Capitalism in a Deformed Workers’ State

China: Towards the Brink

First published by the (then-revolutionary) Internation Bolshevik Tendency on April 18, 2004

Millions of workers, poor peasants and other victims of the growth of capitalist social relations in China have been mobilizing on a massive scale. Their organizations are primitive and localized, but the numbers and intensity of the resistance are rising. In the spring of 2002, 50,000 oil workers from Daqing and 30,000 metal workers from Liaoyang in the industrial northeast rustbelt organized a series of street demonstrations, road blockages and sit-ins to protest cutbacks and layoffs. While these actions were carried out to defend individual state enterprises and the entitlements of laid-off workers, their logic points to the need for a broad offensive to eradicate the capitalist tumor that threatens to destroy the institutions of nationalized property and central planning created by the 1949 Chinese Revolution.

The expropriation of the Chinese ruling class and its imperialist patrons freed China from the domination of the world market. The new regime headed by Mao Zedong rapidly introduced measures that produced immediate and substantial improvements in living conditions, healthcare and education. The Chinese Communist Party (CCP) cadres were confident that they were laying the foundations of a new socialist China. However, the bureaucratic Soviet-model command economy introduced by the CCP did not—and could not—result in a society where the working class exercised direct political power, an essential precondition for genuine socialist development.

China is a “deformed workers’ state,” qualitatively similar to North Korea, Vietnam and Cuba. In these societies capitalism has been uprooted, but political power is monopolized by a privileged bureaucratic caste organized by the “Communist” Party. The exclusion of the producers from decision making prevents a collectivized economy from performing efficiently, especially after the rudimentary stages of industrialization have been achieved. Moreover, as Marx and Lenin repeatedly asserted, socialism is conceivable only on the basis of an international division of labor and the conquest of power by the workers in the advanced capitalist countries. The ideology of “socialism in one country” espoused by each nationally-limited Stalinist bureaucracy is an expression, at bottom, of their desire to reach an accommodation with world imperialism.

The scrofulous bureaucratic caste that heads the CCP has no necessary social function. It is solely concerned with attempting to preserve its own privileges and prerogatives. Its program is a mishmash of short-sighted improvisations and bits and pieces of policies borrowed from two fundamentally incompatible economic systems: competitive capitalism and central planning. As contradictions continue to accumulate, the CCP’s room for maneuver is shrinking. China’s bourgeoisie and its proletariat are both far stronger today than they were in 1949 when Mao Zedong’s peasant-based guerrilla army took power. The CCP bureaucracy is vastly weaker in terms of morale, self-confidence and social authority.

Soon after Mao’s death in 1976, Deng Xiaoping’s faction in the CCP took power promising to accelerate growth by introducing elements of market competition. While denounced as “capitalist roaders” by its rivals, Deng’s faction saw the use of capitalist methods as a means to strengthen, rather than liquidate, the party’s position within the workers’ state.

To this day many strategic, and potentially profitable, sectors of the Chinese economy remain closed to private investment. However, China is playing an increasingly important role in the world economy—annual foreign direct investment (FDI) rose from $1 billion in 1983 to $53 billion in 2002. Today China ranks sixth in total trade (the combined value of exports and imports) although much of this is made up of the in-house activity of foreign corporations that import machinery and other equipment and export finished products:

“Walk into any Wal-Mart and you won’t be surprised to see the shelves sagging with Chinese-made goods—everything from shoes and garments to toys and electronics. But the ubiquitous ‘Made in China’ label obscures an important point: Few of these products are made by indigenous Chinese companies. In fact, you would be hard-pressed to find a single homegrown Chinese firm that operates on a global scale and markets its own products abroad.
“That is because China’s export-led manufacturing boom is largely a creation of foreign direct investment (FDI), which effectively serves as a substitute for domestic entrepreneurship.”

—Y. Huang, T. Khanna, Foreign Policy, July/August 2003

The dramatic growth of the consumer-goods sector over the past quarter century, which has meant higher living standards for a significant minority of China’s population, has also sharpened social contradictions, thus undermining the stability of the regime. Capitalist development is severely distorted by the CCP’s ability to set the rules and by state control of energy, heavy industry and finance.

The thousands of newly-minted millionaires in the People’s Republic of China are anxious to be rid of the CCP and to dismantle what remains of centralized planning. This, however, cannot be achieved through a gradual accumulation of CCP “reforms.” The transition from a system of collectivized property to one where private property predominates requires a social counterrevolution. The bureaucracy cannot transform itself into a new bourgeoisie. While a section of CCP cadres could use their positions to carve out individual fortunes, many more would stand to lose everything from capitalist restoration.

The Bureaucracy & Corruption

The centralized monopoly of political power in a society increasingly oriented to the pursuit of private gain is a recipe for monumental corruption. Every enterprise in China today, even the largest ones, depends on the political favors it commands, or is thought to command. Nothing is more important than having political, administrative and financial connections. This is known as the guanxi system. The bureaucracy’s contradictory position as a mediator between workers and capitalists is expressed in its attitude toward guanxi. Personal enrichment is widely viewed as a legitimate reward of office, yet corruption is a crime punishable by execution, and the death penalty is imposed frequently, if inconsistently.

