, the financial industry sector, such as banks in charge of money circulation, is a path to economic activity and a vital point. Money circulation plays a role like the ‘heart and blood vessel’ in terms of the human body in that it mediates each economic activity and moves the necessary goods. In addition, it can be said to be the ‘conductor’ of the economy in that it restores or subsides each sector of the economy by adjusting the direction and amount of money circulation, and controls the direction.

The financial sector therefore serves as a mirror to the country’s economic situation. Looking at the Chinese economy through such finance, it can be confirmed again that ‘state ownership dominates the Chinese economy.’

State-Owned Banks of China

Wang Yun-jong’s China’s Economic System: Backwardness and Vulnerability in the Government-controlled Financial System 중국의 경제체제: 관치금융시스템의 후진성과 취약성,” published in November 2017 by the Seoul National University Institute for International Affairs, explains Chinese finance abundantly.

Wang Yun-jong first points out that almost 100% of Chinese banks are state-owned.

“China has 99.45 percent of state ownership of banks. In the early 1980s, when the single banking system centered on the People’s Bank of China began to diverge, various commercial banks were established, but they were all government-owned banks. Stock commercial banks, which began to be established in the late 1980s, were also practically owned by the government because they were joint ventures between state-owned companies or by state-owned companies and local governments.”

This is also a widely confirmed fact among researchers, and there is little room for reconsideration.

The Purpose and Operation of the Banks of China

Next, the business purpose and operational method of Chinese state-owned banks are quite different from private banks in capitalist countries.

The capitalist system regards the exclusive profit of private capital as the greatest goal on earth. In this system, banks are at the top of the food chain. In the face of profit, the banks have no blood or tears. They don’t care about the well-being of members of society. They are ferocious predators who do not mind slaughter or war.

But China’s banks based on state-owned systems do not. Private profit is not a priority for their business.

“In most control-based systems, banks are privately owned, traditionally independent, powerful actors who vigorously enforce their interests. In China, however, banks have very few ways to enforce their interests; for example, legally they have low priority in repayment in the case of bankruptcy. Banks are not allowed to own stock directly. Most important, because of their long tradition of passively accommodating government lending policies, banks have neither the capability nor a clear mandate to aggressively monitor enterprise performance.”—Chinese Economy: Transition and Growth to the Market, Barry Naughton

“In China, however, banks have very few ways to enforce their interests,” said the above, “legally they have low priority in repayment in the case of bankruptcy.” From a capitalist point of view, it’s not a bank if it doesn’t enforce their interests. There is no reason for existence in capitalism. And banks that “have low priority in repayment in the case of bankruptcy.” cannot survive in the capitalist jungle.

Moreover, according to the above, the owner of a Chinese bank is not a private capitalist. Chinese banks are “passively accommodating government lending policies, have neither the capability nor a clear mandate to aggressively monitor enterprise performance.”

It is also confirmed through Wang Yun-jong’s study that the banks of China perform according to the national policy logic, not the logic of private capital.

“The reason why China is lagging behind in the financial sector domestically is the status of the central bank, the People’s Bank of China, at the national level. It is no exaggeration to say that the People’s Bank of China has little independence as a central bank. The president is only one of 35 members of the State Council and briefs on China’s economic situation and interest rate levels every two weeks. The actual monetary policy authority is determined by the top decision-makers or members of the State Council.”—ibid.

Securities, Insurance and Other Financial Sector

Not only the banks, but also securities and insurance are dominated by state-owned enterprises.

“Top 5 companies of banks, securities and insurance are state-owned companies whose owner is Chinese government(in parentheses, proportion of government):

Banks: Gongsang Bank(69.3%), Construction Bank(57.1%), Agriculture Bank(79.2%), China Bank(64.0%), Transportation Bank)26.5%

Securities: Jungsin Bank(38.8%), Haetong Bank(45.6%), Gwangbal Bank(23.6%), Guktae Bank(49.7%), Chosang Bank(75.6%)

Insurance: China Insoo Insurance(96.9%), China Pyeongan Insurance(45.2%), Shinhwa Insurance(84.0%), Pacific Insurance(72.1%), China People Insurance(100%)

Local government majority stake in the case of financial institutions and shareholdings, even if rate is low, ” de facto control of events ―System change and the limiting factors and economic fabric in China 중국경제 구조 및 제도변화와 제약요인, Bank of Korea, August 2017.

2016 study of the International Society for Contemporary China is almost the same description.

“In the case of securities companies, state-owned companies are still in a leading position, although not as much as banks.. Jungsin (中信) ⋅ haetong (海通) ⋅ Guotai Junan (國泰君安) ⋅ gwangbal (廣發) Eunha (銀河) other major securities firms are all national series…

The insurance industry is dominated by state-owned insurers. Chinese assistant secretary of state in life insurance and non-life insurance, state owned companies such as China Inbo(中國人保), Pyeongan(中國平安), PIC(中國太平洋保險), Taikang, (太康人壽) and NCI(新華人壽), rate of more than 70 percent.”―Economic Characteristics of the financial, state-owned and land 중국 특색 사회주의의 경제적 특징 금융, 국유, 토지, International Society for Contemporary China firmly maintaining Chinese socialism, November 2016.

And in stock and bond markets of China’s opening or other capital significantly lower than in capitalist countries.

3) Foreign Investment

China’s overseas investment increased sharply in the 2000s, especially after the financial crisis from the United States in 2008.

A surge in foreign investment was usually headed to South America and Africa, which had a lot of resources. The funds that went abroad purchased local resources on better terms and funded infrastructure construction such as roads, ports and power plants. In that way, China gained local popularity. Upon receiving the benefit of the Chinese funds, many countries in Africa and Latin America is a friendly attitude towards China.

China’s Foreign Investment

China’s overseas investment increased sharply in the 2000s, especially after the financial crisis from the United States in 2008.”

A surge in foreign investment was usually headed to South America and Africa, which had a lot of resources. The funds that went abroad purchased local resources on better terms and funded infrastructure construction such as roads, ports and power plants. In that way, China gained local popularity. Upon receiving the benefit of the Chinese funds, many countries in Africa and Latin America have a friendly attitude towards China.

