The following is a contribution from Claudio Belotti one of the leaders of the Italian section of the International Marxist Tendency. The article is a challenge to the IMT's official position that defines China as capitalist.      

.............      

The process of capitalist penetration in China presents us with some features which have no historical precedent, both in terms of what we have seen in the past few decades in the ex-Soviet bloc and in some fundamental points of Trotsky's analysis in the Revolution Betrayed. One fundamental difference is on the economic plane. Trotsky had predicted that capitalist restoration would have led to a catastrophic economic and cultural collapse. This prediction was only too eloquently borne out in the events that unfolded in the former USSR, former Yugoslavia, etc. However, in China in the last 20 years or more, the introduction of capitalism and the penetration of foreign capital have coincided with an unprecedented development of the productive forces. This is an element of crucial importance in determining the tempo, the duration and the gradual nature of the process.   

 Another fundamental difference is that in the former Soviet bloc the more or less gradual opening up to market forces went hand in hand with an increasing corrosion of the power of the bureaucracy, which rapidly lost its authority both internally and internationally, up to the point where this created the conditions for the sudden collapse in 1989-91.

On the other hand the Chinese bureaucracy today sees its prestige growing on a world scale. After one and a half centuries China is once again a major player in world politics.

A satisfactory definition of the process that is presently taking place can therefore only be achieved through an understanding of the process as it has developed historically, in its concrete evolution and in its peculiarities. In the given context, seeking a simple label to attach to what is happening in China risks us making important mistakes when we come to develop the perspectives. A definition of the process and the tasks that flow from this must be rooted in the analysis of the phenomenon and not imposed on it.

With the opening up to the market and to private property, new contradictions are emerging within the Chinese economy.

First of all, one must not forget that in spite of the enormous development (not only in the last 20 years, but also since 1949) the Chinese economy is still relatively weak compared to the main capitalist countries. Participation in the world market, combined with what is still strong control on the part of the state, has undoubtedly produced, and will continue to produce, important and even spectacular successes, as the successes of the space programme underline. However, this is not enough to define the general position of the Chinese economy which, without the strong control that the state continues to exercise, would not be able to compete with the main capitalists economies.

If China were really open to capitalist competition, without the role played by the state and the bureaucracy, it would be reduced once again to being a semi-colony as it was prior to the 1949 revolution. The ruling elite of the CCP is well aware of this and,

in spite of all the opening up so far carried out, it takes great care not to allow the country to go in this direction and tends to keep control of the necessary instruments.

Stephen Roach sums up the present situation the Chinese economy finds itself in:

"China chose the occasion to announce a critical transition point on the road to reform. For the first time since the Communist Revolution in 1949, the old numerical targeting and sectoral allocation conventions of central planning have all but been eliminated from the multi-year framework. Only broad aggregate growth guidelines remain - 7.5% average gains in real GDP through 2010 - but they were presented as more of a forecast than a top-down edict. In effect, the Chinese leadership is telling us that the dawn of a new market-based approach to macro policy management is at hand. (...)

"At this point in time, however, the transition is more in theory than in practice. China basically has only one leg in the Promised Land of the market system - the other remains planted firmly in the old framework of centrally-directed controls. While Chinese ownership conventions are shifting away from state-owned to private-sector enterprises, the transformation to market-based pricing continues to lag. That's certainly true of the legacy system of administered pricing of many goods and services that still exists for utilities, public transport, coal, natural gas, oil, gasoline, and indirectly for food due to state-sponsored agricultural inventory management programs. But it is also true of the prices on a variety of financial instruments - namely, interest rates, the currency, bank credit lines, and bond prices. These prices are still tightly controlled by leadership decisions made at the highest levels of the Chinese power structure. As financial sector reforms continue apace, I have no doubt that market-based pricing will spread into these areas as well. But for now, that is far from the case.

"The resulting hybrid system is not without some serious problems. (...) China evidently does not yet feel that the institutional conventions of its newly reformed system are strong enough to withstand the full-blown pressures of market-driven forces." (S. Roach, Inside the China Debate) [http://www.morganstanley.com/GEFdata/digests/20060322-wed.html]

The preponderance of Foreign Direct Investment (FDI) has had the effect of creating an imbalance in its weight within the economy and a relative weakness of the bourgeoisie proper. In this sense we can make a comparison between these investments and other similar kinds of investments that in the past have been used by the imperialist powers to set up their industries in colonial and semi-colonial countries. However, this analogy reaches its limits at the decisive point. In the latter examples economic dependence led to direct political dependence. The State was merely the local storekeeper for the imperialist masters. This was the position of pre-revolutionary China, with its hundreds of territorial, economic and military "concessions" to the imperialist powers, which rendered it a semi-colonial state even though it was fomially independent. Today that situation cannot be repeated without breaking down the structure of the Chinese state, i.e. without a fight to the death with the bureaucracy. Today's Chinese state is radically different from the state that existed towards the end of the imperial era or even of the "nationalist" period of the 1920s and 1930s, which was a state in decomposition. Today it is a sovereign state

that feels sure of its own strength, as its growing willingness to participate in world politics demonstrates.

Precisely because of these reasons, whatever the immediate advantages the multinationals may reap from their investments in the country, the attitude of imperialism towards China and its regime remains one of distance, suspicion and hostility. Yes, there are different points of view about the relationship with China. The extremist wing - that has the vain hope of overthrowing the regime, possibly by using the national question - is not in the driver's seat. This is in spite of the fact that Bush has defined China as no longer being a "strategic partner" but a "strategic enemy" — which in any case comes far closer to describing the real situation. Another wing, which is making huge profits by investing in China, declares angelically that "sooner or later" economic growth and relations with the outside world will bring about the "democratisation" of China. Although this may seem more subtle, this second position is more than anything else an admission of weakness. In any case, neither of these two wings of the bourgeoisie thinks that the Chinese state, its bureaucracy and the Communist Party can be trustworthy instruments in defending their historical interests.

