In this era of rampant inequality, increasing wars and climate catastrophe, many around the world are desperately searching for an alternative to the rotten capitalist system. Inevitably, some are looking towards China. We publish an edited transcript of Oscar Parry’s introduction to the discussion on China at Socialism 2025. Oscar is a member of the Socialism 2025 organising team
The Chinese regime is full of contradictions. It’s the second largest economy in the world after decades of massive growth. It’s got huge investments in renewable energy and infrastructure. And it can seem like China’s economy is working better than the rest of the capitalist world in crisis.
But its economic growth figures have been achieved on the back of the Chinese working class, hundreds of millions toiling in brutal conditions, working 996 shifts – 9am to 9pm, six days a week, for poverty pay. And the regime is increasingly authoritarian, cracking down on any dissent.
To understand the character of China today, we have to go back to the origins of the Chinese state. Unlike the Soviet Union, which in 1917 was established by a revolution led by the working class successfully overthrowing capitalism and establishing a democratic workers’ state, which was then isolated and degenerated, the Chinese Communist Party (CCP)-led state was deformed from its very inception. A variant of Stalinism under Mao Zedong was its starting point.
From the very beginning, while defending a planned economy, the state machine was not subject to democratic checks by the working class. Far from being a party of internationalism and world socialism, the CCP now and in the past relies on Chinese nationalism to rally support.
So, if the CCP was undemocratic from its very inception, how has it survived this long?
The authority of the CCP originally stemmed from the 1949 revolution in China. Before that, 10% of the population owned 70% of arable land, and the vast majority of the Chinese population was trapped in brutal poverty. Based on the poor peasantry, the 1949 revolution overthrew landlordism and capitalism, leading to important gains for the working class and poor peasantry.
Revolutionary Gains Gone
Today, however, many of the initial gains have been completely destroyed. And while elements of it still formally exist, security of employment is gone, and state education and health care are not available to the 300 million migrant workers who have left their homes in the countryside to go to the cities looking for work.
Without going over the history of the Chinese economy since 1949, I will say that although China under Mao based itself on a bureaucratic caricature of a planned economy, there were considerable differences between the planned economy in Stalinist Russia and in China.
For example, the prices of only about 1,200 commodities were set centrally in China. Under the Russian plan from 1966, they tried to set 25 million prices centrally. In China, much of the plan was always under the control of the provincial bureaucracies which had considerable economic freedom.
As far back as the 1970s, the Chinese bureaucratic state began to take some steps towards introducing market relations. These were taken empirically to try and overcome the economic crisis that had developed in China and Russia under the bureaucracies’ mismanagement of the planned economies.
In the aftermath of the collapse of Stalinism in the Soviet Union in 1991 and in Eastern Europe, capitalism appeared to reign triumphant globally. The powerful Chinese state machine went much further and introduced capitalist relations on an enormous scale. They were setting out to breed their own Chinese capitalist class.
Learning from the implosion that had taken place in Russia, they strove to keep it under state direction. Even today, the regime is not simply the repressive agent or servant of the newly formed, historically speaking, Chinese capitalist class. The Chinese state has a large degree of autonomy in fostering and steering the development of capitalism in the way that best preserves its own power.
There’s no simple historical analogy which fully applies to China today. But Marx and Engels used to talk about the complex relationship between a state superstructure and its economic foundations, and how under certain conditions a state power could balance between different social classes. They called this a Bonapartist state. And explained how it could, for a certain period, play a role in sponsoring the development of capitalist industry. This is what the Chinese state has done.
It has fostered the development of a capitalist class, and that’s led to huge inequality. The privatisation of state-owned urban housing, valued at about £600 billion pounds in the early 2000s, was one of the biggest wealth transfers in history, and has entrenched rural to urban inequality.
450 Billionaires
China is now home to 450 billionaires, second only to the US. But the state which has created this capitalist class, stills rules in the name of socialism and Marxism. And the CCP justifies this by arguing that, given China’s underdeveloped economy, the development of market relations is a necessary precondition for a higher level of socialism at some unspecified future point.
