The Class Nature of China

https://iclfi.org/spartacist/en/69/china

What is China? From the ruling classes to the far left, this seemingly simple question divides opinion. For American capitalist Ray Dalio, the regime is one of state capitalism, where “capitalism and the development of the capital markets could, in a few years, be more embraced in China than they are in the U.S.” Directly refuting such views, we find Xi Jinping, general secretary of the Communist Party of China (CPC):

“Some have called our road ‘Social Capitalism,’ others ‘State Capitalism,’ and yet others ‘Technocratic Capitalism.’ These are all completely wrong. We respond that socialism with Chinese characteristics is socialism, by which we mean that despite reform we adhere to the socialist road—our road, our theory, our system.”

Both views reflect distinct interests: Dalio those of the foreign capitalist investor, Xi those of the CPC regime. But what of the workers movement? How is one to understand the nature of China starting from the interests of the international working class?

This is one of the most important and divisive questions for the left today. There are some who turn a blind eye to the crimes of the CPC and consider China a socialist model to emulate. But this remains a minority view in the international Marxist movement. Most organizations claim that China is a capitalist and/or imperialist power. Among the parties claiming to be Trotskyist, International Socialist Alternative (ISA), the Revolutionary Communist International (RCI—formerly IMT), the Trotskyist Fraction and many more hold this view. The same is true of old-school Stalinists like the Greek KKE and most Maoists outside of China, for example, the MLPD in Germany and the Sisonites in the Philippines.

It is against this trend that this article will focus. We will show that far from offering a viable political alternative to the CPC, those who argue that China is capitalist and imperialist simply conciliate the U.S. and its allies. As for the arguments employed, they reject basic Marxist principles on the state and imperialism. To start, we will address why China is not imperialist. Then we will argue that despite important capitalist penetration, China retains the basic features of a deformed workers state. The fundamental argument developed throughout is that advancing the interests of the working class must start with opposing the U.S.-dominated world order. This is a task that requires defending the remaining gains of the 1949 Chinese Revolution but also fighting for a political revolution against the CPC Stalinist bureaucracy, whose strategy and policies are leading China to disaster.

Part One: China Is Not Imperialist

1) Marxism vs. Empiricism

The term “imperialism” is thrown around by all kinds of people in all sorts of contexts. To objectively evaluate the claim that China is imperialist, it is necessary to push the liberal clamor to the side and approach the issue from a Marxist standpoint. The difficulty is not to define imperialism. Most will agree with Lenin’s view that it is:

“capitalism at that stage of development at which the dominance of monopolies and finance capital is established; in which the export of capital has acquired pronounced importance; in which the division of the world among the international trusts has begun, in which the division of all territories of the globe among the biggest capitalist powers has been completed.”

Rather, controversy arises when it comes to determining which countries today are imperialist. Some put China, Brazil and even Greece on a continuum with the U.S., while others deny that Japan and Germany are great powers at all.

This wide range of opinion is as much a problem of method as it is of program. It is essential to approach the question of imperialism not from morals or abstract ideals but in its concrete historical development, i.e., with dialectical materialism. For example, the analysis of the capitalist system developed by Marx looks at how it emerged as a distinct mode of production from the class struggle of the preceding feudal order. Imperialism must be approached in the same way: as a living system which has evolved through the class struggle of the last century, where the place of an individual country fits in as part of the whole.

This is not the method employed by the left. A vulgar yet representative example of how they do approach the question can be found in the ISA article headlined “Is China Imperialist?” (chinaworker.info, 14 January 2022). To answer the question, the article looks at whether China corresponds to the various points from Lenin’s definition. Does it have monopolies? Does it export finance capital? Does it have a big military? Once every box on the checklist is ticked, China is deemed to be imperialist.

This is not Marxism but empiricism. Instead of looking at China’s development within the world system, the ISA judges its character simply by comparing empirical evidence (size of the army, amount of capital exported, etc.) to an abstract norm (Lenin’s definition). Transposed to biology, this would be like categorizing species looking only at physical traits and ignoring their evolution. The problem with this method is that it is almost entirely subjective, with no way of objectively deciding which set of features are decisive in determining the passage of quantity into quality. With this approach, a set of facts can be selected to “prove” that a certain country is imperialist just as a different selection can prove the opposite.

To cut through such hair-splitting debates over who is in the imperialist club, it is necessary to approach the whole question by looking at how imperialism has concretely evolved historically. And to determine China’s specific place in this system, it is necessary to locate its own evolution within that of the overall world system. Only in this way can we obtain a Marxist answer to the problem.

2) The U.S. World Order and China

The starting point for any analysis of the contemporary imperialist system must be 1945. Out of humanity’s greatest carnage, the U.S. emerged as the dominant imperialist power. The key pillars of the current world order were established in that context. The U.S. dollar as the world’s reserve currency, the UN, the IMF, NATO and the European Coal and Steel Community (ancestor of the European Union—EU) were all designed to confront the USSR and enshrine exorbitant privileges for the U.S. The other capitalist powers—Britain, France, Germany and Japan—had little choice but to follow the U.S. The old colonial empires rapidly ceased to play an independent role in world politics, their status and privileges instead becoming dependent on their relations with the U.S.

As for China, a century of imperialist pillage had reduced it to the status of neocolony. The permanent seat it acquired on the UN security council simply reflected that it was an American ally against Japan. However, this relationship radically changed when in 1949 Mao’s peasant army defeated Chiang Kai-shek’s nationalist regime, resulting in the Chinese bourgeoisie’s flight to Taiwan, the liberation of China from the imperialist yoke and the establishment of a workers state. The Chinese Revolution was a humiliating blow to the U.S. and directly led to an escalation of the Cold War. To stop the spread of communism and avoid “another China,” the Americans launched the McCarthyite witchhunts and intervened militarily in the Korean Peninsula and later in Vietnam. During this period, the U.S. and China stood at polar opposites of the world order, defined by conflict over communism, colonial struggles and the USSR.

This changed again sharply in 1972 when Nixon and Mao sealed a pact against the Soviet Union. As the U.S. was being defeated in Vietnam, it sought to shore up its position by exploiting the conflict that had emerged between the Soviet Union and China. Sino-American relations further improved when Deng Xiaoping took over from Mao and engaged on the “reform and opening up” path of economic liberalization. That said, the bilateral relations had a very peculiar character. The two countries worked together to undermine the Soviet Union, yet their social regimes remained fundamentally antagonistic.

In 1991, the collapse of the Soviet Union marked a dramatic turning point in the world situation and heralded a new era for relations between China and the West. With the USSR gone, the U.S. stood as the uncontested world power. American dominance and the opening of the Chinese market created conditions for the massive expansion in foreign investment and trade known as globalization. China became the industrial center of the world, where foreign corporations could count on cheap labor, state planning and CPC-guaranteed labor peace.

From the U.S. standpoint, market liberalization in China represented a huge opportunity. Moreover, since liberal democracy had “won the Cold War,” Chinese Communism was no longer viewed as a threat but simply as an anachronism which would be overcome through economic integration with the West. This sentiment was clearly expressed by U.S. president Bill Clinton, who thought that “by joining the WTO [World Trade Organization], China is not simply agreeing to import more of our products; it is agreeing to import one of democracy’s most cherished values: economic freedom…. And when individuals have the power…to realize their dreams, they will demand a greater say” (9 March 2000).

