China’s economy has grown by leaps and bounds over the years since 1980.
by Ken Hammond
July 1, 2021 is the 100th anniversary of the founding of the Communist Party of China. Celebrations throughout China and commemorations worldwide are taking place today in recognition of the Party’s leadership and its incredible legacy. It’s worthwhile for socialists to reflect on this legacy and, in particular, and the contemporary state of China’s political economy.
On November 9, 2013 Xi Jinping gave a talk at the Third Plenary Session of the 18th Central Committee of the Communist Party of China (CPC) in which he discussed the characteristic features of China’s economy after more than two decades of “reform and opening.” He recalled that at the 14th National Congress of the CPC, in 1992, the Party had re-dedicated itself to the goal of “establishing a socialist market economy, allowing the market to play a basic role in allocating resources under state macro control.” He went on to assert that, by 2013, a socialist market economy had been “basically established” but also observed that “there are still many problems.” This assessment of the situation, which remains essentially applicable to China today, reflects the complexity of China’s historical path since Liberation in 1949.
Xi Jinping describes a Chinese political economy which is socialist, but within which market mechanisms are allowed to play a key role. This approach to development was first initiated at the end of the 1970s, when Deng Xiaoping led the move to a policy orientation of “reform and opening to the outside” which encompassed both changes in the domestic economic system and China’s engagement with the global economy, the capitalist world of production and trade. China would use the mechanisms of the market to develop its productive economy, in order to create the material conditions of prosperity necessary to begin the realization of the socialist project, a process which, it was anticipated, would take decades, perhaps a century, to fulfill. But markets were not simply to be allowed to operate without oversight and supervision. The state, working in tandem with the Communist Party, would retain the dominant, guiding role in China’s economic and political life. The Party and the state would buffer the negative effects which markets generate, though it was recognized that these effects could not be entirely eliminated.
Party debates about the path towards socialism
The idea that markets could play a significant role in advancing the development of the productive forces in China can be understood in part through reference to Marx and Engels’ review of the rise of the bourgeois economy in the Communist Manifesto. There is an extended discussion of the history of capitalism, the unleashing of new productive capacities driven by market forces, the process through which the bourgeoisie has “conjured up…gigantic means of production and of exchange.” Marx and Engels clearly understood that the development of the capitalist market system drove the expansion of productive forces, setting the stage for the future transcendence of bourgeois social and political relations and creating the preconditions for the working class to embark on the venture of building socialism. The power of bourgeois markets also drove the concentration of capital in the hands of a small class of exploiters, and produced the immiseration of the mass of proletarians as capitalists sought to extract the maximum surplus value from their labor. Markets by themselves yielded both creative and destructive outcomes, and could not be allowed to operate without strict oversight and control.
Another precedent for the instrumental utilization of market mechanisms, in a more minimal form, is the Bolsheviks’ New Economic Policies of the early 1920s, when Lenin and the other leaders of the Soviet Union allowed markets and capitalists to play a crucial role in ‘jump starting’ the economy after the devastations of World War I and the Civil War. This was a limited license for bourgeois elements to pursue their business and financial interests while also contributing to the foundation and initial development of new industrial and commercial enterprises which could become part of the future socialist project. Capitalists would be carefully monitored by the Soviet state and the Bolshevik Party, and would not be in a position to dominate or influence political developments.
The decision to undertake the new policies of reform and opening arose from the material conditions of Chinese society after the first thirty years of building socialism. China had made great advances in the decades from 1949 to 1979. Public health had been dramatically enhanced, with average life expectancy rising from less than 40 years to nearly 80, and with sharp reductions in infant mortality. Education had been expanded and literacy rates had risen significantly. Housing had been provided, and massive infrastructure development had taken place. Overall economic growth had averaged more than 3% a year across this period. And yet at the end of the 1970s China remained a low-income country, with what might be thought of as an egalitarianism of poverty.
