Thursday, 26 November 2009

The Class Nature of the Chinese State A critique of “China’s Long March to Capitalism”.

The Class Nature of the Chinese State

A critique of China’s Long March to Capitalism”.

By H Khoo August 2008

In 1949 the Chinese revolution led to the formation of a workers state, which abolished landlordism and capitalism and established a planned economy that transformed the living conditions of the masses. Since 1978 the Chinese Communist Party adopted economic methods not used on a large scale since Lenin introduced the New Economic Policy in the Soviet Union. This policy fostered exploitation, created inequality and class polarization, but also led to the development of the productive forces and the working class.

China’s urban working class grew from 95 million in 1978 to 283 million in 2006, and the rural working class grew from 28 million to 173 million,[a] an overall rise of new workers of 333 million in 28 years. To put this in perspective; the working population of Europe is 219 million[1] and that of USA 145 million.[2] The formation of new class relations created both capitalists and workers, but it has been driven by the state ownership of the commanding heights of the economy.

Until the restoration of the capitalist economy and state in the 1990s Marxists characterized the Soviet Union as a ‘transitional society’. The victory of a series of counter-revolutions in democratic or nationalist garb in the USSR and Eastern Europe from 1989 onwards, made the question of ‘transitional’ societies less central to Marxist discussion. The issue appeared to have been settled by events.

China’s trajectory took a different path after the defeat of the Tiananmen Square movement in 1989, and the Chinese Communist Party remained firmly in command of society. Private and foreign owned sectors of the economy expanded steadily, billionaires formed at one pole of society and a slave trade at the other; this gave the appearance of the victory of primitive capitalism. Against this background the World Congress of the International Marxist Tendency approved a document titled ‘China’s Long March to Capitalism’. (CLMC) Normally national sections write their own analysis of perspectives, but in the absence of an affiliated group in China, the International Secretariat prepared this position paper on China for the World Congress.

Emphasis on the negative tendencies in China’s development and the apparent victory of the market, led many Marxists to overlook or minimize the relevance of conflicting processes. The contradictory and positive trends include; rising living standards for the majority, rising productivity and expansion of the means of production in the state sector, the increasing size, influence and strength of the working class, and 30 years of the fastest economic growth of any major country in world history.

CLMC correctly states that, “If we want to enter into a dialogue with workers, students, honest Communist Party members in China, we must make sure that our analysis corresponds to the real concrete situation. Therefore we must study all aspects of Chinese economy, society and politics.” (CLMC p25)

I have studied and written on Chinese affairs from a Marxist perspective for our tendency since 1989. From this I know that there are sufficient English language sources to produce accurate material that will enable us to enter into a dialogue with English speakers from China and participate in the debates taking place inside China. In the two years since CLMC was adopted, articles on China on based on the ideas proposed in CLMC have covered a range of topics including the Chinese Communist Party, Tibet, Chinese foreign economic investments and other issues. These articles led me to become more and more alarmed at the consequences of CLMC’s theses. I am now convinced that CLMC is an impediment to our influence in China and to the development of Marxist forces there.[b]

China’s Long March to Capitalism claims that China is a capitalist economy and state. It is supposed to have arrived at this condition by gradual transformation from a planned economy and a bureaucratic workers state. It is asserted that the transformation was intelligently guided by the Communist Party leadership in a fashion similar to the way that the rulers of feudal Japan and Germany introduced capitalism at the turn of the 20th century. This is said to be why China has not suffered a collapse like that experienced in the USSR. According to this view China is a capitalist country ruled by a ruthless Communist Party. These ideas conveniently allow us to share and repeat the same views as mainstream intellectual opinion, China is capitalist, China is imperialist, China is a dictatorship, etc. but this does not result in accurate analysis.

This reply is divided into several parts, unfortunately CLMC contains so many errors, of fact, of logic, distortions of fact, conflicting and contradictory conceptual frames and errors of theoretical interpretation and perspectives that the reply is as long as the original and still only covers some of the problems.

This article will show:

1. That CLMC was poorly researched and contains elementary factual errors.

2. That misinformation forms the basis of CLMC’s arguments and theoretical system.

3. That the Chinese Communist Party and the ruling bureaucracy remain in essence a ruling caste i.e. the bureaucracy has not changed itself into a capitalist class.

4. That a creeping counter-revolution in property relations has not fundamentally changed the class character of the state.

5. That the Communist Party, the wider bureaucracy, and the army remain welded to state ownership of the means of production.

6. That the Chinese bourgeoisie is weak and is primarily composed of small sized petty bourgeois enterprises.

7. That the commanding heights of the economy and the banks remain in state hands.

8. That the balance of class forces is shifting towards the working class.

9. That the bureaucracy is splitting more and more into pro-capitalist or pro-worker and peasant.

10. That the new balance of class forces altered the repressive state apparatus providing greater opportunity for the workers and peasants to organize struggle.

11. That a significant section of the bureaucracy and the Communist Party are opposed to the threat of capitalist counter-revolution.

12. That increasing social differentiation is fostering militant and revolutionary movements, led by lower level cadres, many of whom will be open to the ideas and methods of Marxism.

No doubt some may think that dissecting the errors in CLMC is pedantry; capitalism’s victory in China seems to be self evident, China is dominated by markets, Chinese goods are for sale everywhere, almost every journalist, in print, radio, TV or on the Internet thinks China is capitalist, and ‘what is the main direction that China is heading?’ They ask.

The central question however, is not where China appears to be heading, (I shall show this is by no means as clear as it seems) but what are the main contradictions in its development? What is the relation of forces between the classes, castes and groups, how do these contradictions express themselves in the struggle of living forces? Has there been a counter-revolution that changed the class character of the Chinese state?

False analysis of China means incorrect analysis of the world. CLMC overturned the position that our tendency held on China for 57 years. CLMC provided evidence showing that capitalism conquered China and was accepted on that basis. Therefore I consider it expedient to prove that the evidence presented for CLMC fails to prove its case. Thus I hope that Marxists look again at the question of the class nature of the Chinese state, and study what is and where it is going, by investigating the dynamics and contradictions governing the fate of Chinese society. In this way we can enhance our understanding of the struggle for socialism and facilitate an informed dialogue with revolutionaries in China.

Some simple errors?

The misinformation in CLMC starts with the identification of the causes of the Chinese Revolution, it reads,

“The main reason why the Chinese Revolution took the form that it did was first of all the inability of US imperialism to intervene.” (My emphasis CLMC p1)

This is a most peculiar argument. US Imperialism backed China’s Nationalist forces and intervened with arms and support, a fact that Ted Grant specifically noted. “The American Imperialists intervened with huge supplies of arms, money and munitions, to aid the corrupt gang of Chiang Kai Shek”[3] It is true that US intervention was limited by the world situation, in particular the conflict with the USSR in Germany and Europe.[c] US General Marshall speculated that a complete colonial administration would have been the only way for the US to keep Mao’s army at bay in China.[d] However CLMC’s inverts the truth, the ‘main reason’ for the ‘form’ of the Chinese revolution was not external to China but internal, i.e. the strength of support for Mao’s Peoples’ Liberation Army and the weakness of Chinese capitalism. Here we have an error of fact and logic, alas it is not a lonely example in CLMC.

On p22 we read “ In 1991, 80,000 workers were killed in work accidents. By 2003 that figure had shot up to 440,000” Where is the source for the figure of 440,000 workplace deaths in 2003? In 2004 in an article on titled Capitalism means War on the Working Class the official figures on workplace deaths are provided, “79,422 workers were killed in 1991, 136,340 in 2003”,[4] The reference source for the figures that I provided was China Daily, unfortunately they misleadingly represented “industrial accidents” so as to include in this category, those killed in traffic accidents. The actual figures for industrial deaths are a small percentage of this. “More than 101,400 people died in workplace and transportation accidents last year, down 10 percent on 2006.”[5] Nobody claims that 440,000 workers were killed in China in 2003. Perhaps the authors confused the death figures with injury figures? If so, this just requires a simple correction with an explanation in brackets on

A similar numerical error is found on p24, “In 2004 China received $54 Trillion in foreign investment.” This figure is nearly equal to Global GNP! This is so obviously false that no explanation is needed when amending trillion to billion.

As a minimum one would expect the editor of for the sake of accuracy to correct these errors forthwith, and to be honest with readers that these statements were simple errors of fact. Hopefully by the time you read this, this will have been done. Unfortunately there seems to be an inexplicable unwillingness to correct elementary errors when it comes to articles on China.[e] It is my belief that such a cavalier attitude to facts is damaging to the influence of the International Marxist Tendency.

In the past factual errors in a newspaper article were soon forgotten, but errors on the Internet remain until corrected. It is obvious that we cannot maintain such false information on our web site, facts aren’t changed by congress votes or editors scissors. Such errors make us look foolish; in the eyes of anyone who bothers to verify factual information by a search on the Internet, and ignorant; to anyone with a cursory knowledge of the history of the Chinese revolution or China today.

The State Apparatus and the Mandarins

“The Chinese state started off from the very first day that the Communist Party came to power as a deformed workers’ state. In actual fact the Communist Party inherited the old Mandarin state apparatus” (p20 CLMC)

No evidence is given for this statement and instead of proof we are given assertion and analogy. We are told that many Tsarist cadres were employed by the Soviet state, “especially in a backward country, the new state had to count on many of the old officials,” “In Russia” the document continues, the Soviets could “curb the conservative tendencies of this stratum. But in China that was not the case.” (p20 CLMC) In other words the document is stating that the Mandarin Bureaucracy asserted powerful influence in China immediately after Liberation in 1949. Some historians have tried to draw parallels with the style of Mao’s rule and that of the Mandarins; none have claimed that the apparatus of bureaucratic power was ‘inherited’ from the Mandarins. In a document adopted by the International one expects more respect for facts.

The Communist Party did not ‘inherit’ the Mandarin state apparatus; it created an entirely new state apparatus. The leading cadre of this state apparatus, formed during the Chinese Civil War, remained in control of the fate of China until the death of Deng Xiaoping. Of course as in Russia there were some people from the old state apparatus in positions of power for a time, but that has nothing to do with the formula ‘the Communist Party inherited the old Mandarin state apparatus’. Such statements will give readers the impression that the IMT has no knowledge of Chinese history. The Mandarin bureaucracy existed in China from 605 AD until 1905, during this time the selection of bureaucrats was based on imperial examinations. This no longer existed at the time of the Chinese revolution.

“The examination system was finally abolished in 1905 by the Qing dynasty in the midst of modernization attempts. The whole civil-service system as it had previously existed was overthrown along with the dynasty in 1911/12.”[6]

Even the administrative cadres of Chiang Kai-shek’s Nationalist Guomindang government left China en masse in 1948-9, over 2 million refugees left the Peoples Republic coming mainly from the business and administrative sectors of society. This republican bureaucracy abandoned the field and fled, due to their role in the civil war or their collaboration with the Japanese. The Maoists created their own national state apparatus because there was none. However this was not simply a replica of Russia, the Maoists had been in power of occupied zones for 22 years in advance of the seizure of national state power.

“Mao Zedong and the Chinese Stalinists formed a state in China in the image of Stalinist Russia - a monstrous bureaucratic caricature of a workers' state and therefore the Chinese Revolution of 1949 began where the Russian Revolution ended.” (p1 CLMC)

Although the Maoist state did take on the essential formations of Stalinist Russia there were important differences between the Chinese bureaucratic state and the Soviet one. The Maoists had an independent base having administered power over tens of millions of people in the “liberated zones” between 1929 and 1949. Whilst the basic characteristics of the Chinese bureaucracy were Stalinist, the differences have influenced the present divergent paths. It is essential to study these differences as well as the similarities in order to scientifically analyze the laws of motion of China’s economy, society and state.

A general formula that was essentially correct in the widest sense until the 1970s, in outlining the basic patterns of Stalinist development, becomes wrong when mechanically imposed on historical details and changing realities. After the USSR collapsed and China’s regime continued, did everything fit into formulas already worked out for the USSR? This is self evidently absurd as a method for studying China and even useless for a tiny island of Stalinism like Cuba.

Comrades do not start documents on Cuba with the formula ‘Castro formed the state in Cuba in the image of Stalinist Russia -a monstrous bureaucratic caricature of a workers’ state.’ We all know such an approach would be pure sectarianism and that our tendency would lose all influence in Cuba, surely it is just as damaging to deal with the Chinese revolution in such a fashion?

The Anatomy of the Chinese Bureaucracy.

Liu Bin Yan, former reporter for the People’s Daily wrote about the formation of the state from the pre-Liberation era. “The first order of business for the military was to gain an understanding of the situation in the new area and determine who were its potential enemies; to do this it was necessary to reorganise the people’s lives and issue new government decrees. In as much as officials of the previous regime were not to be trusted, activists willing to work for the new regime came to the assistance of the military and the party, and the most loyal and competent among them were recommended or appointed by military or party officials as local officials... the Chinese party established a system of control over a nation of one billion people based upon its experiences in military control, in which a given area might be abandoned at any time. It is not a complex system: political loyalty to the party is the prime consideration in appointing an official, far more important than abilities or cultural level; the reinstatement, promotion or demotion of an individual is invariably determined by how an official higher up feels about him, rather than by his character, morals, abilities, or achievements or by how the masses feel about him. The bureaucrats’ children often intermarry, establishing a blood relationship or what is called a kinship relationship. School ties and such things as the place of birth unite the bureaucracy together. If one man commits a crime, the network is mobilised to form a protective cloak around him; it is very effective. In 1957 Mao revealed that ‘there were at the time 1.8 million officials throughout China.’ There are now 27 million.” [7]

By 2007 the national bureaucracy of China was made up of some 40 million cadres, they are in charge of all aspects of the state bureaucratic machinery and administration. The broader ruling caste is composed of the following hierarchal command structure:

a. 2500 Ministers or above

b. 39,000 Prefecture Bureau chiefs

c. 466,000 leading cadres at county/division chief level or above

d. 15.3 million CCP cadres below county/division chief level--24.3 million non-CCP cadres below county/division chief level

e. 45.2 million rank and file party members[8]

The state apparatus at each level in the pyramid of power requires, the approval of those above, the acquiescence of those below, and the active support of lower level cadres. The entire apparatus requires the approval or at least acquiescence of the 45 million party rank and file. The majority of members of the CCP are normal workers and peasants holding no bureaucratic power or authority.

CLMC dedicates considerable space to the process that is supposed to have led to ‘capitalist restoration’. A potted history is presented that claims that the Deng faction of the bureaucracy were ‘capitalist roaders’ waiting in the wings under Mao. According to CLMC they gradually created the conditions and then the fact of a capitalist economy and society. The bureaucracy “never took a step backwards” and when “faced with moments of instability the process was slowed down but never reversed” (p12 CLMC)

In fact there were a series of zig-zags between 1989 and today. This is the ‘normal’ form of motion generated by contradictions in transitional societies - deformed workers states governed by a ruling bureaucracy. Immediately after Tiananmen there was a sharp reaction against capitalist penetration of the party, which was reversed after the Southern Tour by Deng Xiaoping in 1992, the trajectory continued in the rightward direction but at an even pace until the ascendancy of Hu Jintao in 2003. The leadership of the party has shifted to the left since 2003 under pressure from the underlying discontent amongst workers, peasants and lower levels of the bureaucracy.

CLMC claims that after the Tiananmen Square movement and the collapse of Stalinism elsewhere, “the Communist Party leadership decided to accelerate the process of ‘market reform’. They began to see capitalist restoration as the solution to their own crisis, but they were determined that the process would take place under the firm control of the bureaucracy. In essence this meant that the bureaucracy was preparing the ground to transform itself into a new capitalist class.” (my emphasis p13 CLMC)

This is the first time we encounter the central contention in CLMC that China’s bureaucracy is becoming a ‘new capitalist class’ through metamorphosis. This formulation is strikingly similar to the old theory of State Capitalism developed by Tony Cliff, whereby the bureaucracy of the USSR transformed “itself into a new capitalist class” in 1928. Ted Grant answered these theories clearly and succinctly:

“The state is the instrument of class rule, of coercion, a glorified policeman. But the policeman is not the ruling class. The policeman can become unbridled, can become bandits, but that does not convert them into a capitalist, feudal or slave-owning class” ... “the state is the apparatus of rule: it cannot itself be the class that rules”.[9]

As these texts are well known to us all, we can assume that the authors did not mean what they said, perhaps they meant that sections of the bureaucracy transformed themselves into capitalists, and that the bureaucracy has transformed itself into a capitalist bureaucracy. This will have required the transformation of the class foundations of the state apparatus.

