Is China capitalist?

Louis Proyect lnp3 at
Tue Dec 14 10:07:09 MST 1999

[Straight Facts Production is a socialist collective in Austin, Texas that
runs a weekly radio show. They interviewed me once on Colombia. They are
influenced strongly by the Spartacist League, but seem open to other saner

The following is a contribution from Straight Facts Productions to an
ongoing discussion on the Marxist Workers' Group Internet discussion list
(marxist-worker at stemming from the recent protests against the
World Trade Organization in Seattle.

As Straight Facts Productions (SFP) has observed in previous postings,
anticommunism -- primarily focused against the Chinese workingclass state,
in an effort "to ratchet up US anticommunist hysteria against China" -- was
one of the central issues around which the mainstream (and some of the
ancillary) recent anti-World Trade Organization (WTO) protests in Seattle
were organized.

Other issues at the core of the protests included virulent, xenophobic "Buy
American" protectionism, a thrust to prettify imperialism and "reform" and
"democratize" the WTO, and a fuzzy and utopian push to "abolish the WTO".

This relatively cursory analysis will focus on the question of the class
character of the Chinese state, which clearly is quite relevant to
understanding the underlying character of the street protests in Seattle.
In his posting of 99/12/07, list contributor "Ben" passionately defended
his support for the Seattle protests, in part by ridiculing SFP's defense
of China as a workingclass state: "you would have to have been locked in a
dark closet with no access to any form of news for years in order to
classify China as anything but capitalist."
(burgisbe at 99-12-07)

In the context of warning of the anti-China, anticommunist hysteria being
promoted by the top Seattle mobilization organizers, SFP also noted that
the Marxist Workers' Group (MWG) "has now, conveniently, redefined [China]
as a capitalist state ...."

MWG honcho James Paris responded by attempting to bolster the MWG's
Cliffite-esque potrayal of a "restored capitalist" China, while
"China-baiting" SFP with an article describing the inroads of the private-
profit economy in China. \jparis at (James Paris) 99-12-08\

Certainly, China is in profound crisis -- a deeply deformed workingclass
state, engulfed by severe economic and social crisis, teetering on the
brink of the restoration of capitalism. Political revolution by the Chinese
working class, to overthrow the venal, authoritarian bureaucracy and
establish workers' democracy, is essential if the remaining achievements of
the 1949 revolution are to survive, and have any prospect of being secured,
developed, and expanded.

China's deep crisis -- and the Chinese bureaucracy's headlong rush to
foster capitalist exploitation and imperialist penetration -- have global
imperialism absolutely salivating to consummate the process of capitalist
counterrevolution. Tremendous pressure -- in terms of both the capitalist
market and its economic institutions like the WTO, and the military threat
of (especially US) imperialist power -- is being brought to bear to nudge
the deformed workingclass state into the final abyss.

In this context, the MWG's "redefinition" of China as "capitalist" (like
that of the Northite Socialist Equality Party, in the footsteps of other
defectors such as Max Shachtman and Tony Cliff) is possibly the MWG's most
decisive retreat from the "revolutionary Marxism" it professes to embrace.

As a workingclass state, even with its severe deformations, China must be
unconditionally defended against imperialist threat -- despite the fact
that in the growing private sector, major sections of the country's working
masses are exploited in conditions resembling those of Dickens's Britain.
But merely redefine the state as "capitalist", and -- presto! -- you are
relieved of this duty. You can then dance with the "Free Tibet" campaign,
and heap ridicule on the warnings of those, like SFP, who point to the core
theme of anticommunism that underlay the recent anti-WTO protests in Seattle.

Contrary to the denials -- and ridicule -- of the MWG, China, despite its
severe deformations and conflicts, and the dangerous penetration of private
capital -- remains a state based on workingclass, not capitalist, property
forms. Even with state-owned enterprises (SOEs) accounting for only about
one-third of China's economic output, the Chinese state itself -- although
seriously fractured and unstable -- is based on socialized, not capitalist,
property relations.

The bureaucracy -- despite its rampant corruption, and individual
participation in capitalist exploitative enterprises, still retains its
"dual role" as a politically brittle, contradictory social caste,
positioned parasitically atop the workingclass property forms and state
while wheeling and dealing with the hostile imperialist environment
encircling it.