Deng Xiaoping and the leaders of the Communist Party at that time understood, as had Mao Zedong, Zhou Enlai, Chen Yi, and others in the initial period of socialist construction, that to attain true socialism, to be able to even begin to contemplate the future transition to communism, China would need to achieve a high level of material prosperity. Socialism and communism are systems of abundance, within which the wealth socially produced can be distributed initially according to labor, and ultimately according to need. But to begin to advance towards these goals it was first necessary to create the productive capacity to generate the accumulation of social wealth, and to ensure that political mechanisms were in place to eventually oversee the equitable allocation of resources. The Party resolved to pursue the project of economic development through the use of market mechanisms, which also involved the opening of the economy to foreign investment in order to gain access to modern productive technologies and organizational practices. This has proven to be a remarkably successful endeavor, though one encompassing serious contradictions and risks.
The contradictions of the Chinese economy post-reforms
China’s economy has grown by leaps and bounds over the years since 1980. GDP expanded for more than two decades at rates of over 10 percent a year. The material standard of living for Chinese people has risen steadily. Chinese cities, which now are home to more than half of China’s 1.4 billion people, have become some of the most modern in the world, as science and technology have made great strides. More than 800 million people have been lifted above the UN’s poverty line. Education, especially higher education, has been made available on an ever-widening basis, with around half of all high school graduates now being able to go to university. China has become the great manufacturing center for the global economy as well, in the process accumulating huge reserves of foreign currencies which provide financial resources for macro-economic management by the PRC government. But these achievements have come with significant costs in material as well as social and political terms.
The use of markets to drive rapid economic growth has generated a range of negative associated outcomes. There has been a great increase in income inequality, with a small elite of very wealthy capitalists pulling away from the broader rise in incomes for the vast majority of Chinese. Corruption has been a persistent problem, with some officials in the state and Party organizations exploiting their positions to enrich themselves at public expense. Environmental problems proliferated, especially in the first decades of the reform period, with severe pollution of the air, water, and soil causing health problems and contributing to excessive death rates. The focus on profits inherent in a market system led to cutting corners and ignoring safety regulations, with sometimes tragic consequences. These contradictions have triggered frequent protests and sparked popular movements of citizens demanding their rights be respected and that the government and the Party live up to their stated goals and values.
China’s integration into the global economy, the global capitalist system, was also a complex mix of positive and negative elements. The United States eagerly welcomed China’s expansion of foreign trade and investment. American and other Western political leaders and academic analysts hoped that the incorporation of China within the capitalist world order, in tandem with the growth of the domestic economy, would lead to political transformation in China, ultimately yielding a new system which would be a subordinate component of a new global division of labor. China, in engaging with the realities of world trade and the presence within China of joint ventures and other forms of foreign investment, made significant political concessions to American global interests, often abandoning solidarity with other socialist countries like Cuba, and discontinuing support for revolutionary movements in many parts of the world. Through the first decades of the reform era China pursued a foreign policy which was essentially aligned with the United States.
Xi’s leadership, recent shifts, and the nuances of China’s path
In recent years, as Xi Jinping has assumed the leadership of the Party, China has shifted away from such compliance with American interests. China has not succumbed to the wished-for transformation of its political and economic systems. China is becoming more self-confident and assertive in international affairs, rejecting the American-dominated world order which has been in place since World War II, and aiming, through initiatives like the Belt and Road (BRI) and the creation of international economic and financial institutions independent of those in the West, to build a new framework for development and shared prosperity in Asia, Africa, and Latin America.
Given this complex mix of great achievements and serious problems, how should the contemporary Chinese political economy best be characterized? Sincere socialists and Left activists hold a range of opinions. Some see China as having taken the “capitalist road” since the late 1970s, and may go so far as to portray the Chinese system as just as exploitative as American capitalism, asserting an equivalence between them. Others argue that China has already established a truly socialist system, refraining from acknowledging any shortcomings or flaws. Perhaps a more nuanced analysis can be undertaken to provide a clearer, yet not uncritical, understanding, one which transcends any simple dichotomy.
As noted above, Xi Jinping refers to China as having a market socialist economy. China is also said to have “socialism with Chinese characteristics,” meaning that the theoretical model of socialism has been adapted to the material realities of China. These phrases can provide a basis for considering the features of China’s economic and political order as it actually exists today.