The People’s Liberation Army as an Agency of the State Capitalist Bureaucracy

The “evidence” for the theory of State Capitalism by Tony Cliff was that economic changes in USSR in the 1920s brought huge inequality and increased the wealth of bureaucrats, “the army began to change fundamentally. From a workers’ army with bureaucratic deformations it became the armed body of the bureaucracy as a ruling class…”[10]

Unfortunately we encounter essentially the same argument in CLMC. “Today many of the sons and daughters of the bureaucrats have been transformed into owners of the means of production. Among this layer there is no desire to return to a nationalized planned economy. There is no material base for them to wish do so. They would resist any attempt to turn the clock back, and they would have the backing of the state. It is also worth noting that the tops of the army have also been transformed into owners of property. Thus the officer caste within ‘the armed bodies of men’ also has a material interest in the new property relations that have been established.” (my emphasis p20 CLMC)

There is no doubt that it is very significant and alarming that ‘many of the sons and daughters of the bureaucrats’ have become owners of means of production, and this is important for the formation of capitalist forces and the increasing class differentiation within the Chinese bureaucracy. However this fact, prepares the ground for the claim that the core of the state apparatus itself, i.e. the army officer caste, is now a capitalist officer caste, that the “tops of the army have also been transformed into property owners.”

If the tops of the army were capitalists this would certainly be powerful evidence that the Chinese state is capitalist. One wonders why such information is merely ‘worth noting’, surely it is decisive evidence for the capitalist bureaucracy case? But as in so many cases in CLMC no evidence is provided because none exists.

On the 2 July 1998 under Jiang Zemin the PLA was compelled to divest itself of participation in business. The Chinese Communist Party leaders knew that the commercial operations of the PLA from 1978 to 1998 spread corruption and capitalistic values and interests inside the army. If the PLA officer caste were to transform themselves into owners of the means of production this would jeopardize the rule of the Communist Party and the bureaucracy. At the Politburo on 22 July 1998 Jiang Zemin is reported to have said, “the military cannot run business any more or the tool of the proletarian dictatorship would be lost and the red colour of the socialist land would change”.[11]

Divestment was precisely intended to prevent the PLA officer caste from becoming instruments of capitalist interests after a series of high profile corruption cases were exposed. The process of divestment was supported by the leadership of the PLA and the party, and was largely completed by the year 2001. Neither military units nor individuals inside the military were allowed to hold onto enterprises, employees in military businesses had to leave the military to remain at work. Whilst there are some companies still operated by the PLA they are either in sensitive military sectors or involve subsistence activities.[12] The situation is the opposite of that described in CLMC. These matters are well documented, so this reveals that the evidence presented in CLMC was very poorly researched, furthermore our Congress has been misled into voting to accept the false argument that China’s military tops are now capitalists.

Following the severance of Soviet aid to Cuba the Cuban army studied PLA economic activities and emulated western business models, in fact the much of the Cuban economy is run by the Cuban Army. “According to an estimate cited from Cuban sources, by 1999 military enterprises accounted for ‘89 percent of exports, 59 percent of tourism revenue, 24 percent of productive service income, 60 percent of hard currency wholesale transactions, 66 percent of hard currency retail sales, and employ 20 percent of state workers.’”[13]

Military companies run luxury hotels, dominate foreign currency wholesale and retail transactions, which is at the very core of societal corruption in all Stalinist countries with non convertible currencies. This military involvement in economic activity certainly poses as much danger to the Cuban revolution as it used to in China![14] The forcible divestment of the military in China was a correct measure to take against the threat of counter-revolution. I assume that Marxists in Cuba would support similar divestment to ensure the army does not become the instrument of counter-revolution.

The Chinese State as the Mother of the Weak Bourgeoisie (Metamorphosis and other stories)

Having alleged that the bureaucracy was transforming “itself into a new capitalist class” the position shifts, and the state is portrayed as tenderly nurturing a bourgeois baby. Thus we read that, “in the process of capitalist transformation they haven’t yet developed a bourgeoisie that is capable of running major corporations on the scale of some of the American and Japanese multinationals, without the help of the state. The state will continue to play a key role for some time, but eventually a powerful bourgeoisie will emerge.” (p14 CLMC) No longer is the bureaucracy turning itself into a capitalist class, now the state is protecting and nurturing a weak capitalist class in a state capitalist incubator in preparation for fully grown adulthood when “a powerful bourgeoisie will emerge.” In CLMC this underdeveloped capitalist class is said to be controlling the direction of state policy, the tail is wagging the dog.

The idea proposed is that the CCP leaders are preparing the largest state industries to be handed over to the bourgeoisie at a later date. However here we return to a future tense in describing the present governing class formation, the bourgeoisie is presented as too weak to manage major companies. Surely if the bourgeoisie is too weak to manage a few companies, then taking hold of the Chinese state, an organization of far greater size, scope and influence, which includes the management of all major companies is an even bigger and more distant task?

The Chinese bureaucracy is presently in charge of companies like:

PetroChina 2nd World Market Capitalization

China Mobile 5th World Market Capitalization

Industrial and Commercial Bank of China 6th World Market Capitalization[15]

If the bureaucracy was preparing in the 1990s to ‘transform itself into a new capitalist class’ why had this process not been completed 15 years later? There were clearly social forces and interests powerful enough to oppose ‘full’ capitalist restoration throughout this period. These forces have been able to limit the power of the capitalists on the one side, and capitalist forces have been insufficiently powerful to seize state power on the other.

If the state bureaucracy that runs the major corporations has transformed itself into a capitalists state, why should they be incapable of running these same major corporations as capitalist companies? Why does (or would?) a ‘powerful bourgeoisie’ need the Communist Party in power and a Stalinist state?

It is the contradiction in the balance of forces between the size, specific weight and influence of the proletariat and discontented peasants, on the one hand, and the interests, aspirations and weakness of the bourgeoisie on the other hand, that gives rise to the present structure of power, i.e. to the present balance of forces inside the party, bureaucracy and society.

Which class does the state represent now? CLMC states that the Chinese bourgeoisie is weak and thus the Stalinist state is needed to help it to grow strong, so that a powerful bourgeoisie will take control of the helm at some stage in the future, but surely this means that the bourgeoisie is not in control of the state now?

Again in relation to the assumption of ownership of Township Village Enterprises we are told “This is a perfect example of how old state-owned enterprises and the state-owned sector now serve the interests of capitalism in China, by nurturing and supporting the nascent bourgeois elements of society until they can assume ownership directly.” (p15 CLMC)

CLMC is actually saying that even in the villages, where petty production forms dominate, nascent bourgeois elements have not yet assumed ‘ownership directly’. It is therefore clear that the document proves the opposite of its intention; it shows the Chinese bourgeoisie is weak, so weak it cannot possibly manage the state or challenge the power of the Communist Party or the State bureaucracy.

“The bureaucracy in China does not want to become prey to imperialist domination. And they are not going to allow that to happen. They know they must maintain a strong Chinese capitalist sector and they are doing that by building up and actually strengthening some of the state companies. They have huge amounts of capital available. The state banks are being used to pump money into these state corporations.” (p15 CLMC)

This is an extraordinarily confused statement. In order to ‘maintain a strong private sector’, the state invests in…the state sector! And state banks lend almost exclusively to the state sector, presumably this is a cunning plot to make the ‘strong Chinese capitalist sector’ stronger by starving them of funds, after all you have to be cruel to be kind! If the state wants to strengthen the private sector why don’t state banks lend them money? These are facts that international capitalist advisors have harped on about for twenty years. The author of CLMC has the solution for these advisors; the state sector is in fact the private sector in metamorphosis. State banks, state industry, the Chinese Communist Party, the bureaucracy and the army are actually just the outer shell of a transparent pupa barely concealing ‘a strong private sector’ inside.

China’s State Owned Enterprises are not capitalist companies they are part of the public sector of the economy, even in capitalist countries there are such sectors. In any transitional society between Capitalism and Socialism, the instruments, forces and tendencies of the publicly owned sector of the economy do battle with the forces, instruments and tendencies of the individual, cooperative, private and foreign capitalist tendencies in economy.

This will be unavoidable even in transitional societies emerging from an advanced industrialized base. The poorer and more backward the starting point of the transitional economy the more protracted and dangerous the process of socialist accumulation is. The need for this struggle is not abolished even by complete nationalization such as was carried out in some former Stalinist states. In these countries the battle reflects itself in the black market, corruption and nepotism inherent in an economy governed by bureaucratic fiat in prices and dictat in planning.

If and when the Chinese SOEs, which own and control the commanding heights of the economy were privatized we could call them capitalist entities, but that is not the case now and there is no indication that it is the ‘intention’ of the bureaucracy that they will be privatized! The bureaucracy has been well served by living off the state; their material interests are bound up with the public ownership and control of the commanding heights. There have been privatizations of small and medium sized SOEs but the largest enterprises controlling the commanding heights of the economy remain in public hands. How are workers supposed to mobilize to defend state property behind a tendency that says that state firms are already capitalist?

The old forms of operation of SOEs have changed significantly, many of the benefits offered to the workers have been undermined but others have been enhanced. Wages and conditions in SOEs and the state sector as a whole have steadily improved. Wages in the state sector are equal to, or have outstripped those in the private sector,[16] when one takes welfare benefits, housing, pensions and social security into account, the total wage is far higher than in any of the private sectors.

We are told that these state companies are competing “on a capitalist basis.” In a capitalist world market how would a mobile phone company of a genuine workers’ state compete with the US and the Japanese etc. if not on a capitalist basis? Is there some sort of socialist technique for China Mobile to compete with the USA or Japan? If so, what is it? In the transitional epoch between capitalism and socialism, state companies inevitably compete “on a capitalist basis” in the world market, buying and selling on markets with the aim of increasing the wealth of the state sector, its technology, means of production, influence, market share and the productivity of labour.

In 1932 Trotsky explained the role of the market in a transitional society succinctly:

“The innumerable living participants in the economy, state and private, collective and individual, must serve notice of their needs and of their relative strength not only through the statistical determinations of plan commissions but by the direct pressure of supply and demand. The plan is checked and, to a considerable degree, realised through the market. The regulation of the market itself must depend upon the tendencies that are brought out through its mechanism. The blueprints produced by the departments must demonstrate their economic efficacy through commercial calculation. The system of the transitional economy is unthinkable without the control of the rouble. This presupposes, in its turn, that the rouble is at par. Without a firm monetary unit, commercial accounting can only increase the chaos.”[17]

Under Socialism governance by workers’ councils instead of the bureaucracy, determines what is done with the companies and their revenues, but where they sell on the market they sell “on a capitalist basis” i.e. on the basis of the socially necessary labour time determining the price. Although the state intervenes in the market to amend the influence of the law of value, the law of value is not abolished and neither are markets for goods and services. One of the main reasons for the sudden collapse of Eastern European economies was the non-convertibility of the currency, the miniscule participation on the world market and the lack of markets for goods and services. Of course under a transitional regime some barter arrangements might be made such as Cuba and Venezuela have implemented with the health and education for oil programs, but these arrangements are a sign of the weakness of Cuba not of its socialist nature.

Property Ownership and Production by the State

Bourgeois economists are very astute in pinpointing many failings of the Chinese economy, everything would be far better they say, if the Chinese Communist Party were to call elections and enact laws to adequately protect property. The dynamism of private entrepreneurs would reduce the inefficiency and wastage inherent in the one party dictatorship and presumably the economy under full blown capitalism, freed from all these constraints, would expand 5% or 10% more than now, at perhaps 20% a year or more!

With the collapse of Stalinism internationally from 1989 a caste of economists, consultants and advisors were engaged by universities, governments, companies, etc. to theorize the “transition to capitalism”. Their ideological foundation was the ‘Property Rights Theory’ whereby ownership is supposed to equate with efficiency and growth. However empirical evidence in China revealed that the theory that the establishment of clear ‘private property rights’ boosts economic expansion did not match the facts. Many of the economically successful mutations from SOEs and TVEs do not have clear property rights and leave ownership and control effectively in the hands of the state, city or township government. Nevertheless this ‘theory’ underpins almost every article, book, report, or analysis by journalists and academics about the ‘transition’ from around the world. Property Rights theorists remain uneasy with China’s transition precisely because there are no clearly anchored capitalist property relations, and state institutions for the defence, protection and expansion of capital accumulation remain weak.

Most experts agree that the Stalinist system that abolished private ownership of the banks, land, trade, services and industry, and operated under a centralized plan of production and distribution was socialism. For many the buying and selling of goods on the market constitutes capitalism. Thus China’s adoption of the market as the dominant means of distribution of goods and services is taken to mean China is making good headway in moving towards capitalism. In fact this corresponds with Trotsky’s concept of a transitional economy where: ‘The plan is checked and, to a considerable degree, realised through the market’. This was the dominant view of the Left Opposition to the Stalinist system of the centralized bureaucratic plan and to bureaucratic determination of prices and currency exchange. Of course having a market does not equal socialism, but equally a transitional society that abolishes the market is not socialism.

Thus one is confronted by a mass of literature and studies on China whose entire basis has a misleading foundation. Unfortunately Chinese Communist Party sources do not resolve matters as they often conceal more than they reveal, reflecting the conflict of tendencies inside the CCP and the Chinese state. In order to attract foreign investment the Chinese state organs have encouraged the view that they are open to capitalism, that they want a market economy, that they have all the legal guarantees you need to protect investments and so on. They have a stock market, shops full of goods, and all the trappings of normal capitalist countries. The logic of the majority of economists and experts is that China is capitalist - after all “if it looks like a duck, sounds like a duck, and acts like a duck, it probably is a duck.” Marxists understand that if things are simply as they appear there would be no need for science. In the case of studying China this is an apposite dictum.

The Commanding Heights of the Economy - how large is the State Sector?

The role of China’s state owned enterprises causes confusion amongst pro-capitalist commentators. Most exaggerate the scale of the private sector. They say it is capitalism that is driving China’s economic growth; but the reality is that China expanded the production and productivity of its SOEs which remain at the core of the economy. This is in direct contradiction to Western economic theory, that only private ownership can foster rapid economic growth.

Total state employment expanded from 80 million in 1980 to 112 million in 1995, thereafter; state employment fell back to 76 million in 2001. Within state employment, SOEs reduced their staff levels dramatically from 76 million in 1995, to 39 million in 2001. However employment in state owned corporate units, rose by 12 million in the same period.[18] In 2006 the number of urban employees of the state was 64.3 million with an additional 19.2 million employed in Limited Liability Corporations, 7.4 million in State Holding Companies and 0.45 million in Joint Ventures which are all state owned and controlled units by another name. Taking these into consideration we arrive at a figure for urban employment in the public sector of 91.3 million, [19]a decline of over 20 million compared to 1995 but an increase relative to the 1980s.

SOEs and state owned units serve as the backbone, which allows the government’s to realize its economic development plans. Local governments administer 90% of SOEs, (157,000 in 2001) the State Council administers the remaining 10% of SOEs (17,000 in 2001) for the central government. Large SOEs themselves govern a myriad of subsidiaries. Local governments instruct SOEs directly or through industrial corporations. Since May 2003 the overall management of SOEs is under the State owned Assets Supervision and Administration Commission (SASAC) and at national and local levels they are responsible for supervision and management of State Assets.[20] Enterprise groups were created in the 1990s spanning several industries and localities, “to supply key products, facilitate specialization in production, and to help coordinate economic activities among regions.”[21] Giant conglomerates were created by the central state and its agencies, 147 (2005) such SOE groups dominate the national economy.

CLMC relies heavily on a book called China’s Ownership Transformation for information on restoration; it provides figures to show “that already in 1988 the state controlled sector was down to 41% of GDP.” “But if we look at the overall Non-State sector, in 2003 it accounted for 66% of GDP” And the document concludes, "the private sector is now the dominant sector of the Chinese economy". It continues, "the share of the private sector is even larger if we take into account that a significant percentage of the collective farms are in effect privately controlled and that the private sector is in general more productive than the other sectors of the economy."

(CLMC p15)

Does this mean CLMC agrees with this assessment that the private sector is generally more productive than the other sectors of the economy? One would assume that no Marxist document would make such a statement without the qualification of explaining the distinction between the overall benefit to society of state owned enterprises, and the individual interests of capitalist enterprise owners. However a little later we read:

“We have to take this state sector into account, but we have to understand that now the private sector is the most dynamic part of the economy and the move towards capitalism has been consolidated.” (CLMC p23)

Why the private sector is the most ‘dynamic part’ of the economy is not explained? Let me assist, most private companies employ less than 10 workers; of course such tiny companies are more ‘dynamic’ than state owned companies that employ tens of thousands of workers. Such language as, ‘the private sector is the most dynamic part of the economy’ has no place in Marxist documents. To add to the confusion created by CLMC we read:

“China exports more than 50% of its GDP. It has very cheap labour costs and very modern means of production - i.e. very high levels of productivity.” (CLMC p23)

Does cheap labour and modern mean of production equal ‘very high levels of productivity’? Surely cheap labour is required to compete against countries whose productivity of labour is higher than China’s? If China has very high levels of productivity in general why are the majority of the toiling masses peasants? A few companies in China have ‘very high levels of productivity’ but overall China’s national average rate of productivity is very low, far, far behind advanced capitalist countries.

