by Thanasis Spanidis on behalf of the Central Leadership of the Communist Organization
4. The social system of China [top]
The following part is divided into four subchapters, each of which will deal with the following aspects of the Chinese social system: a) The economic system and the role of private and state capital as well as economic planning; b) the transformation of labor power into a commodity, i.e. the creation of an exploited working class through capitalism, the situation and the struggles of this class; c) the bourgeoisie in China and the instruments of its rule, especially its connection with the state and the “communist” party; and d) finally, the ideology and program of the CPC, the proclaimed goals that “socialism with Chinese characteristics” is intended to achieve and the society that this concept aims to achieve. It will also be about refuting a common myth that the CCP only introduced capitalism temporarily.
a. State and private capital in Chinese capitalism [top]
The dismantling of the socialist planned economy from 1979 naturally meant a profound change in the functioning of the Chinese economy. State-owned enterprises, which were the most important units of the economy during the socialist phase of China’s history, were largely privatized in the 1990s and early 2000s. At the same time, the widespread assumption that over time all state-owned companies would be sold one by one and China would become an economy based on the Western model has not yet been fulfilled. The state’s influence on the economy is still high and leads both some liberals and some leftists to the fallacy that China is still not a “real” capitalism. We will therefore now look at the forms of ownership in Chinese capitalism and the economic role of the state in the Chinese economy as well as the role of the private and state economic sectors. We will see that the distinction between the state and private sectors is not at all congruent with the contrast between socialist and capitalist economies, and that both private and state-owned enterprises in China have a capitalist character.
First of all, it is helpful to get a rough idea of how large the state share in the Chinese economy is. But this question is not that easy to answer; there are no official statistics for it. In general, the state focuses heavily on the top of the corporate rankings: While there are millions of small, medium and large privately owned companies and only a few state-owned companies, most of the largest corporations are still state-owned.
Today, the largest monopolies in China, which are also among the largest in the world, can be divided into three broad groups in terms of their ownership structure: Firstly, these are state-owned companies, especially in strategic industries, such as the oil companies Sinopec and CNPC, the energy company SGCC and the construction company CSCECL. The second group consists of effectively mixed listed companies, which are, however, counted as state-owned companies because the state exercises a controlling influence over them. These companies can be found, for example, in the financial sector with the major banks ICBC, Agricultural Bank of China and Bank of China as well as the insurance group Ping An Insurance. Thirdly, among the largest monopolies there are also a number of private companies, which sometimes have a state minority share. These predominantly private capitalist companies can be found in areas such as electronics and the Internet, for example Huawei, Lenovo, Tencent and Alibaba.
However, looking at the largest of the huge Chinese monopolies can easily be misleading because it leads to the illusion that state ownership is still dominant in China. However, as soon as you look at capital as a whole and not just the thin layer of the very largest monopolies, this is definitely not the case.
Estimates from around the mid-2010s mostly agreed that state-owned enterprises in China accounted for around 40% of value added and 20% of labor employment 35 . The most recent study that could be found on this question is from 2019. According to this, two different estimation methods resulted in a share of Chinese state-owned enterprises in China’s GDP between 23 and 27.5% and a share in employment between five and 16% 36 .
These proportions still sound relatively high and are so compared to most other capitalist economies today. However, as we will see, they can easily be misinterpreted: The fact that state-owned companies probably produce around 25% of the added value today does not mean that 25% of the added value is state-owned – because the state is not the only shareholder in state-owned companies and he usually owns less than half of the shares. Conversely, this number also means that in the supposedly “socialist” China, around 75% of total production and probably around 90% of employment take place in non-state, ie primarily private, companies 37 .
How did such a development come about in a former socialist economy, in which private capital was finally able to assume a clearly dominant role?