Uncomfortable Imperialism

Then, the imperialists became ill-tempered. Their eyes on China have become more straightened. China, a producer of vast resources and work force, is itself a coveted prey. If a capitalist counter-revolution occurs, as in the Soviet Union and Eastern Europe, it will once again give imperialist financial capital a bonanza. Capitalism, which is spilling all sorts of filth and breathing hard, will rejuvenate.

However, the prey holds out by raising its head and revealing hidden muscles. In addition to that, it repeatedly challenges the U.S.-centered imperialist hegemony in solidarity with semi-colony such as Russia, Venezuela, Iran, and worker’s state like Cuba and North Korea. Moreover, it now expands its influence, undermining the colonial gardens that have been cultivated for decades in Africa and Latin America.

List of Imperialist Nitpicking and the Left Advocates: ‘Debt Trap Theory’

The imperialist media has become busy. Thus, China’s overseas investment was placed on the anti-China nitpicking list. The phrase ‘China’s loan industry, debt trap’ has begun to be pushed as a buzzword. The argument goes like this. ‘China puts African and Latin American countries in a ‘debt trap’ by expanding overseas investment. It affects the country’s politics and steals assets by providing indebtedness.’

Because it’s not true, it’s a sham propaganda that can only be argued and cannot be grounded in fact. But each country’s puppet media follows the propaganda. Interestingly, even some domestic and foreign organizations pretending to be ‘left-wing, progressive, labor’ accept the propaganda on face value. The so-called ‘leftists,’ who even define China as ‘not only capitalism but also imperialism,’ are struggling to support this impressionistic non-science. Then, if anything looks plausible, they promptly bite. They gulp down the bait without checking whether it is imperialist or not. The steel fish hook hidden behind the bait passes through the nose and pierces the top of the head. This is the case of recent Worker’s Institute of Social Science(노사과연).

China’s Motivation for Overseas Investment: ‘One Belt, One Road’

To maintain the industry through the economic blockade of the U.S.-centered imperialist camp, China needs natural resources such as oil and minerals and a transportation route for supplies to safely transport their resources to the mainland. In order to avoid a political and diplomatic blockade and isolation imposed by the U.S. imperialist camp, it is essential to secure friendship among ‘third-world’ countries.

“China has emerged as the world’s second-largest oil consumer after the United States since 2002 due to a surge in demand for oil, energy and mineral resources”

—China promotes its own energy-securing strategy in line with its policy not to rely on US-led international oil and raw material markets as much as possibleInvestment centered on state institutions and state-owned enterprises: China’s foreign direct investment is centered on state institutions (SAFE, CIC) and state-owned enterprises (only 10.2% of the total number of foreign-invested enterprises as of 2010, but these enterprises account for 73.5% of total investment)”—China’s foreign direct investment trends and characteristics after the global crisis 글로벌 위기 이후 중국 해외직접투자 동향 및 특징, Bank of Korea, January 2013These facts are not so secretive or esoteric. In fact, multiple researchers, who carefully examine the relationship, point out China’s motivation for overseas investment like that. “China’s Economic Cooperation in Central and South America and Africa 중남미와 아프리카에서 중국의 경제협력,” the Institute for Foreign Economic Policy in December 2021, explains this problem in more detail.“One belt one road business is…Domestic factors such as the need to shift economic development strategies and the U.S. Obama administration’s Pivot to the Asia-Pacific strategy…It was created with the aim of responding to external factors such as strengthening checks on China in the Asia-Pacific region.The plan is to build a land silk road connecting Central Asia and Europe and a maritime silk road connecting Southeast Asia, the Indian Ocean, Africa, and Latin America at the same time. The land Silk Road aims to promote trade and economic development between China and neighboring countries through infrastructure maintenance such as roads and railways, and the marine silk road is designed to improve infrastructure centered on ports of each region. In the case of Latin America and Africa, the focus is on building infrastructure to secure resources such as mine development.”

The Difference to Imperialist Aggression

As such, China’s overseas investment is a struggle to survive through the imperialist blockade. This is very different from imperialism’s motivation for overseas expansion in the form of receiving super profits.

Finance capital in advanced capitalist countries, which reached the monopoly stage at the end of the 19th century, advances overseas for super profit, the ‘profit beyond profit exploited by their own workers’ [This concept is very important for understanding imperialism!]. In order to obtain super profits, super exploitation is required, and super exploitation inevitably results in fierce resistance from local workers. Imperialism carries out cruel tyranny to suppress the resistance of the local people and maintain the colonial system. This is why military dictatorships, coups, assassinations, civil wars, and slaughter are frequent in the colonies.

It is difficult to find these characteristics of imperialist foreign domination in China’s overseas investment.

First of all, China’s overseas investment centered on state-owned enterprises, unlike imperialist private capital, does not set profit as the greatest goal on earth. Platform.c’s translation (28 October 2021) introduces this difference.

“Compared to transnational private capital, Chinese state capital is relatively more compromised with Zambian authorities…During the 2008 economic crisis, as copper prices fell below production costs, transnational capital KCM (Indian capital) and MCM (Swiss capital) announced a series of production cuts and large-scale redundancy. However, the NFCA (China African Mining Limited) would rather not cut jobs, cut production, or cut wages.…The Zambian government’s response to the “super profit tax” also revealed this distinction. When copper prices peaked, the Zambian government decided to collect additional “super profit taxes” under strong pressure from the private sector and opposition. Meanwhile KCM and MCM strongly opposed this, senior officials of CNMC (NFCA’s parent company) rather expressed support. Subsequently, China’s national capital was actively in charge of the construction of the Zambian mining district’s multifunctional economic zone, which was the core of Zambia’s development strategy to enhance the added value of the copper mining industry. Transnational capital such as KCM and MCM never supported the project because there was no profit to be gained.”―The peculiarity of Chinese national capital revealed in Zambian labor politics in Africa 아프리카 잠비아 노동정치에서 드러난 중국 국가자본의 특수성

To sum up the article, ‘unlike other imperialist capital, Chinese capital does not cut production even when the economy gets tough, does not take all of its profits when copper prices soar, returns to the state through excess profit taxes, and takes on projects that do not want to benefit immediately.’