State owned units account for 32 per cent of urban employment, in the North East of China they account for 70 per cent of GDP. Heavy industry is dominated by state owned enterprises and the bulk of technology is concentrated in these enterprises.[f] Much of the decline of SOEs is due to their transformation in form. The state sector includes many shareholding companies, joint ownership companies, limited liability companies, foreign funded enterprises, collectives and township and village enterprises. In total state owned enterprises account for over half of industrial output. [g]

Private investment and thus private capitalists would exist in any healthy transitional society. Mixed enterprise formations are valuable means of exploiting capitalism to provide capital, technology and know-how for the state sector. This is how the matter was approached in the early years of the USSR under the New Economic Policy. This method of developing a transitional economy has been carried further in China and this experience holds valuable practical lessons both positive and negative for anyone serious about the problem of how a transitional society will develop towards Socialism in Africa, Latin America and most of Asia. The problem may be summarized as the economic exploitation of the capitalist sectors of the economy by the socialist sectors within the planned economy.[h]

If China were a healthy workers democracy the control of corruption and nepotism through the democratic supervision of management and administration would act as a constant check on the threat posed by these bourgeois and petty bourgeois forces to the workers’ state. In the absence of democratic control by the masses the bureaucracy reacts to threats posed by bourgeois forces, both inside and outside its ranks, by sharp turns, purges, arrests, executions etc. in order to preserve the rule of the bureaucracy as a whole. On the other side bourgeois forces penetrate the bureaucracy and gain powerful positions within the economy. This poses the danger that the bourgeoisie will seize control of the state and establish a society in its own image. It is my contention that China is not a capitalist state and capitalism has not yet been restored. However Chinese Communists are confronted by the real and growing threat of capitalist restoration. They would to well to heed Samuel Johnson’s maxim, ‘when you’re dining with the devil you need a long spoon’.

Social Welfare in SOEs today.

Large scale SOEs in China were like mini-states, enclosed cities or communities of their own. In the past they provided their staff with everything; from food to childcare, healthcare to housing, and even entertainment. You never needed to leave the SOE compound.

The 1980s was a period in which the ‘iron rice bowl’, universal provision by the SOE, was to be smashed and Western corporate structures emulated, the intention was that SOEs would become more productive and profitable.

Surplus workers were to be shifted off the books and employment found elsewhere, the revitalized SOEs were to expand their scale and penetration of the national and world market. This was to be carried out on the basis of importing technology and know-how from advanced capitalist corporations and by continued support from the government to ensure that local and national objectives of the state plan were met.

However, rather than eliminate the welfare system in the SOEs there has actually been an increase in spending on wages and welfare services such as housing, health, education for children and subsidized food for employees during the reform era. An OECD estimate in 2000 calculated 30 per cent of payroll costs were for welfare. SOEs provide free health care, run their own hospitals, provide free medicine, doctors visits and hospital care to employees, their children and retired workers. SOEs are liable for retired workers’ pensions and care, this bill normally constitutes the largest proportion of their social welfare budget.

These services continue to function within the SOEs with only minor tinkering in individual SOEs, i.e. some SOEs allow their hospitals or schools to provide services to the wider community or sell houses to employees at reduced prices. Housing provision by SOEs remains a central benefit for most state employees.[i] Since 2001 the market has limited provision of new housing, building private housing aimed at the rich or the overseas market not at the masses. Home mortgages constitute only around 10 per cent of outstanding bank loans, thus a market collapse in housing can only have a limited impact on banking solvency.[22]

State Ownership of the Banks

In China three quarters of all bank loans go to SOEs,[23] and state owned banks or other publicly owned credit sources own over 98 per cent of the assets in the Chinese banking system.[24] The state banks offer cheap credit to the state sector and hardly any to the private sector, using the financial system as a means of controlling the capitalist sector of the economy. Most capitalist companies raise money from outside the banking system.

“The Chinese banking system, in effect acts as a giant redistributive mechanism to transfer savings from the private sector to finance the investment and social obligations of the state sector”[25]

Central government determination for bank funding of SOEs was replaced by bank based determination of funding in 1996, in addition equity markets were used as a means of raising revenue by selling minority stakes in SOEs to domestic and foreign investors. These investors are naturally not keen on high welfare budgets, but as they don’t control or own the companies they are made to ‘suffer’ if the company prioritizes welfare or state objectives rather than investors’ interests which is the rule rather than the exception. SOE managers treat bank loans as an automatic right not a commercial agreement, the state owns the banks, the Communist Party controls the banks and the SOEs, little or nothing has changed in the way banks fund SOEs.

The Communist Party uses the banks to ensure they serve the ‘Plan for National Economic and Social Development’ (currently the 11th Five-Year 2006-2010). As long as a manager does not steal funds, SOEs are allowed to accumulate unsustainable debts and managers are not removed when they arrange this. Managers bear no personal risk for borrowing and banks determine lending on advice of Government departments. These are hardly the characteristics of capitalist banks or companies. Bank lending in China resembles the European concept of grant funding rather than “normal” capitalist commercial operations.[26]

The Township Village Enterprises.

Rural Enterprises in China are composed of four forms of ownership: township, village, groups of households (in cooperatives or partnerships) and private, (employing no more than 8 people). The township and village enterprises TVEs are normally industrial businesses owned by the township (composed of about 3500 households) or the villages (about 200 households) - each community normally has several TVEs. The community government controls the enterprises.

During the Great Leap Forward the rural communes created enterprises to industrialize the countryside, in the 1970s agricultural mechanization saw such enterprises reemerge as repair shops, food processors, and sub-contractors to urban SOEs. During the Cultural Revolution township level collective companies, brigades or communes, traded or bartered sales and purchases, these were the embryos of the present Township Village Enterprises. In the 1980s TVEs were public sector companies that plugged a market gap to provide goods or services to needs outside of the urban planned sector of the economy. Village and township officials mobilized resources on a localized basis to meet rural demand.

This collectively owned sector grew rapidly - in 1978 there were 1.5 million such enterprises, by 1995 there were 22 million. In 1978 they employed 28 million people, by 1995 128 million. [27]TVEs account for nearly half of China’s exports.[28]

An estimated 800,000 TVEs had been privatized by 2002, free market enthusiasts trumpet this, as numerically it represents more than all rest of the world’s privatizations.[29] But this is hardly the victory for capitalism that is claimed, as the average size of a TVE is six people.[30] Ownership restructuring, as in SOEs has been implemented with workers, managers, townships and collectives all owning stakes in these enterprises. There is nothing in this that would be taboo in principle, even in a genuinely democratic transitional socialist state.

The legal status of TVE is defined as follows: “The assets of TVEs are the collective property of the rural residents of the township or village which runs the enterprise; the ownership rights over the enterprise assets should be exercised by the rural residents meeting (or congress) or a collective economic organization that represents the whole of rural residents of the township or village”[31]

From the 1990s TVEs began to change, from being collective or township property used for the development of local communities; some were simply ‘wearing a red hat’ using a collective legal status to gain preferential state benefits, loans etc, others were fully private companies. The ‘red hat’ was also used as protection in case the political climate changed. Private entrepreneurs appear to be far less confident of the CCP’s dedication to nurturing capitalists than the authors of CLMC.

“The International Finance Corporation (the private sector arm of the world bank) estimates that nearly half of the companies that call themselves collective should in fact be called private.”[32] There are no accurate up to date figures on the privatization of TVEs, power in the villages is in flux and property rights are insecure. Generally privatization means a mixture of ownership in which the township, village, manager and workers all own shares.

Private Companies in China

In the 1980s the private sector of the economy was restricted to individually owned enterprises, street vendors and very small-scale firms. These enterprises, known as getihu, were limited to a maximum of 8 workers including the boss, from 1988 more than 8 employees were allowed, but to this day the average workforce is only 10.

Unlike in the former USSR and Eastern Europe the private sector did not emerge from the privatization of the state sector of the economy, rather the private sector emerged from foreign investment and new start-ups. Private funds were raised almost entirely from outside the banking system and private sector savings enter the coffers of the state banks. Members of the Communist Party and the state bureaucracy who became private capitalists are not dominant, even though their theft and acquisition of state assets puts them in command of many of the most lucrative sectors of the private sector economy. They remain numerically and politically weak, and live in fear that their wealth will be challenged as criminally acquired property.

The private sector is dominated by small sized enterprises, only 5 per cent of private enterprises employ more than 500 and only 2% more than 1000 workers. Contrast this with the state sector where 80% of workers work in companies employing over 500 workers. The number of private companies rose from 90,000 in 1989 employing 1.4 million workers, to 3.6 million companies in 2004 employing 40 million workers. 74% of private companies originated as new start ups, 7% are privatized state owned companies, 8% are privatized rural collectives and 11% are privatized urban collectives. The average income of an entrepreneur is $6600 US per year (2002 figures) this gives an idea of the small scale of the overwhelming majority of private sector enterprises in China.[33]

Estimates of the size of the private sector vary enormously,

“A Beijing think tank reckons that the private sector contributes just over 60 per cent of GDP, counting TVEs and businesses with foreign investors (worth about 15 per cent). Yet the World Bank report in January 2003 put the share as low as a third.”[34] According to the OECD the private sector now generates between 57 per cent and 65 per cent of non farm GDP, depending on how it is measured.[35]

When dealing with China one has to recognize the vast discrepancies in the data which reflect the differing interpretations of the meaning ‘private’,’ state’ and ‘non-state’. The actual scale of the private sector is an issue of dispute.[j]

However this much is clear: the key industries and banks, which constitute the backbone of the economy are state owned, the commanding heights of the economy are in state hands. If the small and medium sized enterprises were state owned - and the largest companies and banks were privately owned, and the banks lent almost exclusively to large private companies - it is quite clear that China would be a capitalist economy even if the majority of workers worked in state owned companies. But this is the opposite of that which exists in China.

The Capitalist Class

Capitalism is an acute threat to state ownership of the means of production, and thus to the rule of that part of the bureaucracy whose privileges are based on state ownership, but who balance between the main social classes. A significant layer of the bureaucracy swims in the same sea as the capitalists, they give contracts to family members and strike lucrative deals with private capital, this eats away at the state sector.

Private business was effectively eliminated between 1957 and 1977, landlords, capitalists, and their offspring, (which included a wide net of non capitalists and non landlords) were isolated and turned into an underclass categorized as ‘anti-socialist devils’ and ‘parasites’.

After 1977 private firms were permitted to soak up unemployment but these firms were informal and lived primarily from profiteering through trade speculation. Hardly any of these small businesses ever grew beyond a petty scale; they are called ‘ventures that can never grow beyond 10,000 yuan.’ ($1460 US)

After 1985 dual price systems allowed speculators to profit from differences between state and market prices, as the latter were often 2-3 times greater. Those with access to valued goods controlled by the government could derive large profits, well-connected crooks enriched in this way were referred to by the masses as ‘daoye’, meaning ‘hooligans’.

Nowadays 96 percent of prices are set by the market, but key product prices remain state controlled, for example, fertilizers, grain, fuel, medicines, transport services and electricity. Shikha Jha, a senior economist at Asian Development Bank says, "China is now subsidizing the entire population, but there are people who can afford higher prices."[36]

In recent years the main source of enrichment for capitalists was the property market, large-scale property speculation, based on access to those with powers of disposal. Those private developers, who were intimately connected with corrupt officialdom at all levels, acquired colossal profits. Coercive plundering of lands for speculative activity provoked resentment and riots all over China. The masses do not accept that land or housing should be objects of speculation, as land belongs to the state and the private market is beyond the reach of all but the elite.

The most despised group of capitalists are those who acquired state owned enterprises and collectives and became wealthy through privatization, trickery, theft and speculation. Many of these enterprises were located in central urban districts, so land rights were especially lucrative. The contrast between the enrichment of these capitalists and the poverty of the former workers, serves as a constant reminder and ongoing source of explosive discontent.[37]

“For years, the Chinese assumed that anyone who was wealthy owed their fortune to corruption, monopolies and political influence. Most of the rich avoided taxes. So the wealthy liked to keep a low profile. A very low profile: Researchers and financial journalists who compiled ‘rich lists’ in China were constantly threatened with lawsuits and by hired thugs.”[38]

This commentary reveals much about the condition of the new rich in China. They are not a secure and confident ruling class firmly established in their throne as masters of the state, rather they constantly fear that elements of the party and state, impelled by discontent within the masses, will threaten their position.

The trade unions are being strengthened and the party is leaning on the mood of the poor, in order to focus on the development of the interior and reduce inequality. All this does not bode well for the ‘coming out’ of a ‘powerful bourgeoisie’ as the new ruling class of China.

The capitalist class emerged with the reform era, some came from small enterprises, others acquired their wealth from the hiving off of sections of large SOEs, or from the transformation of small to medium sized state, collective and village enterprises into private and semi-private firms. To reduce wastage and costs, state enterprises separated their total operations into independent units, each unit would be responsible for their own staff and profits, these entities generally remain half, or at least part owned by the parent company.

The sanction of the bureaucratic apparatus is generally the foundation for the existence of viable private economic entities, nurtured and sustained through contracts, finance, and patronage. In this sense the new bourgeoisie can be said to emerge from within the bureaucracy, but it is dependent upon it, fearful of it, and dominated by it.

Some of the new capitalists have acquired tremendous wealth, there are an estimated 300,000 US dollar millionaires in China. The growth of the new rich class has been extraordinarily rapid, the number of mainland Chinese in the ‘worth’ $1 billion or more jumped to 108, from 15 last year, the average wealth of the richest 800 people in China was $562 million.[39] “Last year 150,000 people could be considered having led an aristocrat life at a cost of 38 million yuan.”[40]

However their financial and numerical growth does not reflect itself in political strength, most of those who became capitalists as a result of the privatization processes retain party membership as a signal of loyalty and a shield of protection, providing connections to those with political influence and power.

Capitalists from the strictly private sector tend to run small enterprises. In order to expand operations they are dependent on establishing cooperation with government entities that have access to the state banking system. Generally joint ventures involving state and private organizations, in one form or another, are required to facilitate this private sector growth. These private capitalists are often the product of direct intervention by the bureaucracy and as such are dependent on the arbitrary whims of this same bureaucracy to survive. Central government has delegated regulatory power over the marketisation process to local government.

“One consequence has been that laws are often non-existent or not enforceable. Thus, entrepreneurs face constant risks of expropriation and discrimination since they cannot rely on the legal system to protect their private property.”[41] (my emphasis)

A stable capitalist class does not just need private property but the recognition and acceptance that their property ownership is legally entrenched. This requires that the legal superstructure be designed to defend private ownership of the means of production. As this is not the case, there is no evidence of stability for the capitalist class in present day China.

Hatred of the Rich

In the mass media and the Internet the term ‘wealth hatred’ has proliferated alongside the discussion of what are popularly known as the ‘problematic rich’. The overwhelming mood amongst the masses is that the wealth of the capitalists is improper, unjustly acquired and criminal. A search in Chinese on Google for ‘the original sin of the rich’ turned up 6000 entries in 2004, in 2007 235,000, and ‘mentality of wealth hatred’ produced 20,000 in 2004 and 304,000 in 2007. Chinese internet media is filled with tirades against the rich. Since the 1990s kidnappings, ransom demands and murders of capitalists have become frequent.

The press have allowed open conflicts on this issue to be expressed, prominent economist and defender of the rich Lin Yifu has been subject to ferocious criticism like ‘it is unbelievable that Professor Lin Yifu asks us not to hate rich people.’ Opinion surveys conducted over 5 years by Xiaowei Zang, revealed a consensus that rejects “any claim that they were rich because of business acumen, risk-taking behaviour, hard work or sheer luck. The interviewees were completely convinced that the rich were selfish, cheap, heartless, showy, contemptuous, sneering, and most of all, that they had amassed their wealth at the expense of ordinary people and had no sense of social responsibility and citizenship.”[42]

Xiaowei notes “It took only twenty seven years to turn China, an international example of egalitarianism in 1978, into one of the most unequal societies by 2005. Conceivably, the collective memory of an egalitarian society and nostalgia for the ‘good old days’ may have been an almost inexhaustible source of fuel to public anger at the widening gap between the rich and the poor in the reform era.”[43]

“Some scholars outside China suggest that private entrepreneurs have been constantly haunted by a nightmare of falling prey to seething popular discontent”[44]

In fact commentators exaggerate the legacy of Maoist egalitarianism, a new egalitarianism has been generated by the birth of the modern reform era proletariat. Its ideology is overwhelmingly egalitarian for all the reasons described by Marx concerning large-scale industry and its impact on the consciousness of the proletariat. The detractors of socialism peddle the idea that the only source of egalitarianism is ‘Maoist legacies’ because intellectual consensus excludes any alternative socialist direction. The balance of power under Deng Xiaoping was neither classical Maoism nor capitalism.