The guanxi system has enabled children of the top political leaders to amass considerable wealth. In the 1990s Deng Zhifang, former president Deng Xiaoping’s youngest son, got rich in real estate and finance, while Jiang Mianheng, eldest son of former president Jiang Zemin, made a fortune as Shanghai’s “King of IT.” Deng Sr. was well known for his aphorism “to get rich is glorious,” but there are limits, and some of the CCP “princelings” have occasionally had their wings clipped.

Officials who are prosecuted for corruption have either run afoul of higher-ups or have been exposed in the media. Uncovering corruption has become a standard weapon in intra-bureaucratic warfare, but it can be a dangerous game as sometimes the whistle blowers themselves end up in prison. Some forms of corruption (e.g., participation in organized crime, land privatizations, large-scale theft of state assets) are punished severely, while other, lesser infractions are routinely ignored (e.g., the private use of state-owned limousines, imposition of unofficial road tolls, awarding contracts and soft loans to cronies). Favoritism is accepted as part of the guanxi system.

One of the most spectacular cases of corruption took place in Shenyang, China’s fourth-largest city, in the northeast province of Liaoning. When revelations of the sale of positions, theft, smuggling, contract-rigging and murder first started bubbling to the surface in 1999, they were vigorously suppressed. Zhou Wei, a retired official who tried to report the corruption, was sentenced to two years in a labor camp, and Jiang Weiping, a journalist who wrote a series of exposés for Front-Line, a Hong Kong magazine, was jailed for nine years. When the government did eventually crack down, several better-connected suspects managed to escape punishment, including Bo Xilai, Liaoning’s governor, whose father happened to have a seat on the CCP’s ruling Political Bureau.

The official investigation uncovered a network of corrupt police, prosecutors, judges, legislators, customs officers, bankers and executives of private companies all working together in Shenyang. One senior official, Liu Yong, went so far as to arrange the murders of more than 30 people in order to free up real estate that he wanted to develop. The city’s executive deputy mayor, Ma Xiangdong, spent $4 million in public funds gambling in Macao and Las Vegas. Shenyang’s mayor, Mu Suixi, hid $6 million worth of gold bars and 150 Rolex watches in the walls of his two country homes, which he unwittingly furnished with a collection of fake antiques.

Corruption on this scale poses an obvious threat to the survival of the deformed workers’ state. The appropriation of huge quantities of state property by well-connected bureaucrats is the most frequent complaint made by ordinary Chinese citizens, who see corruption as a major factor in the collapse of state enterprises and the resulting mass unemployment. A call for the creation of a network of workplace committees to safeguard public property and root out corruption would have widespread appeal—and potentially revolutionary implications. To be effective such formations would have to be democratically elected in the offices and factories by rank-and-file workers and be completely independent of the CCP apparatus. Such committees could represent an important step in the mobilization of the Chinese proletariat against the rising tide of counterrevolution.

The People’s Liberation Army

For years the People’s Liberation Army (PLA) officer corps, an integral part of the bureaucracy, ran its own farms, textile factories and other operations. Deng Xiaoping’s decision to permit PLA enterprises to produce commodities for sale to the general public predictably resulted in widespread corruption and the growth of pro-capitalist sentiment within the officer corps. In State and Revolution, Lenin noted that the state, reduced to essentials, is an armed force that defends the interests of a particular social class, i.e., its property system. Any state is in imminent danger when elements of its military begin to develop an attachment to a different social system. The most overtly pro-capitalist wing of the CCP, represented in the late 1990s by Prime Minister Zhu Rongji, was comfortable with the PLA’s growing attachment to the market. But the majority of the bureaucracy was not and, in July 1998, the government demanded that the military divest itself of its business interests. In early 1999 the regime took a further step and centralized military procurement, thereby severing many of the threads connecting local military commanders and entrepreneurs.

The CCP is a profoundly heterogeneous formation containing many shades of political opinion, from outright pro-capitalists to orthodox “Marxism-Leninism-Mao Zedong Thought” leftovers from the disastrous Cultural Revolution of the 1960s. The party is cohered by two things: a fear that China will descend into social chaos if the bureaucracy loses its grip and a desire to preserve its personal security, political authority and privileges. The CCP leadership is well aware of the economic, social and political disaster that resulted from capitalist restoration in the Soviet bloc, culminating in the fragmentation of the former USSR, Czechoslovakia and Yugoslavia.

Those bureaucrats less well placed to get a share of the loot—a category that now includes most PLA officers—have serious reservations about continuing down the path of privatization and integration into the capitalist world market. The left wing of the bureaucracy—the more conservative elements who wish to preserve the existing social institutions—are concentrated in the declining northeast and the poorer and less developed western and central areas of the country. China’s booming southeast, where capitalist activity is centered, is home to the right wing of the bureaucracy, i.e., that section most willing to press economic “reform” all the way to capitalist restoration.

The intra-bureaucratic squabbles have so far been contained within the existing structures of the CCP. A middle faction of “pragmatists” has maintained a precarious balance between the conservatives and the pro-capitalist “reformers.” The pragmatists hope that continued private-sector growth and the further integration of China into the world market will somehow raise productivity and living standards enough to allow the bureaucracy to muddle through.