African and Latin American infrastructure construction

In order to pursue China’s political and economic national interests in Africa and Latin America and to avoid imperialist vested interests such as the U.S., the U.K., and France, it was important to please the governments of each colonial country and the local people. So much of the Chinese money earned from the world’s factories was spent on the construction of the country’s industrial infrastructure, which was not immediately profitable.

“Economic relations between China, Central and South America, and China and Africa have grown rapidly around trade since China joined the WTO in 2001, and many countries in Latin America and Africa have benefited from the surge in Chinese resource imports. From the mid-2000s, China’s investment in South America and Africa was activated, and from the late 2000s, development financing and official development assistance distribution began in earnest to these countries. As a result, China has become a major economic cooperation partner for most countries in Latin America and Africa.…”

Experiencing Western sanctions and isolation, it has expanded diplomatic cooperation with Latin American and African countries as a way to win political support from other continental countries except Western countries. There is a recognition that support from third-world countries such as Latin America and Africa is essential to establish a diplomatic support environment for gradual change in the international order that China aims for.…

“China has become Africa’s largest trading partner since 2009, with trade volume between China and Africa reaching $170 billion in 2017. China also said it has contributed greatly to the development of African infrastructure, providing investment and loans for 6,200km of railways, 6,500km of roads, 20 ports, 20 bridges, 80 power plants, and 80 stadiums in Africa by 2017.”—China’s Economic Cooperation and Foreign Economic Policy Research Institute in Central and South America and Africa 중남미와 아프리카에서 중국의 경제협력, December 2021

According to Chinese Foreign Ministry spokesman Wang Wen-bin’s Facebook post (August 6, 2022) and China Daily (August 19, 2022), China has built more than 10,000 kilometers of railways, 100,000 kilometers of roads, nearly 1,000 bridges, nearly 100 ports, 66,000 kilometers of power transmission facilities, and hospitals in Africa.

There are 40 member states and partners who submitted the data, “United States, China, Japan, Germany, UK, India, France, Canada, Italy, Brazil, South Korea, Australia, Spain, Mexico, Saudi Arabia, Netherlands, Switzerland, Poland, Turkey, Sweden, Argentina, Norway, Israel, Ireland, Austria, Denmark, Colombia, Chile, Finland, Czech Republic, Greece, Hungary, Slovakia, Lithuania, Costa Rica, Slovenia, Latvia, Estonia” (Rank by GDP).

The report, which compares the ‘number of companies, number of employees, and corporate value’ of all public companies owned by 40 countries, compares public companies in all countries except China and China as follows.

“• Taking China aside for a moment, governments in the sample area are the full or majority owners of 2 467 commercially-oriented enterprises valued at USD 2.4 trillion and employing over 9.2 million people.

• In China alone, the central government owns 51 000 SOEs, valued at USD 29.2 trillion and employing approximately 20.2 million people.”

Let’s just pick out the corporate value again. “The total value of public enterprises in 39 countries in the sample area excluding China is 2.4 trillion dollars,” and “China is 29.2 trillion dollars.” The total value of Chinese state-owned enterprises is about 12 times more than the total value of state-owned enterprises in 39 countries including the United States, Japan, Germany, the United Kingdom, and France!

China’s total population is approximately 1.4 billion, and the total population of the remaining 39 countries is over 3 billion. However, the value of public enterprises is more than 12 times that of all other countries in China.

Can China be put in the same basket as the rest of the 39 capitalist countries?

  *      *     *

Let’s summarize the entire discussion of II-3: China’s ownership relationship: still dominant state ownership system.

In China, all key industries such as electricity, communication roads, railways, ports, air transportation, oil, aerospace, military and banks are owned by state.

More than 99% of Chinese banks are state-owned

China’s overseas investment is led by the state and state-owned companies, and unlike imperialism, receiving “super profits” is not the goal. It does not use the method of tyrannizing the local people.

The total value of Chinese public enterprises is more than 12 times that of public enterprises in 39 capitalist countries, including all imperialist countries.

It is unscientific nonsense to define the country with these characteristics as a capitalist. It is a reactionary perception that sells out the achievements of the Russian Revolution in 1917 and the Chinese Revolution in 1949 with poor impressionism, cowardice, and intellectual laziness.

China’s vast possessions of the state still remains the result of the revolution. China is not a capitalist country. It is not defined by private ownership, but a ‘worker’s state in transition’ operated mainly by state ownership. The fate of China, a worker’s state, is however on the brink. It will be determined by the fierce battle between the working class and the capitalist class at the world level as well as China and its relationship of force. Along with the progress of the global revolution, it may move toward ‘socialism,’ but otherwise, it may face a catastrophic tragedy of returning to capitalism.

As Marxists, we defend China against a capitalist counter-revolution. Defense of China is a deadly bridgehead for the world revolution.

August 31, 2022

Ⅲ. China and the Left

Our Analysis of China

Through Part I: From the 1949 Revolution to the 1978 ‘Reform and Opening-up’and Part II: Changes in Chinese Society as a Result of ‘Reform and Opening-up’, we analyzed China diachronically and synchronically. Through them, we explained that China is not only a phenomenon in one country but also the result of advance and retreat of the world revolution.

China was liberated from imperialism by the 1949 Revolution, which was based on the result of the Russian Revolution in 1917. The world’s working class advanced further by this. The global labor-capital power relationship significantly changed, creating a more favorable phase for the working class.

However, the Soviet Union, Eastern Europe, North Korea, China, Cuba, and Vietnam, where workers states were established, were all underdeveloped countries. Although the form of ‘socialist ownership’ was established through the abolition of private property system, the problem of low productivity was not solved. As Marx said in “German Ideology”, “the development of productive force which is an absolutely necessary practical premise” for socialist construction, did not resolve, then poverty persisted and “old filthy business” ‘bureaucracy, oppression of workers’ democracy, and the remnants of capitalist elements’ reproduced.