The Chinese bureaucracy is getting stronger and has been legitimised even on the political and social plane, above all with the constitutional changes in 2004 and the CCP opening its doors to the capitalists. However, the latter remains a weak class that still relies on cultivating good relations with those who have "power", i.e. with the CCP. The fact that 30% of the capitalists interviewed in an opinion poll joined the Party, rather than indicating the strength of the bourgeoisie, indicates that it feels so weak that it cannot express itself through its own party.

This is how one author of a recent analysis of the Chinese "reforms" expresses herself:

"In the PRC, however, there is little chance for the leaders of the private economy to play a central role in China's political change in the near future. The delayed development of private industry has resulted in a sector that, while growing rapidly in terms of employment and output, remains small in scale, often dependent on local governments for support, and still facing discrimination in credit opportunities. In fundamental ways, FDI has become the substitute for large scale private industry in China. This substitution has important effects on the possibilities for democratization in China." (Mary Elizabeth Gallagher, Contagious Capitalism - Globalization and the Politics of Labor in China)

Replace "democratization" with "restoration of capitalism" and the meaning of what is being said becomes abundantly clear. The weakness of the Chinese bourgeoisie is clearly demonstrated in its inability to express itself through its own party: "The main slogan of the liberals is 'down with the Communist Party'. But the workers make a distinction between the Party of the Maoist era and today's Party, which increases further their conflict with the liberals" (interview with one of the editors of the China Workers website, closed down by the authorities). This statement is of the utmost importance: the liberals, or rather the political and ideological spokespersons of the bourgeoisie, dream of destroying the CCP. However, the real flesh and blood capitalists join that very same party: it is clearly a confirmation of the weakness of the Chinese bourgeoisie, not of its strength.

In the course of capitalist restoration in the USSR the CPSU fragmented and was destroyed. Leaving aside the different interpretations of that process, it is indisputable that there were several breaking points and qualitative turns that are clearly identifiable: 1989 with the opening of the borders and the collapse of the East European satellite regimes; the failed coup in August 1991 that led to the dissolution of the USSR and the disbanding of the CPSU, a party that on paper counted 18 million members was banned without it putting up any serious resistance; this was a blow that objectively dislocated the bureaucracy leaving it at the mercy of the restorationist forces led by Yeltsin.

In 1993 the conflict erupted once more with the clash between the President (Yeltsin) and the White House (the parliament, around which were gathered the forces that in some way were trying to put a break on and block the process of capitalist restoration). This was a clash that verged on civil war, and from which once again Yeltsin emerged victorious.

To date, none of this has happened in China. The cause undoubtedly is to be found in the radically different economic situation, which has allowed for a reconciliation of different interests with the prospect of development for all. However, this has had the effect of keeping substantially intact the political domination of the CCP, i.e. of the bureaucracy.

This does not mean that the problem has been resolved with gradualist methods, but rather that the decisive confrontation has been delayed.

The question of the CCP and of the nature of the state remains an open one. The position that states that the bureaucracy has become nothing less than an instrument of the new bourgeoisie is one-sided. The CCP was and remains the backbone, the skeleton of a powerful bureaucratic apparatus still capable of imposing its interests and decisions on the nascent bourgeoisie. In a certain sense one could say that to date it is the bureaucracy that is using the bourgeoisie to achieve its own aims rather than the other way round.

The development of Chinese capitalism can only be understood within the context of the general perspectives for world capitalism. For at least a decade the process of capitalist restoration in China has had a stabilising effect on a world scale. Industrial development and the rapid proletarianisation of the population have provided fields of investment and above all they have kept up the rate of profit on a world level. This reduced the impact of the 1997 "Asian crisis" and, at least to date, has allowed the US economy to defy the laws of gravity and to continue to grow in spite of its gigantic trade deficit, which is covered precisely by the finances generated by the Chinese and more general Asian growth.

The thesis of the "completed transition" implies recognising that effect has been transformed into cause, taking the whole process onto a higher level. According to this way of thinking, the relative softening of the contradictions of capitalism on a world scale have allowed for the completion of the process of Chinese restoration in a molecular and almost imperceptible manner. Thus in China we would have the possibility of new development similar to that in the USA in the 19th century, with all the effects that this would have on a world level. Capitalism would thus have found in China a terrain for its own rejuvenation, a new "frontier". This would be the case not only on the economic plane but also on the level of the class struggle, if one takes into account what the consequences would be of a victory obtained through the mere application of economic pressure. A new historical phase would open up, a long historical period of slow accumulation of the contradictions, before any new revolutionary possibilities would appear on an international scale. Our characterisation of the epoch would have to be profoundly revised.

However, such a development is excluded for now precisely because of the inherent contradictions within the process of capitalist restoration in China and the consequences of all these both internally and internationally. Should the process continue along the same lines that we have seen so far, (and as things stand this is the most likely perspective) a breaking point will be reached which will be determined by the contradiction between the bourgeoisie, both national and international, and the Communist Party, i.e. the bureaucracy. The very successes of the "reforms", at a certain point would pose the new bourgeoisie with the following question: why should we the owners of the country have to live under the totalitarian (and very costly!) domination of an all-powerful, greedy, corrupt and authoritarian apparatus? Just as we govern the economy, we must control the state, the bureaucracy, the army, and the political system.

An analogy can be made with the USSR in the 1920s when the very success of the NEP led to a rupture between the renascent bourgeoisie and the bureaucracy. It is worth remembering that the first blow was struck not by the bureaucracy but by the rich peasants, event though in the end the bureaucracy won out.