Contrary to the earlier expectations of capitalism in the West, China’s president Xi Jinping has resisted subserving the Chinese economy to the control of the world capitalist economies dominated by US imperialism.
Instead, the Chinese regime has been empirically pushed towards greater state intervention because of the multiple economic crises in capitalist economies. The role of the Chinese trillion dollar stimulus package in 2009 was very important in limiting the effect of the Great Recession in China.
That led the CCP leaders to further strengthen their confidence in a state-led economy. But this doesn’t mean that private capital has ceased playing an important role. On the contrary, while there’s a lot of state oversight and there have been some harsh crackdowns, particularly since 2020, private enterprises are increasingly the engines of China’s growth. 92% of the firms are privately owned. The private sector accounts for about 85% of employment and manufacturing output, about two-thirds of GDP and fixed investment.
The CCP still maintains huge control of the private economy, firstly via state investment, and there are also CCP branches in most workplaces. The CCP exerts economic control by demanding voting rights to appoint directors, for example.
Nationalisation has also taken place in recent years. From 2018 to 2020, over 100 firms were nationalised, a total of about $100 billion in assets.
It would be wrong to imagine that the Chinese capitalist class will indefinitely accept the constraints put on it by the state. And there are already tensions.
The CCP disciplinary agency, first mainly aimed at CCP members and government officials, is increasingly frequently used on business people. Some estimates find that more than a quarter of Chinese entrepreneurs have left the country, and about half of those remaining are thinking of doing so.
30 to 35% of all capitalists are CCP members, and many of the big capitalists, ‘the princelings’, are literally children of high-up CCP leaders. CCP propaganda has an effect, so too does education and upbringing. Ultimately, their own material class interests will be decisive in the outlook of the Chinese capitalists. When Stalinism in Russia collapsed, no amount of schooling in Stalinism prevented the oligarchs from stealing as much of the state’s resources as they could.
The primary reason that the majority of the capitalist class accepts CCP constraints is because, up to now, the rapid growth of the Chinese economy has made it worth their while. And also, the most important factor is their fear of the working class entering the scene of history. Those factors are not going to contain tensions at the top indefinitely, although they may initially appear in a partially disguised way.
In future, tensions are not likely going to be expressed as just the CCP on one side and pro-Western capitalists on the other. Much more likely are splits within the CCP which, in 2024, claimed it had 100 million members. Whatever the initial basis for conflict, class struggle is going to lie at the root of future crises.
The growth of the Chinese economy has allowed the Chinese state to manage these tensions, effectively balancing between them, striking blows in different directions in order to maintain its own power. And the regime is just as likely to squash discussion that is too far left, calling for a turn to the glory days of the planned economy under Mao, as it is likely to squash openly pro-Western capitalist discussion.
Such a crisis would begin at the top, but would certainly lead to mass revolt from below, although in its initial stages it may be confused. Whatever the character of the coming revolt in China, long-term stability is ruled out because of the developing economic crisis in the global economy.
Cina’s Growth
China’s prolonged period of growth was unique in human history. From 1978 to 2019, GDP grew at about 9.5% annually, increasing 60-fold. This was only possible with a unique set of circumstances, including the unique role of the state.
In 1998, when the Asian financial crisis hit, the government launched a fiscal stimulus programme of infrastructure spending. It built a national expressway, expanded ports up and down the country; investment in power plants exploded, China installed new power plants equivalent to Great Britain’s total supply every year, for example.
For a whole period of time, China has played the role of an assembly plant for Western capitalism. It’s facilitated the entry of a billion-plus very low-paid workers into the world capitalist economy; above all those were Chinese workers.
China has developed, locked together with the US market. It is now the world’s manufacturing superpower with about 30% of total manufacturing output. Most of those products are bought by the US.