To solve this problem, a revolution in advanced capitalist countries was needed. However, due to the betrayal of the imperialist labor aristocracy, the revolution of the advanced capitalist country have been failed. The revolution was isolated without aid. The isolated revolution was plagued by imperialist aggression outside, poverty and tyranny by bureaucracy inside.

The post-war revolutionary crisis did not lead to the victory of socialism in Europe. The social democrats rescued the bourgeoisie. That period, which to Lenin and his colleagues looked like a short “breathing spell”, has stretched out to a whole historical epoch. The contradictory social structure of the Soviet Union, and the ultra-bureaucratic character of its state, are the direct consequences of this unique and “unforeseen” historical pause
—Socialism and the State, Chapter 3 of The Revolution Betrayed

China is the result of this class relationship of force. Although it maintains a form of socialist ownership, the productivity that lags significantly behind advanced capitalist countries is not socialist. China is a contradictory system that is socialist and simultaneously not socialist. Trotsky’s definition, which calls the Soviet Union, which is the product of the advance and retreat of the Russian revolution, “a preparatory regime transitional from capitalism to socialism” is also applicable to China today.

However, we define China a ‘deformed workers state’, while we define Soviet Union a ‘degenerated workers state’ in which revolutionary leadership of working class existed and the revolution retreated.(see 5. Degenerated and Deformed Workers’ state in The Program of the Bolshevik-Leninist) We defend China’s state-owned system of ‘deformed workers state’ against imperialist aggression and capitalist counter-revolution.

The Leftists who Define China as a ‘Deformed Workers State’

Our analysis and political position, which explains the reality without contradiction, are scientific and therefore the most revolutionary. Unfortunately, however, this political position is a minority in the left.

ICL, IBT, BT and IG which are rooted in the Spartacist League(SL) tradition, hold this position. The SL tradition inherited Lenin-Trotsky’s revolutionary continuity against the two opportunism, the submission to Stalinist bureaucrats and abandonment of defensist position on workers’ states such as Soviet Union, East European countries, North Korea, China, Cuba, and Vietnam.

However, the SL tradition is contaminated with opportunism that gave in to imperialist labor aristocracy, as they confessed themselves by The Struggle Against the Chauvinist Hydra(ICL) and In Defense of (Seymour’s) Marxism(IBT). In that sense, these organizations cannot be the leadership of future revolution. We have explained that point in detail through a number of documents.

Meanwhile, Class Conscious published China: Capitalist, Socialist, or “Weird Beast”? This organization also defines China as a ‘deformed workers state.’

Three Categories that deny the Trotskyist analysis

Meanwhile, most Leftists deny the Trotskyist analysis that defines China as a “transitioning system from capitalism to socialism” or a ‘deformed workers state.’ These positions can be largely divided into three categories.

First is the view that China has been a capitalist since 1949. Tony Cliff’s International Socialist Tendency(IST) is typical. They have defined workers states’ such as the Soviet Union, Eastern Europe, and North Korea as ‘state capitalism,’ and it is same on China.

Second is the view that China was once ‘socialism’ or at least a workers’ state, but it changed to capitalism at some point after Mao Zedong’s death through “reform and opening-up.” This is the case with RCIT, SF, LCFI, Left Voice, WSWS, etc.

Third is the view that China has been and is now, and will continue to follow the path of “Chinese socialism” without wavering. This is the official position of the Communist Party of China, and Dr. Kim, Jung-ho represents this position in Korea.

IST and Workers’ Solidarity: ‘Democracy over Ownership’

The theory of state capitalism which IST and it’s South Korean affiliate Worker’s Solidarity, is famous. Using this theory as a shield, IST founder Tony Cliff exempted himself from the obligation to defend workers’ states that expanded to Eastern Europe and North Korea shortly after World War II.

Their position is that ‘the state property system is secondary to the character of the state, and where is no workers’ democracy, there is nothing to defend in that society.’

“Basic political and civil rights are not guaranteed in China. Can we call China socialism without these rights and democracy?”—Workers’ Solidarity, Is China Socialism?

“The workers did not have any active roles in this [1949] revolution, and the regime that came to power was not socialist in any way. Workers did not run factories and offices, and farmers did not run villages.”—Tomashi Tengli-Evans, Was Mao’s China a socialist society?

“For Marx, socialism had nothing to do with the state-ownership system. It involves nationalization if necessary, but the essential aspect was self-liberation of the working class. In other words, socialism meant that workers controlled the economy and production. The important point was who controls the country, and whether or not the country was nationalized or not was not important.”-Marx 21, Interviewed Choi Il-bung, a member of Workers’ Solidarity management committee

Anyone who has studied Marx and Engels’ Communist Manifesto, Lenin’s State and Revolution, and Trotsky’s Revolution Betrayed, at once will be able to see how anti-Marxist the arguments cited above are. What determines the character of a state is, above all, the ‘form of property system.’

Imperialist camps, including the U.S., Britain, France, Germany and Japan, have been constantly hostile to the Soviet Union, Eastern Europe, North Korea, China, Cuba and Vietnam since the October 1917 revolution. The camps educated their working people incessantly to abhor those workers’ states. The hostility and hatred are not because the country’s regimes are ‘undemocratic.’ This is because they have a system that abolished private ownership and imperialism can never tolerate such a property system. Trotsky has already explained this issue.

“In spite of all the efforts on the part of the Moscow clique to demonstrate its conservative reliability (the counterrevolutionary politics of Stalin in Spain!), world imperialism does not trust Stalin, does not spare him the mist humiliating flicks and is ready at the first favorable opportunity to overthrow him. Hitler―and therein lies his strength―simply more consistently and frankly expresses the attitude of the world bourgeoisie to the Soviet bureaucracy. For the bourgeoisie―fascist as well as democratic―isolated counter-revolutionary exploits of Stalin do not suffice; it needs a complete counter-revolution in the relations of property and the opening of the Russian market. So long as this is not the case, the bourgeoisie considers the Soviet state hostile to it.”―Not a Workers’ and Not a Bourgeois State?, Trotsky

Unless these “complete counter-revolution in the relations of property and the opening of the market” were achieved in the Soviet Union, the imperialists did not think they had won. Contrary to the pathetic perception that “whether or not the country was nationalized or not was not important.”