Privatization and capitalist restructuring of the state economic sector
In China, unlike the Soviet Union and most other former socialist countries, the transition from an economy dominated by social ownership of the means of production to one in which the means of production are predominantly in the hands of private capitalists took place gradually, over a period of many years. The crucial stages of this process were as follows:
In a first phase of the so-called “reform and opening policy” from around 1978 to 1984, the focus of the policy was on giving the management of state-owned companies greater leeway in business decisions and partially separating the company’s budget from the state budget: This is how the companies were allowed to production outside of the binding state plan, exporting companies were allowed to keep part of the foreign currency gained and spend it as they wished. This meant that central planning of investments and the distribution of goods was already severely undermined in the initial phase of capitalist restoration 38 .
In 1984, another decisive step was taken with the introduction of a system according to which the managers of state-owned companies were given complete management of the company through their employment contract. This required them to pay a fixed amount of profits to the government and allowed them to keep the rest of the profits. By 1988, 93% of all companies had already switched to this system. This had two main consequences: Firstly, the managers were now only interested in short-term profits. Since they usually only managed a company for three or five years, there was no longer any incentive to make long-term investments or even to maintain the stock of fixed investments. It was much more worthwhile to plunder the state-owned enterprises as thoroughly as possible and enrich oneself. At the beginning of the 1990s, 40% of state-owned companies were so drained that they registered losses 39 . Secondly, this automatically created a class in China that had actually been abolished by the revolution: a capitalist class that gained considerable control over the still state-owned means of production and privately appropriated a large part of the surplus product in the form of profit. In the second half of the 1980s, the Chinese social order entered a phase of upheaval – the years of transition from socialism to capitalism began.
The qualitative leap into capitalism was completed in the early 1990s: after a series of influential speeches by Deng Xiaoping that emphasized the importance of the market for economic development and after the 14th Party Congress of the CPC set the goal of a “socialist market economy”. The focus is on “reform and opening policy”. While the focus had previously been on changing operational management, state ownership of the means of production now came under direct attack. The opening of the Shanghai and Shenzhen stock exchanges enabled state-owned enterprises to list on the stock exchange and thus sell shares to private investors 40 . The stock market listing meant that from this point on these companies were subject to the imperative to distribute returns, i.e. they were primarily based on profitability criteria.
In 1978, when Deng Xiaoping took over the leadership of the CPC, 77% of industrial production was in state-owned enterprises, and the remaining 23% was in collective enterprises, which were legally owned by local workers. That changed drastically in the 1980s and 90s. In 1996, the share of state-owned companies had already fallen drastically to 33%, the rest was distributed among collective companies with 36%, which, however, now mostly represented a disguised form of private companies, official private companies (19%) and foreign companies (12%) 41 . Between 1996 and 2006, the privatization of state-owned companies was further accelerated: their number was halved and around 30-40 million workers were laid off. But privatization also affected those companies that continued to be listed as state-owned companies in the statistics. Because they now received the right to sell shares in the company to investors 42 .
In the 2000s, the focus was on reforming the remaining large state-owned companies. The smaller and less strategically important of these companies were transferred to local and regional governments. Large companies that were considered strategically important remained in the hands of the central state, which created the SASAC (State-owned Assets Supervision and Administration Commission) in 2003. SASAC is subordinate to the State Council, i.e. the government, and is the central government shareholder in state-owned companies. At the same time, she is responsible for monitoring a select group of large state-owned companies. When SASAC was founded, there were 189 “central state-owned companies” 43 .
The privatization processes in large state-owned companies are no longer taking place at the same rapid pace as they were around 20 years ago, which indicates that the Chinese leadership is changing course: Unlike in the 1990s and early 2000s, the motto is no longer to get rid of all state ownership as quickly as possible into the hands of private investors. Instead, both state and private ownership of the means of production are recognized by the government and party leadership as legitimate parts of the system.
In 2013, the Central Committee of the CPC decided to redefine or upgrade the role of the market in the conception of the Chinese economic system. Until then, official statements had spoken of the market playing a “fundamental” role in allocating resources across sectors of the economy. Since then it has been said that the market plays the “decisive” role in the Chinese economy 44 .
In the same year, a new wave of state-owned enterprise reforms was approved by the National People’s Congress, i.e. the Chinese parliament: “ For competitive sectors, the instruction was to ‘continually promote mixed ownership of state-owned enterprises and ensure that both state and non-state capital in the operation of the state-owned enterprises concerned’, while for strategic sectors ‘state-owned enterprises in the relevant sectors should remain in state hands, but participation by non-state parties is encouraged ‘.” 45 .