Contrary to various remarks made in CLMC, (on p 19 and 20) the short and intermediate term perspective for China is not just between capitalism and socialist revolution. A layer of the bureaucracy leaning on the masses, could crush the bourgeoisie and by doing so win the support of the majority of workers and the poor.

A transitional regime can continue to develop China under the rule of the bureaucracy until they become an absolute fetter on the development of the productive forces. Indeed new transitional regimes may come to power for example in India, Africa, or Latin America which bear many of the characteristics of China’s present transitional economic and political structure. The history of transitional societies did not end with the collapse of the Soviet Union.

Base and Superstructure

CLMC pieces together elements from many other documents in a sort of patchwork quilt with no pattern or form, the aim of the document seems to have been to stitch together apparent “evidence” of capitalist restoration with “theories” to match this. We find the document ends with a resounding condemnation of the Chinese system.

“The state apparatus was and is that of the old monstrous totalitarian bureaucratic regime and this has been fused with the most repulsive features of capitalism and Stalinism. The outer shell, the form, is that of the Stalinist state apparatus, but the content is bourgeois. This situation is producing contradictions which must produce a revolutionary movement at some stage” (p 26 CLMC)

If we accept this contention what does it mean? Given a state in which the form is Stalinist and the “content is bourgeois”, what is it about this situation that ‘is producing contradictions that must produce a revolutionary movement’? If the form is proletarian (though deformed) and the content bourgeois (also deformed) the contradiction will produce a capitalist counter-revolution, if the form is overthrown to bring it into line with the content. Alternatively if the form asserts itself against the ‘bourgeoisie’, then this will mean the smashing of the bourgeois economic content. The bourgeoisie could be smashed by the Stalinists, by the proletariat; or the Stalinists leaning on the proletariat to strike blows against the weak bourgeoisie; before it becomes too ‘powerful’.

In Ted Grant’s critique of the theory of State Capitalism we find the following description of Stalin’s Russia. “What is puzzling about the Russian phenomena is precisely the contradictory character of the economy. This has been further aggravated by the backwardness and isolation of the USSR. This culminates in the totalitarian Stalinist regime and results in the worst features of capitalism coming to the fore – relations between managers and men, piecework, etc. Instead of analyzing these contradictions comrade Cliff endeavors as far as possible to fit them into the pattern of the normal laws of capitalist production.”[45]

What Ted Grant explained here is that in spite of having capitalist work relations combined with the Stalinist state apparatus this does not equal capitalism, the patterns of capitalist production do not govern the laws of motion of the economy or society. Nor do they in today’s China.

In CLMC we read, “although there are still remnants of the old system, both in terms of the state owned sector and the state apparatus, the fundamental task that now faces China is social revolution. The bulk of the economy is in private hands. The move towards capitalism is an inescapable fact.” (CLMC p26)

Note once again we are presented not with an established capitalism but with the ‘move towards capitalism’ in other words an uncompleted act. But by now the reader has come to expect such confusion, so let us look more closely at what is being said in relation to the state apparatus. ‘The outer shell’ is a Stalinist state, i.e. the armed bodies of men and their appendages are Stalinist, thus their Communist label, laws, etc. and they remain in power over the bulk of a private economy. The ‘remnants of the old system’, the state owned sector is at the core of the economy. In fact they own the majority of assets of the country, produce over a third of GDP and are at the heart of the increase in the productive forces and economic growth and thus the term the ‘bulk of the economy’ is deceptive as the commanding heights are not in private hands.

However even if the majority of the economy were in private hands, given the fact that the state owned sector is driving the economy -and society is ruled in the name of Communism - it is obvious that the main target of Marxist agitation and propaganda must be for workers control and management of the state and the commanding heights of the economy.

Consider the discussion on Property Law between 2004-2007. The legal acceptance of private ownership rights was proposed in 2004, but in 2005 the intervention of Beijing University law professor Gong Xiantian galvanized opposition inside the party against the attempt to give legal equality to private enterprise. This delayed the adoption of the new property rights law until 2007.

Clearly there is not overwhelming support inside the party for either capitalist membership of the party or the recognition of legal rights for capitalists. Each advance by the right met with resistance from the left. Are we to stand aside in these disputes, claiming the conflict is a sham as capitalism already controls society and the protagonists are simply different wings of the new ruling class?

Marxists i.e. scientific communists stand for the unconditional defense of public ownership of the commanding heights of the economy and intervene in the debates and struggles determining the direction that the Communist Party is driving Chinese society. We advocate ideas, strategies and tactics that assist the working class to wrest control over administration of society from the hands of the bureaucracy, in order to replace this with democratic control and leadership by the working class. We propose measures to protect public ownership and the planned economy from internal corrosion and corruption by the new capitalists and their allies inside the bureaucracy.

The alternative promoted in CLMC is to seek the overthrow of the ‘Chinese capitalist state’ something that does not yet exist and to target the Chinese Communist Party leadership as the primary agency of counter-revolution. In these circumstances ‘down with the Chinese Communist Party!’ becomes a logical slogan. Most comrades will instinctively realize that this slogan is a counter-revolutionary slogan that should be rejected by the International Marxist Tendency.

Whilst there are powerful tendencies towards capitalism, they have not been powerful enough to overthrow the ‘remnants of the old system’; to eliminate the state ownership of the commanding heights of the economy or overthrow the Stalinist state.

Marxists advocate democratic control by the workers over the All China Federation of Trade Unions and the Staff and Workers’ Representative Councils. We seek to re-fertilize the Chinese Communist Party with the ideas and methods of the founder of the Chinese Communist Party Chen Duxiu. The Chinese revolution faces acute danger from capitalist restoration. Marxists unconditionally defend the planned economy and seek its expansion throughout the world. Only the leading role of the working class can expand and strengthen socialist forces in China and worldwide. The harmonious development of society is only possible on the basis of a democratic plan of production and consumption under the control of the working class and the poor. The inevitable product of the present course and relations of power is corruption and the wholesale theft of state assets this is preparing the way for capitalist counter-revolution. Only the mass involvement of the workers and peasants through democratic organs of supervision and control of the party and state bureaucracy can open the way to a genuine socialist society.

The Chinese revolution faces acute danger of capitalist restoration; to define this process as already completed will exclude our tendency from any influence in and around the Communist Party and lead to ultra-left sectarianism. To use the analogy of pregnancy, we have adopted a stance that says that the mother has miscarried and the foetus is dead. In fact the baby is alive and kicking inside the mother’s womb and she may be about to give birth. Our new official diagnosis leads us to clear the doctors and nurses from the delivery room, tell the mother her child is already dead and that before she can bear a child, at some time in the distant future, she needs to be fertilized again. The mother will give birth anyway but without any assistance the birth will be fraught with danger.

How else can one interpret the following statements?

“What is the future of the Communist Party? As long as the economy continues to develop at the present rate the Communist Party leadership will be able to hold the situation and maintain a certain stability within society and within the Party” (CLMCp23) “The irony is in the long run this process could tear the CP apart”. (CLMC p22)This temporary and unstable balance can be maintained as long as GDP grows at the current rate of around 9%”. CLMC p23 “If they could have another 10-20 years of 7-10% annual growth, they might be able to achieve this level of urbanization and industrialization relatively smoothly. But this depends on the world market.” (my emphasis CLMC p23)

CLMC says that the Stalinist state can sustain itself and transform itself relatively smoothly whilst remaining in power for a generation or more. China’s ‘Capitalist-Stalinists’ will impregnate the economy with full-blown capitalism following the conscious plan of the Chinese Communist Party leadership by 2028.

Could this stable capitalist transformation have been carried out in the USSR and Eastern Europe from 1989 had the Stalinists there adopted the methods of the Chinese bureaucracy? Did the Stalinists in Eastern Europe and the USSR simply not think things through enough?

The contradictions between bureaucratic control of the commanding heights of the economy and the state, and the interests of the new capitalist class will be resolved - either in the victory of the capitalists backed by the sections of the bureaucracy bound to the capitalists - or the defeat of the capitalists at the hands of a section of the bureaucracy backed by the workers and peasant poor. Once mobilized against the capitalists and their allies inside the bureaucracy, the workers may go further and carry through a political revolution by taking control over society into their own hands.

On the Nature of the Communist Party Today.

In Chinese the Communist Party is called gongchandang, literally translated this means the “public assets party”. Following 1989 ‘entrepreneurs’ were banned from joining the party, it was alleged that capitalist forces around the Stone Corporation (a company with alleged to have ties with the former General Secretary Zhao Ziyang) had been influential in the Tiananmen protests and that this required the exclusion of ‘capitalists’ from the party.

“During these years, entrepreneurs were subject to harassment and even imprisonment for violating ill defined laws and regulations concerning their business activities, their private property rights were not protected by law, and their factories and land could be confiscated without compensation.” In order to protect themselves they put on a “red hat” and functioned as collectives. In 2002 the CCP constitution was revised to allow ‘entrepreneurs’ back in.[46]

CLMC states that the Communist Party has fundamentally changed:

“In the past the party was an instrument of the state bureaucracy, but in the recent period the Chinese capitalists have been allowed to join. Now thirty percent of Chinese capitalists are members of the Communist Party, which shows that they feel their interests can best be defended by being in the party.” (p22 CLMC)

Here we are informed that “in the past” the party was an instrument of the Stalinist Bureaucracy and we are supposed to conclude that now it is an instrument of the Capitalists. The evidence for this is supposed to be that 30% of capitalists have joined the party. In fact this figure is the one of the highest estimates and is not of new members but of includes CCP members who became capitalists. As this figure backs up the theory that the Chinese Communist Party is no longer “an instrument of the state bureaucracy” the authors of CLMC have adopted it.

Minxin Pei argues that 20% of registered entrepreneurs are members of the party. His survey shows that:

“The rapid increase in the number of private entrepreneurs who were also CCP members, however, was not the result of a massive recruitment campaign.”

“Indeed the survey reveals that only a tiny minority - 5.6 percent - of private entrepreneurs joined the CCP after they had set up business. Jiang’s famous speech on July 1, 2001 in which he implicitly called for the recruitment of private entrepreneurs, appeared to have no immediate impact on admitting private businessmen into the party. Only 0.5 percent of the private entrepreneurs in the sample had joined the CCP after the speech.”[47]

The overwhelming majority of CCP members who are entrepreneurs were CCP members before they became entrepreneurs. The party provides them with networking potential and, “quitting the CCP would be unnecessarily risky because that step would signal disloyalty and could have negative political repercussions. Private entrepreneurs who are not CCP members, however may see no advantages in entering the party because membership would come with burdensome chores and responsibilities. But private entrepreneurs, CCP members or not, seem to have drawn a firm line on the issue of allowing the party to establish its cells inside their private firms. The party’s inability to extend its organizational presence into private firms shows that the private entrepreneurs remain wary about having such a presence because it may not only interfere with their business operations, but also threaten the security of their property rights.” [48](my emphasis)

The capitalists inside the Communist Party undoubtedly use their connections inside the party to promote their economic interests but they also use their party card as a protective shield against accusations of theft, corruption etc. In terms of political influence this is far more limited. Where capitalists are politically involved inside the party they tend to come from larger firms, and this could give the impression that they have gained powerful influence inside the party. The party entrepreneurs are certainly a group provided with avenues for lucrative and criminal access to money and power; simultaneously their membership provides the means within the party to supervise their activities and take action against them both individually and as a group, at any time.

Having created the impression that the Capitalists took over the Communist Party, CLMC proceeds to magically turn 30% of something unknown into a major numerical force, indeed one so powerful it now controls the state.

“The capitalists are a small number in absolute terms, but it is very significant that such large numbers of the capitalists have been allowed in”. (p22 CLMC) Nowhere before or after, is a figure given for quantity of these “large numbers of the capitalists”, once again assertion is considered adequate proof.

The alleged “large numbers” were supposed to prove that the party and state is now an instrument of the Capitalists. Thus we read that a few years ago the party leadership was changed, “obviously some of the older bureaucrats who were an impediment to capitalism were pushed out. Thus, the Communist Party is being used by the Capitalists as an instrument to defend their class interests” (p22 CLMC) “those at the top who have the levers of power in their hands, are guiding the process towards capitalism”

Let us recap the arguments being made here

1. Large numbers of capitalists have entered the party,

2. They pushed the old guard aside “a few years ago”

3. They are using the party as their instrument

4. They are guiding the direction of the party to capitalism.

None of this is true.

In 2004 only 894 of the 2.42 million new party members were ‘entrepreneurs’ “One reason for the apparent lack of

recruitment was that local cadres did not support the new policy. They dragged their feet in carrying it out, found reasons to disqualify entrepreneurs from joining the party.”[49]

Dickson’s survey of capitalist participation in the party seeks to emphasize the influence of capitalists inside the party, but when one studies the data collection problems he encountered in 1999 and 2005 it is notable that his survey sought to include only capitalists firms with a turnover of over 1 million RMB ($146,000 US) but this proved impractical because, “In some counties, the size of the private sector was too small to make this a feasible criterion for inclusion; in other counties, the private sector was large but the size of the firms was small.”[50]

The Peoples Daily the official organ of the Communist Party reports,

“Currently, nearly three million of the party’s 73 million members come from non-public enterprises. Last year alone, a total of 1,554 private entrepreneurs joined the CPC, taking up 14.4 percent of the 10,773 members from new social strata.”[51] (my emphasis) Given that 70 million party members, are or were involved in or tied to, the non private sector it is quite clear that the interests of the Communist Party remain welded to ‘public assets’.

“Meanwhile, 2.9 million CPC members are working in private companies, which employ a total of 120 million people, or 9.2 percent of China’s population.”[52] (Here the figure given for private companies probably includes many collective, township or village enterprises.)

Of course working in the private sector does not make you a capitalist. According the Far Eastern Economic Review two figures exist for the number of private business leaders who are members of the party, 20,000 according to the party’s Organization Department and 300,000 according to the Federation of Industry and Commerce. “Most joined when they were working for the state and kept their membership”[53]

So what is the party membership actually made up of?

“By June 2007, the Party had 7.96 million, or 10.8 percent, workers; 23.1 million, or 31 percent, farmers, herdsmen and fishermen; 21.3 million, or 29 percent, cadres, managerial staff and technical specialists; 1.6 million, or 2.2 percent, army men and armed police; 1.95 million, or 2.6 percent, students; 13.77 million, or 18.8 percent, retired people, and 3.64 million, or 5 percent, ‘others’”. [54]

The authors of CLMC has been thrown into confusion concerning the figures on capitalist membership of the Communist Party. The Chinese Maoists considered anyone with a “petty bourgeois” idea to be a ‘capitalist roader’ and thus the definition of the term capitalist is still a confused one in China. The definition is likewise confused in the west where many economists think anyone who owns a house or goes on holiday to Spain is a Capitalist! We really should not import such confusion into our own ranks!

The New Social Stratum

The creation of the “New Social Stratum” as a sociological category by CCP ideologists has been undertaken both to reveal a new official toleration of wealth acquisition and to provide western academics and politicians with a theoretical frame in which they could visualize and conceptualize a large market for goods and a class formation in the image of Western bourgeois democracies.

In Chinese official stratification methodology a category has been added called the ‘new social stratum’. This category is not the capitalist class, (i.e. they are not owners of the means of production) but is primarily composed of representatives of the upper stratum of the urban working and the middle class; what in Europe would be called white-collar workers. The concept of a specific "social stratum" harks back to the 1960s and 70s when Chinese society was officially divided into five strata - farmer, worker, intellectual, cadre and soldier. Within this ‘new social stratum’ the mass of lower levels are workers and the minority at the upper level are capitalists.

“It is estimated that the “new social stratum” consists of 50 million professionals who possess or manage capital totaling 10 trillion yuan (1.3 trillion U.S. dollars), according to the United Front Work Department (UFWD) of the Central Committee of the Communist Party of China (CPC).”

“About 134,000 people from the “new social stratum” applied for party membership. Some were accepted, although the organization department did not give a specific figure, and 64,000 of them are likely to join the party soon and currently being assessed by the CPC, it said.

The “new social stratum” includes private entrepreneurs, technicians and managerial-level staff in private or foreign-funded companies, the self-employed and employees in intermediate organizations, according to the CPC.”[55]

Stalinist Fetters - Relative and Absolute.