From the standpoint of the CPC, the new era was fraught with danger. The collapse of the Soviet Union stood as a warning of what would happen should the party loosen its political hold on the country. At the same time, the Tiananmen uprising of 1989 had shown that the masses were restless and demanded better conditions. The deadlock was broken in 1992 with Deng’s “Southern tour,” a campaign to put the party firmly behind his agenda of market liberalization. The idea was that sufficient economic growth would dampen political discontent and consolidate the power of the regime.

This proved successful. Contrary to American expectations, China’s economic integration did not lead to a fall of the CPC or a breakup of state monopolies. The converging interests of the CPC and foreign capitalists in the 1990s and 2000s reduced the overall pressure on the regime and made it possible for China to develop at an incredible speed by combining state control of the economy with liberalized capital flows and trade expansion.

It is essential to understand this dynamic. China’s explosive growth occurred through its integration into the U.S. economic system, not in opposition to it. China’s foreign policy—like that of all Stalinist regimes—has continually been driven by the aim of achieving peaceful coexistence with imperialism. In fact, to this day China has not challenged any of the basic pillars of U.S. domination. It joined the WTO, supports the IMF and the UN and still trades and invests overwhelmingly in U.S. dollars. Crucially, China has done nothing to replace the U.S. as the world’s military enforcer.

3) The Breakdown of U.S. Hegemony

The contradiction at the heart of today’s world situation is that while U.S. hegemony created conditions for China and other countries of the Global South to grow substantially, this has in turn weakened the American position. The U.S. ruling class understands this and is increasingly undermining the main pillars of its own liberal democratic world system. Donald Trump has been emblematic of this transition, stating in 2015 to launch his first presidential bid:

“Right now, think of this: We owe China $1.3 trillion. We owe Japan more than that. So they come in, they take our jobs, they take our money, and then they loan us back the money, and we pay them in interest, and then the dollar goes up so their deal’s even better.

“How stupid are our leaders? How stupid are these politicians to allow this to happen? How stupid are they?”

Symbolizing how the liberal order is becoming an obstacle to the U.S. itself, Washington threatens to sanction the International Criminal Court for investigating Israel, considers defunding the UN and sometimes even speaks out against NATO and the EU. The CPC for its part still believes that globalization is an immutable force of history and that China can continue to develop within the rules established by the U.S. We now find ourselves in the bizarre situation in which China preaches free trade and international law while the U.S. and the EU advocate protectionism and disregard their own international rules.

Overall, the current period is very different from that leading up to World War I, the classic period of interimperialist rivalries. At that time, the established empires of France, Britain and Russia were confronted with emerging imperialist powers (Germany, Japan and the U.S.) that were aggressively expanding their own colonial empires. In the early 1900s, the imperialist system was fractured, and instability came from the expansionist appetites of new but already established empires.

Since 1945, the imperialist system has been unified. Today, the highly integrated imperialist cartel dominated by the U.S. is increasingly breaking down due to the emergence of various regional powers. These are countries that have been besieged by the U.S. and its allies for the past decades but are now demanding that their regional and domestic interests be respected. Given that the stability of the world system depends on uncontested U.S. dominance, these relatively modest ambitions represent an existential threat and are what is behind the turbulence of the current epoch.

Placing China’s development within the imperialist system of the post-Soviet period, it is clear that it has not in any way followed an expansionary imperialist course—at minimum, that would require breaking from the American economic order. In fact, we see that despite China’s economic weight—far larger than that of the USSR—it has pursued a muted foreign policy overwhelmingly focused on maintaining the status quo. But even if we look at Russia, which has followed a much more confrontational strategy, we see that it has not been aggressively expanding but rather reacting to U.S. designs on its periphery and allies (Georgia, Ukraine, Syria). Russia has been challenging the U.S., but it is not vying for world leadership. The bottom line is that world politics is a zero-sum game. The emergence of a new imperialist bloc cannot happen without dealing a major defeat to or breaking up the imperialist alliance that has dominated the world since 1945.

4) Peaceful Imperialism?

The first mistake made by those who argue that China is imperialist is to posit that a new imperialist world power could emerge through entirely peaceful means. Whether we are speaking of the Roman Empire of antiquity or the modern imperialist system described by Lenin, imperialism requires military coercion. The fact that militarism is the product of economic relations does not in any way make it an optional characteristic. Exploitation can be imposed only through force.

The decisive importance of military power has been somewhat masked in the last three decades by the overwhelming military dominance of the U.S. Uncontested American power created conditions for a highly unified world economy which appears at first glance to function largely through peaceful means. Billionaires from Saudi Arabia, Germany or India can invest their money abroad without having to worry that their property will be seized or their loans cancelled. This is because the U.S. military has served as the enforcer for the entire modern imperialist system. In exchange for the service of guaranteeing private property rights to capitalists around the world, the U.S. extracts a disproportionate share of surplus value through the U.S. dollar and its control of the key centers and institutions of world finance capital.

It is crucial to understand that to this day the stability of the world economy rests on the U.S. military. It has at least 750 bases in 80 countries. The U.S. and its allies control all the important maritime choke points: the Panama and Suez canals, the straits of Malacca, Gibraltar and Hormuz. China’s maritime might is growing, but the Pacific very much remains an American lake, just like the Atlantic and Indian Oceans and the Mediterranean. Since 1945, the U.S. military has intervened abroad in more than 200 conflicts. Taken individually, many of these interventions seem to make little economic or strategic sense. They must be seen as demonstrations of American power that serve to keep the peace over the international system as a whole.

We have already seen how China’s economic development has taken place fully within the key institutions of the U.S. imperialist system. Even if China were capitalist, to become imperialist it would have to break with the American system and ensure its global economic interests through its own military power and institutions. The quickest glance at the world situation makes clear that China has not taken any serious steps in this direction. It is in fact the only significant military power that has not intervened abroad in the last 40 years (UN peacekeepers don’t count).

To this day, when China makes investments and loans abroad, it continues to rely first and foremost on the institutions of U.S. rule, not on its own military power. Without this essential attribute, China cannot be considered an imperialist power. To argue the contrary is to paint imperialism in pacifist colors. It would mean that countries around the world accept being superexploited on purely commercial grounds and that the world has already been redivided among the great powers in an entirely peaceful manner.

What about countries like Germany and Japan? They also depend on the U.S. military. Does this mean they are not imperialist? No, it doesn’t. Germany and Japan both made attempts to challenge the U.S. for supremacy—with catastrophic consequences—and since their defeat, they have been partners in the American system. They both occupy privileged places within the world economy as a function of their alliance with the U.S. This is different from China, which has always been an outsider despite the deep economic integration of the past decades.

5) Which Countries Does China Oppress?

There can obviously be no imperialism without the oppression of foreign countries. This begs the question: Which countries does China oppress? There is no doubt that the political regime in China is oppressive to its own people. It is also clear that China oppresses national minorities within its own borders. But if this is all it takes to be imperialist, Iraq and Sri Lanka would fit the bill. Most countries oppress national minorities within their own borders and all countries are ruled to the detriment of their people. That does not make them imperialist.