In the following years, further major privatizations took place: For example, in 2017, the second largest telecommunications group China Unicom sold 35% of the shares on the Shanghai Stock Exchange to a group of private and state investors. The state holding company, which previously held 63% of the company’s shares, fell to 37%. This is particularly relevant because the telecommunications sector was previously considered a strategic sector under strict state control 46 . A bourgeois study is pleased accordingly: “ It is a promising trend that more private capital is being allowed into strategic and pillar industries as more competition is introduced and the technical, management and strategy know-how of private companies is leveraged .” 47 . It should be mentioned at this point that there were also counter-tendencies: the state simultaneously bought into private companies or took them over completely, especially in the form of state rescue packages for bankrupt companies 48 . Such examples are often used to argue that the Chinese state is increasing its control over the economy – either by economic liberals, who use it to paint the “specter” of China’s return to a planned economy, or by dengists, who want to use this to prove a socialist orientation therefore rate these measures positively. As has already been shown, the overall trend continues to be clearly towards strengthening the private sector compared to the state and not in the opposite direction.
The new 2013 policy also bifurcated state-owned enterprises by the CPC Central Committee and the State Council, dividing them into a “public” and a “commercial” category. The “public” companies are those that are responsible for the provision of important goods and in which the state wants to retain a decisive influence. These companies should therefore remain subject to political decisions, although they too will be aimed at reducing costs and increasing profits at the same time. The “commercial” category, on the other hand, is intended to be fully exposed to market competition and, above all, to generate profits 49 .
A further reform of the management of state-owned companies was decided in 2014. In various variations, the aim was to transform the state from a direct manager of the companies into a manager of the securities of these companies, to give state-owned companies a freer hand in appointing their managers and to promote the privatization or partial privatization of some of the state-owned companies The state should sell some of the shares to private investors 50 .
In 2019, a new law on foreign direct investment eased the flow of foreign capital into the Chinese economy. While foreign investors in many sectors had previously been obliged to set up joint ventures with Chinese companies, a number of other sectors were excluded from the regulation and thus made available to foreign investment 51 .
In July 2023, the CPC Central Committee jointly with the government released a key document on private sector expansion. It resolves: “ To resolutely resist and immediately refute false statements and actions that undermine or weaken the basic socialist economic system, negate or downplay the private sector ”; “ supporting private business representatives to play a greater role in international economic activities and economic organizations ”; “ to support the various levels of government departments to consult outstanding entrepreneurs and utilize their role in formulating and evaluating policies, plans and standards related to business ”; and “ prudent recommendation of outstanding private economists as candidates for representatives of the People’s Congress at all levels and as members of the CPPCC52 , with the All-China Federation of Industry and Commerce playing a leading role as the main channel for orderly political participation of private economists .” 53 .
In summary, the document includes: 1) A clear commitment to expanding the role of the private sector in Chinese capitalism and a fight against still existing positions that want to reduce this role. 2) The strengthening of international economic diplomacy by Chinese capitalists with the aim of better global representation of the interests of Chinese monopolies. 3) The greater direct involvement of capitalists in the development of laws and policies. And 4) a secure presence of capitalists in the leading state organs. We will explore some of these points in more detail in the following chapters, but this explanation gives a taste of what awaits us there.
The continued and deepened capitalist reforms since Xi Jinping took over the presidency in 2013 also refute the myth, popular in parts of the communist movement and spread by some bourgeois media, that China under Xi Jinping is turning more towards a socialist orientation again. But more on that below.
What function do state-owned companies fulfill?
