Encyclopedia of Anti-Revisionism On-Line

Democracy and Class Struggle

Contemporary China – What is its social character: is it capitalist or is it socialist?

Issued: October 25, 2008.
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Speech delivered by comrade Nickglais to meeting in Conway Hall London on 23rd October 2008 organised by Second Wave Publications and Distribution

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Let us look at China’s Response to the current economic crisis. Has the crisis of global capitalism made the Communist Party of China think of a return to socialism and regulation and control its capital markets?

Here is the Chinese State Council response as reported in Time magazine by Bill Powell its Shanghai correspondent on Tuesday October 7th 2008:

Earlier this week Beijing sent a clear signal that, notwithstanding the mess in the U.S. and Europe, it still seeks to develop, slowly but surely, a more sophisticated capital market. China’s State Council has approved a plan to allow margin trading and short-selling, giving domestic investors in China’s A-share market “new opportunities to hedge and leverage their positions,” says Jing Ulrich, head of China Equities at JPMorgan Securities in Hong Kong.

We should remember that short selling has been banned in UK and US and Australia and nobody today needs reminding of the effects of margin trading and leverage has contributions to the current crisis.

Is this action of the Chinese authorities an aberration or is it part of something much more profound and fundamental relating to contemporary power and class relations in China?

Lenin in the Three Sources and Three Component Parts of Marxism written in 1913 said something which many comrades need to be reminded of when trying to understand China.

People always have been the foolish victims of deception and self-deception in politics, and they always will be until they have learnt to seek out the interests of some class or other behind all moral, religious, political and social phrases, declarations and promises.

Let us follow our Chinese Comrade Pao-yu Ching to understand the class basis of the current leadership of the Communist Party of China today.

If we trace the origins of the Deng Xiaoping Reforms after Mao’s death. The reform formally began after the Third Plenary Session of the Eleventh Congress of the Chinese Communist Party in December of 1978.

When Hart-Landsberg and Burkett explain how Deng began the Reform and how the capitalist restoration has continued for the past thirty years, they searched for reasons beyond personal greed and explained that the capitalist restoration, once started, generated “structural contradictions” that have kept it going.

We, of course, have to look for reasons other than personal greed to explain the political, economic, and social development in China or in any other countries; however, Hart-Landsberg and Burkett seemed to imply that the Reformers did not have a clear idea about their Reform programs and that they indeed have been “crossing the river by touching the stones” – a famous saying of Deng Xiaoping and – and once the Reform got started it seemed to generate enough contradictions to keep it going.

However, if we look into the history of class struggle in China, we would reach a very different conclusion. Deng’s Reform programs – the dismantling of the Commune, the privatizing of state-owned enterprises, the Labor Reform, the opening up of the economy to foreign investment, and many others–all have their origins long before 1979. Deng and his predecessor and mentor, Liu Shaoqi, tried repeatedly to institute these programs since the 1950’s. Therefore, contrary to what Deng openly said, the Reform that began in 1979 not only had a clear direction but also a well-planned road map.

One example of this plan is the history of the post 1979 Labor Reform that Hart-Landsberg and Burkett documented. Contract Labor instituted in 1986 was part of the overall Labor Reform that abolished the permanent employment system in State-owned enterprises, and it has its origin in the 1950’s. Pao yu Ching wrote the following in “Labor Reform – Mao vs. Liu-Deng” in 1993:

...The Labor Contract System, implemented since the beginning of the Reform, did not originate with the current reformers. As early as the 1950’s Liu Shaoqi began advocating the advantages of the Contract Labor System. An essay from the recently published Labor Contract System Handbook revealed the history of Liu’s attempts to institute temporary contract workers in state owned factories.

The essay stated that in 1956, Liu sent a team to the Soviet Union to study their labor system. Upon its return, the team proposed the adoption of the Contract Labor System modeled after what the Soviet Union had adopted. However, when the changes were about to take place, the Great Leap Forward started, thus interrupting its implementation.

The essay continued in stating that in the early 1960’s Liu again attempted to change the permanent employment status by adopting a “two-track system,” enterprises were to employ more temporary and fewer permanent workers, and the mines were to employ peasants as temporary workers.

Then, in 1965, the State Council announced a new regulation on the employment of temporary workers, indicating that, instead of permanent workers, more temporary workers should be hired. The regulation also gave individual enterprises the authority to use allocated wage funds to replace permanent workers with temporary workers.

Again, according to the author of this essay, the Cultural Revolution interrupted Liu’s effort to reform the labor system, and, in 1971, large numbers of temporary workers were given permanent status. Although Liu could not fully implement his labor reform, he had “experimental projects” going on here and there, and before the Cultural Revolution began, large numbers of temporary workers had been hired.

The author of Labor Contract System Handbook expressed his regrets that these earlier efforts to institute labor reform failed, and he stated that if there had not been the Great Leap Forward and the Cultural Revolution, it would have been possible to carry out these Labor Reform long before the current time.