“But what about the Belt and Road Initiative (BRI),” screeches the ISA & Co. “Isn’t it an exploitative imperialist project?” It is true that China has invested billions (of U.S. dollars) in countries in Africa and Asia, building infrastructure and saddling them with debt. There is also no doubt that China is not making such investments starting from the interests of workers. It has attacked union rights, corrupted officials, disregarded local sentiment and supported all sorts of reactionary regimes. However, the question is not whether China’s actions are benevolent but whether projects such as the BRI have transformed China into an imperialist overlord. That is, does China use force to impose its will on countries where it has made substantial investments?

Let’s look at Sri Lanka, the poster child for Chinese “debt-trap diplomacy.” Sri Lanka was famously unable to pay interest on the Chinese loans it accrued for building a new port and leased it to China for 99 years. But does China rule Sri Lanka? No. When in 2022 the country was unable to pay its foreign creditors (in U.S. dollars), it was not China that swooped in to dictate terms. As always it was the IMF, and the key negotiations with creditors were held in Washington, not Beijing. Even Western observers were forced to admit that Sri Lanka’s debt crisis was not due to Chinese loans.

What about Pakistan? In 2017, the Revolutionary Communist International Tendency (RCIT) put out a statement proclaiming, “The China–Pakistan Economic Corridor Is a Project of Chinese Imperialism for the Colonialization of Pakistan!” The ISA for its part claims that Pakistan is part of China’s imperialist bloc against the U.S. (“‘China’s Rise’—An Outdated View,” chinaworker.info, 24 April). Anyone with the most basic knowledge of Pakistan knows this is utter nonsense. While China has close relations with Pakistan, the U.S. calls the shots. This was demonstrated with utmost clarity as recently as 2022, when the U.S. conspired with the Pakistani military elite to have President Imran Khan removed from office and jailed. In response, China did nothing.

Claims of “Chinese imperialism” are probably most grotesque when they concern Africa. The Western powers have oppressed Africa for centuries, keeping the continent in a state of destitution and conflict. It is French and American military bases that cover the continent, not Chinese outposts (their sole foreign base is in Djibouti). It is France that holds half the foreign reserves and controls the currencies of more than a dozen African countries. And as everywhere else, debt crises occur over payments in dollars and euros, not renminbi.

Once more, this is not to say that China plays a benevolent role in Africa. Far from it. The point is simply that China does not impose its will through coercion of any country in Africa. It is not China that devastated Libya, Somalia, Mali, Niger, Chad and so many others. In all these cases, the Western imperialists are responsible.

This brings us to the South and East China seas. Does China wish to transform the Pacific into a Chinese lake? We think not. But even if it did, this does not make it imperialist. It is necessary to be concrete: what is the situation as it currently stands? Since the defeat of Japan in the Second World War, the U.S. has been the master of the Pacific. You only need to look at a map to see that China is completely surrounded by American allies, most of whom welcome U.S. troops on their soil. The Philippines, South Korea, Indonesia, Taiwan—none of these countries is oppressed by China, all are dominated by the Americans.

This was not a peaceful and gradual process. It was established in the firebombing of Tokyo, the holocausts of Hiroshima and Nagasaki, the Korean War, the slaughter of Indonesian Communists and countless other crimes. Apologists for Western imperialism scream bloody murder at China’s military buildup in the region. But who has China invaded? One must only look objectively at the facts to see that cries of Chinese imperialism in the Pacific are nothing but crass capitulations to the status quo of U.S. rule.

As for Taiwan, its case is quite unique. Historically it was a part of China. After the 1949 Revolution, it became a refuge for the Chinese capitalist class. Since then, Taiwan has been consciously built up by the Americans as a bridgehead for bringing China once more under imperialist domination. It is true that today most people on the island do not wish to be reunified with China. This is in large part because the CPC offers only repression and maintaining capitalism there. But this does not change the fact that the conflict over Taiwan is about the imperialist domination of Asia by the U.S. and Japan. It is this domination that explains the separation of Taiwan from the mainland. A war over Taiwan would be a war to finish the 1949 Revolution, not a war of imperial conquest by China.

6) Political Implications

The hue and cry over Chinese and Russian imperialism serves only to mask the fact that it is the small group of powers under U.S. leadership that oppresses the entire planet. Neither China nor Russia oppresses nations beyond their immediate borders or periphery. They are, in fact, the ones who have been besieged for decades by Western imperialism.

The starting point for revolutionary strategy and unifying the proletariat in East Asia or Eastern Europe must be the expulsion of U.S. imperialism from the region. Does this mean that it is necessary to support the CPC or the Kremlin? Of course not. Their reactionary policies undermine the fight against imperialism at every turn. For example, the oppression of Ukrainians and Uyghurs by the Russian and Chinese governments impedes the unity of workers against the U.S. and its allies. Recognizing their national rights would strengthen the fight against the powers oppressing East Asia, Eastern Europe and the world.

But wouldn’t a victory of Russia or China in a war against the U.S. mean that they will take its place at the head of the world imperialist system? It all depends on the concrete circumstance in which this victory is achieved. The task of communists is precisely to fight to ensure that the collapse of the U.S. order occurs on revolutionary internationalist terms favorable to the working class. To shape this struggle, it is necessary to actively participate at every stage. It would be the worst crime to not fight for the defeat of the U.S., the power that oppresses the world today, out of fear that tomorrow another power may become the new oppressor.

At bottom, denouncing “Chinese imperialism” is a thin fig leaf for refusing to oppose the domination of the U.S. and its allies. The strength of this position on the left reflects the reality that in Western-aligned countries it is impossible to be considered respectable by the trade-union bureaucracy or liberal circles while defending China against imperialism. While it may sound radical among some to make an equivalence between the U.S. and China, the facts are that the former has dominated the entire imperialist system since 1945 while the latter does not dominate any part of the world outside its own borders. Of course, you cannot be a revolutionary while defending the policies of the CPC. But it is crude social-chauvinism to reject the fight against U.S. domination by raising the bogeyman of “Chinese imperialism.”

Part Two: China Is Not Capitalist

1) Marxism and the State

In discussing whether the Chinese state is capitalist or remains a workers state, it is important to establish a basic methodological approach. As with imperialism, most of the left ends the question where it begins. For the “China is capitalist” camp, simply pointing to the number of billionaires and multinational corporations resolves it. For the opposing view, state control of strategic industries and high economic growth are deemed enough to prove that China is not capitalist. Once again, the question cannot be understood by looking at individual snapshots but must be viewed in its concrete historical development.

The proliferation of capitalists and the high level of nationalized industries are both key to understanding China, but they do not on their own prove anything. As Trotsky pointed out in “The Class Nature of the Soviet State” (October 1933), the Bolsheviks did not nationalize industry in the first year of the Russian Revolution; it remained in private hands under workers control. In 1921, the Bolsheviks reintroduced market relations in agriculture through the New Economic Policy, yet this did not mean a return to capitalism. Furthermore, the capitalist class can itself nationalize huge swaths of industry in response to certain crises (for example, Portugal in the 1970s). These examples only go to show that property forms taken as an isolated factor are not sufficient to determine the class nature of a country.