In additon, it is important to understand that the Chinese bureaucratic
caste, unlike Yeltsin or even Gorbachev circa 1991, have not, yet, embraced
a full ideological commitment to capitalism; rather, their illusions in
capitalism (as the means to make China a "superpower") are tempered by

The Chinese Communist Party (CCP), the bureaucratic apparatus, the People's
Liberation Army (PLA) are not under the hegemony and control of the
bourgeoisie which have been invited into the country (and have also
sprouted indigenously). How could they be? These organs have remained the
(distorted) instruments of power of the (deformed) workingclass state since
its inception; the counterrevolutionary bourgeoisie will need to shatter
this state apparatus and develop its own organs of state power. As Vladimir
Lenin underscored in 'The State and Revolution': "Revolution consists not
in the new class commanding, governing with the aid of the OLD state
machine, but in this class SMASHING this machine and commanding, governing
with the aid of a NEW machine." This is exactly what has happened as
capitalism has been restored in the former Soviet Union and East Bloc
countries, as discussed later in this analysis.

Certainly, the "market reforms" of Deng Xiaoping and Zhu Rongji have given
much to the exploiters, and have strengthened capitalism tremendously while
disastrously weakening the socialized economy, at great danger to the
workingclass state. But this state apparatus is critically deficient in
fundamentals esential to capitalist class dictatorship -- missing foremost,
perhaps, the crucial legal infrastructure enshrining the right to own and
inherit property and pass it to one's heirs. As the arch-conservative
magazine 'Economist' -- mouthpiece of bedrock British capitalism -- has
noted, the political-legal structure for defending property rights "is
entirely absent" in China. [Economist 97/02/22]

Praising "the private economy" in the Chinese constitution as "one of the
important components of the socialist market economy", as was done last
January by the National People's Congress, is undoubtedly an ominous step
toward such a legal- political infrastructure, but it has not established
that structure itself.

In a 'New York Times' report last spring, Elisabeth Rosenthal voiced
capitalists' complaints that they weren't being treated as favorably by
state banks as public enterprises, and were being coerced into routing
their companies' exports through state-run "trading companies" (hardly the
treatment one would expect from a state apparatus supposedly belonging to
the capitalists themselves). "The new constitutional amendment does not
specifically address any of these practices," wailed Rosenthal, "nor does
it specifically protect private property -- a change many entrepreneurs had
hoped for." [ELISABETH ROSENTHAL: New York Times March 15, 1999]

The MWG's definitive document "Capitalist restoration in China", published
in their 'Class Line' of Spring 1998, is a clever contrivance of
para-Marxist confusion, idealism, impressionism, and obscurantism. Perhaps
its pre-eminent confusion and obscurantism revolve around the MWG's
conception of the Stalinist bureaucracy itself: Has it become the state
agency of the Chinese bourgeoisie, or has it been transmuted into that
bourgeoisie itself? In one section of its argumentation, the document
describes Stalinism as "a petty bourgeois ideology that vacillates between
a course favorable to the working class and one more beneficial to the
international bourgeoisie" -- with the "norm" that "it ends up in the camp
of the multi-national big business owners." Yet, in a later section, we're
informed of "the Stalinists' ability to transform themselves into a new
class" (incidentally a concept of "class transformation" that is
unadulterated idealism -- and one which places the MWG much more firmly in
the Shachtman/Cliff camp of renegades than in that which merely sees a
restorationist sellout to an indigenous bourgeoisie). The MWG's analysis
can't seem to decide what it's really trying to argue.

Certainly, the grim example of counterrevolution in Russia demonstrates
that splinters from the bureaucracy can "appropriate" capital from the
corpse of the workingclass state -- transforming themselves, as the
"Russian mafia" and "cowboy capitalists", into members of the post-Soviet
neobourgeoisie. But, far from "transforming itself" wholesale and intact
into the new ruling class, the original state apparatus was long since
decisively smashed.

Similarly, in the Yugoslavian capitalist counterrevolution, the Milosevic
fraction of the Titoite bureaucracy easily assumed the role of an
authoritarian regime, with strong bourgeois-nationalist connections,
providing a suitable conduit for nascent bourgeois state power. In the
process, many in Milosevic's circle enriched themselves -- through
corruption and public theft -- and joined incoming emigre capitalists to
become members of the rebuilt ruling class. As in Russia, the military
ranks (particularly those of the officer corps) were purged and the entire
state apparatus was overhauled and reconstructed into an appropriate
bourgeois regime, with only faint resemblance to the workingclass state
structure. Quite likely, such a pattern of neobourgeois state formation --
some co-option, combined with overhaul and refabrication -- can be expected
should counterrevolution succeed in the remaining workingclass states such
as China and Cuba.