The continued importance of state-owned enterprises in a predominantly private economy indicates that state-owned enterprises in the Chinese economy perform three main functions: firstly, they are intended to provide infrastructure and important services that increase social and political stability, but above all also for accumulation of private capital to be made available cheaply. This means that private capitalism in China can, for example, rely on a well-developed transport and communication network as well as cheap energy, which represents a decisive advantage in international location competition 54 . Secondly, the state-owned companies should also accumulate capital themselves and be developed into internationally competitive monopoly companies. Thirdly, and related to the first two functions, state-owned companies should also open up international markets and ensure the supply of raw materials for the growing capitalist economy. As part of the Belt and Road Initiative, loans from state banks, infrastructure projects (often by Chinese state-owned companies) and raw material extraction in other countries are closely linked.
All three functions are not unusual for capitalist countries. There are examples in almost all economies of the fact that the state keeps certain companies in its hands because privatizing them can have economically damaging effects: This particularly affects infrastructure and communications companies (telecommunications, railways, water and electricity supply), but also, for example, the extraction of certain raw materials. And as far as the second function is concerned, it is true that in most developed capitalist countries, privately owned monopolies occupy the dominant position in the national economy and in the export of capital. Nevertheless, the targeted development of “national champions”, i.e. internationally competitive top corporations with (majority) state ownership or massive state support, has been at the core of the economic policy strategies of other East Asian countries such as South Korea and Japan, but also France, for decades.
An example of how leading international monopolies are created under state guidance is the area of artificial intelligence. The Chinese government’s 2017 multi-stage “Plan for Developing a New Generation of Artificial Intelligence” states: ” By 2030, China’s AI theories, technologies and applications should have reached a world-leading level, making China the first AI innovation center in the world.” “The world will achieve visible results regarding applications in the areas of intelligent economy and intelligent society and lay an important foundation for a leading innovation-driven nation and economic power .” This will be achieved through a systematic policy of technology development, the creation of large Internet corporations and the acceleration of the “ creation of global leading AI companies and brands in advantageous areas such as unmanned aviation, voice recognition, pattern recognition (…) smart robots, smart cars, wearable equipment, virtual reality etc “ 55 .
To make the comparison with France more concrete: In the post-war period, the model of “planification”, i.e. planned capitalism, was created in which the central state controlled economic development by giving companies targeted incentives to achieve this as part of an overall economic development strategy to strengthen the position of French capital in the competition. In particular, this also included the nationalization of many key industries and banks and the targeted development of so-called “national champions”, that is, predominantly state-owned companies that were supposed to achieve global competitiveness under the protective hand of the state 56 . The economic system and economic policy in France at the time shared many similarities with today’s Chinese capitalism: indicative planning using incentives, state ownership of the financial system and the largest industrial groups, and a targeted industrialization policy supported by a central bank monetary policy designed to promote growth. However, no one would have thought of assuming that this policy in France had a “socialist” character. On the contrary, it was mainly pursued under the conservative presidents Charles de Gaulle and Georges Pompidou. France was undisputedly considered a capitalist country and was part of the anti-communist Western alliance system.
What reasons are there why large state-owned companies can play an important role even in capitalist countries? In the monopolistic stage of capitalism, in most sectors of the economy and in all medium and high-tech sectors, ultimately only the monopoly is competitive, since only the monopoly companies are able to raise sufficient financial resources to be able to make the necessary investments. In addition, only monopoly companies can usually achieve transnationalization of investments, i.e. capital export. Therefore, China’s rise to become a world power, especially in the economic sphere, is only possible on the basis of a huge concentration and centralization of capital. And this strategy is successful: In 2000, nine Chinese state-owned companies were among the 500 largest companies on the Fortune Global 500 list, but in 2017 there were 75 57 . In 2023, the number of Chinese companies among the 500 largest will be 135.
The “Belt and Road Initiative” (BRI), the ambitious project to promote Chinese exports of goods and capital, also primarily serves or is implemented by monopolies (see Chapter 5). It is therefore not surprising that the state is deliberately promoting the centralization of capital: “ To support the BRI and the “going-out” initiatives of state-owned companies, mergers to create large “national champions” will help to ensure sufficient economic resources for to provide overseas mergers and acquisitions and research and development (R&D). The mergers will also help avoid the loss of funds due to price wars between state-owned companies in the international market .” 58 . SASAC pursued a targeted policy of creating large corporations through mergers in the largest state-owned companies under its supervision in the 2010s, and in the six years between 2012 and 2018 alone it guided mergers in 20 large state-owned companies 59 .