For Marxists, the crux of the question is the state itself, that is, the armed forces and the bureaucracy. Which class dictatorship do they defend? Despite the great possible variations in the political forms a state can take (democratic, bonapartist, fascist, etc.), it always represents the rule of a distinct class. Summarizing Engels, Lenin explained:

“The state is a product and a manifestation of the irreconcilability of class antagonisms. The state arises where, when and insofar as class antagonisms objectively cannot be reconciled. And, conversely, the existence of the state proves that the class antagonisms are irreconcilable.”

Lenin insisted that “petty-bourgeois democrats” will never understand “that the state is an organ of the rule of a definite class which cannot be reconciled with its antipode (the class opposite to it).” And so it is to this day. Every mistake about the class nature of China and the future perspectives of the People’s Republic of China (PRC) is based on rejecting these basic concepts of the state outlined by Lenin.

Revisionism on this question starts with the CPC itself. Mao’s own conception outlined in “On New Democracy” (1940) is the “joint dictatorship of all the revolutionary classes” of China—which was supposed to include the nationalist bourgeoisie. This proved to be a total illusion. When Mao’s People’s Liberation Army (PLA) defeated the nationalist forces of the Guomindang, there was no “joint dictatorship.” The bourgeoisie overwhelmingly fled to Taiwan and those who did not were expropriated. The PRC—a dictatorship of the proletariat—could not be conciliated with its antipode, a clear confirmation of Marxist theory. However, this same illusion was behind Deng’s “reform and opening up” and is still upheld by the CPC. From Deng to Xi, “socialism with Chinese characteristics” is based on the myth that there is no fundamental conflict between the bourgeoisie and socialism. Such illusions are a mortal threat to the PRC.

In a different way, the various socialists claiming that China is capitalist make the same mistake. Instead of positing that capitalism and socialism can cohabit as the CPC does, they argue that there was a gradual and seamless transition from China being a workers state after 1949 to being a capitalist state in the 1990s. According to them, this transition took place without a period of acute crisis in which the state structure of the PRC was broken up and replaced by a new one. In other words, they think that the same state apparatus, the same bureaucracy and same regime can defend the dictatorship of two antagonistic classes. This is just another way of erasing the irreconcilable class conflict that the very existence of a state embodies. Answering exactly these arguments in relation to the Soviet Union of the 1930s, Trotsky explained:

“The Marxist thesis relating to the catastrophic character of the transfer of power from the hands of one class into the hands of another applies not only to revolutionary periods, when history sweeps madly ahead, but also to the periods of counterrevolution, when society rolls backwards. He who asserts that the Soviet government has been gradually changed from proletarian to bourgeois is only, so to speak, running backwards the film of reformism.”

To establish the class character of China, the key criterion is not the degree to which market relations or the planned economy prevail, although these are certainly important factors. Rather, it is whether there has been a qualitative change in the nature and function of the state apparatus. Those who believe that China is capitalist must either argue that Trotsky was wrong, and it is indeed possible for a state to gradually change its class character, or they must explain when and how the counterrevolution in China took place.

2) Counterrevolutions in Eastern Europe and the USSR

A key difference between Trotsky’s theoretical argument in the 1930s and today is that we have seen a series of clear historical examples of counterrevolutions. There is practically no controversy over the fact that capitalism was restored in the former workers states of Europe and in the USSR. The process was different in Poland, the DDR (East Germany), Yugoslavia and the Soviet Union itself, but every single one of these examples thoroughly confirms “the catastrophic character of the transfer of power from the hands of one class into the hands of another.”

Without going into a detailed history of how counterrevolution triumphed in every instance, it is possible to distinguish several essential features common to all. In each case an acute political crisis led to the collapse of the Stalinist regime. Although in certain countries former Stalinists were able to maintain prominent or even leading positions under capitalism, in no case did the former Communist party remain in power. Moreover, in all cases the state structure was thoroughly reorganized. In Yugoslavia, Czechoslovakia, East Germany and the Soviet Union, the states broke up or liquidated. But even where this wasn’t the case, the state reorganized its armed forces and changed its name, constitution and legal system.

There are no more Red Armies or People’s Armies in Europe. There are no more hammers and sickles on the national flags—leaving out Transnistria—nor are there Socialist and People’s Republics. Some may argue that such names and symbols are meaningless. But this is wrong. As a conquering army, capitalism brought its flags, its symbols, its values and language. These changes expressed the decisive rupture in state power. They represented capitalism’s decisive victory over Stalinism.

Let’s look at the economic side of the question. Leading up to counterrevolution, many countries in the Eastern bloc had taken measures over the years to liberalize their economies. However, the return to capitalism was not a gradual economic transition but came in the form of a catastrophic shock. The old economic models abruptly collapsed and a new model was introduced, generally under the dictates of the IMF. The immediate consequences were deindustrialization, mass unemployment, inflation and recession.

According to a 1998 World Bank study, “Income, Inequality, and Poverty during the Transition from Planned to Market Economy,” the total value of goods and services produced in the countries that transitioned to capitalism declined by at least a quarter in real terms. In most cases, state enterprises were liquidated in fire sales. Belarus is the exception that proves the rule. State enterprises were not liquidated, yet the economic shock was just as brutal, with GDP per capita contracting 34 percent.

The social consequences of capitalist restoration were dramatic. Life expectancy contracted in most countries. Russia experienced a rise in mortality beyond that of any industrialized country’s peacetime experience. Yugoslavia broke up in civil war. Poverty exploded throughout the ex-Communist states. The World Bank study on these countries (excluding those at war) stated: “While it was estimated that, in 1989, the number of people living on less than $4 per day (at international prices) was 14 million (out of a population of approximately 360 million), it is now estimated that more than 140 million people live below the same poverty line.”

The conclusions are clear: Everywhere counterrevolution was a brutal process. Whether it was at the political, economic or social level, the transition from a workers state to capitalism was abrupt and represented a clear rupture with the past.

3) Reform and Opening Up in China

How do the counterrevolutions in Eastern Europe and the Soviet Union compare to “reform and opening up” in China? By focusing only on isolated factors, such as the number of privatizations and the proliferation of market relations, it is possible to point to similarities. But if we step back and look at the big picture, it is quite clear that the two have nothing in common.

On the political level, the differences are the most obvious. China was not spared the political turmoil that shook the non-capitalist countries in Europe and Central Asia in the late ’80s. However, the outcome of this turmoil was precisely the opposite. The broad uprising of students and workers sparked by the Tiananmen protests of 1989 threw the CPC regime into a crisis. But unlike the Stalinist bureaucracies in the DDR, Poland and the Soviet Union, the CPC did not collapse but crushed the movement in a bloody wave of repression. As a result, the CPC strengthened its hold on political power. The result of the Tiananmen events was political continuity, not rupture.

Today, all key state institutions are fundamentally unchanged in their functioning and appearance. China is still ruled by a Communist Party. The armed forces remain the PLA which traces its continuity to Mao’s peasant army. The People’s Republic still stands, the highest state organ is still (formally) the National People’s Congress, and the most prestigious post remains that of general secretary of the Communist Party. No one disputes these facts—they are simply considered irrelevant by those who think China is capitalist.