Until recently the most prominent conservative in the CCP was Premier Li Peng—the analogue of Egor Ligachev or Gennady Yanayev in the Soviet party prior to the August 1991 counterrevolution. The leading figure among the pro-capitalists in the CCP—the Boris Yeltsin analogue—was former Prime Minister Zhu Rongji. Deng Xiaoping’s successor, President Jiang Zemin, played the role of Mikhail Gorbachev, balancing between the two extremes.

China’s perestroika has been relatively successful in part because it has not been accompanied by glasnost, or democratization. Jiang held the CCP together by permitting capitalist development, while preserving state ownership in key economic sectors and jealously guarding the bureaucracy’s control of the media, the police, armed forces and all regulatory and juridical institutions. Jiang’s replacement, Hu Jintao, was selected because he is a pragmatist committed to keeping the CCP intact. But as insurance, Jiang has retained the position of chairman of the Central Military Committee, just as Deng Xiaoping did when he “retired.”

For the working class and poor peasantry the defense of the system of socialized property and state planning is a matter of life and death. While advocating the overthrow of the CCP through proletarian political revolution, Marxists unconditionally defend the Chinese deformed workers’ state against capitalist restoration, and are prepared to bloc militarily with Stalinist bureaucrats against counterrevolution.

In August 1991 many Soviet workers recognized the Yeltsinites as their enemies, but the only instruction from the conservative Stalinist bureaucrats of Yanayev’s Emergency Committee to the working class was to do nothing. A small revolutionary organization prepared to intervene before the counterrevolution gathered momentum could potentially have rallied enough pro-socialist workers to have tipped the balance. Yeltsin’s victory was not inevitable—the absence of revolutionary leadership conditioned the outcome.

A Chinese capitalist state will not be established with the speed and relative bloodlessness seen in Russia. Millions of working people in China who understand that their interests are counterposed to those of the “capitalist roaders” have already begun to act entirely independently of the bureaucracy. The rhythm of developments has been far slower and more uneven in China than in Russia in the late 1980s. There is still an opportunity for the development of the consciousness, program and organization necessary to successfully defend the collectivized property system and oust the CCP bureaucracy.

Ostensible Trotskyists & China

The program of proletarian political revolution was initially advanced by Leon Trotsky for the bureaucratized Soviet workers’ state in the 1930s. Most ostensibly Trotskyist organizations today which claim to uphold Trotsky’s perspective fail to do so in practice. The Spartacist League/U.S. (SL), for example, has oscillated wildly on China. In 1997 the SL gloomily announced that CCP plans to sell off a bunch of state-owned industries “would mean the liquidation of what remains of the planned, collectivized economy and the restoration of capitalism in China” (Workers Vanguard [WV], 3 October 1997, emphasis in original). A couple of years later, WV was still claiming: “the main force leading the drive for capitalist restoration today [in China] is the Stalinist regime itself” (WV, 11 June 1999). In 2000, the SL announced that China’s entry into the World Trade Organization (WTO) would effectively signal the end of the deformed workers’ state:

“WTO entry would mean eliminating what remains of the state monopoly of foreign trade, further subjecting the economy to the pressures of the world capitalist market. It would thus act as a battering ram to force through the CCP’s 1997 decision to privatize the bulk of state-owned industry.”

—WV, 7 April 2000

This pessimistic prognosis has been proven wrong. China’s membership in the WTO represents a significant step toward integration into the world market and increases the pressure for capitalist restoration, but so far there has been no dramatic privatization of the state sector. The SL’s characterization of the Chinese Stalinists as the leading force for capitalist restoration recalled its refusal to bloc militarily with Yanayev’s Emergency Committee against the Yeltsinite riff-raff in August 1991. They criticized our position of military support to the Stalinist coupsters, who, the SL claimed, “were just as committed to capitalist restoration as Yeltsin” (“The International Bolshevik Tendency—What Is It?”).

The leaders of the Internationalist Group (IG—a 1996 split from the SL), who uphold the Spartacists’ 1991 position on the coup for reasons of personal prestige, criticized the SL for taking an essentially identical approach toward China. The SL responded by claiming that the IG were Stalinophiles who ascribed a revolutionary capacity to the bureaucracy. IG leader, Jan Norden, was denounced for having “endowed the geriatric Stalinist has-beens [in East Germany] with some kind of instinctive revolutionary appetites” and for promoting, “the illusion that a wing of the Beijing bureaucracy will itself take up the fight against capitalist counterrevolution” (WV, 11 June 1999). In fact, it is entirely possible that elements of the Stalinist apparatus would side with the workers against capitalist restoration. And revolutionaries would certainly seek to exploit contradictions within the bureaucracy to strengthen the position of workers mobilized for independent political action.

The SL criticisms of Stalinophilia are particularly odd coming as they do from a group which paraded around as the “Yuri Andropov Battalion” in the early 1980s, and which “hailed” Leonid Brezhnev’s intervention in Afghanistan. The SL’s Stalinophilia reached its height in January 1990 when James Robertson, the group’s founder/leader, tried to arrange a personal meeting to offer free advice to three top Stalinists in East Berlin: Soviet General B.V. Snetkov; Markus Wolf, a top East German intelligence officer; and Gregor Gysi, leader of the ruling party (see “Robertsonites in Wonderland,” 1917 No. 10).