In fact, Liu-Deng and their allies had a plan to develop capitalism in China since the 1950’s. The afore-mentioned Labor Reform was only one of the many projects they prepared to carry out. Their plan to develop capitalism in China before 1979 consisted of projects to be implemented in every economic, political, social, and cultural sphere writes Pao yu Ching.

That was and is the precise reason for the past and current class struggles in China.

China started its economic reforms by abolishing the people’s communes. Suddenly, without the collectives, the peasants had to privately purchase seed, fertilizer and water rights, and to pay higher taxes to support a large cadre of local party officials.

But the prices of farm products were kept low, forcing many to work as migrant workers in the cities. Others followed when their land was seized for urban and industrial development. Once in the cities, they were given neither residential status nor legal rights and protection, but they were nevertheless expected to be gainfully employed.

Otherwise, under the “custody and repatriation” laws, beggars, vagrants and those with no employment were repatriated back to their villages, held at detention centers, or even used as forced labor. The Chinese version of the English “enclosure” process created approximately 150 million impoverished migrants who had to sell their labor cheaply in order to survive.

Meanwhile, state enterprises were slowly privatized. Their employees no longer enjoyed the guarantee of “the iron rice bowl” and had to find jobs on the open labor market. The masses of rural migrants, joined by growing numbers of laid-off state enterprise workers, provided China with an endless supply of cheap labor.

There is some plausibility (but wrong) in calling China State Market Socialist in the early years of the Deng Reforms when you just had a few isolated Special Economic Zones and there were limits on the size of private enterprise in China but by 1992, if you use the intellectual apparatus of Marxism, what you see is the extention of Market Reforms to the rest of the Chinese Provinces and wholesale dismantling of the State sector with an attack on collective property and the wholesale implementation of the Guangdong free market model for the whole of China.

We see entirely new production relations emerging in China in the 1990’s. The end of the Danwei or work unit which combined production and consumption, education and health the separation of the means of production from working people with privatisation of State assets. The laying off of the old working class in the factories and in the mines the use of hired gangs from the countryside with no knowledge of mining causing one of the highest mining accident rates in the world.

This is evidenced by persistent labor safety violations that have led to spectacular industrial accidents, including gas explosions, mine cave-ins and flooding that killed 100,000’s of people every year. While China accounted for 80 percent of the world’s total coal mining-related deaths it produce only 35 percent of the world’s coal.

Comrade Gong Xiantian in his famous open letter about the Property Law informed us that the output from the State sector is below 17% of total output in China and that basically the market has put itself in command and not the party and the people as in the past.

The creation of a new working class based on super exploitation in the new factories of peasants pouring in from the countryside without rights of residence in the factory towns and cities basically second class citizens depriving them of access to education and health services which are just provided for locals.

Discussion has started in China to privatise land has they have already done with industry hopefully this will re-energise the peasants and workers to combine and re-establish the fight for socialism.

Production relations in China have changed in most dramatic way in the last 30 years; the means of production have been wrested from the working class and privatised. The most equal country in the world in 1978 is now heading for the inequality of South Africa and Brazil.

Take the State Industry sector the Governor of the Central Bank of China Zhou Xiaochuan boasts how one third have been fully privatised one third put on hold for potential buyers and one third closed. Even nominal State shares in privatised companies are scheduled to be sold by State to pay pensions.

The Township and Village Enterprises built up in Mao’s time and which formed the basis of China’s economic growth have become private property in most cases taken over by a local bureaucrat has his own possession.

The robbery of public assets and public property by powerful individuals in China is one of the biggest expropriations of the working class in history and the new bureaucrat “cadre” capitalists are not satisfied with that now they are eyeing the land for privatisation.

According to a report by the China Rights Forum, only 5 per cent of China’s 20,000 richest people have made it on merit.

More than 90 per cent are related to senior government or Communist Party officials. The richest among them are the relatives of the very top officials who had used their position to pass the laws that have transformed state-owned industries into stock holding companies, and then appointed family members as managers. In this way the children of top party officials – China’s new “princelings” – took over China’s most strategic and profitable industries: banking, transportation, power generation, natural resources, media, and weapons.

Once in management positions, they get loans from government-controlled banks, acquire foreign partners, and list their companies on Hong Kong or New York stock exchanges to raise more capital. Each step of the way the princelings enrich themselves not only as major shareholders of the companies, but also from the kickbacks they get by awarding contracts to foreign firms to call this “socialism with Chinese characteristics” is a joke.

The Chinese Princelings are the direct equivalent of the Russian Oligarchs.

I have to say that the China Rights Forum is correct and their position is validated by my personal experience in China.

There are clearly voices in China in the Society the State and even the Communist Party not just unhappy with this turn of events but seeking to re-orientate China away from the market direction which has now run its course – and put Socialism back on the agenda but they have a tough time as the bureaucrat capitalist elite is firmly entrenched in the Party and State machine.

Just for you to know how tough it is here is an example of a political and labour rights activities in China in the early 21st Century.