Public and collective ownership of productive enterprises and financial institutions constitute the core of the economy. From huge state-owned enterprises (SOEs) to smaller units owned and operated by townships or local-level cooperatives, key sectors of the economy remain in various forms of social ownership. There is also a significant private sector in the economy, encompassing both ventures of foreign direct investment and domestic private capital. Capitalist-owned businesses pursue their goals of profit making within the larger context of China’s legal and regulatory systems. Perhaps most importantly, the system as a whole functions under the oversight and supervision of the Communist Party. The Party retains the leading role in setting policy, and establishes the parameters within which both public and private economic activity takes place. The policies of reform and opening have been adopted and implemented with a recognition that there would be contradictions and challenges, the kinds of concerns noted above, which have been seen as unavoidable costs incurred in the course of developing China’s economy and expanding social wealth. But the leading role of the Party, with its 92 million members drawn from all sectors of society and with a presence in every branch of social and economic life, means that the worst effects and excesses of market mechanisms can be monitored and buffered, and the interests of the working class can be protected and advanced in accord with the actually existing realities of China.
In the early 1990s the Communist Party began to allow capitalists to apply for membership, and has admitted business owners to the Party since then, though they remain a small element within the broad ranks of Party members. There are most certainly capitalists in China today, but they do not form a capitalist class which can dominate the state. It is also the case that the situation of the working class in China is not that of the classic proletariat under bourgeois rule, having no means of sustaining themselves other than by selling their labor power to the capitalist owners of the means of production. The socialist state provides all citizens with a household registration, a place where they are entitled to residence and to basic social services, including education and healthcare. This means that, in contrast to capitalist society, workers in China are entitled to a share in the social wealth which they have produced, and are not reduced to a condition of having nothing but their labor power to sell in order to survive.
This is not to say that workers in China do not seek to find the best employment opportunities they can, and that in this search they don’t leave behind their home villages, the sites of their household registration. It is also the case that the level of provision in rural China is often minimal, as China is still a developing country with relatively low per capita income levels. But there is a genuine safety net which can and does serve to protect the basic needs of working people in situations when bourgeois markets would otherwise abandon them. The constraint and oversight of the capitalist class by the Party and the state, and the existence of basic socialist entitlements for workers, means that China cannot be said to be a capitalist society. A few examples of the practical reality of this will demonstrate the validity of this characterization.
The most basic indicator of the overall nature and orientation of the Chinese system is the steady and extensive improvement in the material conditions of life for the 1.4 billion Chinese people. Poverty alleviation programs have raised more than 850 million people above the internationally recognized level of absolute poverty. Beyond that the vast majority of Chinese have seen their incomes rise from year to year, live in better and better housing conditions, have more and more access to social and cultural resources, and have greater opportunities for personal development. Tens of millions of Chinese travel abroad each year as students or tourists, and travel within the country far exceeds that level, much of it on the country’s impressive network of high-speed trains. The quality of life for the Chinese people has been enhanced in many ways as a result of the economic development driven by the reform and opening policies.
The Party responds to the challenges of growth and world crises
The government and the Party have also been able to mobilize state and social resources to deal with both ongoing challenges engendered by growth, and major crises arising in the course of recent history. Serious environmental issues emerged as the economy was surging forward in the 1980s & ‘90s, continuing into the early 21st century. The early development of the industrial economies of the West produced massive pollution throughout the 19th and 20th centuries as well, but in China, as social wealth was accumulated the state became able to direct more and more resources towards addressing these problems, in ways the Western capitalist nations have still not matched. China produces more alternative energy than any other country, is at the forefront of research and development in solar, wind, and other forms of clean power generation. With a planned economy and under the leadership of the Communist Party China has been able to make long-term investment choices to address environmental concerns which the anarchy of capitalist markets and the dominance of the bourgeois class have precluded in America and much of Europe.
China has also sought to deal with problems of corruption in the interface between the state and the economy, and to regulate and control the trends towards monopoly and the challenges of quality control inherent in the operations of markets. Since 2012 there have been extensive investigations and prosecutions aiming to bring corrupt officials and business executives under control. This is an ongoing campaign which has targeting individuals and corporations at all levels of the system. Recent events involving the hyper-capitalist Jack Ma and his corporate enterprises have demonstrated the capacity of the state and the Party to oversee the high-tech sector, which in the West has been the subject of much talk but little regulatory action.