RCIT and the Workers’ Revolutionary Party: ‘Always Anti-China/Anti-Russia

Revolutionary Communist International Tendency(RCIT) and the South Korean affiliate the Workers’ Revolutionary Party are at the forefront of anti-China and anti-Russia within the so-called international Leftists. In most international events, including Syria, Hong Kong, Myanmar, Sudan, Belarus, Kazakhstan, Ukraine, and Taiwan, although the root of the problem lies in imperialism, especially U.S., they claim the responsibility to ‘imperialist China’ or ‘imperialist Russia’ or they see the matter a problem of both U.S. imperialism and China/Russian imperialism. RCIT and WRP elevate even the neo-colonial South Korea to imperialism.

The RCIT’s ‘elevation’ of all U.S. imperialist counterparts to imperialist countries is to use Lenin’s ‘revolutionary defeatism.’ This is because the U.S. counterpart must also be imperialism to apply Lenin’s tactics which is on imperialist rivaly. This is because only then they can disguise their opportunism of surrendering to the real predator, the U.S.

In this way, they are blurring the eyes of working class against U.S. imperialism, which is the pinnacle of the imperialist system sustaining global capitalism and the apex predator. In this way, they, intentionally or not, act as a left cover for American imperialism.

RCIT sees China as ‘capitalism and imperialism,’ like IST. However, contrary to the tendency of IST and other state capitalism, RCIT recognizes that the Soviet Union and Eastern European countries were workers’ states. While the IST also claims that China has been capitalist since the founding of the People’s Republic of China in 1949, RCIT believes that China has been a workers state or a non-capitalist state for some time since 1949. They say, at some point, that China, Vietnam, and Cuba were transformed into capitalism. But it’s a little different about North Korea. For some time, it was claimed to be a workers’ state. Then, in 2018, when the South Korean branch, led by IST-related state capitalists, joined, they changed their position and declared that North Korea is a capitalist state.

SF and LCFI: ‘Risk of Misleading the Working class’

Socialist Fight(SF) is a British-centered group advocating Trotskyism, and the Liaison Committee for the Fourth International(LCFI) is an organization separated from SF in 2020. The latter is a combination of local organizations in the United Kingdom, Brazil, Argentina, and the United States.

SF and LCFI have almost the same position as us against the Anglo-chauvinism of SL tradition regarding the cases of anti-imperialist struggle. In November 2018, shortly after our split from IBT, SF published IBT Split: the Asian Anti-Imperialist Marxist Position. Posting a full text of our internal debate, they expressed “100% support.”

In imperialist neo-colonial regime change using “assassination, coup d’etat, civil war, etc,” breaking off from SL’s Anglo-chauvinism that erases imperialist elements and taking neutral position is one of the core platforms of revolutionary politics(see Defend Lenin-Trotsky revolutionary thoughts against Anglo-American chauvinism!/ The long lasting hegemony of British-US imperialism, Anglo chauvinism and the degeneration of Trotskyism) The international communist leadership will only be built on its foundation. In that respect, it is very welcome for SF and LCFI to support our position.

Unfortunately, however, SF and LCFI define China as capitalism. Fortunately at least, unlike RCIT and IST, these comrades define China as a neo-colony. Thus, they take a China defensist position in the US-China conflict that is taking place in almost all international arena.

BT published The Myth of Capitalist China in 2021. And SF refuted the BT’s through an article titled The BT: Capitalist Roaders in The Myth of Capitalist China.

What embarrasses the organizations that define China as capitalism is the vast state ownership that still exist in China. So the conventional trick used by state capitalists is to inflate some of the negative and exaggerate it as if it were a key of the whole. The Chinese billionaire, it is known that the number is bigger than the United States, is satisfying argument of state capitalists. The expression “billionaire” appears 21 times in the SF’s article

The Soviet Union or China is the product of the advance and retreat of the world revolution. As a result, there are negative factors to overcome as the world revolution moves forward: “capitalist distribution norms, pro-capitalist forces, and bloated and corrupt bureaucrats.” The same goes for Chinese billionaires.

For Lenin, they would be “illegal, or lawless, or God-knows-whence-derived speculators or private capitalist businessman” who will try to “seize the wheel” of a workers state in the future(Platform of the Joint Opposition). Meanwhile, Trotsky compared them to “malaria poisioning liver.”

“A liver poisoned by malaria does not correspond to a normal type of liver. But it does not because of that cease to be a liver. For the understanding of its nature, anatomy and physiology are not sufficient; pathology too is necessary. Of course it is much easier upon seeing the diseased liver to say: “This object is not to my liking,” and to turn one’s back upon it. But a physician cannot permit himself such a luxury. Depending upon the conditions of the disease itself, and the resulting deformation of the organ, he must have recourse either to therapeutic treatment (“reforms”) or to surgery (“revolution”). But to be able to do this he must first of all understand that the deformed organ is a sick liver, and not something else.”—Trotsky, Not a Worker’s State, Not a Bourgeois State? 1937

For Lenin and Trotsky, the negative factor is just the object to be overpowered to protect positive achievements. They never give up the “whole” of the machine and the liver because of the negative factor of the “part.” However, state capitalists deny the car and the liver under the pretext of their negative factors. When it is tricky and difficult to analyse, they turn their backs to saying, “This object is not to my liking.”

Of course, serious inequality and the growth of the emerging capitalist class are risky in that they strengthen the counter-revolutionary forces in the workers state. As Lenin and Trotsky did, we must treat the issue of driving the capitalist counter-revolution with keen awareness. But we should not conclude that everything is over. We are not “empty idealists(Trotsky, ibid).”