Secondly, the penetration of foreign capital at a certain point could put in doubt the national independence of China. This is a perspective that the bureaucracy, and in particular the army, would never accept and against which they would fight with all the means at their disposal.

Thirdly, the social consequences of the march towards the market could spark off the struggle of the proletariat, which has been enormously strengthened. This struggle would inevitably have an effect on the official trade unions and the CCP itself.

Obviously it is true that the corrosion produced by private capital, the corruption, the social and regional differences, in the long run can all weaken the possibility of resistance on the part of the bureaucracy, strengthen the openly bourgeois wing within the bureaucracy and put into question the final outcome of this conflict. However, it is one thing to say that the outcome of the process is uncertain and that the balance of forces could eventually tip in favour of the restorationist forces. It is a radically different thing to say that this confrontation has already taken place and that the elements of contradiction are merely residual. The first statement is true, the second is false.

The position according to which the transition has been completed implies clear political consequences. The first concerns the definition of the state: a bureaucratic-

totalitarian state that defends the interests of capitalism implies a clear choice of slogans, programme and tactics. The labour movement would have to pose itself the problem of presenting transitional demands of a democratic character: freedom of the press, parliamentary democracy, etc.

However, such an approach would not correspond at all to the real situation inside the country, nor would it allow us to connect with the most advanced layers, who — as is also demonstrated by the material published by our international — are well aware of the need not to be confused with the "democratic" demands raised by the liberals (inside and outside China).

The development of the class struggle inside China will express itself also in the form of a conflict within the CCP, involving not just rank and file elements but also higher levels of the apparatus that tomorrow could find themselves in opposition to the bourgeois line. Given the traditions of the CCP and of the country, it is practically inevitable that the conflict would express itself also at the highest levels of the Party and thus of the bureaucracy, although at the moment it is not possible to accurately anticipate the timing and the forms in which this would unfold. The history of post-revolutionary China is one of sudden and violent turns which on more than one occasion have brought the country to the brink of civil war. These ruptures within the leadership have taken place even though every time right up to the last minute everything seemed to be under control and on the surface there seemed to be conciliation between the different positions and interests.

A correct definition of the process now taking place is indispensable if we want to develop demands and a programme that we need for the intervention in China. It is not by chance that the position of the "completed transition" remains silent on this question. What should be the economic and social programme'? What political demands should we raise? What is the relationship between the democratic and the economic demands? The question of the programme helps to place the analysis on a concrete plane.

What should our demands be?

Firstly, the right to organise trade unions and to set up workers' committees in the factories, as essential tools in the struggle to win decent wages and living conditions; - a programme of social welfare protection (healthcare, education, pensions, etc.) which would guarantee egalitarian social conditions, something which is completely missing at this moment in time. - A review of the agreements reached with the foreign investors, which would guarantee the basic interests of the workers and of the Chinese people; expropriation of those companies that refuse to accept the new conditions. - A new plan of short, medium and long term investments to redress the huge social imbalances that the rush towards capitalism has created, and that rationalises economic development with the aim of meeting the needs of the workers and peasants. - An offensive against the widespread corruption. - A public investigation under the direct control of the workers of all the privatisations that have taken place in the recent years, at the end of which a decision would be taken on which sectors and which companies should be renationalised.

The political demands flow directly from the economic and social programme: trade union rights, workers' control, workers' and peasants representation at all levels (factory councils, soviets) right of recall of the leaders, the right of expression and of organisation for all genuinely socialist positions.

Democratic demands which we would put forward in a normal capitalist context (parliamentary elections, freedom of the press, etc.) should be considered in an extremely conditional manner precisely because of the nature of the party in power in China (and thus of the regime that flows from this), which, over and above the labels we place on it, we cannot treat purely and simply as if it were the bureaucracy of a "normal" capitalist state.

Even now a genuinely proletarian government could apply such a programme without the need for a thorough social revolution. The State still has control of the financial and fiscal levers and of the strategic industries (often belonging to the army). It is evident that we have here is a "hybrid" programme in which certain tasks of the social revolution are mixed together with those of "reform" (in the sense given to that word by Trotsky when he refers to the political revolution being a "reform" of the Soviet state). This is dictated by the hybrid and still uncompleted nature of the process taking place.

To define the process of restoration as uncompleted and the bureaucracy as still a distinct organism from a normal bourgeois bureaucracy does not mean hypothesising a simple "return backwards" guided from above. What it means is that we take into account the following: 1) The decisive conflicts provoked by the process of restoration are not behind us in the past, but still have to unfold in the future; 2) The dynamics of the forces that are being played out cannot be reduced to two sides, proletariat and new bourgeoisie, with the state apparatus and the CCP being mere instruments of the latter; 3) The process can be considered as completed only once a genuinely bourgeois state apparatus is in place, which is not yet the case. On this road the bourgeoisie will have to come into conflict with important sections of the bureaucracy and also with the working class. The conditions for this conflict and the relationship between the different forces on the ground are yet to be defined. 4) This conflict will decide the future of the CCP, which will be torn apart by the two opposing camps. 5) Twenty years or more of opening up to the market have greatly strengthened the position of the bourgeoisie and imperialism. However, the outcome of this conflict will not be automatically determined solely by the forces operating within China, but will be deteimined by the world context as a whole.

May 23, 2006

A discussion on the facebook wall of Jorge Martin prompts us to make this letter public.   

A letter to Jorge Martin. by Jonathan Clyne  

The following is a letter I sent to Jorge Martin (Jordi) about his article Negative economic indicators pile up as China is hit by global capitalist crisis published on Friday, 12 December 2008 at http://www.marxist.com/china‐hit‐by‐global‐capitalist‐crisis.htm  

It shows that whatever excuses he might be making today about 'the delay of the crisis', his method was wrong then, as it is today. He never replied to my letter.

