By Alex Callinicos
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China’s champions of state capitalism

This article is over 2 years, 11 months old
Issue 2761
Eighteenth National Congress of the Communist Party of China
Eighteenth National Congress of the Communist Party of China (Pic: Wikicommons/ Dong Fang)

Zheng Zeguang, the Chinese ambassador to Britain, recently tweeted a picture of him visiting Karl Marx’s grave in Highgate, London. This was to celebrate the centenary of the foundation of the Communist Party of China (CPC).

From any standpoint the CPC’s is an extraordinary story. Starting as a handful of persecuted radical intellectuals meeting in semi-colonial Shanghai, to becoming the ruler of the second biggest economy in the world.

The politics of the CPC’s triumph are relatively clear. Within a few years of its formation, the party was at the centre of a huge and militant workers’ movement sparked by a police massacre in Shanghai. It was allied to the mainstream nationalist movement the Guomindang, led by Chiang Kai-shek. But in 1927 Chiang turned on the CPC and slaughtered its activists.

Driven from the cities, the CPC re-emerged eventually in the mid-1930s as a rural guerrilla force led by Mao Zedong. Mao skilfully exploited the disastrous Japanese attempt to conquer China from 1937 onwards to force Chiang increasingly onto the defensive. Mao manoeuvred between the efforts to control him by the two emerging superpowers, the Soviet Union and the United States. Sometimes he leaned towards one, and sometimes towards the other.


In October 1949 the CPC took power and proclaimed the People’s Republic of China. Mao declared, “The Chinese people have stood up!” But his prime objective was to free China from the imperialist powers that had dominated and partitioned it in the 19th century. This meant, above all, achieving economic self-sufficiency—not workers’ self-emancipation.

Tony Cliff wrote in 1957 that “the thread running through the entire economic and political development of Mao’s China is the effort of an elite to goad the people into building a magnificent economic-military machine on a backward, narrow agricultural foundation.”

As Isabella Weber puts it in her important new book How China Escaped Shock Therapy, “The Mao era price system functioned as a central mechanism to squeeze resources for urban industrialization out of the countryside.

“Agricultural purchase prices were kept below their value, peasants working the same hours as urban workers achieved a lower material living standard.” Despite many upheavals, this drive to build state capitalism laid the basis of a modern industrial economy by the time of Mao’s death in 1976.

But China remained a very poor country—with no significant increase in its share of global output since the revolution.

Mao’s eventual successor Deng Xiaoping decided both to encourage peasant production by relying more on market mechanisms and to open up to global capitalism.

1949 — Mao & the Chinese revolution
1949 — Mao & the Chinese revolution
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Two crucial decisions took place under Deng. First, as Weber shows, the regime did not give way to the siren song of neoliberal economists. It did not embrace “shock therapy”—switching overnight to an entirely unregulated system of market prices. This reflected the determination of the CPC leadership to retain overall political and economic control.

Secondly, the regime allowed Western transnational corporations to use China as a low-cost platform for producing goods for the world market. It was this move that eventually led to China becoming the world’s largest manufacturing and exporting economy.

But—to the fury of Western politicians—the CPC is still in control. Under president Xi Jinping, the regime has become ideologically shriller, geopolitically more assertive, and domestically more authoritarian than Deng thought prudent. The party-state bureaucracy continues to dominate the economy. It does this directly through state owned enterprises and indirectly via influence on nominally private corporations.

China’s capitalists are among the richest and most powerful in the world, but they are still tied to the CPC by multiple visible and concealed links. And China is ever more clearly the US’s greatest rival. This is why president Joe Biden says the US must win the 21st century from Xi’s “autocracy”.

But Wall St doesn’t seem to mind the CPC’s continued hegemony. The big US banks are pouring into China to reach its vast pool of savings.

The love affair between Chinese “communism” and Western capitalism isn’t over yet.

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