On the character of state-owned enterprises in today’s China
Do state-owned enterprises, which continue to account for a large share of China’s economic output, still represent a “socialist sector” in the Chinese economy today? This is often claimed by propagandists of Chinese “socialism”. But this is a fundamentally incorrect understanding of the role of these state-owned companies.
Fundamentally, it is crucial that socialism is not the same as state ownership of the means of production. Rather, socialism as a mode of production means the elimination of capitalist laws and the organization of production according to the binding guidelines of central planning that aims to satisfy social needs. Of course, this presupposes the nationalization of the means of production, but above all it means that the investment and production decisions of state-owned enterprises are made in accordance with the plan.
The character of an individual company cannot be determined independently of the character of the economy as a whole and the economic laws that prevail therein: a state-owned company in an economy that functions according to capitalist laws and is regulated by a bourgeois state cannot have a socialist character because the state that owns the companies is a state of the bourgeoisie and therefore also uses state-owned companies to secure the overall capitalist order and to provide services for the accumulation of private capital. State ownership of the means of production is in itself entirely compatible with a capitalist economy and, as has already been shown, is nothing unusual. In the Federal Republic of Germany, for example, Deutsche Bahn and the Kreditanstalt für Wiederaufbau are still state-owned companies.
Friedrich Engels already pointed out: “ The more productive forces it (i.e. the state, note) takes into its ownership, the more it becomes a real total capitalist, the more citizens it exploits ” 60 . And Lenin also states that “ in the era of finance capital, private and state monopolies are intertwined and both are in reality just individual links in the chain of the imperialist struggle between the largest monopolists for the division of the world ” 61 . The fact that a company belongs to the state does not in itself allow any conclusions to be drawn about its social character.
In any case, the state-owned enterprises in China have the typical form of capitalist state-owned enterprises within a capitalist economy: as has already been shown, they serve the accumulation of capital in private hands. But beyond that, they themselves are structured according to fundamentally the same principles as private companies. It should be emphasized that in China “ political decision-makers and owners of state or collective companies can be understood in their economic behavior analogous to private owners. What is important is not their legal status, but rather their (economic) function .” 62 .
In today’s Chinese corporate law, the budget of state-owned companies is formally and actually separated from the state budget. The companies thus became independent economic units whose activities were no longer directly controlled by the state and no longer paid the state any fixed taxes, but which operated on their own account and were only taxed by the state, like any other company 63 . The “soft budget restrictions” that liberal economists 64 repeatedly criticized in socialist planned economies – that is, that a socialist company did not simply go bankrupt in the event of financial losses, but were absorbed by the state – no longer exist in today’s China. Companies operate according to profitability criteria and the state is often prepared to abandon them if they make losses 65 . If such a state-owned company goes bankrupt, the question arises as to who will bear the burden of bankruptcy. In China, the practice has become widespread of prioritizing the interests of the company’s creditors over those of the workers – first the debts to banks have to be paid off, and only then can compensation for lost jobs be considered 66 .
The industrial enterprises that were previously completely controlled by the state were either completely privatized or partially privatized in the 1990s and 2000s. Even those companies that are still officially run as state-owned companies have sold a large part of their capital to private capitalists. As early as 2003, the proportion of shares held by the state in state-owned companies was only 46.6% on average. By 2017 it had fallen to 38.3% 67 . However, a state shareholding below 50% does not necessarily mean that the state gives up its controlling influence over the company: firstly, because the share of a company’s shares does not always correspond to the share of voting rights; secondly, because it is possible to still retain control over pyramid structures with less than 50% of the capital 68 . Since the Chinese state avowedly wants to retain control over the state economic sector, it can be assumed that these mechanisms will also be used frequently. In addition, the state seems to want to counteract the tendency that state revenues could slowly erode as a result of the progressive partial privatization of state-owned companies. In 2015, it was therefore decided to increase the share of the profits that state-owned companies have to pay out to the state from 15 to 30% 69 – in concrete terms, this means that the state-owned companies will share part of the profits that have always formally belonged to the state, but until then they have that were available to finance investments must now be paid to the state. Regardless of this, the trend described above clearly shows a progressive transfer of ownership of the means of production and thus also of claims to profit from state to private hands.