Dear Jordi,

I was disappointed when I read your latest article on marxist.com and saw that you quote statistics in a misleading way in order to try and prove that capitalism has, after a long gradual change, been established in China. You focus on the small picture, losing sight of the big picture. Let me give you some examples.

1. You write that “The Economist is forced to admit that China's ‘dreadful trade figures’ are a ‘blow to the world economy‘. These figures, they say, ‘are particularly shocking because China's racing trade has been an engine of world trade, and thus global growth.’”

If you are going to quote this week‘s Economist you should not just quote what they are writing about their feelings on one month‘s trade and FDI figures, but also what they write in another articles about the facts about domestic consumption in China. “Chinese manufacturers are well aware that they operate in one of the few large markets that is still showing a pulse. Retail sales in October were up by 22% compared with the same month in 2007—a slight drop from 23.2% in September, but an impressive figure nonetheless. That certainly exaggerates the country‘s economic vigour (growth in car sales, for example, is declining), but it would be a stretch to believe that China is in recession.” The article chronicles how falling world demand is causing Chinese export manufactures to find all kinds of ingenious ways to re‐route their goods to a booming domestic market.

2. You should not lose sight of another fact. Sudden drops in exports are nothing new for China. The same thing happened as part of the crisis in East Asia, and the world recession of 2001‐2003. Since China opened itself up to the world market it has never been in doubt that it would be, and has been, affected by a world financial crisis and recession. But the fact is that the massive increase in investments that the Chinese bureaucracy implemented in the past when trade suddenly dropped had the desired effect – China‘s growth was maintained after the initial trade shock.

As Alan likes to point out, nobody can foresee the exact date of any capitalist crisis and it is a bit of a tall order that the Chinese bureaucracy should be able to take measures against a deep recession outside of China before it has happened. What is remarkable about China is not that its trade has finally been hit by the world recession, but that in the past year China‘s trade has held up extraordinarily well. This has been a year in which world trade has been squeezed substantially.

The main point is that there is no general crisis of overproduction in China. In the main, the problems are imported and are being dealt with. And even if some, or even a large part of the gigantic stimulus package is not ‘new’ investments, but investment plans brought forward, that is completely irrelevant. The effect is the same. It will deal with the current crisis.

3. You should not get carried away by the figure of China‘s exports being 40% of its GDP. (Still that has at least some basis in reality compared to the 50% figure that Fred likes to mention. I have no idea what his source is for that). This does not mean that 40% of everything produced in China is exported. Only about 10% of everything produced in China is exported, which is substantial, but not decisive. The 40% figure is based on a simple way of comparing the trade dependency of different nations. It is not an analysis of the actual export content of a countries production. Again see another article in the Economist. It is called An old Chinese myth (http://www.economist.com/finance/displaystory.cfm?story_id=10429271).

Between 2005 and 2007, net exports contributed only two to three percentage points to the increase in GDP, whereas domestic consumption added eight to nine percentage points. The latest figures show exports to be even less significant. (http://www.economist.com/finance/displaystory.cfm?story_id=10688833). So, even in the unlikely event that exports entirely disappear, China would still have an extraordinary high growth rate.

Of course, because of the opening to the market there are some bubbly elements in the economy.

Nobody is claiming that there is no capitalist mode of production whatsoever in China. All I point out that it is not the dominating mode of production. You mention a housing bubble and give a few statistics to show falling prices. You do not mention that ―a fall in house prices will hurt Chinese consumers much less than their American counterparts, because Chinese households are not up to their necks in debt. Total household debt (including mortgages) amounts to only 13% of GDP, against 100% in America. During America‘s boom, it was easy to get a mortgage for 100% or more of the value of a home, but Chinese buyers have had to put down a minimum deposit of 30%.ǁ (http://www.economist.com/research/articlesbysubject/displaystory.cfm?subjectid=478048&story_id=12606998)

The basic problem with your article is its starting point – the idea that you can gradually and peacefully move from a deformed workers state to capitalism. This leads you into only seeing the small picture. You will always find some facts for your concept, as you will for almost any concept under the sun, but you will never get the big picture. That one will only get by basing oneself on tried and tested Marxist concepts and perspectives. Trying to push China into the capitalist mold you also end up with some strange bits of economic analysis.

1. You write that “it is not even clear that a devaluation of the yuan would help boost Chinese exports. Her neighbour South Korea has seen a devaluation of around 30% of her currency and still South Korean exports collapsed by 18% in November. Even if your products are cheaper, they are not going to be sold if there is no one out there to buy them!" Now, it is perfectly true that devaluation is not a very effective way of boosting exports. But that is not because there is ― "no one out there to buy them!" A completely absurd statement. Obviously the entire population of the world has not suddenly overnight stopped consuming commodities.

Devaluation is not a very effective means of increasing exports, because while it cheapens exports it also increases the price of imports and so, in an economy where a large part of the exports have an import content, it does not really make much difference. Neither the German nor the Japanese nor for that matter the Chinese export miracle were based on devaluations, on the contrary their currencies were continuously revalued. The miracles were based on increased productivity, due to much larger investments than their competitors. (The reason for keeping the Renminbi slightly undervalued has been at least as much in order to keep imports out and develop manufacturing in China, than to encourage exports). In past recessions China has gained market shares, probably at a faster rate than during booms. There is no reason to presume that the same thing will not happen now, not because of any devaluation, but because of the investment plan. There are still plenty of consumers out there who will buy Chinese goods, if the price is right.