What about the economic and social spheres? Trotsky predicted that continued bureaucratic rule in the USSR resulting in the collapse of the proletarian dictatorship would lead to a “cessation of economic and cultural growth, to a terrible social crisis and to the downward plunge of the entire society” (“The Class Nature of the Soviet State”). We have already seen how this is precisely what happened in Eastern Europe and in the Soviet Union. In China, however, we see the total opposite. The 1990s saw the most astounding development of productive forces in history, an unrivaled reduction in poverty and a general improvement in socio-economic indicators.

This is not to say that market liberalization in China was done according to the interest of the working class. In addition to the horrid working conditions in the new capitalist enterprises and foreign ventures, huge layers of the working class suffered terribly due to privatizations and market reforms. But taken as a whole, the Chinese economy simply did not go through the same kind of destructive shock experienced in countries that had a counterrevolution. The process of reform had dramatic consequences, but it was done incrementally and in a way that maintained the overall structure of society.

In fact, the entire point of “reform and opening up” was not to restore capitalism but to create the economic conditions for the CPC to avoid the fate of other Stalinist regimes. It is worth quoting Deng Xiaoping during his 1992 Southern tour, which many consider to be the turning point for capitalist restoration, to see how the bureaucracy itself presented this transformation:

“As for building special economic zones, some people disagreed with the idea right from the start, wondering whether it would not mean introducing capitalism. The achievements in the construction of Shenzhen have given these people a definite answer: special economic zones are socialist, not capitalist. In the case of Shenzhen, the publicly owned sector is the mainstay of the economy, while the foreign-invested sector accounts for only a quarter…. There is no reason to be afraid of them. So long as we keep level-headed, there is no cause for alarm. We have our advantages: we have the large and medium-sized state-owned enterprises and the rural enterprises. More important, political power is in our hands.”

The point is not the degree to which Deng was being truthful about his commitment to socialism. Rather, these words are significant because they show a clear desire for continuity. These are not the words of a Boris Yeltsin set on building a new social regime, but of a right-wing Stalinist reformer (such as Bukharin or Gorbachev).

But what about inequalities in China? Didn’t they explode just as in Russia and other ex-workers states? The inequalities are indeed monstrous, and this shows the reactionary nature of CPC policies. However, we must only look at the millions who starved under Mao to see that this is hardly new. Once again, it is important to look deeper than simple statistics.

In Russia, inequalities exploded and billionaires emerged in the context of general social decline. In China, this process happened in the context of general social progress. In the first case, we have a rotting society being pillaged by foreign capital and oligarchs. In the other, we have capitalists and bureaucrats taking a disproportionate share in a rapidly developing society. In both cases, the Gini coefficient rises, but this occurs through fundamentally different social processes—counterrevolution on one side, on the other high growth based on fusing foreign capital with economic state control.

4) Running Backwards the Film of Reformism

Confronted with the obvious fact that the Chinese state and regime have remained essentially intact, the various proponents of China being capitalist must either ignore this question or explain it away theoretically. Let’s look at two examples that at least attempt to solve the problem.

Militant Tradition

The Militant tendency was known for arguing that socialism can be achieved with a parliamentary majority of socialists peacefully seizing control of the capitalist state. It is not a coincidence that its various descendants are among the most vocal proponents of the view that China is capitalist.

In the lead-up to the collapse of Stalinism in Eastern Europe, the Committee for a Workers’ International (CWI), basing itself on the theories of Ted Grant, extended its reformist program to deformed workers states. A 1992 document by the CWI’s International Executive Committee held that this period saw the emergence of “peculiar hybrid states, in which counter-revolutionary governments moving to establish capitalism, rested on the economic foundations inherited from the workers’ state” and that “under such conditions it is not always possible to apply a fixed social category: capitalist state or workers’ state” (“The Collapse of Stalinism”). Gone is Lenin’s “irreconcilability of class antagonisms” and in comes the porous “hybrid states.”

The concrete result of this revisionist theory was that the CWI took an active part on the barricades Yeltsin erected to bring down the USSR. In denying that a counterrevolution was necessary, they ended up participating in one. After all, if Russia was no longer a workers state before 1991, then there was nothing to defend. The catastrophic consequence of the Soviet Union’s destruction clearly shows the utter bankruptcy of this view and the historical betrayal it represented.

Instead of learning from this failure, the CWI and its descendants have extended the same methodology to China today. In the pamphlet Is China Capitalist? (May 2000), the ISA’s Laurence Coates uses the notion of a “hybrid state” to argue that China gradually transitioned toward capitalism:

“China was a hybrid from the late 1980s until 1991-92. The transformation from one system to another had not been completed—this was a period in which two paths or perspectives were possible. This is no longer the case. The main factor was international events—the collapse of the Soviet Union and quickening pace of globalisation, although the crushing of the movement in Tiananmen Square and the effect this had on consciousness, was a decisive turning point.”

As we have already seen, the outcome of Tiananmen was political continuity, not rupture. As for the international context, it is of the utmost importance. But the nature of a state does not change because of something that happened in another country. The fate of the Russian Civil War was determined in large part by international events, but the nature of the state had changed when the Bolsheviks seized power. It is precisely such decisive turning points that are erased by Coates. Instead of the state being proof of irreconcilable class interests, we find a sliding scale of state forms that could pass gradually from one stage to another with the entire regime and state structure remaining intact and without a decisive clash of class interests. This is simply Militant’s old parliamentary reformism applied to China.

RCIT

Coming from a different political tradition, the RCIT at least gives some consideration to the question of political power. According to them, a capitalist counterrevolution takes place “when a Stalinist bureaucratic workers’ government is replaced by or transforms itself into a bourgeois restorationist government” that is “firmly resolved, both in words and deeds, to reestablish a capitalist mode of production” (Cuba’s Revolution Sold Out?, 2013).

We have already seen how neither Xi nor Deng ever “firmly resolved” to reestablish capitalism. But more important is the RCIT claim that a “Stalinist bureaucratic workers’ government” can transform itself into a “bourgeois restorationist government.” How is this possible? For the RCIT, it is because they believe that the instruments of state repression in deformed workers states are in effect already bourgeois. They argue:

“While Trotsky did not formulate it explicitly, it is clear from his writings that he expected the working class revolution against the Stalinist bureaucracy to be much more violent than a possible capitalist restoration overthrowing the proletarian property relations. The reason is that the ‘bourgeois-bureaucratic’ state machine (i.e., police, standing army, bureaucracy) is not a proletarian instrument, but one of the petty-bourgeois Stalinist bureaucracy which is much closer to the bourgeoisie than the working class.” [our emphasis]

While it is correct that the Stalinist bureaucracy has a petty-bourgeois character, it is absolutely wrong to say that the state machine it commands is “not a proletarian instrument.” This revisionist view amounts to rejecting the very definition of a workers state. In The State and Revolution, Lenin explained:

“Like all great revolutionary thinkers, Engels tries to draw the attention of the class-conscious workers to what prevailing philistinism regards as least worthy of attention, as the most habitual thing, hallowed by prejudices that are not only deep-rooted but, one might say, petrified. A standing army and police are the chief instruments of state power.” [our emphasis]

The “chief instruments of state power” of the dictatorship of the proletariat in China are a “standing army and police,” just as for every other class dictatorship—slavocracy, feudal or capitalist. In a workers state that is bureaucratically deformed, these “bodies of armed men” are wielded against the political interests of the working class by the bureaucracy, but they remain organs of a workers state.