And what about the Chinese army, the PLA? Certainly, the PLA must be
considered the core of the "bodies of armed men" which Leninists perceive
as the underpinning of state power. On one hand, of course, the PLA is rife
with its own corruption; in 1993, the 2 of the nation's highest military
officials warned of "decadent capitalist ideology and lifestyles" within
the PLA. But corruption is insufficient to fundamentally alter the class
character of such an apparatus; the PLA (despite relatively minor purges,
mainly in the aftermath of the 1989 Tiananmen uprising) has remained
essentially intact as an organ of workingclass state power.

This enduring aspect of the workingclass state has been noted by bourgeois
sources. For example, this past summer, the pro-imperialist think tank
Stratfor (based here in Austin) reported that "The institutions created by
communism (party, army, security apparatus, state industries, planning
apparatus) continue to exist," although the analysis observed that "no one
any longer takes the ideology itself seriously." \STRATFOR's Global
Intelligence Update Weekly Analysis July 26, 1999\

Endeavoring to bolster its portrayal of a "capitalist" state administration
in China, the MWG document presents a vision wherein the leadership
steadily and ruthlessly is laboring to weaken, diminish, and dispense with
China's state industries (SOEs).

But the real picture reflects the contradictory, dual role of the
bureaucracy: More recently, especially in response to mounting economic
problems, the state has moved to strengthen the SOEs, as the following 'New
York Times' report from last March reflects:

>> During 1998, as the economy slowed, more state industries than ever lost
money. To boost growth and forestall mounting protests by unpaid workers,
the government instructed banks to lend more freely to state companies --
which some foreign economists warned would perpetuate outdated factories
and deepen future losses. << \ERIK ECKHOLM: New York Times March 6, 1999\

As a result, state industry losses slowed in the latter half of 1998, and
the bureaucracy declared its aim to "stabilize" some 7,680 large and
medium-sized public companies (of which about 2,300 were "losing money").
Particularly given today's "neoliberal" emphasis on privatization, mounting
such a program of state-industry stabilization on this scale is virtually
unthinkable for any capitalist regime in the world (asphyxiation of state
industries, as in Russia, is the policy of choice especially where such
enterprises exist in exceptionally large numbers).

To be sure, this current policy of stablizing China's state sector cannot
be interpreted as any kind of longer-term commitment to socialization. As
noted above, the Chinese bureaucracy are pragmatists. 1998 was not a good
year for Asian capitalism, so they backpedaled somewhat from their
privatization drive.

Similarly, in an analysis this past August, the Stratfor think tank
reported that

>> Letting market forces reconcile themselves is unacceptable to the
Chinese government, which is terrified at the social unrest that could be
unleashed by high unemployment. Chinese President Jiang Zemin, currently on
a tour of troubled SOE's in northeastern China, has called for the
development of those enterprises. Rather than release these large employers
to their market-driven fates, Jiang has ordered that they be propped up. <<
\STRATFOR.COM Global Intelligence Update August 19, 1999\

The Associated Press also reported in August that "... President Jiang
Zemin is visiting one factory after another, exhorting all to do their best
to reinvigorate state enterprises." \Associated Press/NYT August 22, 1999\

"The good performance of state enterprises is not only a major economic
issue ... but also a major political issue affecting the fate of the
socialist system'' Jiang was quoted as declaring. And, the AP observed
gloomily, "Despite the sense of crisis, President Jiang and other leaders
seem to lack the political will to starve inefficient state enterprises and
nurture the fast-growing private sector." \Associated Press/NYT August 22,

Not exactly resounding evidence of an unequivocal program for privatization
by a bourgeois state.

Likewise, while central state economic planning and the state banking
system have been severely impaired, economic planning and regulation
continue to exist on a scale unimaginable in a capitalist state. This is
illustrated also in Stratfor's "Global Intelligence Update" from last August:

>> The Eximbank's loan targets mark a continuation of de facto devaluation,
subsidizing exports and pumping money into infrastructure. The bank is also
distributing money to China's economically lagging central and western
regions, rather than to centers of economic growth on the coast. Priority
in Chinese economic decision-making has all but abandoned Western market
strategies, and has been given over to maintaining social stability. <<
\STRATFOR.COM Global Intelligence Update August 19, 1999\

The continuing large-scale regulation of the economy (and efforts at a
modicum of planning) are further indicated in the "drastic" measure by the
Chinese state last August, aimed (according to the 'New York Times') at
"reversing a steady fall in prices": the move to "ban construction of any
new factories that make a broad range of ordinary consumer items, from
refrigerators and air conditioners to candy, apple juice and liquor." \SETH
FAISON: NYT August 19, 1999\