Initially, Chinese manufacturing was largely assembling Western products. Now it is determined to develop itself into an advanced manufacturing economy.
Alongside this, Xi’s 2025 ‘Made in China’ policy of state intervention is driving to develop ten strategic sectors in the economy, from next generation IT to agricultural machinery. China now leads the world in international patent applications, and it seems that the next five-year plan from 2025 to 2030 is going to seek to build on those foundations.
China still has problems in its economy, not least that its domestic market is very limited. Chinese capitalism is still reliant on being able to sell its products internationally. It also still has a very limited capacity to produce some of the most advanced technology.
USA
For US imperialism, still the most powerful economy on the planet, even though it’s in decline, it is imperative to block the rise of China, its nearest rival. That’s why Trump introduced tariffs on China in his first term. And Biden kept those tariffs in place, giving massive subsidies to US manufacturing. Now we’re seeing further tariffs being threatened under Trump 2.
Given the levels of integration that exist, the US and other western capitalist powers, aren’t about to completely decouple from China. A very important factor is that more than 95% of rare earth materials or metals come from or are processed in China.
China is the world’s biggest creditor. It has lent huge sums, mainly to neo-colonial countries, to fund Chinese-built infrastructure projects. China also holds around $1.1 trillion of US government debt, about 4%. By selling this, it could plunge the US into crisis with severe consequences for the world economy, including China.
Nonetheless, the direction of travel in this increasingly multipolar world is for exacerbated tensions between the major powers. Above all, tensions between the US and China. The result isn’t going to be a short-term victory for either side. There’s going to be a period of intensifying instability and conflict as the world’s greatest powers fight for dominance, but neither one is capable of decisively claiming it.
In this situation, there’s no prospect of China acting like it did in the Great Recession, when it acted as a motor for the world economy, while the US was the banker of last resort.
The Chinese regime responded in 2008 with a massive investment stimulus. And was able to do this because the state’s control of its capital account meant that it could effectively depreciate its currency, the yuan, against the dollar. The US allowed this, but in doing so suffered a cumulative loss of about $4 trillion. At the start of the 2008 crisis, China’s economy was 20% of the size of the US, now it’s 60%.
But the Chinese economy is not without its problems. There are the effects of tariffs and economic barriers, and of economic slowdowns around the world. The housing and infrastructure boom has been slowly unravelling. Property company Evergrande, once the most valuable real estate company in the world, has now gone completely bankrupt. The post-Covid economic rebound has been weaker than hoped so the People’s Bank of China has started to cut interest rates in order to try and encourage growth. Meanwhile, youth unemployment soared to something like 20% before they stopped releasing figures.
Growing Crisis
Against this background of a growing economic crisis, nothing can prevent huge social explosions. The centralisation of power around Xi Jinping can give an impression of strength, but this could very quickly turn into its opposite as economic crisis develops. The voice of the powerful Chinese working class has not yet made itself fully heard. The Chinese state is terrified of that changing.
This year, China Dissent Monitor documented about 2,500 protests in the first six months of the year, a 73% increase from last year. Labour protests are the most common. Most protests are almost certainly undocumented.
The reasons for these protests repeat themselves consistently. Wage cuts, redundancies without compensation, forced transfers to other provinces. There have been strikes. For example, at Shenzhen Advanced Semiconductor, about 1,000 workers went on strike and won a pay rise.
In this era of capitalist crisis and economic instability, it is the mighty Chinese working class, which is now potentially the most powerful in the world, that can develop society. The crucial task for the working class is to develop its own independent organisations, including trade unions.
The growth of China is a factor destabilising world capitalism, but the growth of the Chinese working class will further the struggle for genuine democratic socialism. There’s no way out of the long-term problems for the Chinese regime.
Only a genuinely socialist China, which would include a planned economy under democratic workers’ control and management and real socialist internationalism, a workers’ state in China acting as a spur for socialist revolution in the region and worldwide, can secure peace and prosperity globally.