2. You write “The Chinese have one of the highest rates of savings anywhere in the world, and the thinking is that if they can get them to spend that money, then the economy will be boosted by its internal market. However, the main reason for these high rates of savings is the fact that the capitalist reforms destroyed or scaled‐back the Iron Rice Bowl system of life‐long secure employment and social welfare programmes that existed in the past. Now, the average Chinese household has to pay for a large part of their health, education, pension and other related costs. They are saving because they are terrified of getting sick, losing their jobs, getting old, and need to pay for part their children's education costs.” This analysis is doubly wrong.

Firstly, the thinking is not at all if they can get them to spend that money, then the economy will be boosted by its internal market. It is only a small part of the Chinese government plan to directly put more money into people‘s pockets. The main part consists of investments and improving health and education.

Secondly, you seem to have a rather quaint view of savings, as if savings are treasures collected in a cave or at least in a bank vault, and if you give people more money it will simply be hidden away too. In fact, it is an elementary axiom of economics that savings = investments. The more people save the more is available for investments, unless the savings are literally put away in a cave or hidden in a mattress. Under capitalism, when people are heavily indebted, the axiom is not entirely true, because when economists talk about increased savings in times of crisis what they are really talking about is the tendency for people to try and reduce their debt. But the Chinese people do not tuck away their savings and do not have many debts. They put them in state banks, where they are safe and earn a relatively high rate of interest. The state then uses this money to pump it into the SOEs, thereby increasing their productivity and their ability to compete in the world market. The more that is saved, in China, the greater will investments be.

3. You write that “the average Chinese household has to pay for a large part of their health, education, pension and other related costs. They are saving because they are terrified of getting sick, losing their jobs, getting old, and need to pay for part their children's education costs. If you add to this the effects of rapidly falling house prices which will hit the urban middle classes, and the risk of rising unemployment, the real impact of any Keynesian stimulus plan is likely to be limited.” On the one hand you make a logical mistake. In effect, you say that the effect of taking measures to reduce unemployment will be limited because there is – unemployment! On the other hand (if we ignore the problem of falling housing prices which does not occur in every recession), you are in practice saying that the effects of Keynesianism would not be limited in China if the state simultaneously extends the welfare system to encourage spending by the masses. Thus, the Chinese capitalist state has the means at hand for capitalism to overcome a capitalist crisis, if the effect is 'limited' it is because of a policy error ‐ 'insufficient welfare'. A pure reformist position. Which is entirely different from my position that Keynesianism does not work under capitalism because the state does not own the commanding heights of the economy.

Anyway, I will leave things at that, at this stage. I am very much looking forward to discussing the whole issue when the international bulletin is published, and at the IEC next summer. 

The Communist Party of China at 90   

In the spring of 1921 the Communist Party of China was just an idea in the minds of a handful of revolutionaries led by  Chen Duxiu. Today its membership stands at more than 78 million. This is greater than the memberships of all communist and  social democratic parties in the rest of the world at the peak of their popularity combined. For the last 30 years, the CPC  presided over the fastest economic growth of any country in history, and within a decade China will be the world's No. 1  economy. This shift in the global balance of power will have profound consequences for mankind. 

When Marx wrote the "Communist Manifesto," the working class of England was only 2 million strong. Today China's urban working class is well over 450 million strong. China has more workers than the United States and Europe combined. There is no country better placed to validate or negate Marx's prediction that the increasing power of the working class will usher in a socialist world of plenty.

The creation of the largest proletariat in the world is an outstanding achievement of the CPC in recent times. This working class is not an ideological construct nor a proletariat defined by its "redness" or by quoting Mao Zedong, but one forged out of the planned development of the means of production; a real, industrious, educated and cultured working class, whose home is urban modernity, whose means of communication are mobile phones and the Internet, and whose world outlook is scientific and universal.

The CPC rules over an economy in which the commanding heights, the banks and major industries, are owned and controlled by the state. It is on this material foundation of public property, enshrined in the constitution, that the party and state rest. This has facilitated the macroeconomic guidance of the economy and enabled China to avoid collapse when export markets contracted in the great recession of 2007-2009.

Many prominent Marxist economists believe that underlying the world financial crisis was another crisis caused by the long-term tendency for the rate of profit to fall. Under capitalism as competition for profit drives investment, expenditure on machinery rises relative to expenditure on labor. This causes the average rate of profit to decline over the long term, eventually leading to sharp economic contraction as capitalists go on strike.

China's planned economy does not abide by the same laws of motion as capitalist states do. Despite the low profit margins of state-owned companies in China, these companies continue to make massive investments for the medium- and long-term future of the nation as a whole. One stark example illustrates the comparative advantages of planned economics. China will spend 67 times as much on low-cost housing this year as India plans to spend over the next five years!

Marx thought that the working class would seize control and ownership of society in the advanced capitalist countries and that modern industry would rapidly produce abundance following such revolutionary change. However, the revolutions that Marx envisaged broke out in countries without developed industry.

Accurately assessing China's present stage of economic development is important. It determines what can realistically be expected from its economy and provides a yardstick for international comparisons.

The aim of this article is to provide this yardstick not in abstract statistics but in comparison to the development of Asia's two large industrialised economies – Japan and South Korea. Such comparison vindicates the Chinese government's realism, provides encouraging indicators of China's company development, and clears away confusions introduced by some commentators.

To assess China's stage of economic development it is important not to confuse the size of its total GDP with the best indicator of an economy's productivity – its GDP per person. The latter, not the former, determines how developed an economy is.

It is officially recognized that China will overtake the US to become the world's largest economy within 10 years. At market exchange rates this will take place around 2019. On the IMF's latest calculations it is likely in 2016, if the comparison is made taking into account different prices in differing countries.

