‘Abandoning’ state capitalism?

China: Beijing’s new turn

As the third plenum shows, China is moving towards some form of state capitalism, writes Eddie Ford

Over November 9-12 members of the Communist Party of China’s central committee met for its third plenary session. The CC, at present numbering 376, whose members occupy all the top posts in the government and military bureaucracy, meet in Beijing once or twice a year between national congresses.

The plenums are significant for the simple reason that they are where the important decisions are made - not in the party’s national congress or the top legislature of the National People’s Congress. And, of course, in true Stalinist tradition, the role of the CC is to loyally rubber-stamp the decisions already taken by the politburo - or, to be more exact still, its self-perpetuating seven-person standing committee that apparently meets once a week and operates by ‘consensus’.

It was at the third plenum of the 11th central committee in 1978 that the then “paramount leader”, Deng Xiaoping - after ousting Hua Guofeng, Mao Zedong’s chosen successor - announced the “opening-up” of China’s economy and spearheaded major market-oriented reforms, perhaps summed up by his famous 1961 declaration: “It doesn’t matter whether it’s a white cat or a black, I think; a cat that catches mice is a good cat.” We need economic growth by almost any means necessary, so long as the CPC retains its monopoly position. And it was at the third plenum of the 14th central committee in 1993 that Zhu Rongji announced the introduction of the “socialist market economy.”

The current “paramount leader” is Xi Jinping, who last year became general secretary of the CPC and represents the ‘fifth generation’ leadership. Additionally - you can never have too much of a good thing - he is president of the People’s Republic of China and chairman of the central military commission, not to mention the chair of the politburo’s standing committee.


Three days after the plenum a 22,000- word document was released outlining the leadership’s strategy for at least the next 10 years. This report concentrates on the ‘one-child’ policy, which is to be formally “relaxed”, though no time frame has yet been given and the government emphasised that it would not totally abandon intervening into family matters in the “near term”. Upon the news, shares of baby formula, stroller, diaper and even piano manufacturers rose sharply on the expectation that demand would soar. On the other hand, Chinese condom maker Humanwell Healthcare Group saw its shares dip sharply. That really is capitalism with Chinese characteristics.

Now, the number of couples allowed to have two children under the law will be expanded to include families where just one of the parents was an only child. Previously the law granted this concession only to couples where both parents were only children. Eligible couples will still have to apply for permission to have their second child and the new ‘relaxed’ policy does not mean an end to fines (or other sanctions) for couples who do not meet the criteria. And the penalties are hefty, if not crippling - the highest known fine was one of Rmb300,000 ($50,000) imposed on a Beijing couple who had two children, even though only one parent was an only child.

However, the one-child policy has frequently been ignored and there are also official exemptions. For example, rural residents are already allowed to have a second child if their first child is a girl or disabled and those from officially designated ethnic minorities are permitted two or even three children - and in practice many in the countryside have more than that, yet rarely, if ever, get fined.

An inevitable consequence of the government’s policies, given that many Chinese people still believe that a son is more valuable than a daughter, is ‘female foeticide’ - the selective abortion of girls in the womb. Meaning there are now 117 boys born for every 100 girls in China, creating a potentially destabilising future - and much personal misery - for a entire cohort of men who can never marry or have a family (those with money often look for wives abroad). The problem has become so acute that China officially forbids doctors from revealing the baby’s gender, but couples can easily find out.

In fact, abandoning the one-child policy is likely to make very little difference to birth rates. By some estimates, the change could increase the number of births by 5%-10% (or one to two million) in the first few years - but others say that is an overestimate. Even if the policy were completely abolished, large sections of Chinese society have simply got out of the habit of having larger families. According to a recent census, the estimated 2011 birth rate among women aged 20 to 29 was only 1.04 and in 2010 the overall birth rate in cities was only 0.88 - nearly the lowest in the world. In Shanghai, for example, a mere 8% of couples who satisfied the previous criteria for a second child actually applied to have one - and over 80% of couples with Shanghai residency were only children. China’s population levels therefore seem destined to remain stable or even decline in the long-term - so much for the ‘crisis’ of overpopulation we hear so much about in certain western circles.

However, the problem facing the CPC is obvious. China has an acute labour shortage, and the one-child policy certainly did not help (according to the government, 400 million births have been averted since 1980). Yet Deng’s strategy for growth was predicated on there being surplus labour in the countryside - which could then be relocated to the cities and made to work in the factories producing dirt-cheap goods for the western market. But, with falling birth rates, where are the new workers to come from?

In that sense, China is repeating the same pattern we saw in the Soviet Union - inexorably using up its surplus labour. With relative ease you could draw a graph or devise a mathematical formulation showing the decline in the growth of the labour-force - perhaps even predict that the Soviet Union would collapse as a result (although you might have been a bit foolish to give the exact date!). That did not mean, of course, that Soviet workers were working round the clock - far from it. But at the end of the day, if a new factory opens then it has to be staffed with workers - the supply of which began to dry up. At some stage, China too will simply run out of surplus people. Chinese officialdom knows this, as does the more intelligent bourgeois press in the west. The show cannot go on forever.

