WeeklyWorker

10.04.2025
Shenzhen: China’s ‘Silicon Valley’

Capitalism with Chinese characteristics

The US-China trade war has seen both tit-for-tat tariffs and a strategic attempt to shift away from any reliance on the American market. Yassamine Mather gives her take on current dilemmas and the socio‑economic nature of the People’s Republic

In a video clip that became viral, US vice president JD Vance discussed the Trump administration’s foreign trade policies with China, directly insulting the Chinese people: “We borrow money from Chinese peasants to buy the things those Chinese peasants manufacture.”

Earlier, he had said: “I think it’s useful for all of us to step back and ask ourselves, what has the globalist economy gotten the United States of America? Fundamentally, it’s based on two principles. Incurring a huge debt to buy things that other countries make for us.”

Of course, China’s so-called “peasants” are now travelling on the world’s largest high-speed rail network, driving cutting-edge electric vehicles and living in one of the most modern societies on the planet. Their country is making breakthroughs in AI with models like DeepSeek, proving it is not just catching up - but in some areas it is leading. Of course, Vance and his boss, Donald Trump, are upset that China did not stay a cheap manufacturing hub for America’s benefit.

At the time of writing, China has just responded to Trump’s 104% tariffs by slapping on its own 84% levy, driving stock markets around the world to new lows. The commentary by The People’s Daily on April 7 shows a level of confidence about measures already implemented to mitigate the worst and immediate effects of US tariffs. Under the title, ‘Focus on doing our own things well to enhance confidence in effectively coping with the impact of US tariffs’, the key points can be summarised as follows:

So what are China’s options? It could impose its tariffs on goods from other countries to pressurise the US to back down by damaging its exports. It could try the legal route and file a complaint to the World Trade Organisation. However, such cases can take a long time and do not always lead to the required result.

China could devaluate its currency, the yuan, to make its exports cheaper in global markets, offsetting some of the effects of the tariff. But this can be risky and upset other trading partners. The Chinese government can take the option of supporting companies affected by US measures with subsidies or tax breaks, so that they can keep prices low, even with the tariff. China can use the ‘Belt and Road’ initiative and sell more goods to other countries to make up for the losses. This means expanding trade with so-called developing countries, in Asia, Africa, Latin America, etc.

The Chinese government will no doubt try to reduce further any reliance on exports. Focussing on expanding its domestic economy, it is already encouraging its population to buy more locally made goods and invest within China. Meanwhile, some Chinese manufacturers might set up factories in other countries, so that their goods can be exported from tariff-light locations.

Of course, despite these remedial measures, tariffs will affect Chinese plans for economic growth and this is exactly what Trump and his supporters want.

Our view

Let me clarify that I am not a supporter of China. I do not consider it to be any type of ‘workers’ state’, deformed or otherwise. What we are witnessing in the trade war between China and the United States is a conflict between two capitalist powers at a time when Chinese capitalism has made major advances, making it a serious contender for becoming the ‘hegemon power’ in global capitalism.

China’s ‘Made in China 2025’ initiative (MIC2025), launched in 2015, has been a relative success, boosting the country’s confidence. This was a strategic shift in its development goals. The plan’s declared aim was to transition from being primarily a low-cost manufacturing hub to becoming a global leader in high-tech industries. The planners of MIC2025 had identified 10 priority sectors. These included robotics, aerospace, biopharmaceuticals and new energy vehicles - with a strong emphasis on increasing domestic innovation, strengthening supply chains and reducing dependence on foreign technology and components.

So what have been the achievements so far?

However not everything is progressing as planned.

The MIC2025 strategy has attracted considerable international attention and concern, particularly from the US and the EU. There is a level of panic over China’s rapid technological rise and potential threats to global competition and this has led to tensions, and the imposition of tariffs, export restrictions and sanctions - especially targeting Chinese firms involved in strategic technologies. In response to these pressures, even before Trump’s latest tariff war, China had scaled back public references to MIC2025, opting for a more low-profile implementation approach, while continuing to pursue its objectives behind the scenes.