China overtaking the US to become the world's largest economy will certainly be a turning point in world history – ending 140 years of the US holding that position. But China's huge GDP growth has led some non-Chinese commentators to mistakenly claim that China is no longer a developing country. For example Gideon Rachman, the Financial Times chief foreign affairs columnist, claimed earlier this year: "Anybody who talks regularly to Chinese officials will be familiar with the mantra that 'China is a developing country'. But Shanghai, which I visited last week, mocks this modest description."

The claim that China is a developed, and no longer a developing, country is also used to spread a myth that China's economy is not "creative" – allegedly proved because China has not yet created brands as world famous as Apple or Google. According to British economist Will Hutton, for example, not only China but all of Asia outside Japan is unable to achieve this "creativity". He claims: "The reason why so few Britons can name a great Chinese brand or company… is that there aren't any." And: "Asia, except Japan, remains in essence a subcontractor to the West... China's... is an economy that does not innovate – it is the great copier and counterfeiter of Western technology. This may change over the next 200 years, but not during the lifetime of most of the people reading this column.... Not one of this century's general-purpose technologies will be made outside the West and Japan, which have held a monopoly for 300 years. Their lead will widen rather than narrow."

Actually the reality is China's government is entirely accurate in insisting that China is still a developing country. Even when China's GDP is as big as the US, given that China's population is more than four times that of the US, China's GDP per capita will still only be 23 percent of that of the US. China's very large GDP is important, for example in military defence, but even when China's GDP is the same as that of the US it will still be less developed than the US.

To make a real comparison of the present stage of economic development of China it is useful to take its present GDP per capita and see in which year other countries achieved that level. Taking internationally recognised statistics produced by the University of Pennsylvania, China's GDP per capita today has reached the same as Japan's in 1966 or South Korea's in 1986.

These are illuminating comparisons. Japan in 1966 and South Korea in 1986 were no longer primarily agricultural. But the glory days of the international impact of Japanese and South Korean industrialisation still lay ahead. By 1966 Japan's Toyota, protected by tariff barriers and restrictions on inward investment in a way China's car companies are not, was a significant force in the domestic car market but not yet a large scale exporter. South Korea's Samsung in 1986 was entering the high tech market, becoming a leading manufacturer of memory chips, but it was a decade before it became the style leader it is now.

By the mid-1960s and 1980s, the sectors Japan and South Korea had built themselves on were heavy industry, steel and shipbuilding, and domestically competitive motor cars. In short they precisely resembled China's economy today!

A significant difference to 1966 or 1986 is that the world's leading economy, the US, was less developed than today. The gap between the US and China now is bigger than that between the US and Japan and South Korea in 1966 or 1986.

To put numbers on this, in 1966 Japan's GDP per capita was 50 percent that of the US, and in 1986 South Korea's GDP was 30 percent that of the US. China's GDP per capita today is however only 19 percent that of the US. China today faces much more advanced competition from the US than Japan or South Korea did.

What, therefore, would we expect from this comparison? First, in terms of the industries in which China is strong you would expect it to look more or less as it does today – at its present stage of development you would not expect China to have brand names with the global recognition of Apple or Google. At this stage of their development Japan or South Korea didn't have them either. But within two decades Japan and South Korea did achieve them in Toyota, Honda, Sony, and Samsung.

Today, China's Haier is the world's largest domestic appliance manufacturer, Huawei is likely to overtake Ericson as the world's largest telecoms equipment producer in the next two years, and China is already the world's largest manufacturer of high speed trains.

In short, China's development today is entirely equivalent to Japan or South Korea at a similar stage of their economic growth. And in the following two decades of their economic development Japan and South Korea's brands stormed the world.

To make a real comparison of the present stage of economic development of China it is useful to take its present GDP per capita and see in which year other countries achieved that level. Taking internationally recognised statistics produced by the University of Pennsylvania, China's GDP per capita today has reached the same as Japan's in 1966 or South Korea's in 1986.

The author is a columnist with China.org.cn.

by Heiko Khoo 

China’s rise in the world economy was produced by changes in work and the working class. New workplaces and work practices diversified the composition of the working class. Nowadays there are two main categories of urban workers. The traditional working class predominantly employed in state owned units, and migrant workers generally employed by the private sector or in enterprises of hybrid ownership. 

I shall focus on the new migrant workers and look at how their protests and demands relate to those of the traditional working class. For the Communist Party of China the trade unions are central to the maintenance of legitimacy, therefore I shall assess how the Chinese trade unions act and react to workers demands and look at ways that workers express their demands and organise to attain them. 

The ACFTU 

The All China Federation of Trade Unions (ACFTU) was formed as a militant workers organisation in 1925. However, after liberation in 1949, the union generally acted as a transmission belt to assist the party and management to increase production and promote party ideology. The trade unions were almost abolished in the Cultural Revolution, yet it was in 1975 that the right to strike was included in the constitution. Even though the launch of the reform era after 1978 saw the ACFTU reactivated, the right to strike was eventually removed from the constitution in 1982 following the strikes in Poland led by Solidarity.

At the time of the Tiananmen Square protests in 1989, the ACFTU expressed support for the students, but new independent workers’ organisations, like the Beijing Autonomous Workers’ Federation, claimed the right to supplant the ACFTU as the voice of the workers. The Party leadership saw these organisations as a direct challenge to Communist rule. Thus after the suppression of the Tiananmen Square protests, plans for greater autonomy for the ACFTU were shelved. [1]

With the growth of the private sector and multinational investments, the ACFTU straddles the division of interests between capital, labour and the state. The trade unions have generally been viewed as subordinate to the party, state and business interests. Therefore scholars have overwhelmingly emphasised problems of trade union legitimacy (Jie Shen 2007, Anita Chan 2005). In general the role of the ACFTU was limited to those of a welfare and social organisation for the workers, providing social services and advising workers about legal rights. Nevertheless, the ACFTU has promoted changes from above, which significantly improve the legal rights of the working class, like the 2008 Labour Law. These new legal rights often act as a focal point around which workers’ activism is galvanised.