The effects of China's relatively massive state regulation are also alluded
to in this dispatch from the 'New York Times':

>> Paradoxically, one of the causes of China's current stability is that
its economy is not yet fully integrated with the rest of the world. China's
currency is not freely convertible, so there is little immediate market
pressure on the yuan. << \SETH FAISON: New York Times January 4, 1999\

These actions by the Chinese state do not in themselves define the class
character of the state, but they are evidence of behavior consistent with
that of a workingclass state, even severely deformed. The MWG's document,
on the other hand, relies heavily on its impressionistic interpretation of
these same kinds of indicators, and passes this off as its much- vaunted
"Marxist method" and the application of "materialist dialectics".

If, as the MWG claimed, capitalism had been "restored" in China, the MWG
realized they would have to figure out when such a counterrevolution
occurred. So their document decides to date the "capitalist restoration"
somewhere in the period of the 1989 Tienanmen Square uprising through 1992.
Somewhere, in this 3-year period, the counterrevolution evidently raged, up
and down, taking "one step back in order to take two steps forward ...."

The Tienanmen uprising must serve as a nice event for the kind of
cataclysmic upheaval you need for a true counterrevolution (like the
coup/countercoup that heralded the counterrevolutionary process in the
Soviet Union) -- and, after all, Tienanmen was a major crushing of a
leftist workers' revolt. But 1989 itself is not overall a good year for
dating a counterrevolutionary overthrow in China. For example, the MWG
document itself relates that "The Stalinist apparatus re-consolidated and
temporarily slowed down the process of reform, in an attempt to
re-establish their control of the economy." In addition, as a response to
1989, there was a brief revival of the Mao cult, with its "anticapitalist",
pro-"socialist" fetishism, as well as a certain amount of egalitarian rhetoric

So MWG doctrine has the counterrevolution sort of drag on ... and on, until
... 1992, when it's finally consummated. Now, 3 years is rather long for a
decisive event like changing the class character of a state; and, except
for 1989, and the immediate aftermath of repression, the period was
relatively quiet. But the MWG's plot for restoration goes something like
this: Deng Xiaoping was dying to restore capitalism, but "he wanted
restoration to be controlled by the CCP so as to protect the Stalinists'
ability to transform themselves into a new class." (Perhaps they were in a
kind of chrysalis stage here.)

But some "sectors" of the bureaucracy were "resistant to capitalist
restoration". So, to impress them, he cracked down hard on insubordinate
soldiers as well as workers who had rebelled in the Tienanmen uprising. But
the brutality Deng displayed so impressed the anti-restorationists that
somehow he won their hearts. At this point, "Deng had shown his commitment
that the counterrevolutionary process would take place only under the
consolidated leadership of the CCP, by assuring that any threat to this
process ... would be brutally dealt with."

Now, why would Deng's "commitment" to capitalist counterrevolution win over
the anti-restorationists in the CCP? Anyway, the CCP apparatus then "re-
consolidated and "slowed down" the pace of reform. Why slow it down, after
brutality and consolidation have made the way clear for restoration? It was
"an attempt to re-establish their control of the economy" (the story goes)
which evidently had got loose in the meantime.

Meanwhile, capitalist investment starts to pour in; years go by; and we
come to 1992, when the economy begins to "overheat" and the 3-year
counterrevolutionary "process" nears its culmination. "If there was any
doubt within the CCP about capitalist restoration following Tienanmen," say
the MWG, "they had obviously gotten over it by 1992." It's not implausible
that the overthrow of the Soviet Union provoked a stampede within the CCP
further towards the "market reform" policy, as the MWG document suggests,
even among previously "resistant elements" anxious about preserving their
privileges and power. The result, claim the MWG, is "the super structural
consolidation of power by the Stalinists to qualitatively transform the
nature of the state."

Leaving aside the obvious problems of the creeping, prolonged ponderosity
of this "counterrevolution", here the MWG analysis presents something like
a religious miracle: the "transformation" of an intact bureaucratic caste,
its existence based on socialized property forms, into a new
property-owning capitalist class. "Marxist materialist dialectics"? This is
more like medieval magical alchemy.

And there's another problem: 1992 -- why choose that year for what would
have to be a wrenching, momentous counterrevolutionary upheaval, involving
the overthrow of one state and the emergence of a new class dictatorship?
There were no earthshaking events in China in 1992 -- no massive street
protests, no showdowns between competing class forces, nothing one would
expect in the culmination of a 3- year counterrevolutionary process.