The SL’s Stalinophilic zigs were accompanied by occasional Stalinophobic zags, as, for example, when WV denounced the Soviet termination of an imperialist provocation (the KAL 007 spy plane incident of 1983) as “worse than a barbaric atrocity” (see Trotskyist Bulletin No. 1). The IG represents the SL frozen in “zig” mode—they have never repudiated the approach to Gysi, Snetkov and Wolf, and would presumably endorse a similar attempt to brainstrust the leadership of the Chinese bureaucracy.

Unlike the IG, the SL’s approach is not frozen—SL cadres are at bottom not loyal to a particular political program, but rather to a leader, James Robertson, who can shift the group back and forth between different political positions at will. After several years of treating the Chinese Stalinists as simply capitalist-restorationists, the SL, perhaps chastened by the failure of its dire projections to materialize, has quietly changed its line and is once more discussing the possibility that serious resistance to capitalist restoration could split the CCP.

The SL’s failure to offer any explanation for its earlier Stalinophobic deviation has not deterred it from indignantly berating the unscrupulous reformists who lead the Committee for a Workers International (CWI) for adopting the same position:

“Commenting on the 16 th CCP Congress, the British-centered tendency led by Peter Taaffe wrote: ‘China is on the road to complete capitalist restoration, but the ruling clique are attempting to do this gradually and by maintaining their repressive authoritarian grip’ (Socialist, 22 November 2002). By labeling China’s government an ‘authoritarian’ capitalist-restorationist regime, the Taaffeites and their ilk can justify supporting imperialist-backed anti-Communist forces in China in the name of promoting ‘democracy,’ just as they supported Boris Yeltsin’s ‘democratic’ counterrevolution in the USSR in 1991.”

—WV, 21 November 2003

The SL sagely intones:

“A capitalist counterrevolution in China (as in East Europe and the former USSR) would be accompanied by the collapse of Stalinist bonapartism and the political fracturing of the ruling Communist Party.”

—Ibid.

But in August 1991, during the terminal political crisis of the Soviet Stalinist bureaucracy, the SL adopted the same attitude they now attack Taaffe for, and claimed that there was no difference between the Emergency Committee “conservatives” who wanted to preserve the Soviet Union and the Yeltsinite rabble who wanted to restore capitalism.

David North’s Socialist Equality Party, which also claims Trotsky’s political heritage, regularly features articles about China on its web site that studiously avoid the elementary question as to whether China is a bourgeois or deformed workers’ state. The Northites have a record of consistent Stalinophobia, having sided with Boris Yeltsin, Lech Walesa and virtually every other counterrevolutionary in the Soviet bloc. We expect that in any future showdown they will once again come out squarely on the side of “democratic” counterrevolution.

Other supposedly revolutionary groups are less coy. The British Workers Power group, for example, claims that the Chinese deformed workers’ state has already made a seamless (and unremarked) transition into a capitalist state. But serious bourgeois analysts know better:

“The biggest myth about China in the 1990s was that the country ceased to be socialist. Despite a self-proclaimed communist government, operating through a Politburo, a Central Committee and a national network of 50 million Party members, this myth became received opinion. It was repeated in newspapers and magazines, not to mention boardrooms, around the globe. The official credo of ‘socialism with Chinese characteristics’, propagandised daily by the official media, was taken by the outside world to be a Chinese formulation for the still politically difficult concept of capitalism…. The country in the 1990s was not a free market economy, it was a fundamentally socialist country undergoing some Chinese modifications.”

—The China Dream, Joe Studwell

Chinese Stock Markets, Banks
& WTO Membership

Capitalism has made dangerous inroads in China to date, but it is still constrained within a social/political order antithetical to the free market. Unlike in a capitalist market economy, neither China’s stock markets nor its banks function to channel investment to enterprises that seem most likely to generate high rates of profit. In China, investment is controlled by the state apparatus, and the ultimate criterion is not profit maximization, but the maintenance of the position and control of the ruling bureaucracy. This is seen as positively perverse by bourgeois commentators:

“In the early 1990s, when China was registering double-digit growth rates, Beijing invested massively in the state sector. Most of the investments were not commercially viable, leaving the banking sector with a huge number of nonperforming loans—possibly totaling as much as 50 percent of bank assets.”

—Y. Huang, T. Khanna, Foreign Policy, July/August 2003

The capitalist stock market permits companies to raise capital through the sale of “shares” of existing assets and future profits. Share prices fluctuate according to potential profitability and any investor who controls a majority of a company’s shares can determine its decisions.

For a capitalist share market to operate properly, information about the profitability of competing investment opportunities must be widely accessible. This is why, even under conditions of strict press censorship, the financial press in capitalist countries is usually more or less unfettered. The markets have elaborate rules governing disclosure, accounting, auditing and reporting which, in theory, eliminate distortions due to differential access to information. While big players routinely ignore prohibitions on insider trading, violations on a sufficiently large scale are subject to sanctions because they can destabilize financial markets and thus threaten the interests of the capitalist class as a whole.