By April 2024 western governments and agencies suggested that China had accomplished roughly 86% of the targets outlined in the MIC2025 initiative.

Made in China

In many ways, ‘Made in China 2025’ has been a transformative industrial strategy, driving substantial progress in many high-tech sectors and positioning China as a major player in the global technology landscape. While the initiative has delivered many successes, key strategic industries continue to face technological bottlenecks and external pressures. That is why the Chinese leadership emphasises the need for investment and innovation, so that in an extended time frame China can fully meet the vision originally outlined in MIC2025.

However, none of this progress has anything to do with ‘socialism’ - ie, the transition to communism. Here are some basic statistics which show that China is more capitalist than anything else, when it comes to the economy.

To start with, we have widespread private ownership and this is growing. As of 2023, over 60% of China’s GDP came from the private sector, while 80% of urban jobs are provided by private businesses, not the state. These days private billionaires are major players in China’s economy - Jack Ma (Alibaba), and Pony Ma (Tencent), to name two of the better known ones. Under any kind of socialist system, even during the first step of transition, major industries would be owned by the public, not by private entrepreneurs.

Then we have the high levels of inequality. China’s Gini coefficient (which measures inequality) was 0.466 in 2022, and 0.468-0.5 in 2021 - higher than many western capitalist countries. (0 = perfect equality, 1 = extreme inequality). There are massive differences in wealth between rural and urban Chinese citizens, as well as coastal vs inland provinces. And, of course, there is that huge gap between rich and poor families. The very fact that China’s inequality has grown in the past few decades defies any illusions about there being a workers’ state (‘deformed’ or not).

We also have markets and a crude profit drive. In China, most businesses operate to maximise profit, not to serve a planned, equitable distribution of goods. We have consumers who buy and sell freely; prices are largely set by the market. We are dealing with a situation where housing, healthcare and education are commodified. All this is often expensive and competitive. A socialist state would aim to de-commodify essential services and limit profit motives. We see no sign of this in China.

There is no workers’ control or self-management of production. The working class is in no position to run factories or businesses democratically. All trade unions are state-run and do not act independently to protect workers’ rights. Strikes are rare, but, when they do occur, they are suppressed. Workplace decisions are made top-down.

We also have the relentless encouragement of capital accumulation. China has a stock market, venture capital, private equity and real estate speculation - all capitalist tools. The Beijing government often supports companies that succeed in global markets, encouraging transnational capitalism.

Although these are tentative comments and there is clearly a need for considerable research, China has many of the characteristics of a form of state capitalism - an economic system where the government plays a strong role in the economy, owning or controlling key businesses, guiding economic policy, and using obvious capitalist tools (like markets and profits) to achieve national goals.

There are what are referred to as massive state-owned enterprises (SOEs). As of 2023, 142 of the Fortune Global 500 companies are Chinese (including those in Hong Kong), making China the country with the most companies on the Fortune Global 500 list in 2023. Many of them are state-owned or state-controlled: eg, Sinopec (oil and gas), State Grid Corporation of China (electricity), and China National Petroleum Corporation (CNN). These SOEs dominate key sectors: energy, banking, telecom, steel, aviation and the railways.

When it comes to the banking sector, China’s top banks - like ICBC, China Construction Bank and the Bank of China - are state-owned and used to direct credit to favoured industries.

The People’s Bank of China closely manages interest rates and credit, unlike most so-called free-market economies, where central banks are independent. The government sets five-year plans that lay out strategic sectors (eg, AI, semiconductors, green energy). Initiatives like MIC2025 show state-directed efforts to build national champions and reduce foreign dependency. Local governments often support industries with subsidies, cheap land and low-interest loans. In some private tech companies (like Alibaba and Tencent), the state has inserted ‘golden shares’ - giving it board-level control despite minor ownership.

The Communist Party of China has committees in many large businesses - even in private firms. This gives the state informal influence over decision-making, reinforcing control beyond ownership.