In China, the PLA has been used to suppress left-wing dissent since the time of the Civil War—a fact graphically shown in 1989. However, the PLA destroyed the Chinese capitalist state and established the dictatorship of the proletariat. Did the PLA remain a petty-bourgeois organ? Was the PRC a petty-bourgeois state? No, since 1949 the PLA has been the key organ of proletarian power against internal and external counterrevolution. It is because of the PLA that the Chinese bourgeoisie in Taiwan has never been able to cross over to the mainland.

As Trotsky explained, the relationship between the bureaucracy and the state in a deformed workers state is analogous to that between pro-capitalist bureaucrats and a trade union. Even though the former can use the union apparatus to repress rank-and-file discontent and is “closer to the bourgeoisie than the working class,” the union itself remains a working-class institution whose very existence is a rampart against the bosses. For a trade-union bureaucrat to fully become an uncontradicted representative of the capitalists, he must break with the union. In the same way, a Stalinist government cannot become a “capitalist government” without breaking the link with the state organs of the revolution.

It is precisely this link that was broken in the USSR in 1991. Yeltsin destroyed the workers state and in so doing destroyed the source of the bureaucracy’s power—and the bureaucracy itself as a ruling caste. In China, the bureaucracy has consciously avoided this road and maintained itself as a unified grouping by keeping firm control over the organs of state repression. The whole point of the RCIT’s “theory” of the state is to erase the qualitative distinction between the two examples. According to them, you can seamlessly pass from one class dictatorship to another—with the Stalinist bureaucracy remaining intact—because the police and the army were always at best organs of the petty bourgeoisie. This is a rejection not only of Trotskyism but also of basic Leninism on the question of the state.

Following the logic of their theory, the RCIT not only declares that China and Vietnam are capitalist but even the likes of Cuba and North Korea! By erasing the need for counterrevolution, they discover capitalism everywhere, even in countries whose economies and regimes are obviously based on typical Stalinist models.

5) Who Rules China?

No doubt the reassertion of basic Marxist principles on the state will not convince our critics. They will answer that such theoretical points are contradicted by facts. After all, China has 814 billionaires and many of the biggest capitalist companies in the world, and even its state-owned enterprises (SOEs) operate according to market principles.

These are certainly important facts, but to be properly interpreted they must be placed within a correct understanding of the historical laws guiding China’s development. Humans have mastered the science of flight; this does not invalidate the laws of gravity. In fact, it is only by understanding such laws that it is possible to explain how a plane can lift off. China is a deformed workers state that has capitalists. This is a highly contradictory development, but it does not invalidate the Marxist theory of the state. Rather, it is only with Marxist theory that we can properly make sense of empirical evidence and answer the question of who really rules China.

We have already seen the value of theories positing the gradual change of China’s class character. But most who think that China is capitalist focus less on the theoretical problem and more on an impressionistic interpretation of empirical facts. For example, in a recent polemic against two defenders of CPC socialism, the RCI asserts:

“It is very clear that the state does not ‘dominate’ the economy, although it does play a more influential role than in the economies of its western competitors. But the point here is that, even if the banks are ‘primarily accountable to the government rather than private shareholders’, both the banks and the government are powerless before the dictates of market necessity. The markets do not ‘serve socialism’.”

To support this position, the RCI points to the fact that the economic measures taken by the CPC following the 2008 Great Financial Crisis (GFC) fostered long-term imbalances in the Chinese economy. This is true, but while it shows that the CPC’s policies are misguided, it does not prove that the CPC is ruled by the market and has, in the RCI’s words, “lost control of the economy and of its own state owned enterprises.” In fact, 2008 proves quite the opposite. In The Party (2012), Richard McGregor explains:

“The Party’s power was on display in late 2008 and early 2009…. The central bank, the bank regulator and even the banks themselves, all counselled caution in formulating a response to the crisis. All three had battled hard to build a credible commercial banking system over the previous decade. The Politburo, however, staring into the abyss of a sharp slowdown, issued an edict from on high for the money pumps to be opened. Once done, the banks had no choice but to race out of the blocks…. Just 15 per cent [of loans] went to household consumers and private businesses, compared to a peak of one-third in 2007. Most went to state companies.”

The author goes on to explain that the banks in China behaved in a completely different way from those in the West, where, despite governments effectively controlling banks in this period, they had no means to force them to lend money. Fundamentally, the GFC showed that the two social regimes responded differently. In the capitalist West, where the market dominates, the state stepped in to save the financial system from ruin and ensure profitability and stability. In China, where the CPC controls the economy, the state intervened to ensure the stability of the regime. In the process, it acted contrary to the principles of profitability that banks had spent a decade to establish.

The RCI does not address this. They observe the existence of a speculative bubble following 2008 and conclude that China is capitalist and the CPC has “lost control.” But again, let’s look at the question more closely. How has the CPC reacted to this speculative bubble? In 2020, it introduced the “three red lines” regulation, which was specifically aimed at bursting the housing bubble. This led to the real estate giant Evergrande going bankrupt and the entire sector entering a depression. The economic and social consequences of the CPC’s actions were devastating, not least for the Chinese citizens who will never get the apartments they paid for. The example shows the CPC zigzagging from one extreme to another in the typical Stalinist manner. But it certainly does not show that the CPC is powerless before the market.

Once more, these actions show the difference between the CPC and the U.S. government. In the first instance, the state burst the speculative bubble itself to avoid a sharp crisis that could lead to political instability. In the U.S. case, the government did everything it could to keep the housing bubble going for as long as possible, and today it is doing the same thing with the stock market. These are all facts. But without understanding that each state acts according to fundamentally different laws, it is not possible to correctly interpret them.

Part of the difficulty in understanding China’s economy is that the CPC worked hard over decades to give it the outward appearance of a market economy in order to attract foreign investment and discipline its own workforce. It partially privatized SOEs, gave them “independent” boards of directors, let private capitalists grow multibillion-dollar corporations and so on. But behind this liberalization, the CPC kept an iron grip on both public and private companies. In light of this, it is misleading to focus solely on whether a company is formally private or public. The bottom line is that they must all conform to the CPC’s political requirements. This political control is ensured by institutions such as the Central Organization Department (COD), which directly appoints practically every significant position in the country. McGregor makes the following comparison:

“A similar department in the US would oversee the appointment of the entire US cabinet, state governors and their deputies, the mayors of major cities, the heads of all federal regulatory agencies, the chief executives of GE, ExxonMobil, Wal-Mart and about fifty of the remaining largest US companies, the justices on the Supreme Court, the editors of the New York Times, the Wall Street Journal and the Washington Post, the bosses of the TV networks and cable stations, the presidents of Yale and Harvard and other big universities, and the heads of think-tanks like the Brookings Institution and the Heritage Foundation.”