The Shanghai and Shenzhen share markets have been operating for two decades and today 60 million Chinese have trading accounts. Yet rather than funneling investment to profitable enterprises, the role of these exchanges is to provide financial support for the firms that are permitted to list their shares—most of which happen to be State Owned Enterprises (SOEs). The government not only decides which enterprises are permitted to list on the exchanges, but also what financial information is available. As a result, prices swing wildly on the basis of manipulated information, insider trading and swindles, much of which would be exposed by the financial press in a capitalist country. Shareholders can make or lose money as stock prices rise and fall, but they have the same relation to the firms they invest in that bettors at a racetrack have to the horses they wager on:

“In China…bureaucrats remain the gatekeepers, tightly controlling capital allocation and severely restricting the ability of private companies to obtain stock market listings and access the money they need to grow. Indeed, Beijing has used the financial markets mainly as a way of keeping the SOEs afloat. These policies have produced enormous distortions….”

—Ibid.

The enormity of the distortions makes the Shanghai stock market roughly 800 times as volatile as the New York exchange, according to an article in the Summer 1998 issue of the Harvard China Review.

When it joined the World Trade Organization in December 2001, China agreed to allow imported commodities to be sold at world market prices. This promises to devastate the Chinese countryside, where the majority of the population still lives, as well as strategic industries such as steel. But despite its agreement on paper, Beijing has retained considerable leverage over its domestic economy. For example, foreign insurance companies, which were supposed to get access to the Chinese market within two years, are not permitted to operate without a government license, which the authorities grant at their discretion. Half of China’s telecommunications market is supposed to be opened to foreign ownership, but the terms are set by China’s regulatory body, which owns the largest fixed-line supplier and the two main cell phone companies. The regulations require three quarters of the capital to be put up by a domestic Chinese partner (Financial Times [London], 15 March 2002).

Foreign banks are now permitted to operate in China, under the terms of the agreement with the WTO, but the Chinese government has stipulated that each bank may only open one new branch per year. Given that the four big state banks already have a total of 130,000 branches across the country, it will be a while before foreign banks are able to compete effectively. These four banks, which account for two-thirds of all transactions, are wholly owned by the finance ministry. Most of China’s other banks and credit institutions are owned by government agencies, and all are tightly controlled by the central authorities who use them as a mechanism for financing new investment. In China, unlike in a capitalist country, investment is determined by the requirements of the ruling bureaucracy:

“The central government treat the banks as a ‘secondary budget,’ a convenient place to find funds with which to paper over problems of the past. Fixing sick state-owned enterprises is only the starting point. There are, in addition, high-tech zones to build, rivers to dam, and anything in China’s western region to be developed. State leaders expect the state banks to do their part.”

—The Coming Collapse of China, Gordon G. Chang

A large proportion of bank loans go to the SOEs that still employ 55 percent of the urban workforce. The fact that most of them cannot pay their debts is irrelevant. Under capitalism, the banks, and the SOEs they keep afloat with subsidies and soft loans, would be forced into bankruptcy. But in the People’s Republic of China, state-owned enterprises can only go bankrupt by government decree.

SEZs & SOEs

One of the key “reforms” introduced after Mao’s death was the dissolution of collective farms into household enterprises. Today in rural China millions of families lease small plots from the state. While a few farmers have accumulated enough capital to launch larger-scale operations, many more have sunk into desperate poverty. Yet even the most successful Chinese farmers cannot compete with Western agribusiness. For example, corn was listed on the Chicago commodities exchange in September 2000 at $100 a ton. In China, it was selling for $175 (Minneapolis Star Tribune, 1 October 2000). Almost 20 percent of the rural workforce is already unemployed. More than a hundred million former peasants have been forced into street trading, prostitution and petty crime in the shantytowns surrounding China’s cities. The Chinese Ministry of Agriculture has projected that relaxing import controls as required by the WTO will cost at least another 20 million agricultural jobs.

In 1980 the government opened four Special Economic Zones (SEZs) for foreign investment in Guangdong, near Hong Kong. There are now about 12,000 SEZs, mostly concentrated on the southeast coast. They are essentially capitalist economic colonies in the deformed workers’ state, accounting for an eighth of China’s total manufacturing output and half its exports. The Chinese capitalists in Hong Kong and Taiwan who put up most of the initial investments have found the SEZs to be very profitable. China has some of the cheapest labor power in the world: wages are half the Mexican rate and one twentieth the American. Wages are held down because the CCP, which sets the rules, ruthlessly suppresses any attempt to create effective trade unions.

The huge State Owned Enterprises of the northeast, which are managed directly by the CCP, constitute the core of the collectivized economy established by the 1949 Revolution. In the 1980s, the SOEs accounted for virtually all of China’s non-agricultural production, but today their share has fallen to a mere 30 percent. However, they still constitute vital sectors of the economy (heavy industry, high-tech, armaments, energy and telecommunications), account for roughly 70 percent of total fixed assets, and pay a disproportionate share of the taxes that finance the state. The SOEs, through which the state guaranteed workers an “iron rice bowl”—jobs, food, healthcare, housing and pensions—remain critical to the bureaucracy’s hold on power, although without either the pressure of the market or democratic control by the producers, productivity has declined steadily, both in absolute terms and relative to foreign corporations.