1. Let us look at case of Yao Fuxin from Liaoning in 2003

Yao Fuxin was the leader of large-scale worker demonstrations at Liaoyang Ferro-Alloy Factory after it declared bankruptcy and failed to make wage/benefit/pension payments to workers.

Leader of “All-Liaoyang Bankrupt and Unemployed Workers’ Provisional Union.” He was convicted with Xiao Yunliang of subversion by Liaoyang Intermediate People’s Court and sentenced on May 9, 2003 to seven years’ imprisonment.

His appeal was rejected by Liaoning Higher People’s Court on June 27, 2003. Serving sentence in Lingyuan No. 2 Prison, where he reportedly suffered a heart attack in August 2005.

This is not untypical of what happens workers leaders in China.

Status: Due for release on March 19, 2009.

2. The Zhengzhou 4

It was in Zhengzhou on September 9, 2004,on the 28th anniversary of Mao’s death that a worker activist Zhang Zhengyao, passed out a leaflet Mao Forever our Leader attacking the Communist Party and government for deserting the interests of the working classes and taking part in widespread corruption.

His flyer also denounced the restoration of capitalism in China and called for a return to the “socialist road” taken by Mao. Both he and the co-author of the leaflet, Zhang Ruquan, were arrested, after police raided their apartments. Their case soon became a cause celebre in China, with many leftists from all over the country traveling to Zhengzhou to protest outside the closed trial of the two in December 2004.

In 2004, when they were each sentenced to three years in prison, together with Ge Liying and Wang Zhanqing–who assisted in the writing and printing of the leaflet, and who have also been harassed by the police–these worker activists have come to be known as the “Zhengzhou 4.”

A petition letter, to President Hu Jintao and Prime Minister Wen Jiabao, calling for their release, attracted over 200 signatures–about one half each from inside and outside China. This was an unprecedented show of support for leftist workers, especially given the potential risk for those who signed it, uniting Chinese intellectuals and activists with their international peers.

Though the government did not respond directly to the letter, Zhang Ruquan was later released from prison, ostensibly for health reasons, which some activists believe was at least partially a result of the pressure generated by the petition and other related solidarity activities, such as the posting of sometimes quite lengthy information and analysis regarding their case on left websites.

The Zhengzhou 4 represent the refusal of workers in China to passively accept the new conditions imposed on them by the party and state, the persistence of Maoist ideology and activism in their ranks, and the growing support which they are gathering from others throughout the society and even abroad.

But this case also brought out the divisions as well as the renewed strength of the Chinese Left. It was mainly the younger leftists who took the lead in signing the Zhengzhou 4 petition letter, using the internet to circulate it widely, while criticizing those among their elders and mentors who, at least at first, had tended to hold back. For the young generation, solidarity with workers who were taking a public stand on the left took precedence over concern with having the exactly correct “line.”

For the older leftists, on the other hand, past divisions and struggles over ideology and policy often prevent the ability to unite for common action. In their case, it is harder to lay aside historical conflicts in order to face the new conditions of the present.

3. The Yantai case.

In 2008 the case of rank and file union activism in China can be seen in Yantai. In the North-Eastern Chinese port city of Yantai there are workers’ willing to struggle for two years for their right to form their own union that will stand up for their rights.

The company in question is Ole Wolff (Yantai) Electronics Ltd, a Hong Kong and Danish co-owned company that produces cell phone speakers, receivers and other electronic productions.

It is the first Chinese independent trade union to be set up through strike in China”

The Ole Wolff Yantai Trade Union has taken an oppostional stance towards both the company and the local union branch.

It describes itself boldly as a “red union” (i.e. Socialist) while dismissing the All China Federation of Trade Unions has a “yellow union”

The union’s internet blog has article, entitled: “Where there’s oppression, there will be resistance!” Class Struggle is alive and well in China.

The movement for Socialist Renewal in China is young like the new century but it will grow and win back the lost positions of the last 30 years in the economy in the party and society in China has it gains clarity about its defeats and its future.

But this in no way is helped by describing contemporary China has socialist – primary stage of socialism – socialism with Chinese characteristics, in fact it is essential to understand the capitalist character of contemporary China has many in China are now recognising as a precondition for that essential vital Socialist Renewal that China needs to undergo.

The rebirth of Chinese Socialism is the rebirth of the Marxism Leninism Maoism and has Henry CK Liu writes on his essay on Mao and Lincoln:

The full impact of Mao’s revolutionary spirit is yet to be released on Chinese society. A century from now, Mao’s high-minded principles of mass politics will outshine all his neo-liberal critics.


Pao-yu Ching, Professor Emeritus of Economics, Marygrove College in Detroit USA – The origin of Deng’s Reform – the case of Labour Reform.
Zhou Xiaochuan Governor of Peoples Bank of China speech at World Bank 26/4/2004
Gong Xantian Law Professor in Beijing Author of the famous Open Letter
Part of letter on Political Economy Research on Internet
China Study Group on Internet Source for information on Political and Labor
Activism in China including Mao forever our leader leaflet of Zhengzhou Four.
Mike Servethepeople for Yantai workers information.