Another serious and related problem for the regime is that the western market is saturated with (often substandard) Chinese goods. Demand for Chinese imports is thus bound to meet limits, especially when you consider that the United States and the European Union are hardly expanding economically at a tremendous speed - to put it mildly. Thus another necessity, as discussed in the plenum report, is to develop an internal market. But how on earth do you do that? There are plenty of empirical reports and anecdotes about highways with no cars on them, cities with next to no-one living in them, industrial estates that show no sign of economic activity and so on. Just like the Soviet Union again, China, especially its state concerns, are characterised by endemically low levels of productivity - workers pretend to work and the government pretends to pay them. In the case of China, you might have impressive-looking GDP growth figures - but that does not necessarily translate into either higher productivity or an increased number of use-values available for people.

Other plans announced at the third plenum include the scrapping of the “re-education through labour” detention/gulag system, “improving” various social welfare programmes (housing in particular), and a pledge to “accelerate” reform of the hukou system - essentially a nightmarish, bureaucratic knot tying hundreds of millions of migrant workers to their rural home towns. The country will “relax overall control over farmers settling in towns and small cities, and relax restrictions on settling in medium-sized cities in an orderly manner,” according to the Xinhua news agency.

The plenum report detailed a number of other less headline-grabbing reforms, such as a promise to explore ways of setting up an “intellectual property court” and reduce the number of crimes subject to the death penalty. Inevitably, the report contains numerous contradictions. Whilst we read about the importance of a “fair use of judicial authority” and upholding the country’s constitution - which, believe it or not, promises “freedom of speech” and “freedom of assembly” - the same document wants to “strengthen public opinion guidance” and “crack down on internet crimes”: ie, anyone expressing dissenting or anti-government opinions on social networking sites or personal blogs.

Two things are abundantly clear from the plenum, however: the CPC will not countenance any loosening of its grip on power; and more market elements and ‘incentives’ - capitalism - will be unleashed upon the Chinese economy.


What is interesting has been the response of the left. So far, significantly or not, the Morning Star’s Communist Party of Britain has said precisely nothing about the third plenum. Eventually the CPB will have to come out with some line or other. However, whatever it says is likely to be couched in the odious ‘official communist’ language of diplomatic internationalism - fawning and cowardly.

Of course, the CPB comrades used to worship the fallen Soviet god. Way back then, when the Soviet bureaucracy was the object of its strange, vicarious patriotism, China was viewed with horror - anti-Soviet, on the capitalist road, an ally of US imperialism, fascist, etc. A bad country. Now, however, it is a country to be loved and admired. Something manifested in its dreadful programme, Britain’s road to socialism, where we discover that “China’s communists have placed greatest emphasis on economic and social development” and that “state power is being used to combine economic planning and public ownership with private capital and market mechanisms, with the aim of building a socialist society in its primary stage”.

Essentially, the story goes that Deng’s ‘open door’ policy and break with Mao’s autarky is the equivalent of Lenin’s NEP. Absolute nonsense, of course, though it is certainly the case that China has attracted huge inflows of foreign capital - something Lenin never really succeeded in doing, for all his hopes. For the CPB, presumably, the turn to capitalism by their Chinese comrades is a purely temporary, ‘tactical’ measure and at the first possible opportunity the Chinese will be back on the direct road to communism.

A pitiful delusion. All you need to do is look at the enormous scandal involving the ‘princeling’ and heir apparent, Bo Xilai - former politburo member and highly influential secretary of the Communist Party’s Chongqing branch. He and his wife were living a corrupt billionaire’s lifestyle, to such an extent that he openly admitted not being able to keep track of all the bribes he received. Poor man. More to the point, the sons and daughters of people like Bo will be joining the global elite - the only way is up. It is no accident that the CPC’s rules were amended in 2001 to allow capitalists to join the party - that is the reality of what the CPC has become.

If anything, the comments from Alex Callinicos in Socialist Worker are even more deluded than the Morning Star - at the very least they represent the triumph of dogmatism (November 12). Alex tells us that China is in the process of abandoning “state capitalism”. He goes on to say that after Mao led the CPC to power in 1949 it constructed a “state capitalist regime”, where workers “had no more control over the process of production than they do in western societies”. Despite Mao’s pursuit of “self-reliance”, he continues, China remained “subject to the logic of competition and accumulation at the global level” and now the fundamental problem is one of “class power” - the Chinese economy has been “opened up to foreign transnational corporations” and a “class of indigenous private capitalists has developed over the past 30 years”, even if there are “still powerful elements of state capitalism” remaining in China. Moreover, the comrade adds, “informal networks often bind foreign, private and state capital together through the role of the ‘princelings’, the children of party leaders who have gone into business”.

There is nothing much wrong with the description: it is the use of the term “state capitalism” that is totally up the creek. Comrade Callinicos fails to recognise the blindingly obvious fact that under Mao there was nothing approaching the operation of the law of value and there was no labour market or wage-labour. Under the Chinese social contract of the ‘iron rice bowl’, a minimal level of subsistence was guaranteed, along with access to housing, education, etc. Therefore your motivation for working was not wages or the threat of the sack and unemployment - the system supplied you with the basics.

But now that regime is being thrown into reverse, especially for those workers in the western-invested workplaces. Chinese workers are increasingly working for wages, however paltry. So, comrade Callinicos, is wage-labour on the retreat in China or, quite the opposite, on the advance? To ask the question is to get the answer - and the conclusion is the opposite of the one he draws: China has clearly been moving away from bureaucratic socialism and towards some form of state capitalism.