Only a few large companies, especially in infrastructure areas, are financed directly by the state in China. Most state-owned companies are listed on the stock exchange, like private companies, and are therefore directly obliged to distribute returns to shareholders 70 . These state-owned enterprises, which represent the vast majority of Chinese state-owned enterprises, produce according to the criterion of profit and the unlimited accumulation of capital. In 2017, Xi Jinping stated that 90% of state-owned corporations had already been restructured into corporations and the remaining 10% should now follow 71 . This means that the entire state-owned economic sector in China takes on the typical form of monopolistic finance capital, in which an industrial group functions as a financial group and corporate financing is carried out via the participation system.
As a result of these reforms, the large state-owned corporations have become companies that operate largely on their own initiative, whose management is still responsible to state authorities, but is hardly restricted in its economic decision-making scope. Financially, the state-owned companies are also independent capitalist companies. At the end of 2017, only 6% of the financial resources that state-owned companies used to finance investments came from the state 72 .
In addition, the state deliberately puts state-owned companies in competition with each other. From a state perspective, a situation in which a single state-owned company dominates the market in an industry should be avoided. That is why in China, even in industries in which the state is absolutely dominant (e.g. sensitive industries such as the defense sector), there are always two or more companies, who compete against each other 73 . In most sectors, state-owned companies are exposed to direct competition from Chinese and foreign private companies. In a similar way, the provinces are also consciously placed in competition with each other: the provincial governments compete against each other for investments and therefore to outbid each other with favorable investment conditions.
Economic planning in Chinese capitalism
Why does the Chinese state continue to concentrate a significant part of industry, infrastructure and services in the hands of the state?
In any case, this has little to do with the fact that the state would still strive for socialist development. Rather, the high proportion of state-owned enterprises is a mainstay of the Chinese government’s capitalist development strategy. Various studies have shown that state-owned enterprises in China – contrary to the beliefs of economically liberal economists – have a beneficial effect on capital accumulation by enabling them to raise the necessary capital for strategic investments more quickly with state aid and by making various intermediate products and services available to private capital places 74 . They also allow the state to control the development of the capitalist economy more systematically according to a long-term concept.
This macroeconomic control of economic development is basically also practiced in other capitalist countries, although today in a much more reserved form in Western European and North American countries. The similarities between French planification in the 1960s and 70s and the Chinese planning system have already been pointed out. In China, there has been greater emphasis on macroeconomic management, especially since the mid-2000s under the Hu Jintao/Wen Jiabao government, while in the 10-15 years before that, under the leadership of Jiang Zemin, the focus of economic policy was clearly on privatization and liberalization economic sectors.
However, the control of economic development carried out by the Chinese state has a fundamentally different character than socialist economic planning. In a socialist economy, the planned goals, which are based on social needs, are given to the socialized companies. There have been different degrees of autonomy for companies in history, depending on how many planning indicators were bindingly specified. This meant that companies were left with some leeway as to how and to what extent they had to be fulfilled for some of the planned objectives. In principle, however, planned goals in a socialist planned economy have a binding character, since the company is not an independently operating unit, as under capitalist conditions, but an executive organ of society, i.e. the entirety of producers.
In China, however, binding targets are generally no longer issued for companies. Such imperative planning with binding objectives mainly takes place in large state infrastructure projects, where the state aims for a very specific result of the project. Outside of these few selected sectors, the state only plays a coordinating role with state-owned companies and does not impose any binding requirements. This coordination takes place in two forms: either in the form of contractual agreements between the central government and the responsible provincial governments or with companies, ie in agreements in which both sides must agree. Or in the form of indicative (instead of imperative) steering, in which only incentives (e.g. tax breaks for certain investments) are set instead of specifications.