There are signs that reformers within the ACFTU are trying to engage the key issues of fostering democratic workers’ representation. At a structural level the union organised an extraordinary unionisation drive in recent years. Membership rose from 123 million in 2003 [2] to 226 million in 2010.[3] Importantly, more than half of the 14 million new members in 2009 were migrant workers. [4]

Analysis of workplace unions indicates that although the trade unions are generally controlled from above and are intimately connected to party organisations, there is nevertheless a notable degree of flexibility. Research into the outlook and practices of trade union chairpersons indicates that there are a significant minority of workplaces where the workers utilise workers’ congresses and official union structures as avenues to express grievances, and where competitive democratic elections take place. These tend to be in state or collective enterprises rather than private or foreign funded enterprises (Hishida et al 2010). These studies reveal that increasing differentiation and complexity in the work environment have brought about variations in forms of workplace representation by the unions.

The composition of the urban workforce

The division between the traditional and migrant urban workforce, is revealed in figures from the National Bureau of Statistics. In 2008 there were 64 million urban workers employed in state owned units, and 29 million employed in Share Holding and Limited Liability Corporations. These workers are overwhelmingly traditional urban workers.

Migrant workers predominate in private sector urban employment. This sector increased its size from 10 million workers in 1999 to 51 million in 2008. When one includes the 16 million workers employed by foreign, Hong Kong, Macao and Taiwanese capitalists in urban areas, the private sector figure for urban employment is over 67 million.[5] These workers are overwhelmingly drawn from the migrant workforce.

The rise of market relations generated new and wealthy social classes, officially defined as the ‘new social strata’. At the upper end of the wealth scale, capitalists cultivate intimate connections with party and state power. This is seen by some as being instrumental in establishing a dominant position for private capital (Dickson 2008, Minxin Pei 2006).

However, defining Chinese corporate ownership forms is an area of considerable controversy. Recent research indicates that the extent and influence of privately owned companies has been considerably overestimated (Yasheng Huang 2008, Dic Lo 2010). When Chinese workers confront the management of foreign owned enterprises or those owned by Hong Kong, Macao and Taiwanese capital, the Party and state can gain popularity by defending workers’ rights.

New Labour and the hukou

The planned economy developed in China in the 1950s was based upon state-owned heavy industry. Workplaces were semi-enclosed entities, which acted as a welfare state as well as a productive entity. China’s household registration system, the hukou, was introduced in 1951 and tied people to their place of birth. Without a hukou, one could not get access to food rations, work, healthcare, education or housing. The hukou system severely restricted the movement of labour, particularly migration to the cities from the countryside. This facilitated the centralised bureaucratic planning of national economic life. 

With the strengthening of the private sector and the relaxation of central planning, control over migration based on the hukou diminished, as access to goods and services became a financial matter. Today, employment in urban workplaces grants access to basic level social services. However, migrant workers rarely enjoy full access to these services. If migrants are registered in their home town, they continue to suffer discrimination at multiple levels, in wages, healthcare provision, pensions and insurance, which are all designed to serve those with an urban hukou.[6]

Urban Migrants

Of an estimated 150 million migrant workers in the cities over 61% are aged between 16 and 30 years. Most want to make the city their permanent home. This desire contrasts sharply with ten years ago when over 89% intended to return to the countryside. In the last decade a sea change in attitudes occurred in the outlook and aspirations of the young generation of migrant workers. This is reflected in their assertiveness; only 6.5% fear making complaints when their rights are infringed, and 45.5% of new migrants are prepared to lodge collective complaints.[7]

Migrant workers employed in manufacturing are mostly housed in mass dormitories. These factories are organised as semi-enclosed environments. On the one side these circumstances facilitate surplus value extraction, as the labour force can be called to work on demand; and on the other side, it generates a concentration of workers with common interest and experience, whose potential for organisation and resistance is considerable.

Working alongside official organisations like the Youth League and sympathetic local officials, an NGO called the Chinese Working Women’s Network operates in Shenzhen’s Special Economic Zone. It runs an extensive propaganda, agitation and organisational network, which successfully penetrates factory dormitories and organises workers to defend their rights as defined by the law. For example, in two factories owned by transnational companies, workers’ committees were elected ‘from below’ by secret ballot, in order to monitor the application of codes of conduct and laws as they affect the rights of the workers.[8]

It was private companies owned by Taiwanese and Japanese capital that were the focal point for the spring and summer of worker discontent in 2010. Foxconn employs 920,000 workers in China, 470,000 of them in two factories in Shenzhen. [9] The company is owned by the Taiwanese giant Hon Hai Precision Industry Co. Following the suicide of 12 workers at the Shenzhen plants, management boosted basic wages from $135 a month to $293 a month [10] and engaged in colourful campaigns to discourage workers from jumping to their death.

Old Labour and Resistance

Resistance to privatisation and restructuring of state owned enterprises came to a head in the late 1990s. As a concession to the workforce in the process of reforming state enterprises, there was increasing lip service paid to the democratic management rights of the workers as defined in the constitution. Under articles 16 and 17, state-owned and collective enterprises “practise democratic management through congresses of workers and staff and in other ways in accordance with the law.”[11] The process of restructuring in state-owned enterprises often gave rise to conflicts. The organisational focus for successful forms of resistance was the ‘Staff and Workers’ Representative Council’, which are legally entitled to veto and control management (Stephen Phillion 2009, Anita Chan 2005).