CLMC states that after 1949 the “Communist Party and the state bureaucracy would be able to play a relatively progressive role in developing China” (CLMC p2) and this was a position we maintained until 2006. Where the fundamental tasks of developing an industrialized economy were on the order of the day, we argued that the Stalinists state would be a ‘relative fetter’ on the development of the productive forces.

In the document, “The Collapse of Stalinism and the Class Nature of the Russian State.” 1996 by Ted Grant and Alan Woods one reads the following;

“The situation in China was different. Starting from a more backward basis, the Chinese bureaucracy faced a position far more similar to that of the Stalinist regime in Russia in the 1930s. The difference is shown by the fact that Beijing is developing the productive forces at a far faster rate than any other country in the world. This means that it is still able to play a relatively progressive role. Although there are important elements of capitalism, the bureaucracy maintains an iron grip on the state. Paradoxically, this is what makes China such an attractive proposition to foreign investors, although that can easily change into its opposite in the coming period.”

“For the time being, the rapid growth of production is the explanation of the relative stability of the Chinese bureaucracy in contrast to the situation in Russia and Eastern Europe. The ruling elite feels confident in its historic mission. It is motivated, in part of course by the desire to preserve and augment its power, income and privileges, but also by the aim of creating a modern and powerful China (under its control, naturally)...”

CLMC restates these fundamental postulates of Marxism in relation to China when it states,

“The growth of the Chinese economy after 1949 was spectacular. It is sufficient to compare economic development in China and India in the period 1949-1979. This can only be explained by the fact that China had a centralized, state-owned, planned economy.” (my emphasis CLMC p2)

However, several pages later when analyzing even more spectacular growth for the 28 years between 1978 and 2006 CLMC changes it’s tune - explaining this growth by bureaucrats undermining and abolishing the planned economy. Clearly this is a contradictory methodology and system of thought.

The entire crux of the document is that China is now run under the capitalist mode of production and the Chinese Communist Party, bureaucracy and state are agents of, or are indeed themselves, the capitalist class. China’s economy grew faster between 1978 and 2008 than in the previous 30 years. Nowhere does the document explain why this was so, the closest it comes to explaining the reasons for this growth is a theory of latent unreleased potential created under Mao.

“Although under a regime of genuine workers’ democracy far more could have been achieved, the planned economy under Mao was a huge step forward and the growth that it permitted is the base upon which Modern China rests today.” (my emphasis CLMC p2)

The state owned sector remains the core of the economy, control of it enables the government to determine the direction of the national economy by plan. It seems CLMC proposes a new idea, that the economic foundation laid from 1949 to 1978 provided an impetus to economic growth at an accelerating pace for 30 years, both during and after the “restoration of capitalism”. It was one powerful downhill push! This neatly does away with the need to analyze how the Chinese economy actually grew between 1978 and today.

Wherein lay the reasons for the development of the productive forces between the 1920s and the 1970s in the USSR and Eastern Europe and between 1949 and today in China? Growth was characterized in all these cases by the accumulation of capital by the state sectors of society and its use to drive industrialization. In many ways industrialization emulates the methods used in the development of capitalist industry; primitive socialist accumulation derives from unequal exchange with agriculture, which provides part of the surplus for state investment. Through this state driven investment, urbanization and proletarianization are carried out more rapidly than in comparable capitalist countries.

In China since 1978 as distinct from the USSR and Eastern Europe, foreign and private capital was allowed to invest. The state has not only lost public property to the private sector it has also accumulated resources from the private sector, through bank deposits, investment, technology, trade, customs, taxes etc. This has assisted economic growth in China, but contrary to the arguments of capitalist commentators it has not been the cause of economic growth. The main impulse to economic development was state investment by plan. The alternative method used in the USSR and its allies; an economy with no private sector, has never been the Marxist policy for the development of a transitional society.

An industrialized planned economy with no private sector can only accumulate surplus value from the proletariat; this was the case in the USSR. Two possible paths of development confronted such societies. Firstly, to protect and extend the potential power of the planned economy a political revolution and the victory of proletarian democracy is needed, which opens new impulses to rapid and harmonious economic and social development. Control by the bureaucratic apparatus is replaced by the conscious democratic control of producer and consumer, releasing new energies latent within the planned economy. In such a scenario a layer of the bureaucracy will split off, side with the proletariat and come to its assistance.

Secondly, the emergence of a counter revolutionary political movement, which uses the slogans of ‘democracy’ and ‘freedom’ to galvanize the discontent of the masses and channel this discontent to break the power of the ruling party and bureaucratic state, replacing it with an embryonic bourgeois state (e.g. through parliamentary elections). In the process of the democratic counter-revolution, private ownership of the means of production and the banks strengthen the new bourgeois state. Ownership rights are offered as bribes to ease the transformation process for rapacious bureaucrats, this neutralizes much of the potential resistance by the commanding stratum of the Stalinist bureaucracy.

Other nationalist varieties of transformation took place where central states broke into separate and new national states, (eg. Yugoslavia, USSR, Czechoslovakia, Germany) in these cases nationalism was sometimes used in conjunction with, or instead of, ‘democracy’ as a mobilizing force. There were a few other variants but this is the basic pattern of transformation that we have seen over the last 20 years.

Agriculture and the State

The entire wording of CLMC is so riddled with errors that almost every sentence requires correction to provide an accurate picture of the history covered. Sweeping generalizations are slipped in which will make anyone familiar with Chinese history cringe, let alone any Chinese student of communism.

Concerning the ‘positive’ role of the Maoist bureaucracy CLMC says, “The agrarian revolution was also achieved in one sweep” (p2 CLMC) no further mention is made of this nor is any criticism made of the way the ‘agrarian revolution was achieved’. Everyone with the slightest knowledge of Chinese history knows the agrarian revolution was a disaster, the instantaneous abolition of private land and collectivization, devastated agriculture and led to famine, probably the greatest famine in recorded history.

There is a peasant fable in China:

The head of an agricultural commune is called to Beijing to the ministry of Agriculture,

‘What do you produce?’ Asks a functionary. ‘We run a chicken farm’ ‘Good and what do you feed them?’ ‘With wheat’
What? With wheat? While millions starve? That’s an outrage! I fine your commune 1 million yuan! Half a year later the chicken farm leader is called back to Beijing, the same functionary asks, ‘Well what are you raising?’ ‘Chickens’ ‘And what are you feeding them?’ ‘With rice that is rotting’ ‘Rice for chickens? While so many starve? I fine your commune 1 million yuan! At the next summons half a year later. ‘How’s the chicken farm going comrade? Everything fine?’ ‘Well, I guess so’ ‘And what are you feeding them?’ ‘Comrade at the start we fed them wheat and you fined us 1 million yuan. Then we fed them rotting rice and that cost us another 1 million. Now we just give them the money and they buy what they like themselves!’

Since 1978 the peasants leased land and after 1984 the communes were broken up and peasants were allowed to sell their surplus on private markets. To earn money many surplus peasants migrated to the villages, towns and cities to seek their fortune as migrant workers.

Until the 80s the state purchased all the grain and guaranteed distribution through rationing systems, despite individual peasant production the state still controls Chinese agriculture through consumption.

“China’s agriculture is characterised by scarce land, abundant labour and small-scale production using little mechanisation. The overwhelming majority of crop production originates from tiny farms averaging just 0.65 ha – in 2005, there were some 200 million of these.”[56]

“The importance of agriculture to the Chinese economy is still high, accounting for almost 15% of GDP and providing more than 40% of all jobs. Productivity per unit of land is generally high, though labour productivity in agriculture is relatively low.”[57]

“Before 1980, government central planning dominated domestic grain marketing. The government’s Grain Bureau purchased, transported, stored, milled, and retailed all grain leaving the farm. Then in the 1980’s and early 1990’s, open markets became increasingly important as the government was no longer the sole purchaser and many provinces began phasing out a ration system that allowed urban consumers to purchase grain at low fixed prices (AO March 1997). But current grain policy, initiated in 1998, led to a reversal of the use of open markets for domestic distribution and an increase in government intervention in grain production and marketing. This relatively recent return to intervention in the domestic market has led to higher grain output and reduced demand for imports.”[58] (my emphasis)

“Total support to China’s agricultural sector reached USD 41 billion per year in 2000-2003 which is equivalent to 3.3% of China’s GDP in this period. This percentage is much higher than the OECD average and suggests a relatively high burden of agricultural support on the Chinese economy.”[59]

Agriculture in China whilst dominated by private family production units at the micro level is dominated by state purchase and distribution at the macro level. This ensures that China is able to feed itself and that supplies of essential grains reach the entire national consumer market. Imports and exports of grain are determined by the state and implemented by its organizations, thus contrary to appearances Chinese agriculture is dominated by the state.

Bureaucracy and the State

“In spite of the huge successes the bureaucracy was not a historically necessary social layer in the development of the Chinese economy”(CLMC p3)

Contrary to the assertion made in CLMC, it is an unfortunate fact that the bureaucracy was a necessary social layer in the development if the Chinese economy. Given that China was economically backward it was inevitable that there would be a transitional period between the overthrow of the capitalists and the establishment of socialism, in this transitional era some form of bureaucracy is unavoidable. The specific form of the Chinese bureaucracy was determined by the nature of the Civil war but the USSR already revealed that an isolated revolution inevitably gives rise to a bureaucratic state.

“We have thus taken the first step toward understanding the fundamental contradictions between Bolshevik program and Soviet reality. If the state does not die away, but grows more and more despotic, if the plenipotentiaries of the working class become bureaucratized, and the bureaucracy rises above the new society, this is not for some secondary reasons like the psychological relics of the past, etc., but is a result of the iron necessity to give birth to and support a privileged minority so long as it is impossible to guarantee genuine equality.”[60]

Lenin described the state required as a dying state - one that starts to wither away. Following the experience in the USSR we know that when socialist revolution does not expand to the most advanced countries, bureaucratization of the state is inevitable. One assumes the authors meant that in a workers democracy that spreads to the most advanced countries, the bureaucracy would diminish with each advance of the revolution. Given the fact that China was not industrialized or urbanized, the bureaucracy played and is “still able to play a relatively progressive role” in developing the economy. The Chinese working class in 1949 was tiny, industry, the working class and modern China were created by bureaucratic plan, and in this sense the bureaucracy was ‘a historically necessary social layer.’

The Cultural Revolution and Mass Mobilization

In the period 1949 to 1976 the ‘centrally’ planned economy broke down on several occasions. It was held together by the central state using mass mobilization known as ‘the mass line’ to influence the direction society moved in.

CLMC contends that China’s ‘central’ plan ensured economic growth; the true picture is by no means so clear-cut.

The first five-year plan was a success based on importing Soviet technique and technology although China’s economic backwardness meant it could not fully utilize the means of production provided. There followed the break with Moscow and the Great Leap Forward 1958-61, this threw China backwards. With the defeat of Mao in 1962, there was a return to incentive based markets, this began to get the economy working but was abandoned for ten years when Mao unleashed the Great Cultural Revolution 1966-1976.

It is incorrect to argue that China simply applied the frame of reference developed in the USSR. Under Mao, China planned the development of state industries, mobilized manpower to meet state objectives and purchased grain, but economic units functioned primarily as autonomous and autarchic entities. China’s economy was not a unified, ‘centrally’ planned, national economy, but a series of decentralized administrative units based on the self-sufficient development of each commune, firm, county and province. The centralized element was the state bureaucracy and its ability to mobilize manpower and the apparatus of the state.

This mobilization power enabled the application of manpower to irrigation, flood control, construction projects etc as well as causing massive dislocation during the Great Leap Forward and the Cultural Revolution. It is the same force of mass mobilization that is evident in the efficiency with which the PLA intervened in the recent earthquakes in Sichuan province, in battling the snows in early 2008 or battling floodwaters that engulf regions of China with regularity.

Every country has its own traditions, forms and patterns of change which shape its historical character; France is renowned for its urban revolts, England for its conservatism, the United States for its individualism, China for its upheavals and revolts.

In the modern era the Cultural Revolution provides a revealing insight into the way in which different layers of the leadership, party and bureaucracy, leant on and balanced between contending social forces to deal with opponents through mass mobilization.

Whilst the Cultural Revolution destabilized the nation and wrought havoc, the language, symbols and actions of the Cultural Revolution concealed behind them real social tensions. It reflected not simply a collective madness, but was an expression of the conflicting interests of a myriad of living social forces; between central and local power, between the PLA and the Red Guards, between the lower, middle and upper level cadres, between urban and rural, between wealthier communes and poorer, between intellectuals and peasants, between transient workers and workers in state owned enterprises, between students and teachers, between Mao, Lin Biao, Deng Xiao Ping, Liu Shaoqi, Jiang Qing etc.

Alas CLMC presents the clashes in the Cultural Revolution simply as being between the masses and the pro-capitalist wing of the bureaucracy: “By clamping down on the masses, the balance of forces inevitably swung back towards the pro-capitalist wing. Once Mao had curbed the masses, then the balance of forces was determined within the bureaucracy.” (CLMC p8)

In fact Mao, balanced between many forces when attacking ‘the bureaucracy’ and the state apparatus, whilst preserving the rule of the bureaucracy as a whole. Mao unleashed the Cultural Revolution through a layer of the students by permitting the semi-independent organizations of ‘Red Guards’. Inspired by Mao’s wife Jiang Qing, they attacked lower and middle level cadres and sections of the party under various auspices; corruption, ‘taking the capitalist road’, misuse of power, lack of political ‘redness’, bourgeois outlook, and various charges which reflected conflicting interests within local communities, often violence and abuse was of a purely arbitrary nature.

This does not in anyway mean that the people being attacked were ‘capitalist roaders’ or that the people attacking were ‘the masses.’ The Cultural Revolution adopted slogans and forms from historical revolutionary movements; like the political structure of the Paris Commune and performed a theatrical caricature of them. The urban ‘masses’ were composed primarily of students and lumpenised sections of the workers not the urban working class. The people attacked were not ‘pro-capitalist’ bureaucrats, but simply bureaucrats, honest and dishonest.

There is no indication that there was any genuinely pro-capitalist faction of the bureaucracy at that time in China. The fact that Jiang Qing and Mao labeled people as pro-capitalist, did not make these allegations true. Sadly CLMC adopts the theories of Mao and Jiang Qing in defining the character of class relations in China during the Cultural Revolution.

The Red Guard students lent on the discontent of workers in transient employment conditions whose discontent was more easily whipped up than the workers in SOEs. The splits reached the very pinnacles of power. Mao used his personal prestige to knockdown, then recreate structures of power through these social forces. These movements even took up arms against one another.

Reaction to Mao’s methods and to the forces he unleashed came from within the party, government bureaucracy and the PLA. The more stable work units within SOEs were mobilized to discipline the students and transient workers. Armed clashes were finally resolved by the intervention of the PLA and the apparatus of power was reassembled and reconstituted. Mao balanced between these forces, having one foot leaning on the radical student movement and the other on the state apparatus. The clashes were by no means controlled in every detail, nor the outcome predetermined; but what took place was not a struggle between the masses and a pro-capitalist faction.

Matters were finally resolved when the PLA intervened decisively to crush the most radical sections of the Red Guards and Mao sent the ‘educated’ youth to the countryside to ‘learn from the peasants’. The PLA leader Lin Biao staked his claim to be Mao’s heir, but after he tried and failed to settle matters through a coup d’etat against Mao, his plane crashed as he tried to escape to the USSR.[61]

It was the death of Mao in 1976 that led to a shift in the balance of forces within the bureaucracy. In 1978 Deng Xiaoping defeated Jiang Qing and the ‘Gang of Four’ and began the path of incentives to the peasants, more rapid urbanization, permission of private enterprise and opening to foreign investment. These policies in and of themselves are not pro-capitalist policies as CLMC admits: “In the conditions which prevailed in China in the 1970s a kind of NEP would not have been excluded even by a revolutionary Marxist party”. (CLMC p8)

Bureaucratic Consciousness and Planned Economy

CLMC confuses the reader by a misrepresentation of the historical timeline. It discusses the crises in the USSR and Eastern Europe from the 1970s and implies it was the events there in the 80s that inspired Deng Xiaoping to change course. In fact Deng changed course long before the USSR changed. CLMC states that the Chinese bureaucracy under Deng Xiaoping “drew the lessons from the Russian experience and from their own recent past.”