Two recent crises which confronted China were also dealt with decisively, relying on the collectivist nature of China’s social, economic, and political systems. The capitalist financial crisis of 2008, from which China was insulated by the nature of its state banking and monetary system, had an impact on the economy due to the collapse in demand for many goods produced in and exported from the country. More than 20 million workers were laid off from their jobs in factories. In a capitalist economy these workers would have been cast out and basically left to their own resources as casualties of the vagaries of the market. In China, because they had a household registration in their native towns or villages, they were able to return home where they were entitled to housing and basic social services, including health care and education. The level of these services was basic, reflecting China’s still lower per capita available resources, but it was more than adequate to carry this large cohort of workers through the crisis. As the global economy revived, and as China began to emphasize domestic consumption to a greater degree, these laid-off workers could return to their formal employment or seek newer opportunities elsewhere.
Finally, and perhaps most dramatically, when Covid-19 appeared in China at the beginning of 2020 the government and the Party were able to mobilize massive social and economic resources to address this threat to public health. In China public health is seen as a human right, not as a source of profit or private enterprises and their owners and bosses. Doctors, nurses, hospitals and clinics, researchers, technicians, and millions of ordinary citizens, many of them Party members but many outside the Party as well, volunteered their time or were dispatched by their work units to deal with a myriad of issues and challenges in fighting the virus. And the Chinese people, with a consciousness of the intricate linkage between their own health and safety and the health and safety of society, embraced the policies and guidance put forward by the government and the Party and took responsibility for their own conduct and for the protection of their communities and their country. Covid was contained within 2½ months, with fewer than 5000 deaths in a country of 1.4 billion people. The contrast with the United States, where a capitalist health care system and a bourgeois state allowed the virus to spread freely and to kill over 600,000 people out of a population of under 330,000,000 could not be clearer.
What should progressive and left forces do in the U.S.?
These instances of dealing with a range of social and economic challenges through the combined actions of the state, the Party, and the people, show that, as observed above, while China may have capitalists, it is not a capitalist state, in which all other interests are subordinated to the extraction of surplus value for the enrichment of a bourgeois ruling class. The Communist Party is the political force which guides the development of China’s economic system and its interaction with society through the formulation of policies and the constant dialectic of theory and practice. The government of the People’s Republic administers the affairs of society and conducts China’s relations with the wider world. China has not yet become a fully socialist country. It faces major obstacles along its path towards a socialist future. It is not a perfect place, it is a human society, with strengths and weaknesses, with successes and failures. The Chinese people, with the leadership of the Party and through the agency of their government, are making their own way in the world, not, as Marx noted, “under circumstances they themselves have chosen, but under the given and inherited circumstances with which they are directly confronted.” Rising from the ruins of a country wrecked by Western imperialism and torn apart by the Japanese invasion and Civil War, the Chinese people have labored diligently to build a better future for themselves and future generations. It is very much a work in progress, with risks and dangers to come.
People outside of China, especially those who hope to build a socialist future for their own people, who yearn for a world of justice, equality, and peace, should join in supporting the efforts being made to find a path to “socialism with Chinese characteristics.” We should be critical when necessary, recognizing and acknowledging the problems and the mistakes which may be made as China advances, “crossing the river by feeling the rocks.” But we should support China’s project of socialist development, support the leadership of the Party and its work to control and redress the abuses and errors which arise, support the hopes and the hard work of the Chinese people. Most importantly we need to defend China against the aggression of American-led imperialism, the rising tide of a new Cold War, the unremitting demonization of China.
Ken Hammond is a professor of East Asian and global history at New Mexico State University. He is the author of five books and numerous articles on Chinese political and cultural history, as well as a thirty-six-lecture series, From Yao to Mao: 5000 Years of Chinese History. He has been an activist since he was in Students for a Democratic Society as an undergrad at Kent State University from 1968 to 1971. He is currently working with Pivot to Peace, an organization dedicated to promoting better understanding and avoiding conflict between the United States and China. Since 2017, he has been an activist with the Party fo Socialism and Liberation. He can be reached at khammond[at]nmsu.edu