Let’s compare it to the sand flag play. If you scoop out a lot of sand, the flagpole is at stake. However, even if the bottom of the flagpole has been pumped out so much sand that it reveals, there is a situation where it is still standing dangerously depending on the remaining sand. Until then, the game is not over. The outcome has not yet been decided. Then, there may be a moment when the flagpole collapses by scooping out more sand. This is the moment of change from quantity to quality. But we don’t rush to declare that the flagpole had fallen before that moment.y

Like our analysis, China is now at a crossroads between capitalism and socialism. It’s not decided where to go. Fate will be determined by the progress and retreat of the world revolution, as well as the power relationship within China. The sand and flagpole are the achievements of the existing revolution and the world working class. The working class will defend the flagpole in a way that punish those who squander the assets and reinforces the assets.

SF and LCFI comrades are now standing on the same barricade as us in the U.S.-China conflict, as they did in the Ukrainian war. However, there is a high risk of misleading the global working class in the future if they deny the nature of a workers state of China and recognize it as a capitalist colony.

Although choices may be easy in external conflicts between the U.S. and China, there is a high risk of getting lost and wandering in internal conflicts in China. There is a high risk of misjudging the Chinese version of “Yeltsin” pro-capitalist forces, which call for ambiguous slogans such as “democracy, freedom,” as if they were working-class and progressive. Just as they confused during the Hong Kong protests, which heated up the year 2019.

World Socialist Web Site.

The World Socialist Web Site(WSWS) is an online propaganda outlet for the Socialist Equality Party(SEP). The SEP insists on the succession of the “Fourth International International Committee” and acknowledges that the Soviet Union was a “degenerated workers state.” However, at every crisis, they have given up defending the workers state by supporting Yeltsin and Lech Wałęsa. Like many other self-proclaimed Trotskyist organizations, such as RCIT and SF, the WSWS believes that China has become capitalism at some point by its reform and opening-up.

“Deng’s victory was consolidated at the 14th CCP congress in October 1992. The message from the gathering was, according to China specialist Michael E. Marti, “nothing short of opening China to a foreign capitalist invasion”. The “socialist market economy” meant embracing every aspect of capitalist economy, from the establishment of financial and securities markets, to the destruction of state enterprises.”―WSWS, Twenty years since Deng Xiaoping’s “Southern Tour”

II–3: China’s property relationship in this article reveals how unrealistic and irresponsible WSWS’s words such as “opening China to a foreign capitalist invasion,” “destruction of state enterprises,” and “embracing every aspect of capitalist economy.”

Left Voice

Left Voice also believes that China was once a deformed workers’ state, but now it has become capitalism. Last year, the 100th anniversary of the founding of the Communist Party of China, Left Voice published From Revolution to Capitalist Restoration: 100 Years of the Chinese Communist Party, which was translated and introduced by the South Korean supporter Nohaetu(Fighting Alliance for Workers’ Liberation)

This document explains the harm the Stalin-Bukharin’s popular Front policy has done to the Chinese Communist Party, or the secret of its victory even though it has been transformed into a peasant-centered organization away from the urban working mass. This is also an excellent rebuttal to the conventional logic of Nohaetu, which say, “There is no self-liberation of the working class, so there is no workers state.”

“In breaking this alliance, the CCP also called for extensive land reform in the entire Chinese territory, not just those territories under its control. This sparked a huge movement among the peasant masses.…

The remainder of the national bourgeoisie, which was pushed out to Taiwan by Mao’s victory just a year earlier, saw allies in U.S. imperialism, believing they could defeat Mao and regain their interests in China. This alliance finally forced Mao to break with any illusions in the national bourgeoisie and to expand the expropriation and socialization of all private property in China. Yet, while Mao’s victory had successfully pushed out the KMT and its capitalist allies and had also squashed capitalist modes of production within China, it had not prepared the working class to seize political power, which now lay squarely with the CCP bureaucracy led by Mao.

The Chinese Revolution had made great gains in defeating feudalism and capitalism. It had decisively defeated imperialist aggression. In the years after, the CCP made important advances in fulfilling democratic demands to keep with the aspirations of the revolutionary masses, and it established a socialized, planned economy, which included the nationalization of banks and industry. Yet, it wasn’t the self-organized working class, but the CCP bureaucracy that held all political and administrative power and would shape the future of the new Chinese state, leading to the formation of a deformed workers’ state.”―From the Revolution to the Restoration of Capitalism: 100 Years of the Communist Party of China

Left Voice also rightly criticizes the frivolous claims widespread among leftists, namely the existence of an abyss between Mao Zedong and Deng Xiaoping.

“Many on the Left today argue that the blame for China’s degeneration lies not with Mao but with Deng. Yet, the seeds of such a process had already been sown during Mao’s regime.”- ibid.

However, Left Voice reverts to the common claim that capitalism returned as Deng Xiaoping took power, pushed for reform and opening-up, suppressed the Tiananmen Square protests, and consolidated his power.

“After rising to power in 1978 after Mao’s death, Deng launched sweeping reforms that opened the path to the liberalization of the Chinese economy.…In 1989, the Tiananmen uprising marked a crucial moment in this process of capitalist restoration.”-ibid.

Worker’s Institute of Social Science: ‘Imperialist propaganda benchmarking’

The main work that the WISS has done is to defend Stalinism. The conventional logic of defending Stalinism is that “Trotsky and Trotskyists deny the defense of their socialist homeland of the Soviet Union and collude with the imperialists to overthrow the regime (see ‘No Black Propaganda, No Stalinist Defense‘).” At the same time, they pretend to be defenders who fight the most thoroughly against traitors to protect their revolutionary achievements.

For the Soviet Union, which had already collapsed and did not exist, it is the WIIS that keeps such loyalty. However, for China, which is the follow-up result of the world revolution following the Soviet Union and the main enemy of the imperialist camp, they do not take part in defending it. Not only does it not defend, but it also lightly liquidates a workers’ state with a huge population of 1.4 billion on vast land bordering many parts of the world, defining it as capitalism. They overthrow a system achieved by decades of struggle and tens of millions of sacrifices.