The SOEs are seen by the bourgeois financial press as vestigial remnants of a failed system that should be dismantled as soon as possible. But the CCP bureaucracy, itself a “remnant” the imperialists would like to be rid of, takes a different view. Since the late 1990s, the CCP has been attempting to “rationalize” the SOEs by letting the least productive go to the wall, while encouraging others to emulate capitalist enterprises by entering into mergers, issuing shares and selling off the less viable parts of their operations.

In May 2003 President Hu Jintao announced that the SOEs, previously run by various ministries and municipalities, would henceforth be administered by a central State Assets Supervision and Administration Commission (SASAC). The goal is to create a few dozen internationally competitive State Owned Enterprises in strategic industries modeled on the Japanese zaibatsu and South Korean chaebols. While this will not resolve the fundamental contradiction of bureaucratic control over a collectivized economy, it may improve the SOEs’ performance in the short run.

The “rationalization” of the SOEs has meant slashing services for workers and retirees and dramatically shrinking the workforce. Since 1998, the SOEs have eliminated between 25 and 50 million jobs. This wholesale attack on working-class living standards has enraged millions. In China’s northeast rustbelt, where unemployment stands at 40 percent, instead of “cops and robbers,” children play “kill the boss.”

Western Big Development & the
National Question in Tibet and Xinjiang

The CCP has in recent years launched a “Western Big Development” project for the people living in Gansu, Guizhou, Ningxia, Qinghai, Shaanxi, Sichuan, Tibet, Yunnan and Xinjiang. These territories, which constitute more than half of China’s landmass and have a population of 300 million people, include the strategically crucial borderlands, key military installations, and the country’s most important oil and mineral deposits. Geographic isolation, political instability, primitive infrastructure, and poorly educated, dispersed populations make these regions unattractive for capitalist investment.

The project represents a massive expansion of the state sector including construction of roads, railways, airports and a $14 billion pipeline to ship natural gas 2,500 miles from Xinjiang to Shanghai. Xinjiang, China’s largest province, is one of its poorest and home to eight million Turkic-speaking Uighurs, among whom Islamist-nationalist discontent smolders. In early 1997 some 500 Uighurs were arrested during anti-Chinese disturbances in the city of Yining in western Xinjiang. Amnesty International reported that 30 Uighurs were sentenced to death in April 2001 for separatist and religious activities.

The government is actively promoting Han immigration into Xinjiang, which has two major exports, oil and cotton. The Han already run the oil industry and their new, large-scale cotton farms are outproducing the Uighurs’ small private plots. While Uighurs still outnumber Han, the latter will be the main beneficiaries of any future state-sponsored development.

The oppression of Uighurs gets little attention from the Western media, perhaps because 300 of the Taliban prisoners captured by U.S. forces in Afghanistan are Uighur. But despite Beijing’s craven attempts to sign on as a partner in America’s “war on terrorism,” the U.S. steadfastly refuses to acknowledge China’s concern about the existence of Islamic fundamentalism in Xinjiang, or hand over their Uighur prisoners. U.S. policymakers are presumably considering employing Islamist fanatics in Xinjiang for the same reason the CIA armed and trained Osama Bin Laden’s Afghan mujahedin two decades ago.

Unlike the Uighur, the plight of the Tibetans is close to the heart of pro-imperialist “democrats,” who tend to ignore the fact that in 1949 Tibet was an extremely backward, monk-ridden, feudalist society where the average life expectancy was 30. In the early 1950s, when it first came to power, the CCP sought a “united front” with Tibet’s theocrats and aristocratic parasites, and tried to curry favor with the cosseted teenage Dalai Lama and his retinue. This accord unraveled within a few years, and in 1959 a large-scale rebellion was put down by the PLA at the cost of tens of thousands of Tibetan lives. The Dalai Lama fled across the Himalayas to India. Beijing took direct control and proceeded to uproot the traditional social system by parceling out the lands of the nobility and the monasteries to the peasantry.

It is clear that the Tibetan people, who have their own language, culture and territory, resent Han domination. Like the Uighur, the Tibetans are entitled to their own national existence, but for socialists the defense of the national rights of oppressed peoples in China must be subordinate to the defense of the deformed workers’ state. The international campaign to “free Tibet” is one prong in the imperialist drive against China. This is not a new development: the CIA’s involvement in the 1959 uprising has long been a matter of public record, and a few years ago the Associated Press reported: “The Dalai Lama’s administration acknowledged today that it received $1.7 million a year in the 1960’s from the Central Intelligence Agency….” (New York Times, 2 October 1998). An annual subsidy of $180,000 was “earmarked for the Dalai Lama.”

Marxists recognize that reactionary ideologies and nationalist sentiments are rooted in the material inequality of class-divided society. Whenever possible, we would seek to erode the influence of social backwardness through education and economic incentives rather than repression. A Leninist regime would combat Han chauvinism by combining generous subsidies for development with real regional autonomy for national minorities, including the right to control local political institutions, to receive education and government services in the language of choice, freedom of political expression and freedom to travel. By agreeing that the Tibetans or Uighur have the right to control their own domestic affairs, a revolutionary government in China would signal its willingness to coexist with Tibet’s traditional ruling caste and Xinjiang’s mullahs as long as they retain popular support.