Control by the CPC is not dictated by the profit motive. In fact, it directly clashes with its most basic rules. For example, in 2004 the COD decided without warning to reshuffle executives at China’s three largest telecom companies, which were in competition with each other and were supposed to follow the rules of Western stock markets. Rotating top executives among rival companies contravenes the most basic laws of capitalist competition. It’s as if the U.S. government decided to put Zuckerberg in charge of Tesla and Musk in charge of Meta. The CPC did such a maneuver in order to rein in price wars and assert its authority. In what capitalist country does this sort of thing happen? Is this really the market dictating terms to the state?

Despite all the statistics that can be produced to show the prevalence of capitalist relations in China, the basic fact is that the capitalist class does not hold state power. The CPC calls the shots. The huge growth of capitalist relations in China is a product of the CPC having worked in alliance with capitalists over the past decades. This does not, however, mean that the CPC’s interests are the same as those of the capitalist class or that its policies are guided primarily by capitalist interests. Quite the contrary. The Communist Party bureaucracy continues to occupy an intermediary position, navigating between the pressures of capital (foreign and domestic) and the working class. As such, it must wield the state apparatus against both these poles to maintain its position.

6) Bonapartism

The standard argument is that whatever coercion the CPC exerts on capitalists in China, this is not different from that of any other bonapartist regime. In 2017, Crown Prince Mohammed bin Salman (MBS) of Saudi Arabia sequestered hundreds of Saudi capitalists (mostly relatives) and extorted billions from them. In 2003, Russian president Putin arranged for his rival Mikhail Khodorkovsky, then Russia’s richest man, to be imprisoned in Siberia for fraud and embezzlement. How are these cases different from the CPC regularly disappearing capitalists, or some of the examples given above? To understand how they differ, it is necessary to look specifically at each regime and its relation to the domestic capitalist class.

Saudi Arabia is an absolute monarchy, which since the Second World War has depended on its military alliance with the U.S. to maintain itself as a bastion of reaction in the Middle East. In Saudi Arabia, the royal family is basically also the capitalist class. The famous 2017 incident was a dynastic feud worthy of the Middle Ages transposed to the modern world. The purpose of MBS’s extorting his own family was principally to assert his dynastic claim, a “normal” function derived from the feudal nature of the Saudi capitalist class. In Russia, Putin rose to power in the context of anarchic and violent feuds between gangster oligarchs. The bonapartist character of his government reflected the need for an arbiter who could rein in the tensions in post-counterrevolution Russia. It is in this context that he had to assert his authority over certain individual oligarchs who stepped out of line.

In both those cases, bonapartist measures of repression served to uphold the stability of the capitalist regimes. In China, the bonapartist character of the regime is very different. After 1949, the CPC’s power was built on bureaucratic control over a workers state which crushed the capitalist class. Opposed to a revolutionary internationalist program, it found itself constantly squeezed between the backward character of the economy, economic and political demands from the working class and peasantry and hostile pressure from world imperialism. With Stalinism collapsing all around in the ’90s, the CPC opted to lean more forcefully toward where the wind was blowing, with the capitalists. The global and domestic contexts changed, but not the regime itself.

The bonapartist nature of the CPC is still fundamentally derived from the same class forces. Unlike in Saudi Arabia and Russia, the capitalist class in China is not the base of the regime but a rival. This is true even though many capitalists are in the CPC or related to top bureaucrats. Class antagonisms cannot be overcome through marriage and titles, a lesson learned the hard way by the French aristocracy.

Despite the bonapartist character of their regimes, neither MBS, Putin nor Xi can transcend the social interests on which their power rests: dynastic for the Saudi monarchy, oligarchic for Putin and bureaucratic for Xi. In the case of the first two, the power of the ruling strata rests on the capitalist class. To attack the capitalists’ fundamental interests would be contrary to the very nature of the regime. This is not the case with the CPC. Under sufficient external and internal pressure, it could expropriate the capitalist class. Of course, this would create huge turmoil, and that is not what the CPC wants. But let’s not forget that it has done it before, and that before 1949 Mao did not want to liquidate the capitalists either.

The different class basis of these three regimes can be further seen by looking at the behavior of capitalists toward them. Despite the tyranny of MBS, millionaires and billionaires flock to Saudi Arabia like moths to a flame. In Russia, the outbreak of the war in Ukraine and Western sanctions led to the departure of a significant number of wealthy individuals. However, as a whole the oligarchs have rallied around the regime. Since 2022, billionaires have repatriated at least 50 billion dollars in foreign assets to Russia. This is because the regime is a dependable pillar of support in the face of Western hostility.

In China, we see the exact opposite. Capitalists fear the regime more than the West, where they emigrate in droves when given the chance. Every year, China tops the list of countries that capitalists leave, even though the regime strictly limits such emigration. According to the Henley & Partners consultancy, the number of high-net-worth individuals leaving China has increased every year since the end of the pandemic, hitting a record 15,200 so far in 2024. In Mao and Markets (2022), Christopher Marquis and Kunyuan Qiao claim that “more than a quarter of China’s entrepreneurs have left the country since they became rich, and reports suggest that almost half of those remaining are thinking about doing so.” Why would this be the case if the CPC were fundamentally committed to defending the interests of the capitalists in China? Why do capitalists in other dictatorships not fear their government in such a way?

7) Property Rights

The ultimate argument used by the “Trotskyists” who consider China capitalist is that the bureaucracy has transformed itself into a capitalist class. Pulling quotes from The Revolution Betrayed (1936), they triumphantly point to Trotsky’s statement that:

“Privileges have only half their worth, if they cannot be transmitted to one’s children. But the right of testament is inseparable from the right of property. It is not enough to be the director of a trust; it is necessary to be a stockholder. The victory of the bureaucracy in this decisive sphere would mean its conversion into a new possessing class.”

Since CPC officials and their relatives own stocks, our critics conclude that the bureaucracy has transformed itself into a capitalist class. While this may appear true on a superficial level, the actual significance of these property rights is not that straightforward.

The amended PRC constitution states that “citizens’ lawful private property is inviolable” and that “the state shall protect the right of citizens to own and inherit private property in accordance with the provisions of law.” This, however, does not close the matter. In a 1 January 1936 letter, Trotsky spoke of the importance of distinguishing “the real from the supposed forms of property, i.e., from juridical fictions.” Despite formal respect for private property, as with everything else in China, the question becomes murkier upon further inspection.

For starters, the constitution also states that “the state shall safeguard the unity and sanctity of the socialist legal system.” How this is compatible with the defense of private property we shall leave to the Stalinist scholars. But equally eyebrow-raising for any self-respecting capitalist are statements such as “socialist public property is sacred and inviolable” as well as the impossibility for private individuals to own any land in either the city or the countryside. If this is capitalism, it is certainly a very unusual capitalism.

But let’s follow Trotsky’s admonition and go beyond formal legal texts. A basic criterion of private property rights is the ability to dispose freely of the property one possesses. That is the whole point of the property being private. The question is, do capitalists in China control their assets? Yes…but only if they use them in a way that corresponds to the wishes of the CPC.