There was the 14th CCP congress, which formally ratified a "socialist
market economy" and added a bit more capitalist-permissive verbiage to the
constitution. Some "market" measures were stepped up. But, in terms of
moves toward counterrevolution, 1992 pales in comparison with, say, 1978,
when Deng basically launched his drive toward "market reforms" which zapped
collectivized agriculture and established the "special economic zones" of
brutal capitalist exploitation.

Then there are a couple of other problems with this whole scenario. (1)
Assuming the culmination of "capitalist restoration" in 1992, it then took
6 YEARS for the brilliant Marxist dialecticians of MWG to figure out that
the fundamental class character of the Chinese state had changed, from
workingclass to capitalist. (2) Why wasn't there ostentatious jubilation
throughout global capitalism -- in other words, why didn't they whoop it
up, as they did over the fall of the East Bloc and Soviet Union?
Supposedly, something over a billion people were suddenly brought into the
capitalist fold here. But world capitalism didn't just stay silent --
ruling circles and the media were heaping abuse on China, criticizing the
regime for years over Tienanmen (interpreted as a push for bourgeois
"democratic" counterrevolution, not proletarian political revolution).

The reason, of course, is that capitalist restoration has not happened. The
1989-92 "counterrevolution" is a product of MWG's imagination, concocted in
an effort to put some kind of date on what the MWG know would have to be a
discrete, tumultous historical event.

So, if the MWG's vision -- a Chinese workingclass state transmutating
itself, through a relatively tranquil 3-year process, into a capitalist
state -- has gone splat, what would a real-world capitalist
counterrevolution in China actually look like? Such a hypothetical scenario
has been projected by the revolutionary Marxists of the Spartacists on
several occasions.

First, say the Spartacists, it's important to understand the real
motivations of the Stalinist bureaucracy. "The introduction of capitalist
measures under Deng follows a pattern inherent in Stalinist bureaucratic
rule" writes 'Workers Vanguard' [97/03/07]. Bureaucratic economic control
and the lack of workingclass democratic processes screw up economic
functioning, so "Stalinist regimes are impelled to introduce capitalist
market measures: loosening economic planning, forcing plants to produce for
the market, and encouraging the growth of private businesses and foreign
investment." It should be noted that a similar pattern is proceeding in
Cuba, Vietnam, and to some extent in North Korea.

The Spartacists also point to a special danger facing the Chinese
workingclass state in contrast to the prospects for counterrevolution in
the Soviet Union: "Unlike the October Revolution of 1917, which destroyed
the Russian bourgeoisie as a class, the Chinese Revolution essentially
chased the Guomindang out of the mainland to Taiwan, Hong Kong and
elsewhere, allowing the Chinese bourgeoisie to retain cohesion as a class."
[WV 97/03/07]

Far from a quiet, gradual process, the overthrow of China's workingclass
state would almost surely be violent and catastrophic, predict the

>> The dreams of the bureaucrats and bankers of a peaceful, bountiful
restoration of capitalism are illusory. ... The aims of China's would-be
exploiters -- centrally to secure the right to buy and sell property and
hand it down to their offspring -- can only be achieved through the
destruction of the existing state apparatus by one means or another and its
replacement by a new one based on the principle of private ownership of the
means of production. ... The wholesale privatization of China's state-owned
industries would necessarily entail a fierce struggle among the various
factions, cliques and extended families that make up the bureaucracy over
who would get what share of the country's productive assets. ... Such
property-grabbing would almost certainly draw in the military as the final
arbiter. ... A power struggle in Beijing could easily escalate into a civil
war among PLA units fought on a regional basis. Capitalist
counterrevolution would bring not only economic collapse and immiseration
but the danger of a return to warlordism and bloody political chaos. << \WV

SFP finds this a vastly more plausible scenario than MWG's notion of
capitalist restoration via a slow, placid transfiguration of the intact
bureaucracy magically into a new capitalist class.

The reality is that the MWG have cooked up this rationalization of
"capitalist restoration" in China to relieve themselves of the further
burden of defending this workingclass state with its profound,
embarrassing, and contradictory deformities. Thus there is no problem for
them of anticommunism as a central theme of the Seattle protests against
the WTO -- China's not a workingclass state, so the campaign to whip up
anti-China hysteria cannot be anticommunist.

SFP predicts that, for the MWG, this serious deviation from Marxism and
Marxist duty will compound an ongoing pattern of increasing diversion from
revolutionary Marxism as time progresses.

Straight Facts Productions 99/12/13

Louis Proyect

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