The Imperialist Noose

The imperialist noose around China’s neck has tightened considerably in the past few years. The restoration of China as a field for unfettered imperialist looting remains a key strategic priority of the U.S. One of the objectives of America’s recent neo-colonial wars has been to increase its leverage over the Chinese deformed workers’ state. China is increasingly dependent on imported oil, and the creation of a viable U.S. puppet state in Iraq would represent a real threat to Beijing.

U.S. military installations in Kyrgyzstan and Uzbekistan, established during the conquest of Afghanistan, have displaced Chinese influence in former Soviet Central Asia. In addition to its garrisons in Afghanistan, South Korea and Japan, the U.S. is currently negotiating with Vietnam and Thailand for naval and air facilities and is continuing to arm Taiwan. U.S. policy is currently focused on exerting economic pressure on China and checking its ability to project power abroad. At the same time, American missiles permanently target key Chinese installations, and the risk of aggressive military action against the Chinese deformed workers’ state on one pretext or another remains very real.

Falun Gong: Threat to CCP?

The CCP has always jealously guarded its monopoly on political organization. As Joe Studwell observed in The China Dream: “Chinese citizens cannot start a fishing club, a self-help group for alcoholics or a community newsletter without official sanction.” Any organization that connects people with others outside their own immediate locality is seen as a threat. The Chinese news media routinely fails to report on major industrial accidents, corruption scandals, strikes and demonstrations in order to avoid provoking a public outcry on a national scale.

But the CCP’s control has always been imperfect, and the advent of the internet has presented the regime with a new set of problems. The internet is credited with the rapid growth of Falun Gong, a sort of Chinese New Age meditation/exercise movement that developed out of public qigong/tai chi sessions. The government long viewed qigong/tai chi as a harmless source of exercise and social activity for the (mostly older) participants, and turned a blind eye to the anti-materialist philosophical underpinnings of many strands of the movement. The regime even sponsored a Qigong Research Association within which Falun Gong developed in the early 1990s under the leadership of Li Hongzhi. In 1994 Li split from the Association and moved to New York.

Falun Gong preaches “truthfulness, benevolence and forbearance,” while warning that people of mixed race will have difficulty finding a proper place in the afterlife. It also teaches that modern machines (such as computers and airplanes) were created by extraterrestrials disguised as human beings. Falun Gong devotees are taught that by practicing a series of five exercises they can develop a golden-colored spinning “falun” within their bodies which will enable them to absorb energy from different universes, while simultaneously attaining religious enlightenment and physical health. This nonsense has an obvious appeal in a society where an increasing number of people face a future without pensions or access to affordable medical care. It is hardly surprising that Falun Gong is particularly popular with older people, the unemployed and others who are not making it in the “new” China.

In 1999, after local authorities began to complain about the disruptive effects of Falun Gong gatherings, He Zouxiu, a theoretical physicist at the Chinese Academy of Sciences, wrote a highly publicized critique of their teachings. In response, 10,000 Falun Gong followers assembled on 25 April 1999 for a meditation session outside the Zhongnanhai compound in Beijing, home to China’s political elite. The demonstration caught the authorities entirely by surprise. While the CCP feels compelled to tolerate localized protests focused on immediate concerns, it absolutely forbids any organizational activity that it does not control. Following the April demonstration, Falun Gong exercises were prohibited and many of its leaders jailed. But Falun Gong survives. In at least five different provinces Falun Gong supporters have managed to hack into government television channels, enabling them to broadcast messages ranging from simple exhortations stating “Falun Gong is good!,” to programs of up to an hour proselytizing for the cult.

The Chinese Stalinists are too politically bankrupt to be able to effectively combat the primitive notions of Falun Gong. The CCP leadership no longer deals in ideas, only in repression. Falun Gong is doubtless supported by imperialists and freelance counterrevolutionaries, but, unlike Polish Solidarnosc, whose leadership functioned as a consciously pro-imperialist agency within the deformed workers’ state, Falun Gong advances no particular political or social program. Marxists take no responsibility for the CCP’s suppression of this particular brand of superstitious nonsense.

Falun Gong is clearly a pernicious opiate embraced by many Chinese desperate for a refuge from the insecurities and material deprivations of life in a crumbling workers’ state. There are, however, far more dangerous pro-capitalist forces in China, including those within the leadership of the Communist Party itself. The fact that Falun Gong was widely practiced within the PLA, and even within the upper echelons of the CCP, is evidence that the party whose cadres were once animated by “Marxism-Leninism-Mao Zedong Thought” is today committed to nothing more than maintaining its privileges and prerogatives.

China’s Proletariat: A History of Struggle

The working class has repeatedly thrown up its own organizations throughout the history of the People’s Republic of China. During the brief “Hundred Flowers” liberalization campaign in 1956-7, a series of workplace-based “grievance redress societies” that sprang up outside the control of the official All-China Federation of Trade Unions (ACFTU) led a wave of strikes. The high point of this movement was reached when half the workforce on the Guangzhou (Canton) docks mobilized against a pay cut. In the end, however, the CCP was able to crush the strikes and ship many working-class activists off to labor camps.