“In China things have developed somewhat differently. The Chinese bureaucracy observed carefully what was happening in Russia. That wing of the bureaucracy represented by Deng drew lessons from the Russian experience and from their own recent past.” (CLMC p6)

“What is true is that as the economy became more sophisticated the bureaucratic command system began to show its limitations. Just as in the Soviet Union, there was a lack of coordination between different sectors, investment imbalances between different sectors, with overproduction of certain goods and underproduction of others.” (p10 CLMC)

The fact is that at that time the Chinese bureaucracy did not operate a sophisticated planned economy. “In the 1970s central government agencies in the former Soviet Union physically allocated about 60,000 different commodities throughout the plan. In China the number was about 600, unchanged from 1965. Nor, unlike the former Soviet Union, did China have the problems posed by “giantism” and enormous regional specialization underpinned by high transport intensity and fuel prices far below world levels.”[62] Gosplan Soviet state planning committee drew up material balances for 2,000 goods, which constituted the core of their annual plans, and the calculations of Gossnab (the state committee for material technical supply) and the industrial ministries dealt with 200,000 products.[63]

The complexity of dealing with even 200,000 products through central planning escaped the capacity of these ministries. Clearly to equate the Soviet system of planning with the Chinese system in the 1980s will lead to incorrect conclusions. The Chinese economy was far less developed and sophisticated than its counterparts in Europe and it could still expand rapidly even under bureaucratic plan.

In reality China had already undertaken an independent path towards the increasing marketization of the economy from 1978. In 1989 when the Tiananmen Square protests were followed by East European protests, revolutions and counter-revolutions, China was more open to the world market and internal trade than all the other Stalinist states.

Nevertheless the overall level of economic development was backward in terms of industrialization, urbanization and infrastructure and this meant that the bureaucracy’s historical mission was by no means exhausted. This is why the defeat of the Tiananmen protests was followed by a prolonged period of social stability. Bureaucratic rule remained a relative not an absolute fetter.

If one compares China’s path with the regime collapses in Eastern Europe and the USSR, it is self evident that these regions of the world were at different stages of development. All the most powerful State apparatuses in the world collapsed like a house of cards in the wind. The KGB, the Stasi, the Securitate, all dissolved and found virtually no social support from the masses. The bureaucracy was an absolute fetter on the development of the productive forces in nearly all of these countries, it was this material difference that lay at the root of the different paths of development.

Yet CLMC tells us that the Deng wing of the bureaucracy ‘observed Russia’ etc and “drew the conclusion that they could not allow that to happen in China and that some change in policy was needed to avoid a similar collapse in their own country.” (p7 CLMC) An incredible wisdom and vision is ascribed to the Chinese bureaucracy from the time of Deng Xiaoping to today, and this is in spite of also categorizing the bureaucracy as empirics, “the bureaucracy moves empirically, depending on the needs of any given moment”. (CLMC p10) The following examples will remind the reader of the extent of the mental powers ascribed to this same bureaucracy in the pages of CLMC.

“The Chinese bureaucracy observed carefully what was happening in Russia” “drew lessons from the Russian experience” (p6) “they drew the conclusion that they could not allow that to happen in China” The collapse of the USSR and Tiananmen “had a tremendous impact on the thinking of the Chinese bureaucracy”. Concerning the Cultural revolution we are told, “the wing led by Deng Xiaoping was horrified and began to draw conclusions” (p7) and then after the Cultural Revolution “the bulk of the bureaucracy had drawn the conclusion that autarky had failed” (p9) then “the Deng wing of the bureaucracy understood the need to introduce the most advanced techniques into the Chinese economy” (p10)

Alan Woods takes Herr Dietrich to task for exactly the same confusion,

“Historical materialism does not explain the evolution of human ideas in terms of ideas in the heads of men and women, but rather explains the evolution of ideas in terms of objective processes that take place in the productive forces and property relations that develop independently of human consciousness and volition.”[64]

CLMC presents the Chinese bureaucracy as a conscious thinking being, rather than an empirically responsive apparatus of power.

Of course a group of leaders of any country will attempt to learn from other countries and choose a course that seeks to keep them in power. Marxists always emphasize the material constraints that determine the scope for leaders to shape events. ‘Learning the lessons’ does not explain the differences between China and the USSR and Eastern Europe. In fact there was a multiple exchange of ideas and methods between Stalinist states in the 1980s and of course earlier. Gorbachev’s reforms inspired political reformers in China like Zhao Ziyang, economic reforms in Poland, Hungary and Yugoslavia influenced China and each other.

When the Tiananmen protests were quelled, East Germany sent military delegations to Beijing to find out ‘the lessons’ from the protests in China and how to suppress them. Chinese military exchanges with Romania also took place in the summer, autumn and winter of 1989, however different circumstances in each country meant that the bureaucracies actually ‘learnt’ nothing usable and relevant from each other. Some of the East German leadership wanted to apply ‘Chinese solutions’, only to find that the army in China was reasonably reliable, but that of East Germany dissolved to dust at the first encounter with protests by the masses. Ceausescu applied his Chinese ‘lessons’, but paid for them with his life.

In 1956 and 1968 tanks were able to quell protests and revolts in Hungary and Czechoslovakia, why did this not work in 1989? Surely the bureaucracy had ‘learnt the lessons’?

In fact the difference is obvious, it is the difference between a state that is developing and one that is stagnant, unable to develop the productive forces, and therefore doomed. In Eastern Europe the bureaucracy had come to an impasse.

Obviously the leaders of the bureaucracy think, and some like Deng Xiaoping and Mao Zedong thought in the long term, but the result of their thinking and the actions of a bureaucratic apparatus are governed by objective material conditions, not by the brain power and foresight of even the most brilliant Stalinist leader. Or are we to assume that the Soviet leaders did not think and that Gorbachov was an idiot? That many of the greatest military minds in the USSR had no brains, whereas the Chinese bureaucrats thought things through?

The World Market and the Transitional Society

Could the bureaucracies have done anything else to sustain power and develop their economies and societies in Eastern Europe and the USSR? At the time of the revolutions and counter-revolutions of 1989 the initial movements demanding democratic control escalated into mass movements condemning the role of the bureaucracy. The ideas proposed by the bureaucracy in these countries focused mainly on encouraging incentive, more freedom of expression, more private enterprise and encouraging foreign investment.

All these ideas were legitimate concerns, the rigidity of the planning systems was so vastly divorced from any viable value based pricing system that the economies were incapable of competing on the world market with any products outside of a narrow range of raw materials or a handful of primarily industrial commodities. A sudden opening like the removal of the Berlin Wall exposed all the contradictions of their siege economies to the world market overnight. Had the process been controlled by a socialist movement under the administration of workers councils then participation on the world market could have assisted these countries to acquire know how and technique.

However the pull of the west and the internal counter-revolutions shattered the bureaucratic apparatus and enabled the planned economies to be rapidly destroyed, with the assistance of ‘property rights’ theorists and advisors from the west. As barter relations effectively governed Eastern trade the separation from the world market twisted the productive system and trade into strange and quirky forms. Internal products backed currencies rather than any universal measurement systems; therefore they were effectively worthless for exchange.

Thus the story from Czechoslovakia,

“How are things going? Asks the western visitor of the Czech trade specialist.

“Not bad can’t complain, we recently started production of ceramics.”

That’s good and what do you do with the finished products?

We export them to Poland

Great then I bet you make a lot of money from Poland!

No it’s not like that, we get paid in eggs

Oh that’s also good everyone needs eggs

That for sure but we export the eggs to Bulgaria

Oh so you get cash from the Bulgarians.

No we get chickens


Well it would be great except we export them to Romania

And what do you get from Romania?


Even better!

Yes except we export the pigs to Hungary

Then you get something of substance from Hungary?

Yes wheat, but we export it to the East Germany.

Aha so the East Germans send you money?

Money? No, no, they send us screws

And what do you do with the screws

We export them to the USSR

So the Russians pay you!

Pay us? No the Russian send us clay so we can make ceramics.

Even though having Karl Marx’s head on the 100 Mark note in East Germany was amusing, money was worthless outside of the internal market, even ‘brother’ countries refused payment except in Western currency. This was one of the main reasons for the so called ‘Iron Curtain’, to protect the internal market and ‘construct socialism’ which normally meant welfare, healthcare, work, food and homes for all.

Totalitarianism and the State

CLMC describes China’s state apparatus as follows: “The state apparatus was and is that of the old monstrous totalitarian bureaucratic regime and this has been fused with the most repulsive features of capitalism and Stalinism.” (CLMC p25) It is difficult to work out what this means. Surely the ‘old monstrous totalitarian bureaucratic regime’ was Stalinism? Or does this phrase refer to the Mandarin state that CLMC claims the Communist Party inherited?

What is clear is that CLMC argues that the state apparatus under Mao was closer to socialism than the present state, although Mao’s era was bad, things are worse now. The frenzied mania of the Cultural Revolution in which the slightest hint of independent thought was repressed, is nothing to the present ‘totalitarian’ and ‘capitalist’ state. According to this thesis arbitrary repression - afflicting millions of people still exists except now it is worse! Is this really supposed to convince Chinese workers that Marxists understand China’s past and present condition?

The reality is that this portrayal does not correspond to life in China today.

1. Physical repression has sharply declined; mass arrests and campaigns of fear demanding “self-criticism” no longer take place. Direct repression is used selectively, most protests, strikes and demonstrations are not repressed but are contained.

2. Ideological repression has effectively disappeared; privately free discussion is normal, however free organization is prohibited.

3. Individual rights e.g. to change your job, move within China, travel abroad, form unsanctioned personal relations, read non-party literature, practice religion, listen to music of your choice, etc. are incomparably greater than in the 1970s

4. Living standards of the overwhelming majority are higher than ever, although relative inequality has dramatically increased.

5. The press, arts, culture, and government are far more open to differences and freedom of expression.

6. Democratic elections to positions in Village committees take place and more and more often this is true both in branches of the All China Federation of Trade Unions and in Staff and Workers’ Representative Councils.

7. More than 200 million people use the Internet that provides extraordinary scope for free expression of ideas, in spite of firewalls and controls. (In 1989 in the USSR and Eastern Europe normal people could not use a fax, photocopier or make a leaflet.) All the tools are available in China for nationwide mass organization, this is a universe away from what existed in the former Stalinist states in the past.

8. China is far more open to the world than any Stalinist state system was prior to 1989.

All these facts conflict with the description presented in the document that claims the Chinese bureaucracy have fused the ‘most repulsive’ aspects of Stalinist and capitalist repression.

The bureaucratic dictatorship does not retain power because it has perfected the most draconian systems of repression in history, rather as Trotsky wrote:

“The workers fear lest, in throwing out the bureaucracy, they will open the way for a capitalist restoration. The mutual relations between state and class are much more complicated than they are represented by the vulgar ‘democrats.’ Without a planned economy the Soviet Union would be thrown back for decades. In that sense the bureaucracy continues to fulfill a necessary function. But it fulfills it in such a way as to prepare an explosion of the whole system which may completely sweep out the results of the revolution. The workers are realists. Without deceiving themselves with regard to the ruling caste - at least with regard to its lower tiers which stand near to them – they see in it the watchman for the time being of a certain part of their own conquests. They will inevitably drive out the dishonest, impudent and unreliable watchman as soon as they see another possibility.”[65]

Inequality in the Socialist Sector - Wages and Differentials

“The Chinese bureaucracy did not view wage differentials in the same way as the Bolsheviks had done.” (CLMC p3)

In fact wage differentials in China were extremely low compared with the USSR in the years 1949-1976. China’s Gini coefficient (ranging from perfect equality at 0 to 1) in 1978 was 0.22, one of the most equal ever recorded.[66] It was precisely the extremity of wage egalitarianism as an overall trend that led to the toleration of increasingly in-egalitarian wages after 1978. A healthy transitional regime will both defend in-egalitarian wages and promote egalitarianism simultaneously, for example, by increasing the productive forces and productivity of labour through incentives, and diminishing the gap between town and country, and rich and poor through redistribution and national planning. There is no short cut whereby egalitarianism can be magically introduced in a backward country this was a Maoist illusion.

“The existence of this bureaucracy meant that, in spite of all the rhetoric, there were social privileges and inequalities within Chinese society. In 1976, for example, the industrial wage of a worker working 48 hours a week was $12 a month. Professionals earned $120 or more. There was a wage differential of 10 to 1.”

“In the USSR, Lenin had accepted a differential of 4 to 1 - a ‘bourgeois compromise’ as he defined it - as a way of getting the economy moving, but it was seen as a temporary measure, as the Bolsheviks waited for the world revolution to unfold.” (p3 CLMC)

Lenin believed that a wage differential of 4 to 1 was a ‘bourgeois compromise’ but wage differentials were far higher than this even in Lenin’s time. In May 1919 the Central Committee resolved that “only those whose salaries have been endorsed by the Council of People’s Commissars shall receive pay at the rate of 3,000 rubles and more.” Lenin himself was to present the report.[67] These exceptional wages were over 60 times the wage of an average Moscow worker. The average wage in Moscow for workers in 1924-5 was 44 Roubles for industrial workers and 66 for all workers.[68] Lenin’s own wage in 1921 was 500 roubles.[69] Thus Lenin’s wage was about than 10 times that of an industrial worker.

“The Chinese bureaucracy did not view differentials in the same way as the Bolsheviks had done. Wage differentials after the Chinese revolution were not seen as a temporary "bourgeois" compromise imposed by the isolation of the revolution and the underdeveloped nature of the economy, but as the consolidation of the wealth and privileges of the bureaucracy. Bureaucrats lived well above the conditions of ordinary workers. Implicit in such a situation was the possible restoration of capitalism at some stage.” (p3-4 CLMC)

In fact in Chinese state owned industries wage differentials were kept within the bounds of Lenin’s aspiration. A revision to this took place in 1999 and encouraged rising wage differentials based on the idea that managers would receive higher pay if the company performed well.

“Statistics show that before the new system was adopted, the average salary of SOE managers was only two or three times that of their subordinates, drastically contrasting their heavy workloads with the ordinary workers’ responsibilities.”[70]

Until 1999 the Ministry of Labour made it a rule that a manager’s income could not exceed fours times a worker’s average salary. Even today “this does not vary much in many places, at around 2 to 5 times of the local average yearly income of staff, and in some very profitable enterprises it could be 20 times more.”[71]

In 2004 the average wages of directors of state factories was 24,070 RMB,[72] in 2003 the average wage of workers in state factories was 14,577.[73] Average wage differentials in the state sector between director and shop level workers is less than 1:2 but even this is considered to be too high by the masses.

Ultra-egalitarianism was deeply rooted under the rule of Mao Zedong. Marxism has nothing to do with such politics, it is self evident that a society that is industrializing requires skilled labour and a democratic workers state will be willing to pay rates to specialists that are considerably in excess even of formally bourgeois norms of 1:4.

For example, worldwide one billion people live presently on less than US $31 a month. In countries where 50% of the population lives at such a level, is it impossible that a socialist government will pay specialists over US $10,000 monthly? Such income levels are not uncommon for skilled workers in advanced capitalist countries, if you require their skills you may have to pay them such a rate. Whether you employ them inside your country or in their own country will not alter the facts of vast disparities in payment by a workers’ state in a transitional society between backward capitalism and socialism.

It was precisely the ultra-egalitarianism of the Cultural Revolution that paved the way for the backlash in favour of a more in-egalitarian distribution. The levels of inequality in today’s China have reached astronomical proportions, but within the state sector, the stronghold of the party and bureaucracy, inequality remains exceptionally low. Socialism can only be said to come about when such disparities have been overcome and the level of productivity of labour between countries and regions of the world nears equality. Genuine egalitarianism is only possible on the basis of advanced productive forces and the abolition of want based on an economy of superabundance.

The role of Chen Duxiu in the Chinese Revolution

“The main Chinese tradition is a Maoist one. However, it is not the only tradition. There is also an important tradition of Chen Duxiu, (1879-1942), one of the founders of the Communist Party...” (p25 CLMC)

Chen Duxiu was the founder of the Communist Party not ‘one’ of the founders; Mao was ‘one of the founders’. Now this might seem totally pedantic to most comrades, however if comrades have studied the Stalinist falsifications concerning the role of Leon Trotsky they are no doubt familiar with the way in which Trotsky’s role was minimized and falsified in details. There was even a Russian joke about this in the 30s,

A “Who organized the Red Army in Russia?

B “Why comrade Stalin of course!”

A “But you are wrong it was Trotsky”

B “Stalin was operating under that pseudonym at the time”

In the People’s Republic of China the falsification of the role of Chen Duxiu, and the claim that he was ‘one of the founders of the Communist Party’ is part of the Maoist school of historical falsification. Every serious historian of Chinese Communist history knows this, it is obviously a serious error and it is a shot in the foot for our tendency to repeat this falsification.