They claim to be Marxist-Leninist. However, they put forward the pitiful logic that since the constitution has changed, the social character has changed.

“Since Deng Xiaoping’s reform and opening-up policy, China’s capitalization has taken a leap forward, and this reality is clearly reflected in China’s constitutional amendment. …In addition to these amendments, legislation for substantial protection of private property, the Real Rights Act, began to be drafted around 1993, and in 1998, the 8th National Congress Standing Committee formed a Civil Code Foundation team to draw up the Real Rights Act and other parts of the Civil Code.”―Short Thought on Hong Kong Protest

It is an argument made by an open right-wing reformist such as Bernstein, and Sim Sang Jung, a surrender to bourgeois camp who say “progress in the constitution,” that the social system can be changed by revision of the constitution without social revolution. If such a thing were really possible, it would be wise to stop wasting time building a revolutionary party. It would be necessary to enter the National Assembly and seek the path of socialism through “progressive legislation.”

We criticized this non-Marxism as follows.

“This is a serious challenge to the ‘Marx-Leninist’ view.…China’s capitalist revolution, or counter-revolution, as WIIS explains, is “long-term, slow and peaceful.”…There is no “leaps and storms” in the transformation of the Chinese social system as described by the “Short Thought on Hong Kong Protest”. However, it is “slow and gradual.”…“The great debate between the opposition and the pro-opposition…Thousands of debates…The 3,700 petitions and so on” constituted the cataclysm [that they claimed]. Even in the eyes of WIIS, there has been no physical clash between the hostile classes or destruction of the state, or “destruction of the bureaucracy, the military and the police.” [According to WIIS] Despite the counter-revolution of the capitalist class taking power, it still takes power under the monstrous name of the Communist Party. The army is still the People’s Liberation Army (established and named as the Communist Party’s army). The red flag with five stars, a symbol of the 1949 revolution, still flutters throughout China.

By any chance, is the revolution of the capitalist class so long-term, gentle and peaceful compared to the revolution of the working class? Is it that the working class is such a stupid class that they don’t get angry, they don’t say they’re hurt, they just fly the same flag and stay as peaceful as they were yesterday, even when they lost all of their precious?”―Criticism of the “Short Thought on Hong Kong Protest” of Workers’ Institute of Social Science

WIIS have become more vigorous through the Chinese Economy: from Refuge of Excessive Capital to the Epicenter of it(Kwon Jung-ki, August 2022). Beyond the claim that China is capitalism, they have now come to say that China is a “super-powerful imperialist intensity beyond the United States.” They uncritically cites imperialist media as the basis for China to “benchmark” the “senior imperialist robbers.” In this way, they “benchmark” imperialist propaganda.

Now it feels like they have gone to far away. They interpret that the protest agaist Park Geun-Hye was due to the plan of the ruling class(2017), the withdrawal of U.S. troops from Afghanistan was not a losing war but an old plan of imperialists(2021), and Latin America’s Pink Tide is not a progress of the working class, but a deliberate and involuntary creation of US imperialism(2022).

These are analysis that have been paralyzed by fear of imperialism, the world’s ruler. For them, imperialism is undefeated and omnipotent.

MLKorea and Dr. Kim Jung-ho of Peking University

Until a few years ago, the MLKorea(National Workers’ Political Association) had the same position as the WIIS on China. While defining China as capitalism, they repeatedly criticized the view of it as socialism. Then, as the relationship with WIIS grew apart, the position on China also changed. Of course there have been no any explanation of the process of the change or self-criticism of former views as they always do.

Kim Jong-ho, who earned his doctorate from Beijing University, is one of a handful of “Chinese experts” who contribute to Minplus, Redian, and recently MLKorea. MLKorea approaches Kim Jung-ho, on the one hand, and on the other, it shows an attitude to distance itself.

“We have also presented a critical stance on the trend of unilateral prejudice and distortion against China, especially the disintegration of isolation against China, centered on the U.S. and the U.S., while recognizing China as capitalism within the ‘progressive camp’. However, while we maintain our position to defend China against the imperialist offensive and to look at China in a realistic way, we are critical of China’s “reform and open” and “socialist market economy” lines.”―Editor’s remark

This may be because they want to take the argument for criticism of Chinese capitalism from Kim Jung-ho, but are wary of remarks like a royal historian of Chinese Communist Party, such as advocating “market socialism.”

It is fortunate not to define China as capitalism. However, MLKorea is frightened by the so-called “Trotskyism,” the only scientific analysis on the “degenerated and deformed workers’ state. So they create a “Trotskyist straw man” with the theory of state capitalism and attacks it day after day.

It is impossible to obtain factual results by bypassing the existing science verified by historical practice. Stalinist perceptions of “socialism or capitalism” are unscientific and rough. It is impossible for such a driving method to steer precisely so that easy to get lost. Like bourgeois economists who stubbornly deny Marxist analysis on capitalism face economic panic which never be able to explain in bourgeois paradigm, they have to inevitably be in a theoretical panic.

IV. The Duty of the Working Class

China and Transitional Program

The program about Soviet Union, a degenerated workers’ state can be applied almost exactly to China today. In the “Transitional Program” cited below, if the word “Soviet Union” be changed to China and some adjustments are made, it will soon become our program for China.