For this purpose, state-owned companies are monitored by SASAC. Of course, this is not a central planning authority like the GOSPLAN in the Soviet Union, for example, but an instrument that can and should only ensure rough control of the economic development of the state sector in the interests of the greatest possible economic growth. Another instrument intended to ensure the political loyalty of company management towards the state and its strategic goals is the creation of party groups in the companies, which also involves management.
However, the SASAC is by no means an all-powerful authority with the ability to carry out precise planning and control of the economy, simply because the economic and political autonomy of the state-owned companies is far too great for this. “ Many of the companies it oversees are massive conglomerates that control large amounts of resources and are therefore themselves poles of power that are not easy to control. Although it, together with the organizational department of the CPC Central Committee, often appoints the managers of the companies formally subordinate to it, it cannot cancel their business orientation. Since 2010, efforts have been made to partially skim off the high profits in the state-owned corporate sector through increased taxes. However, this is proving difficult for SASAC as large state-owned companies are successfully trying to circumvent the new regulations. This situation also calls into question the sometimes mystified assumptions of comprehensive party control. The fact that the CCP can appoint and remove managers does not yet override the special economic interests and practices of companies. Apparently so-called party groups exist in 420,000 companies today. However, it is questionable whether these embody effective instruments in the sense of coherent economic control .” 75 . If the increased presence of the “communist” party in the economy is seen as evidence of a gradual return to socialist central planning, then this misses the purpose and character of these party groups.
The question of whether market or planning, i.e. whether capitalist or socialist production relations predominate in the Chinese economy, has already been answered (correctly) by the CCP itself: As already stated, it has been the official line of the CPC since 2013 that In “socialism with Chinese characteristics” the market laws dominate, so the blind operation of the law of value plays the determining role.
The financial system
A developed capitalism, a monopoly capitalism anyway, is not possible without a developed financial system, that is, without a capital market. Or to put it the other way around: The development of capitalism has always and everywhere led to the development of a capital market and must do so. Because without a mechanism to achieve the centralization of financial resources necessary for all major investments and to enable the flow of capital from one industry to the other as easily as possible, private property would be too narrow a barrier to allow capitalism to develop beyond its embryonic level to allow beyond the stage. This ever closer convergence of the circuits of industrial, commercial and banking capital, which Lenin described as the emergence of finance capital, is a law of every developed capitalism. Therefore, the process of establishing capitalist relations in China required the establishment of a market for corporate credit at an early stage, because the TVEs (Township and Village Enterprises) and more independent enterprises in the cities (which were now no longer financed by the state) increasingly relied on credit to finance their businesses 76 .
In line with its strategy of state-controlled capitalism, the government in China also imposes clear restrictions on the development of the financial market. The financial system is relatively shielded from the global financial system by various regulations and entry barriers and primarily serves to promote and control economic development and industrialization through targeted lending 77 .
Despite the existing restrictions, there is a stock market through the stock exchanges, a bond market and a market for bank loans, with investment financing taking place mainly through the latter 78 . The Chinese financial system can be divided into three segments:
Firstly, the banking system, which is still heavily dominated by the state and is made up of central government commercial banks, local banks and credit unions and of course the People’s Bank of China, China’s central bank. The four largest banks in China are also the four largest banks in the world, known in the West by their English names. As the world’s largest commercial bank, the Industrial and Commercial Bank of China (ICBC), the China Construction Bank (CCB), the Agricultural Bank of China (AgBank) and the Bank of China, which functioned as a central bank until 1980 and is now also a commercial bank. The ten largest Chinese banks have combined assets on their balance sheets worth $28.2 trillion, which is more than the gross domestic product of the United States. Of course, it should be borne in mind that this capital also has liabilities (i.e. receivables that you have to service). Nevertheless, the statistics give an idea of the extent to which Chinese state banks manage capital.
The second segment of the financial system is the capital market, i.e. trading in securities and shares. However, most companies in China are still not listed on the stock exchange because they are mainly financed through loans. Large companies in particular operate on the stock exchange, including many state-owned companies. The stock exchanges are, above all, an instrument for the government to promote the gradual privatization of state-owned companies.