It might be that the comrade who wrote this was unfamiliar with the details of the Maoist school of falsification concerning Chen Duxiu, however in the next paragraph it is said that Chen Duxiu, ‘was one of the leaders of the anti-imperialist May Forth Movement in 1919.’ (my emphasis CLMC p25) To be fair, in 59 years of Maoists historical falsification they never denied that the May Fourth Movement was led by Chen Duxiu! Given that the context of mentioning Chen Duxiu in CLMC was to show that in China, although “the tradition of the Bolsheviks, of Lenin and Trotsky” is missing “there is also the important tradition of Chen Duxiu,” it seems most odd to make such basic errors.

How can we speak about tradition to Chinese communists when both statements in the document about the greatest Marxist in Chinese history are factually wrong and go far further in falsifying ‘the tradition of Chen Duxiu’ than the Maoists ever did?

Wither the Chinese Communist Party and Bureaucracy?

“Now in China there are very powerful bourgeois interests. The new bourgeoisie is using the Communist Party to defend their class interests. In these conditions could the bureaucracy reverse the process and carry it out successfully? We believe that the process has gone beyond the stage where that could happen without a major conflict. If a wing of the Chinese bureaucracy were to decide to go down that road it would involve a major confrontation with the pro-capitalist wing. Thus a "cold transition" back to some form of bureaucratically planned economy would not be possible. But this is a hypothetical perspective as there are no indications that any such wing exists.” (p19 CLMC)

As we have already shown the bourgeoisie do not control the Communist Party or determine its policies or program. The Communist Party dominates the bureaucracy, part of whose interests are tied to the new bourgeoisie and part are connected with state ownership and the planned economy i.e. with the proletariat and state sector, i.e. SOEs, education, the army, administration etc.

‘Major confrontation’ was always characteristic of significant shifts in power between bureaucratic factions in China. If a ‘major conflict’ breaks out, a faction of the bureaucracy will come under pressure from the workers to defend state ownership and the interests of the workers and poor peasants by thwarting a capitalist counter-revolution.

The urban working class is now easily the most powerful force in society; this makes a victory in such a scenario more likely. In the state sector alone tens of millions of workers and bureaucrats have no beneficial connection to capitalist relations in the sense of capital gained from corruption etc. Given the specific weight of this section of the population within urban China, the unions, the party, army and state, it is likely that these forces will coalesce and mobilize such a ‘major conflict’. Where will we stand on this? All indications are that such developments would catch us unprepared, as our official stance excludes such a perspective as a purely hypothetical construct.

“Thus a ‘cold transition’ back to some form of bureaucratically planned economy would not be possible. But this is a hypothetical perspective as there are no indications that any such wing exists.” (p19 CLMC)

It is true that ‘major conflict’ to stop capitalist restoration is unlikely to be appear as a peaceful and bloodless event, although this cannot be excluded under certain circumstances. The emergence of a revolutionary leadership, a Chinese Chavez, or a ‘Reiss faction’, is most likely to herald from within the CCP and possibly from amongst its leading layers.

CLMC claims that the ‘Reiss faction’ of the bureaucracy that Trotsky spoke of, is not relevant for China because China never had a workers’ democracy therefore there was no genuine Marxist ‘tradition’. This is of course true for all countries except Russia. Reiss was a Stalinist GPU agent who became convinced by the Left Opposition’s criticism of Stalinism. Trotsky’s concept of a ‘Reiss faction’ within the Stalinist bureaucracy had nothing to do with the memory of ‘tradition’ of the October Revolution. It was based upon the idea that a transitional society managed by a Stalinist bureaucracy can either move towards socialism through workers’ democracy or towards capitalism by counter-revolution. The layers of the bureaucracy closest to the aspirations of the masses and aware of the ideas of socialism and Marxism would naturally orientate towards the proletariat and be open to the ideas of Marxism. Trotsky did not see the development of a bureaucratic revolutionary tendency as a historical remnant but as a product of objective conditions. Under conditions where honest revolutionaries are drawn into the apparatus and its reactionary measures, they try their best to make things work in the interests of the revolution, hoping for a sudden miraculous change in policy.

The ideas and the program of the Left Opposition corresponded to the needs of society and thus those who understood the contradictions of Stalinism and sought solutions would orientate to the program of workers’ democracy through political revolution. The Bolshevik program is the solution to the limitations of Stalinist rule. The existence of a ‘Reiss faction’ was identifiable in all the revolutions of 1989-91 and it exists in Cuba today. The idea that this faction cannot develop in China is simply nonsense. In fact there are powerful indicators that precisely such a tendency is developing in China now.

The Left of the Communist Party is Gathering Strength

The end of Jiang Zemin’s rule in 2003 saw increasing discontent with inequality, mass layoffs in SOEs and the inaction by the party against the rising wealth and influence of the new capitalists.

The following became a popular story in China: Jiang Zemin stands on top of the Gate of Heavenly Peace, (which overlooks Tiananmen Square and Mao’s Mausoleum.) He faces south and sees a sea of crooks, faces north and sees millions of laid off workers. Facing east he sees smugglers bringing tankers full of oil, facing west a sea of impoverished common people, looking up he sees US guided missiles falling, looking down he sees thousands of Falungong followers protesting. Looking behind him he sees his potential replacements surging forward, in front he sees the Mao Mausoleum. He calls out to Mao, ‘What shall I do?’ Mao replies ‘Lie down here, I’ll come and take care of things’.

In the face of widespread social discontent amongst peasants, workers and lower level cadres, the leading layers of the Communist Party shifted to the left since Hu Jintao and Wen Jiabao came to power. This is visible in a wide range of policy changes and alterations in government style of operation. A constant and repetitive theme of Hu Jintao’s leadership is ‘honest leadership’ and ‘plain living’ this is a symbol that the central leadership is seeking to lean on masses to limit the power of the new capitalists. Their subjective intentions are not of decisive importance, the social tensions that give rise to their actions are.

In the recent period Wen Jiabao has displayed this style of leadership. Over Chinese New Year he was speaking to huge crowds through a megaphone to pacify their angry moods caused by transport blockages due to heavy snows. In July he was at the scene of the Sichuan earthquake, shedding tears with the masses, personally supervising relief efforts, and promising punishment for officials where they were responsible for the shoddy construction of schools and other public buildings.

In advance of the 17th Party Congress there was widespread opposition from within the party to the present course and the second most vocal force was precisely the ‘hypothetical wing’ of the CCP, of which ‘no indication exists!’’

On August 16th 2007, Cheng Ming magazine in Hong Kong reported “hardliners have been pooling their efforts to force Hu Jintao to ‘clean house’ and ‘return to socialism’.” At 12 meetings attended by the leadership of the party, there were two main tendencies, one supportive of the leaders the other “believed strongly that the nature of the party and state have changed, and if the trend is allowed to continue there would be chaos in the political situation and the party and state would perish”.

15 descendents of CCP veterans cosigned a letter demanding that “all rules and regulations that are not in line with socialism should be changed.” 17 former Ministers and Generals signed a letter that demanded “a return to the former socialist path to prevent people like Boris Yeltsin from gaining leadership.” 28 senior party, government and military officials warned similarly of the threat of political development like in the USSR and that “a political crisis can erupt at any time”.

The ‘hypothetical perspective’ of a left wing tendency within the bureaucracy is further reinforced by the fact that most disputes at state owned factories; are led by former factory leaders, party veterans and PLA veterans.

In a study of collective labour unrest against factory closures by Yongshun Cai published 2006, it was shown that such protests were led by people of the following backgrounds, 29.2% previous enterprise leaders, 22% party-member workers, 17% current enterprise leaders, 9.8% military veterans, 22% others. In other words precisely these groups that CLMC defines as ‘hypothetical’ or ‘capitalist’ are leading the majority of disputes against factory closures and job losses in State Owned Enterprises.

Whence the origin of this faction of the bureaucracy? The mass layoff of recent years radicalized a significant faction of the lower bureaucracy, party and army.

The “initiators or organizers of the collective action of laid off workers include current enterprise leaders, previous enterprise cadres, retired workers, soldier-turned-workers, non-cadre party members, and ordinary workers. Most of these people are the elite among workers who yield more influence than the rank and file. Many of them have experience dealing with management or the government, because they are or were cadres, and can articulate the demands of laid off workers. They are willing to lead often because of their personal stake in the action, community pressure, a sense of justice, or a combination of the three.”[74]

Is this any wonder given that in ten years some 25 million SOE workers were laid off from state owned enterprises and the state sector in the main cities of China?

The New Left the Intelligentsia and Anti-Capitalism

Western Sinologists, China watchers and journalists have been engaged for three decades in the search for China’s liberal intelligentsia whose enlightened self-interest is supposed to foster a civil society modeled in essence on capitalist democracy. They seek the protection of private property and ownership of the means of production, the rule of law (bourgeois law) and an elected national government, made up of bourgeois political parties, and civil society institutions able to represent diverse interest groups, trade unions, NGOs, youth, women, sexual rights groups, ethnic and national groups etc.

They have found themselves confounded since 1989 by the silence of China’s intellectuals, which was originally imposed by repression following June 4th but then shifted away from Western ideals of democracy. Now the dominant tendency within the intelligentsia is the ‘neo-conservatism’ of the ‘New Left’. (Any tendency which seeks greater egalitarianism is called conservative by most bourgeois observers.)

The ‘New Left’ espouses a mixture of ‘third way’ ideas, based on a rejection of the adoption of Western Democratic models and free market capitalism, some are Confucian, some nationalist, some Maoist in inspiration, all advocate a greater egalitarianism and various forms of mass participation.[75] The essence of this question is not what ideas the intellectuals espouse but why they espouse them? Their psychology is a reflection of the social conditions in China, an environment of sharp class antagonisms and increasing social protest.

In 2004 a study group at Beijing University (Beida) composed of some 30 students was closed down and the leaders arrested, they were a mixture of political tendencies, some advocating Western Democracy but others like Xu Wei were Communist Party members who considered themselves Marxists. They gathered in a spirit of seeking the truth about problems and finding solutions to them. They named themselves the New Youth Study group after Chen Duxiu’s newspaper that in1915 sought to modernize and revolutionize Chinese society, inspired the May Fourth Movement in 1919, and helped to found the Communist Party in 1921.

The group was disbanded and the leaders imprisoned. According to the Washington Post this was treated with utmost concern by the authorities, “Reports about their activities reached officials at the highest levels of the party, including Luo Gan, the Politburo member responsible for internal security. Even the then President Jiang Zemin, referred to the investigation as one of the most important in the nation, according to people who have seen an internal memo summarizing the comments of senior officials about the case.”[76]

The unusual concentration of the leadership on such a tiny and apparently harmless group of students lies in the historical significance of Beida. . Beida is the birthplace of the Chinese Marxism, Chen Duxiu was the Dean of Letters here when he led the May 4th Movement in 1919, Li Dazhao was the head of the library and found Mao Zedong a job there.

Revolts in the Townships and Villages

Yu Jianrong, from the Chinese Academy of Social Sciences provides an extremely precise outline of the forces preparing China’s political revolution:

“The foundations for mass social movement in China may already be laid as there are indications that workers, peasants and the lower class of intellectuals are forging a common identity. Up to this point, workers and peasants have not yet merged into one coherent social group, even though they share a common social status and interests. The formation of their common identity and goals may require an outside group that can act as the bond to bring workers and peasants together. This group could be the 20 million demobilized and retired soldiers living in rural China, which possesses the social capital, organizational, networking and mobilization capabilities to be the bridge between workers and peasants.”

“They have already been prominently contributing to peasants’ movement to reduce tax burdens and protect land rights. In some southern regions, demobilized and retired soldiers have launched movements to mobilize both workers and peasants. For example, in some regions in Hunan Province, demobilized and retired soldiers built a 100,000-person ‘anti-corruption brigade’ that was mainly comprised of laid-off workers, poor peasants and lower class intellectuals. In fact, corruption may be the one factor that could bring workers and peasants together since both see this as the root cause of their current predicament and misery. In all past and current social conflicts that involve a combination of workers and peasants, their demands have universally held up anti-corruption as the common enemy.”[77]

Yu Jianrong catalogues the process whereby the enrichment of some of the business, bureaucracy and intellectual elites is matched by the contradictory empowerment of the peasants in rebellion against this. The Hu-Wen administration has enacted laws, which empower the workers and peasants to take up their rights against corrupt and profiteering interests at the local government level. The privatization of much of the wealth in villages and towns created organically corrupt alliances between the wealthy and powerful. Waves of land seizures for development and real estate deals have been met by large scale revolts, Social conflicts have been rising sharply: 8709 ‘peasant-worker incidents’ were recorded in 1993, 32,000 in 1999 and over 87,000 in 2005.[78]

“Their speakers or representatives are often demobilized soldiers, retired government officials who chose to spend their remaining years in the countryside and former village cadres. These individuals have clear political beliefs and understand how to motivate other peasants and directly challenge government agencies at the grass roots level through legal channels.”[79]

The outlook of these leaders is that National Government laws are not enforced by local government officials, they use the rights enshrined in the law against those in power and back this up with social protests that are increasingly violent affairs. The target of protests include, “municipal and country governments, real estate developers and administrators of economic development zones.”[80]

The disputes have shifted to the wealthier regions of China from the central regions and have changed character - originally they would petition higher level governments, propagandize or organize tax boycotts - now they organize demonstrations, parades and sit-ins at government buildings, highways or railways. Under pressure from peasant and worker revolts the local governments have begun to readjust policies to accommodate their demands.

Support from central government for peasants against illegal land seizures and local government’s often violent responses have increased the sense that their revolts are justified and legitimate. It has created a reinforcing effect, as the representatives of the peasants have become heroes, drawing even more peasants to their cause. The movement of the peasants and workers for their rights created a shift in intellectual elites who are “gradually forming a consensus around the need for a ‘new enlightenment’ movement.”[81] Worker and peasant revolts split the army, local government cadres, the intellectuals and the national government.

Not mincing his words Yu Jianrong warns, “If Chinas problems of socioeconomic inequality are left to fester, revolution may indeed be inevitable.”

“Whether confrontation between peasants (with workers) and the elitists group will lead to social crisis or even revolution will be determined by many unpredictable factors. First and foremost is how China’s leaders deal with the movement by these groups to defend their legitimate rights. Currently this movement exists as political pressure on the government, but how much pressure can it tolerate? If pushed beyond its limit, the stress of such political pressure could tip the balance of stability in China. The moderates in the government who are sympathetic to the peasants’ cause could either change their stand and side with hardliners, or completely split with them to support peasants and workers. Either result could lead to a revolution in national politics. The most effective release valve for this pressure is governance by rule of law.”[82]

A clash is forseen as the Hu-Wen administration balances between the conflicting interests of privileged elites and the masses, breaking local government resistance will require peasant and worker mobilization and increasingly harsh central government intervention to punish local governments. Major clashes are inevitable.

“The CCP’s historical ideology and legitimacy declares that the ‘workers are the ruling class’ and the ‘peasants are allies’ (of the ruling class). Yet the capitalists status has been raised far more in the past decades of reform. The nation is entering a stage of being a well off society while hundreds of millions of peasants and workers cannot make ends meet. This gap between reality and professed ideology will inevitably shake the political root of the CCP’s ideology and stability of its rule.”[83]

Trade Unions and Staff and Workers Representative Councils.

“Once the property relations change, the legal superstructure must follow suit. Thus we can expect that the process of bringing the legal ‘superstructure’ into line with the economic base will continue apace. Although there is some opposition within certain layers of the bureaucracy, ‘sooner or later’, the two must be brought into line. Already much has been done, as the changes to the Constitution testify.” (CLMC p16)

The legalization and recognition of private property has been taken by CLMC to mean that the Chinese bureaucracy is changing the legal framework of the state superstructure to bring it into line with capitalism.

It is undoubtedly true that a section of the bureaucracy had this in mind with the changes in the status of the private sector, but this legal change was fiercely resisted in the legislature such that its passage was delayed by 3 years. Although it is also true that there is nothing inherently wrong with a law recognizing private property, in the context of increasing inequality it is correctly regarded as the thin end of the wedge.

However this is only part of the story, members of the All China Federation of Trade Unions (ACFTU) and Communist Party in the workplaces are promoting the rights of workers. Legislation improving workers rights has smooth passage through the National Peoples Congress unlike the law defending private property.

The legally defined hours of work are lower than in many advanced capitalist countries:

“The Chinese Government has stipulated that the maximum working day is eight hours and that the working week should not exceed 40 hours. Employers must double or triple wages paid for extra hours.”[84]

Of course everyone knows that many capitalists and foreign companies simply ignore formal rights and thus a campaign to unionize the workers and inform them of their rights has been promoted by the ACFTU and the Communist Party.

The recent growth in membership of the ACFTU has been meteoric, 120 million in 2002, 169 million in September 2006, and 193 million in January 2008. 543,000 full time officials control the union, which is an extension of the Communist Party. The expansion of membership has brought increasing influence for the union and confidence of the workers. The ACFTU is not a militant organization of workers struggle rather it seeks the avoidance, amelioration and pacification of conflict.