On July 24th 2009 workers at Tonghua Iron and Steel went on strike against a takeover bid by the privately owned Jianlong Steel Holding Company. During the protests, workers beat an executive of the company to death. As a consequence the Jilin State-owned Assets Supervision and Administration Commission (SASAC) cancelled privatisation. Zhang Wangcheng, a professor of the China Labour Studies Centre at Beijing Normal University, blamed the trade union for the failure to pre-empt the unrest and reduce tensions.[12] A month later the ACFTU published a statement that privatisations are illegal unless agreed by the workers’ congress.[13]

The Character of Recent Strikes and Unrest

The Chinese scholar, Yu Jianrong, has identified several characteristics of mounting worker discontent. These include, the sudden and spontaneous nature of disputes, the disbelief in official responses, the distrust of local authorities, and the faith in national government.[14]

Inequality and a perception of injustice against blatant forms of discrimination, rooted in the Hukou system, are also a major cause of anger amongst migrant workers. The migrant workers with a secondary school education are considered to be a serious threat to social stability, as they often feel they suffer from systematic discrimination. They may be able to ignite and sustain flames of revolt, which would go to the heart of the contradiction between the official rhetoric of building socialism and the practical experience of corruption, exploitation and the misuse of power.[15]

One of the key characteristics of unrest by workers, peasants and the poor, in present day China, is the legalistic form that it adopts. Protests concentrate on rights specified in the law. The availability of modern means of duplication and access to information has enabled militancy to be energetically channelled into exposing the discrepancy, between the arbitrary nature of the exercise of power on a local level, and the contrastingly positive legal rights of the poor. Simply by copying laws and directives and using them as a shield and weapon, the subaltern classes have discovered a powerful means of unifying their actions, morale and sense of just cause, and have been able to avoid the repressive measures traditionally associated with dissidence and rebellion.[16]

When a strike broke out on May 17^th 2010 at Honda’s components factory in Foshan, it began as a dispute about low salaries, soon some 1800 workers joined in. They proactively demanded wage rises, new pay scales and career structures, and democratised their workplace union representation. This brought to a head the need for unions to be controlled by the workers themselves.[17] The ACFTU leadership nationally announced that democratic elections would replace the appointments of union officials from above, ‘step by step’, which seems to endorse the Honda workers’ ideas.[18]

An appeal by the strikers indicates the development of a national workers’ consciousness.

“Our struggle for rights is not a struggle to protect the mere interests of 1800 workers. We are concerned with the rights and interests of the workers in the whole country. We want to demonstrate a good example of the struggle for rights of workers.”[19]

In the immediate aftermath of the Honda strike a wave of similar disputes broke out in factories across China, but were most common in Guangdong province. In order to regulate and control these spontaneous outbursts, the Guangdong Province People’s Congress discussed a new law, the ‘Regulations on the Democratic Management of Enterprises’. The proposed regulations envisaged a significant extension of workers rights, for example, if 20% of workers in any enterprise demand an increase in wages, the workers would have the right to elect their own representatives to negotiate with management. In the event of their demands being ignored the workers would be able to strike, and the management would not be able to sack them.[20] The proposals also envisaged that workers would be guaranteed a one third representation on the board of directors and be able negotiate on a wide range of issues. Hong Kong manufacturers claim to have successfully lobbied Beijing to shelve these proposals, warning that giving workers a say in management will provoke “endless fights in the boardroom” because “employers want to pay less and employees want to get paid more”. [21]

Workers’ discontent in state-owned and formerly state-owned enterprises often adopts workers’ democracy as its channel for expression through the staff and workers’ representative congress.  The strikes in Honda and the subsequent legal debates indicate that migrant workers are adopting much the same methods and ideas as workers from state-owned enterprises. It seems certain that the issue of the right to strike, democratic control of the unions, and workers’ representation will be rekindled soon, as these questions appear to be hardwired into contemporary Chinese labour relations.

From John Sexton in Beijing from China.org.cn 

News that Shenzhen officials have told Foxconn workers to value their lives, and stop the rash of suicides that is jeopardizing bonuses, promotions and Steve Jobs' reputation, prompts the question just what value workers should place on their lives. 

Since reform and opening up, hasn't money been the measure of all things in China? And hasn't the Shenzhen government put a precise value on the lives of workers by setting the minimum wage at 1000 yuan a month? (A complex mathematical formula yields a figure high enough to prevent mass disorder but low enough to stop multinationals decamping to Vietnam.)

Now we clearly can't pay workers as much as senior officials, who have a responsibility to keep friends, colleagues, and investors entertained in a punishing round of restaurants, karaoke bars and massage parlors. But we need a figure that will act as a disincentive to self-termination. A government inquiry is clearly called for, and should include a study trip to other emerging economies such as South Africa (in time for the World Cup) and Brazil.

There are reports the company has asked its employees to sign a form renouncing their parents' rights to extraordinary compensation if they kill themselves. This is a wise move, since over-generous compensation previously offered was clearly an incentive to self-immolation. No doubt some of those who committed suicide comforted themselves with thoughts like "Now Mum and Dad will be able to afford the bedroom curtains they always wanted," as they hurtled towards oblivion.

Some journalists have been heard to remark that the workers' dormitories are far better than the pigsties they live in back in the villages. This reflects the deep concern of the media for the weaker social classes and belies the idea that they are only interested in compiling rich lists of green technology billionaires.

The local trade union, after an exhaustive and penetrating inquiry, decided the workers who committed suicide each had their own individual reasons for doing so. In line with the union's profound belief in the superiority of collective over individual action, perhaps they should be urging something more along the lines of a Masada-style event.

Meanwhile, some social scientists have pointed out that, by committing suicide, the workers are simply conforming with statistical laws that determine a definite proportion of the population kill themselves each year. It will no doubt comfort friends and family that their loved ones' deaths occurred strictly in line with the scientific concept of development.

As far as I know, nobody has so far asked the workers their opinion. But given their limited education, what enlightenment could we expect from them?