Individual capitalists own shares of companies, including state-owned companies, but they do not have ultimate control of their businesses. We have already seen how the CPC effectively oversees the appointment of top CEOs. But party control goes further. There are countless examples of the CPC stepping in either directly or indirectly to make clear that property which is private on paper is not really that private. For example, China copied the West by rewarding top CEOs of SOEs with stock options. But when these CEOs decided to sell these shares, they were made to understand that they were not supposed to do that. They owned the company in the same way you can own a little piece of the rain forest—you can hang your certificate on the wall, and that’s as far as it goes.

The most famous example is, of course, the CPC halting the public offering of Ant Group after its owner Jack Ma criticized the party. Ant’s parent company lost billions and Ma disappeared from public view for years. Following the scandal, the conglomerate went through a “restructuring” that saw Ma’s control go from 53.46 percent to just 6.2 percent. Surely his lawyers forgot to insist that private property is inviolable in China.

Such sudden changes in property relations are not unique to this case. In 2004, the executives of Haier attempted to increase their ownership of the company. After this created a scandal, the government without prior notice decided that Haier was not private anymore but state-owned. It was nationalized in a snap and then, after years of controversy, was just as suddenly changed back to a private company.

The “flexible” nature of Chinese private property is seen most clearly in times of crisis. During the Covid pandemic, the CPC was able to marshal resources in a manner and on a scale far beyond that of any capitalist country. The pandemic hit everywhere, and governments reacted in all kinds of ways. But capitalist countries, no matter how harsh their measures, were restricted by the private nature of property. They could only orient the production of goods and services in very limited ways. In contrast, China could mobilize all of society to achieve the aims decided by the government. This was not possible per se because China has an authoritarian government—all governments were authoritarian during the pandemic—but because it could disregard private capitalist interests and function according to a plan.

Without doubt, the current situation in China is not like that of the Soviet Union. There definitely is a capitalist class that owns private property. However, the reality of this private ownership is highly contradictory. The capitalists as a class have yet to fully secure their claims. They do not have full economic or political control because the armed forces of the country are not loyal to them but to the CPC bureaucracy. For the capitalist class to establish its dictatorship in China, this reality must be changed—the power of the CPC must be broken.

8) Counterrevolution or Political Revolution?

What would a counterrevolution look like in China? The examples of the USSR and Yugoslavia give us a sense. Civil war would be a distinct possibility. Overall, capitalists would have unbridled control of the economy. State enterprises would be privatized to a much fuller extent. The government would lose control of the banking sector. Capital flows would be liberalized, making the Chinese market much more dependent on imperialist finance. Millions would no doubt lose their jobs in restructuring plans. This time, it would not be amid a rapidly developing economy but in the context of social disintegration. It is also highly possible that China and Taiwan would reunify on a reactionary capitalist basis—the strategic goal of the Guomindang. There is no basis to think that any of these developments would lead to improved democratic rights or civil liberties.

The international impact of a counterrevolution in China would be equally disastrous. As with the collapse of the Soviet Union, the PRC’s demise would shore up the position of the U.S. and its allies, allowing them once again to throw their might around the world in an unrestrained manner. Furthermore, the massive destruction of productive forces that would occur in a capitalist restoration would depress living standards across the planet.

By denying that there is anything whatsoever to defend in China today, the so-called Marxists who claim that China is capitalist actively work toward these disastrous outcomes. In so doing, they pursue the path of betrayal followed by most of the left in the 1980s and ’90s. From Poland to the DDR to the USSR, the left cheered on counterrevolution. Today, they have learned nothing and do the same toward China, supporting explicitly pro-imperialist movements such as the Hong Kong democracy protests. Instead of breaking Chinese dissidents from liberal democratic illusions and training them to be communist revolutionaries, these groups reinforce the counterrevolutionary currents in Chinese society.

Luckily, the fate of the PRC is not yet sealed. The deciding factor will be the actions of the Chinese working class, the most powerful in the world. But to defeat counterrevolution, it must become conscious of its political tasks. In the first instance, this means understanding that the gains of the 1949 Revolution can only be secured by the revolutionary overthrow of the CPC. This will be a political revolution. Unlike a revolution in a capitalist country, the state apparatus does not need to be fully broken but rather purged from top to bottom and brought under the political control of the working class.

Given the degree of degeneration of the PRC and the widespread influence of capitalism, a political revolution would be a radical and convulsive transformation. A central task will be expropriating capitalist industry. The capitalists will no doubt resist. However, they will be hampered by the fact that the state is not under their control.

What the Tiananmen events showed is that under the impulse of the proletariat, the state apparatus itself started to waver, with whole battalions of the PLA, including top commanders, refusing orders. In the face of strong social conflict, the Stalinist bureaucracy is suspended in midair and starts to disintegrate. The various outbreaks of political revolutions, whether in China, the DDR or Hungary, all show that a working-class uprising in a deformed workers state has a real possibility of bringing over to its side the bulk of the state apparatus. This outcome in China would render the expropriation of capitalists a simple administrative affair. Such a fracture of the state is impossible in any capitalist country and is a key distinguishing factor between a political and a social revolution.

Conclusion

We have shown how China is neither capitalist nor imperialist. That said, whichever way one looks at the question, it is obvious that we are looking at a highly unique phenomenon. Combining state control and capitalism, China has been able to develop at a speed and on a scale unequaled in human history. Bourgeois ideologues interpret this as a triumph for the U.S. world system of free-trade capitalism. Supporters of the CPC interpret this as the triumph of “socialism with Chinese characteristics.” As for “Marxists” who think that China is a capitalist-imperialist country, the PRC’s incredible accomplishments can be downplayed or denied, but they cannot be explained.

To analyze China as Marxists, it is necessary to start from the very unusual conditions following WWII and the end of the Cold War. Lenin and Trotsky did not face a situation in which the main imperialists were united due to the overwhelming domination of one power. Even less were they in a world where there was just one superpower. It is not enough to quote Lenin and Trotsky; it is necessary to extend their analysis and program to such unique realities. At bottom, it is the originality of the post-Soviet world that explains the originality of the current world situation and China’s development.

China’s massive development is not the triumph of either imperialism or Stalinism but the product of specific and unique conditions. The crushing of the Tiananmen movement in 1989 for a time closed the door to both political revolution and counterrevolution. Therefore, China emerged from the early ’90s intact as a workers state facing a relatively benign international context.

On the surface, the CPC appears to have come out on top through its deal with the devil. But high growth and coexistence with capitalism were possible only because external pressures on the regime were at an ebb. As the international context changes and the U.S. confronts China, growth is stagnating and internal tensions are increasing. Despite the CPC’s best efforts to erase class struggle, the inexorable conflict between workers and capitalists will erupt once more in the forefront of the political scene. Then we shall see just how deeply Chinese Stalinism has rotted out the workers state.

Whether or not the PRC can be saved from counterrevolution will be decided by the political leadership standing at the head of the working class. If pro-capitalist forces are allowed to take the lead, the PRC is doomed. If Stalinism, whatever its form, is conciliated, the PRC is also doomed. The only road to victory is that of the Fourth International: ruthlessly opposing imperialism, defending the social gains of the revolution, overthrowing the Stalinist bureaucracy and forging an international working-class alliance for socialist revolution. Just as China’s unique development was the product of the international class struggle, so too will its future destiny depend on uniting with the workers of the world. This is the task at hand.