Superficial observers point out that the ACFTU does not organize strikes, and is in league with the management, as if this decides its fate. As soon as workers enter into struggle they demand their legal rights and place demands on the organizations that are supposed to defend them, the ACFTU and the Communist Party. The success of the mass unionization drive indicates that workers’ expectations for improvements in the rights and living standards are focused on the ACFTU.

The Communist Party seeks unionization as a means of penetrating the working class, and by these means the CCP enters into private and foreign owned factories. A high publicity campaign, led to the unionization of Wall Mart and Coca Cola, providing a signal that all foreign workplaces will have unions. It is estimated that by the end of this year unions will have been established in 80 percent of foreign owned companies.

Workers have become more assertive, they inform themselves and combine more easily thanks to communications technology, the press is generally sympathetic to the workers’ cause and economic growth has strengthened the balance of forces inside the workplace. The new Contract Labour Law introduced on January 1st 2008 enhances workers rights, improves job security, limits overtime, sets minimum wages and guarantees one month's pay for each year worked for sacked employees, and for many employees it means a return to jobs for life.

On paper, workers’ legal rights are better than in the advanced capitalist world, workers enjoy the right to form unions, and factories are governed only with the consent of the Staff and Workers Representative Council. (SWRC) In factories where trade unions exist the likelihood that SWRCs will be established is highest, although like the unions they are normally instruments of bureaucratic and managerial control. In recent years SWRCs have increasingly assumed the character of fighting workers’ councils with real power.

Chapter 5, Article 52 of the Enterprise Law defines the rights of the STWC thus:

“1. to be informed and to examine major strategic policies such as long-term plans, annual plans, basic investments, reinvestment plans, plans for leasing and subcontracting, and so on;

2. to examine, agree to, or veto policies related to wages, bonus and industrial safety issues, and regulations pertaining to penalties and merits;

3. to examine and decide on policies related to the staff and workers’ welfare, distribution of housing, and other important welfare matters;

4. to monitor and assess the performance of responsible cadres at each level and to make suggestions on how to reward, penalize, and dismiss them; and

5. to elect the factory manager according to the arrangement of the supervisory government bureaucracy, and to report the election results to the said bureaucracy for approval.”[85]

SWRCs represent the most likely arena in the struggle of workers for control of their workplaces and communities, precisely because the struggle for control of the legal superstructure is undecided, bourgeois property has been recognized but so have rights for the workers which allow them legally to take over control of their workplaces.
“Control over the production process has never been a hotly contested area in the Chinese workplace. If the SWRCs in China were indeed able to exercise their rights as defined by law, the rights enjoyed by Chinese workers of state and collective enterprises would far exceed those under any capitalist system.”[86]

The issue is of course not what rights exist on paper but how the masses relate to those rights and whether they consider those rights and laws to be part of their state and worth struggling for. Scholars studying SWRCs in China were surprised by what they found. SWRCs were not merely formal legal entities but have become organs of struggle. In many cases studied, SWRCs have been used by workers “to defend their vital interests and democratic rights.”[87]

SWRCs are increasingly able to veto managerial decisions on all manner of issues such as “relocation of factory site, the installation of large-scale equipment and facilities, or enormous financial transactions”. [88]

In collectively owned enterprises the SWRC is the “highest power authority, and this includes the authority to dismiss managers.”[89]

With increasing representation of the ACFTU in foreign and joint venture companies SWRCs have the potential to demand their rights even inside these capitalist enterprises. The workers backed by a section of the bureaucracy are using the legal framework to advance their organization and rights, when workers enter into struggle they will sweep aside petty impediments created by the bureaucracy and claim their legal rights to ownership, control, and mastery of the state and society.

The state apparatus, both repressive and administrative, is firmly controlled by the Communist Party of China. The Communist Party is deeply affected by the development of class forces and contradictions leading to splits within the party and administrative apparatus confronted by increasing inequality and class struggles. The fact is that Communist Party members or lower levels of the bureaucracy lead most workers’ struggles. This clearly reveals that the gulf between the classes is reflected inside the Communist Party and the state.

The capitalist class is not a consolidated national political or economic force able to determine the direction of national policy. In order for it to assume power a decisive defeat of the working class and the Communist Party would be required. The position our tendency has adopted on China misreads the situation and misleads our movement into a sectarian positions vis-à-vis the Communist Party of China. This document is intended to encourage comrades to review our position on both the nature of the Chinese state and the nature of the transitional epoch between capitalism and socialism.

Selected Bibliography

Agricultural Outlook June-July 1999

ASIEN, July 2002

Benton China’s Urban Revolutionaries: Explorations in the History of Chinese Trotskyism. 1996

Benton Mao Zedong and the Chinese Revolution, 2007

Benton Chen Duxiu’s Last Articles and Letters, 1937-1942. 1998

Bruce Dickson The Communist Party’s embrace of the private sector. China Quarterly 2007

China Daily

China Daily

China Development Institute Salary Package Issues of Shenzhen SOE Managers July 2003

Chinese Sociology and Anthropology Summer 2005

Chui and Lewis Reforming China's State-owned Enterprises and Banks 2006

Cottrell and Cockshott Socialist planning after the collapse of the Soviet Union 1993

Dickson Exit the Dragon 2005

Preobrazhensky The New Economics 1965

Economist survey China 2002,

Economist Survey China March 2004

Far Eastern Economc Review

Financial Times

Fred Weston China’s Long March to Capitalism 2006

Goodman et al The New Rich in China 2008

Hong Yung Lee Mao’s strategy for revolutionary change China Quarterly March 1979

Hongyi Chen The Institutional Transition of China’s Township Village Enterprises. 2000

Howe China’s economic reform and study with documents 2000

James C. Mulvenon Soldiers of fortune The Rise and Fall of the Chinese Military-Business Complex 2001

Jie Shen Labour Disputes and their resolution in China 2007

Leon Trotsky The Revolution Betrayed,

Liu Binyan Crisis, China’s Hope 1990

Minxin Pei China’s Trapped Transition 2006

Nathan et al China’s Changing Political Landscape 2008,

OECD Agricultural Policy Reform in China 2005

OECD Economic Survey China Sept. 2005

Peoples Daily

State Statistical Bureau of China

Ted Grant. The Unbroken Thread

Trotsky The Art of Planning, The Soviet Economy in Danger, , 1932

Walder The Party Elite and China's Trajectory of Change, September 2004

Walder and Oi Rights and Economic Reform in China 1999

Wall Street Journal

Woods Reformism or Revolution 2008

Wiktorowicz and Mora Economic Reform and the Military China, Cuba and Syria 2003

World Bank Transition10years on.

Yongshun Cai State and Laid Off Workers in Reform China. 2006

[a] The figures include all employees of Township and Village Enterprises and rural private enterprises. State Statistical Bureau of China

[b] The immediate impulse to write this critique was a conflict about a single paragraph in an article I wrote about the Sichuan Earthquake. ( The editor of claimed that one paragraph was in contradiction to the position of the IMT. I wrote,

“What our friends at the ‘Financial Times’ fear is not the pro-government line advocated by the Chinese media. Rather they fear that under pressure from the masses the Chinese Communist Party might turn its back on the economic line advocated for China by international capitalism.”

He amended this to the following in the Socialist Appeal Journal, “What our friends at the Financial Times fear is not the pro-government line advocated by the Chinese media. What the western bourgeois fear is China becoming a powerful force in the coming period, a force that threatens their interests in the region and around the world. The Chinese state is ignoring the “advice” of western capitalists-i.e. to open their economy completely and remove the guiding hand of the state- and are proceeding according to their own interests, building up a powerful industrial base that is capable of out-competing the western countries.” (Issue 163 p12)

I was surprised that the editor of felt that the position of the tendency excludes the possibility that Financial Times journalists fear that the Communist Party under pressure from the masses may take action against the interests of International Capitalism. Following further discussions I felt the need to clarify everything that I think is wrong with CLMC and the new position of the tendency on China. It is my view is that the official standpoint of our tendency will undermine our influence and abandons some of the basics of Marxism.

[c] According to Pavel Sudoplatov, who was in charge of the Soviet Ministry of State Security at the time, US intervention against Mao had limited options between 1948-1949, US President Truman considered using their atomic bombs to stop Mao’s armies conquering power. Sudoplatov claims that the Soviets used the Berlin blockade (June 1948-May 1949) to pin down US aerial forces in Germany during the endgame of the Chinese Civil War and while the Soviets developed their own Atom Bomb. The Soviet exploded their first atom bomb on 29th August 1949 and the Peoples’ Republic of China was founded on October 1st 1949. (see Special Tasks Pavel Sudoplatov)

[d] “it would be necessary for the US to underwrite the Chinese Government’s military effort, on a wide and probably constantly increasing scale, as well as take over the Chinese economy. The US would probably have to take over the Chinese government and administer its economic, military and governmental affairs” General Marshall Quoted in Eastman’s Nationalist Era in China p354

[e] For example, I wrote to the IS pointing out that the central claims of an article published on 25 July 2008, on that, 1) China’s population is 130 million higher than officially recorded and, 2) that migrant workers are not recorded in the population statistics of the Chinese Government are completely without foundation. Yet in spite of the IS being informed of these basic errors the article remains on the web site to this day.

[f] “In 2001, for example, the state owned units accounted for 47 per cent of fixed asset investment. SOEs by virtue of their dominance of heavy industry and the capital-intensive sectors of the economy still provide the basic productive inputs on which other sectors rely, and for this reason can be considered to occupy a key position in Chinese manufacturing.” (p9 Reforming China’s State Owned Industries and Banks. Chiu and Lewis 2006.)

[g] In fact many of the other enterprise forms created since 1980 are “mutations of SOEs. Of the 6000 or so shareholding companies, 1300 of the largest are listed on the Chinese or foreign stock markets. About 80 per cent of these have their genesis in SOEs, or are spin-offs or offshoots of SOE holding companies, and remain majority government owned. Over 80 per cent of the joint ownership enterprises involve a state body, being either ‘state joint ownership’ or ‘ state-collective joint ownership.’ Some of the limited liability companies’ corporations are solely state funded. A goodly percentage of the foreign funded firms are joint or cooperative ventures with an SOE or a collective. Collectives are themselves a related, but distinct kin, of an SOE in that they are controlled by lower government tiers at the county or urban level. If we ignore the collectives, the state-holding enterprises in 2002 numbered 41,125 (23 per cent of the total) and contributed 41 per cent of industry output. Adding to these figures those of the collectives (36,670) and collective joint ownership enterprises (576) brings the number of enterprises to 79,341 (44 per cent of the total) accounting for 53 per cent of industry gross output.” (p10-11 Chiu and Lewis.)

[h] In China this has been practiced in a number of ways, by state banks accumulating the funds of the private sector, by joint ventures, by transportation charges, by taxes etc.

[i] Many SOEs today provide subsidies for private housing. The enclosed SOE unit is no longer the dominant form of physical organization as SOEs are not so closely bound to single locations and former housing of the SOE workers was often sold to the employees at discounted prices.

[j] For example:

“Private companies, excluding those controlled by foreigners, accounted last year (1999) for less than 20 percent of economic output.” (International Herald Tribune Craig Smith 13 July 2000, p.16)

“Though many people cite figures that show China’s economy is now mostly private, those data include foreign owned and collectively owned businesses, most of which are still controlled at some level by the government. True private companies, those that are majority owned by individuals, still account for less than 20 percent of economic output and for only 50 million jobs.” (International Herald Tribune Craig Smith 4 June 2001, p.11)

“China’s private sector is now responsible for 33 percent of economic ouput state controlled media reported” (International Herald Tribune 8 April 2002, p.11)

China’s private sector provides 25 percent of GDP …the official China Daily quoted a National Bureau of Statistics report as saying…Some Western economists, however, estimate that the the non-state sector, including foreign firms, accounts for 50 percent to 70 percent of China’s GDP. (Far Eastern Economic Review 17 Oct. 2002, p.28)



[3] The Unbroken Thread Ted Grant. p255

[4] China Daily 3/12/2004

[5] China Daily 2008-01-23


[7] China’s Crisis, China’s Hope 1990 Liu Binyan

[8] Andrew Walder The Party Elite and China's Trajectory of Change China: An International Journal - Volume 2, Number 2, September 2004, pp. 189-209

[9] Ted Grant The Unbroken Thread p.236

[10] Cliff quoted in Ted Grant Unbroken Thread p.226.

[11] Soldiers of fortune: The Rise and Fall of the Chinese Military- Business Complex, 1978-1998 p.180

[12] Soldiers of Fortune p182-3

[13] Espinosa and Harding 2000 p.23

[15] FT June 28th 2008 Global 500 list

[17] The Art of Planning, The Soviet Economy in Danger, Trotsky, 1932

[18] Chui and Lewis p53 (State Statistical Bureau figures)


[20] Chui and Lewis 2006 p59-60

[21] Chui and Lewis 2006 p67

[22] Chiu & Lewis 2006 p339-41

[23] Chiu and Lewis p 11

[24] Chiu and Lewis p205

[25] Huang Quoted in Chiu and Lewis 2006 p.213

[26] Chiu & Lewis 2006 p342-345

[27] Hongyi Chen The Institutional Transition of China’s Township Village Enterprises. p5 2000

[28] Economist survey 15 June 2002, p11

[29] Exit the Dragon p102 2005

[30] ASIEN, July 2002 p61

[31] Article 3 of the State Council regulations cited p49 Hongyi Chen

[32] FT 11 May 2000 p14

[33] OECD Economic Survey China Sept. 2005 p83-95

[34] Economist Survey 20th March 2004 p 15

[35] FT 17 Sept 2005, p6

[36] International Herald Tribune 2 July 2008

[37] The New Rich in China p62-70 Xiaowei Zang

[38] May 30, 2007, Wall Street Journal China’s New Rich

[39] China Daily 2007-10-10

[40] China Daily 2008-07-25

[41] Goodman The New Rich in China 2008 p11

[42] The New Rich in China Xiaowei Zang 2008 p58

[43] ibid p59

[44] ibid p56

[45] Unbroken Thread p216

[46] The Communist Party’s embrace of the private sector. Bruce Dickson China Quarterly 2007

[47] Minxin Pei China’s Trapped Transition 2006 p93

[48] Minxin Pei China’s Trapped Transition 2006. p95

[49] Dickson China Quarterly 2007

[50] Appendix Dickson China Quarterly 2007

[51] October 21, 2007 Peoples Daily

[52] October 20, 2007 Peoples Daily

[53] FEER 18 Oct 2001 p40

[54] Peoples Daily Oct 8th 2007

[55] October 08, 2007 Peoples Daily

[56] OECD Agricultural Policy Reform in China 2005 p2

[57] OECD 14/11/2005

[58] Agricultural Outlook/June-July 1999

[59] OECD Agricultural Policy Reform in China 2005 p6

[60] Leon Trotsky The Revolution Betrayed, Socialism and the State

[61] Mao’s strategy for revolutionary change Hong Yung Lee China Quarterly March 1979

[63] Socialist planning after the collapse of the Soviet Union Allin Cottrell and W. Paul Cockshott 1993 p4

[64] Alan Woods Reformism or Revolution p82

[65] Trotsky Revolution Betrayed. Ch 11 pt 3.

[66] Goodman p2

[67] Lenin Collected Works. Volume 42, pages 136c-137a

[69] Revolutionary Dreams Richard Stites p142

[70] Peoples Daily March 9th 2001

[71] China Development Institute Salary Package Issues of Shenzhen SOE Managers July 2003

[72] Goodman The New Rich in China p13

[73] Jie Shen Labour Disputes and their resolution in China 2007 p25

[74] State and Laid Off Workers in Reform China. Yongshun Cai 2006 p107-8

[75] China’s Changing Political Landscape 2008, p32-36, Nathan et al

[76] Washington Post, April 23, 2004

[77] China Security Vol 3 No 2 Spring 2007 p2

[78] China Security Vol 3 No 2 Spring 2007 p5

[79] China Security Vol 3 No 2 Spring 2007 p6

[80] China Security Vol 3 No 2 Spring 2007 p7

[81] China Security Vol 3 No 2 Spring 2007 p9

[82] China Security Vol 3 No 2 Spring 2007 p11-12

[83] China Security Vol 3 No 2 Spring 2007 p13

[84] China Daily 31-08-2004

[85] Chinese Sociology and Anthropology Summer 2005 p11

[86] Chinese Sociology and Anthropology Summer 2005 p12)

[87] Chinese Sociology and Anthropology Summer 2005 p4

[88] Chinese Sociology and Anthropology Summer 2005 p12

[89] Chinese Sociology and Anthropology Summer 2005 p24