The USSR thus embodies terrific contradictions. But it still remains a degenerated workers’ state. Such is the social diagnosis. The political prognosis has an alternative character: either the bureaucracy, becoming ever more the organ of the world bourgeoisie in the workers’ state, will overthrow the new forms of property and plunge the country back to capitalism; or the working class will crush the bureaucracy and open the way to socialism.…

The public utterances of former foreign representatives of the Kremlin, who refused to return to Moscow, irrefutably confirm in their own way that all shades of political thought are to be found among the bureaucracy: from genuine Bolshevism (Ignace Reiss) to complete fascism (F. Butenko). The revolutionary elements within the bureaucracy, only a small minority, reflect, passively it is true, the socialist interests of the proletariat. The fascist, counterrevolutionary elements, growing uninterruptedly, express with even greater consistency the interests of world imperialism. These candidates for the role of compradors consider, not without reason, that the new ruling layer can insure their positions of privilege only through rejection of nationalization, collectivization and monopoly of foreign trade in the name of the assimilation of “Western civilization.’’ i.e., capitalism. …

Atop this system of mounting antagonisms, trespassing ever more on the social equilibrium, the Thermidorian oligarchy, today reduced mainly to Stalin’s Bonapartist clique, hangs on by terroristic methods.…

If we are to examine “Trotskyism” as a finished program, and, even more to the point, as an organization, then unquestionably “Trotskyism” is extremely weak in the USSR. However, its indestructible force stems from the fact that it expresses not only revolutionary tradition, but also today’s actual opposition of the Russian working class. The social hatred stored up by the workers against the bureaucracy – this is precisely what from the viewpoint of the Kremlin clique constitutes “Trotskyism.” It fears with a deathly and thoroughly well-grounded fear the bond between the deep but inarticulate indignation of the workers and the organization of the Fourth International.…

From this perspective, impelling concreteness is imparted to the question of the “defense of the USSR.” If tomorrow the bourgeois-fascist grouping, the “faction of Butenko,” so to speak, should attempt the conquest of power, the “faction of Reiss” inevitably would align itself on the opposite side of the barricades. Although it would find itself temporarily the ally of Stalin, it would nevertheless defend not the Bonapartist clique but the social base of the USSR, i.e., the property wrenched away from the capitalists and transformed into state property. Should the “faction of Butenko” prove to be in alliance with Hitler, then the “faction of Reiss” would defend the USSR from military intervention, inside the country as well as on the world arena. Any other course would be a betrayal.

Although it is thus impermissible to deny in advance the possibility, in strictly defined instances, of a “united front” with the Thermidorian section of the bureaucracy against open attack by capitalist counterrevolution, the chief political task in the USSR still remains the overthrow of this same Therrnidorian bureaucracy. Each day added to its domination helps rot the foundations of the socialist elements of economy and increases the chances for capitalist restoration.
The Transitional Program: The USSR and Problems of the Transitional Epoch

The Conflict is in the Future, not in the Past

In China, a deformed workers state, the power to move toward socialism and the power to return to capitalism coexist. In the process of reform and opening-up for more than 40 years, pro-capitalist forces have grown significantly. As it grew significantly, it became more frequent to squeak with the workers’ state system of “state-centered economy and the Chinese Communist Party regime.” In this conflict, it is increasingly aware of its own pro-capitalist identity. This accumulated contradiction is making Chinese society very tense.

The tendency of workers’ state and capitalism only temporarily coexists in a specific situation, but it is a hostile relationship. The hostile contradictions built up at the base of society will inevitably explode.

The Composition and Program of Pro-Capitalist Forces

Pro-capitalist forces consist of “capitalist groups in China, pro-capitalist factions in the Chinese Communist Party and state institutions, some of the middle class attracted by the sweetness of capitalism and imperialist finance capital inside and outside China,” They have already taken advantage of the power of wealth to occupy important points in Chinese society. However, in order to realize their economic interest as much as possible, political power is urgently needed. Their progam is:
1) to end the 1949 political system represented by the Communist Party of China and take full control of the superstructure of Chinese society.
2) Use the political power to privatize state-owned enterprises such as banks, transportation, communications, steel, military and oil and return to a private-owned economic system.

Bonapartist character of the Communist Party of China

The regime of the Communist Party of China, which has the command of the People’s Liberation Army, reflects the contradictory structure of China. It is not monolithic but contradictory. It exists on the interface between the tendency to defend the state ownership system, which is the source of power of bureaucracy, and the tendency to privatize its power and privileges. The mighty power of the bureaucracy is not because they are united by one will. On the contrary, they stand on top of two opposing tendencies. Paradoxically, therefore, the mighty power of the Communist Party of China simultaneously expresses its vulnerability.

Currently the two contradictions can coexist and the power of the Chinese Communist Party mediates the two tendencies and exercises absolute power on the confidence of both tendencies. But as soon as it reaches its critical point, both tendencies will stop having confidence in the Chinese Communist Party and pull it from both sides. At that moment, the bureaucracy will be divided into pro-capitalist factions and state-owned defense factions.

A celebration of the 100th anniversary of the founding of the Communist Party at Tiananmen Square in Beijing on July 1 2021

Triangular Conflict and Our Tactics

The Chinese Communist Party, which reigns on top of China’s state-owned system, is an obstacle that must be brought down by both the working class to advance the world revolution and the capitalist class who want to return to capitalism. The longer the bureaucracy takes power, the greater the possibility of a capitalist counter-revolution. In order to defend the workers’ state, it is necessary to overthrow bureaucrats and establish a revolutionary democratic system of the working class based on internationalism. But when pro-capitalist forces in collusion with imperialist finance capital openly try to overthrow the Chinese Communist Party, shouting “democracy” or “freedom,” we do not remain neutral. We will confront the Chinese version of “Butenko” and the Chinese version of “Yeltsin” in the same barricade as the one defending China’s state ownership system against the pro-capitalist faction.

The triangular conflict between the forces of :
1) capitalist counter revolutionary forces
2) the defensive faction of the state-owned system in the Chinese Communist Party
3) the working class revolutionary camp” becomes the key of our tactics.

The August 1917 “Kornilov—Kerensky—Bolshevik” conflict or the 1937 triangular conflict in China’s “Japanese imperialism—Chiang Kai-shek—working class revolutionary” are significant examples of the use of the revolutionary tactic.

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China is the core issue in the revolution of this era. The fate of mankind as well as the working class depends on it. International leadership of the working class can only be built on these program.

October 15th, 2022

Bolshevik Group

Davey Heller

Davey Heller is a Trotskyist from Melbourne and long-time campaigner for Left-wing causes including anti-war, refugee rights, environmental protests and workers' struggles. He is a former secondary teacher who studied history at Monash University and currently works in the environmental field. You can follow him on Twitter at @socialist_davey

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