Thirdly, there is also an informal credit system in which small and medium-sized enterprises, which often find it difficult to obtain credit from major banks, can take out loans. The prerequisites for this are, above all, good relationships and an appropriate business reputation 79 .
In the medium and long term, the Chinese government faces a dilemma with regard to the financial market and, in particular, its monetary policy: in order to continue China’s rise in the world capitalist system and become the dominant economic power on the planet, Chinese capital must undermine and replace the dominance of US capital in the financial markets and that of the US dollar as the international reserve and reserve currency. But this in turn inevitably requires a much deeper integration of Chinese capitalism into the international financial market and the opening of the entire spectrum of financial operations to Chinese finance capital. This is exactly what the Chinese government has tried to avoid so far, because it would also mean making the Chinese economy more vulnerable to international capitalist crises and giving up state economic control, which has so far been an essential basis for successful capital accumulation.
The Chinese currency, the Renminbi (RMB), is still little used in international payment transactions given China’s economic weight. The strict regulation of the Chinese financial system also partially stands in the way of the internationalization of the renminbi – because it reduces the attractiveness of a currency for investors if limits are placed on its free use as capital. However, a strengthening of the renminbi and a serious attempt to make it a global challenge to the US dollar would require that the external value of the Chinese currency be specifically strengthened. This in turn contradicts both the interests of Chinese export capital, which benefits greatly from the persistently low exchange rate of the renminbi, and the government’s plans to increase domestic demand (and potentially inflation) through wage increases 80 . These conflicting interests explain why, on the one hand, the Chinese government has repeatedly taken steps in recent years towards a broader international use of the Chinese currency and also towards further opening up to the international financial markets, but on the other hand, it also shies away from complete integration into the capitalist world system in these areas.
Initial attempts to internationalize the renminbi by dismantling capital controls in the 1990s were stopped again with the so-called “Asian crisis” at the end of the 1990s, because the Chinese government feared that greater integration into the international financial market would make it vulnerable to crises in other countries81. Since then, the internationalization of the renminbi has been advanced in other ways, such as the establishment of RMB-based trading platforms, the opening of foreign exchange trading between Chinese banks, the use of the RMB being enshrined in bilateral trade and investment agreements, and the inclusion of the RMB in the IMF’s currency basket . In doing so, China is trying to strike a balance between, on the one hand, increasing the integration of its capital and its currency into international capital flows and, on the other hand, maintaining existing protective mechanisms for the Chinese financial system 82 . The aim of the Chinese government here is, on the one hand, to develop an efficient financial system in order to promote the accumulation of capital in China and its expansion beyond national borders, but on the other hand also to prevent rival capitalist centers from gaining control over relevant parts of the Chinese economy.
The ownership of land
The ownership rights to land will only be briefly discussed here. Apologists for Chinese capitalism often point out that the land in China still belongs to the state, which they see as evidence of the socialist nature of the economic order. From a formal point of view, this is also true: according to the Chinese constitution, the country’s land still belongs to the state. However, it is easy to see that in a capitalist economy land must actually become a commodity – because companies have to build their businesses and office buildings somewhere and in order for there to be competition between companies for the best land, these must also be tradable on a real estate market. In fact, in China too, the land has long been privatized. Although a capitalist cannot acquire legal ownership of a property, he can, for a fee, buy a right of use for it and also resell or bequeath it to third parties83. In this way, the state ultimately retains a theoretical possibility of objection, which it could, however, also retain in other ways; after all, even in western capitalist countries, the use of land is tied to requirements such as obtaining a building permit. At the same time, however, it has removed all barriers to the development of a fully-fledged capitalist real estate market: in 2016, the Chinese real estate market was larger than that in the USA, making it the largest in the world. 84
Source: KO
https://kommunistische.org/diskussion/die-herrschaft-des-kapitals-in-china/?fbclid=IwAR3rO8-2Toa2B2IKWVJbNeeOv21Xyp5TSWT3EZ9Bd53fdYDwuMaRqWvUYQI#viertens
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