The intra-bureaucratic power struggle of the mid-1960s known as the “Cultural Revolution” had the unintended side effect of briefly creating openings for independent labor actions. There was a significant upsurge in working-class combativity in 1966-7, particularly in Shanghai where mass organizations embracing hundreds of thousands of workers were created. These formations played a role in deposing the CCP city administration and establishing the short-lived Shanghai People’s Commune. In early February 1967 the commune was launched with a rally attended by a million workers. Throughout its short life, the Shanghai Commune was effectively controlled by a faction of disaffected CCP cadres who proclaimed their intention of ruling on the basis of the principles outlined by Karl Marx in The Civil War in France, his classic study of the 1871 Paris Commune (although they ignored his injunction that leaders should be popularly elected and immediately recallable). After only three weeks, the commune was liquidated at the “request” of the Great Helmsman himself. The misplaced enthusiasm of Shanghai’s workers for a “commune” that was in fact only a tool for a faction of the ruling CCP demonstrated both the instability of the bureaucracy and the volatility of the working class.

In April 1976 another wave of workplace-based activity flared briefly in reaction to the ultra-Maoist policies of the “Gang of Four.” Deng Xiaoping was briefly deposed a second time for his role in these disturbances, but was soon back in power. Workers took advantage of a temporary easing of political repression as Deng’s “capitalist roaders” consolidated power to demand independent trade unions and denounce low wages, arbitrary management and other features of the new market “reforms.” A journal based in the Taiyuan Iron and Steel Works proposed that to really defend their interests, workers needed their own organizations with elected and recallable delegates. Such voices were quickly silenced, but the ideas they advocated live on.

In early April 1989, when student protesters occupied Tiananmen Square to demand democratic reforms, they were soon joined by delegations of workers from Beijing factories. By the end of the month, the Beijing Workers Autonomous Federation (WAF) had sprung up, based in rail, steel and aviation. Similar formations soon emerged in other major cities. Initially, these organizations focused on demanding the legalization of independent trade unions separate from the ACFTU; however, they soon began to raise issues of wages, living standards, bureaucratic privilege, income differentials and workplace democracy. Workers’ organizations in different cities began linking up and many sent representatives to the Beijing WAF, which had started to function as the leading center of the movement.

On 18 May 1989, one million people, mostly workers, demonstrated in Beijing. A week later a preparatory committee for a national “workers’ self-governing federation” was established. The CCP bureaucracy saw this as a serious threat to its rule. On 2 June 1989, the ACFTU, which had previously acceded to mass demands for a general strike, suddenly began to demand that the WAFs be outlawed. Two days later, army units loyal to the regime brutally attacked the demonstrators, killing hundreds. Thousands of workers who were charged with having participated in the autonomous workers’ movement were thrown in jail or executed.

While the WAFs were crushed by the repression, they provided the workers’ movement with a powerful demonstration of the potential for independent working-class political action. Between 1990 and 1994 three attempts to establish labor rights organizations were suppressed, and their organizers imprisoned. Only the ACFTU (labor arm of the CCP) is legal, and it is only allowed to put forward “reasonable demands,” “uphold [market] reform” and “restore the normal order of production as soon as possible” in the event of any labor disruptions.

Rising Tide of Workers’ Struggle

The upsurge in workers’ protests in recent years, fueled by massive unemployment, has already reached dimensions unprecedented since the 1949 Revolution. According to reports attributed to the Ministry of Public Security, the average number of daily protests more than doubled between 1998 and 2002. While most of these actions focus on immediate demands for the restoration of jobs, health care and unemployment benefits for workers in particular enterprises, demonstrators also frequently denounce the corrupt dealings of managers and local authorities.

The size and scope of the protest mobilizations is a real concern to the authorities. A CCP Central Committee study in 2001 reported: “In recent years some areas have, because of poor handling and multiple other reasons, experienced rising numbers of group incidents and their scale has been expanding, frequently involving a thousand or even ten thousand people” (New York Times, 2 June 2001). The report complained: “Protestors frequently seal off bridges and block roads, storm party and government offices, coercing party committees and government and there are even criminal acts such as attacking, trashing, looting and arson.” Even more worrisome was the fact that participation was “expanding from farmers and retired workers to include workers still on the job, individual business owners, decommissioned soldiers and even officials, teachers and students.”

Some of the militants involved in the 1989 labor upsurge have been playing a role in the current wave of workers’ struggles. Zhang Shanguang, who spent seven years in jail for his role in the 1989 WAF, was sentenced to another ten years in prison in 1998, ostensibly for supplying intelligence to Radio Free Asia, a U.S. propaganda outlet. His real crime, however, was organizing the Shupu County Association for the Rights of Laid-off Workers, which supported farmers’ protests against arbitrary taxation. Yue Tianxiang, a veteran labor activist who initiated the Shaoyang City Workers’ Mutual Aid Society in 1983 and was jailed for heading the Shaoyang Autonomous Workers’ Union in 1989, was sentenced to another ten years in prison in 1999 for his role in publishing the China Workers Monitor in Gansu province. In 1999, Xue Jifeng was locked up in a psychiatric hospital for having organized an independent union in Henan province. A 30 April 2002 Amnesty International brief recounted how Cao Maobing, a worker in a silk factory in Jiangsu province who tried to form an independent trade union and expose management corruption, was sent to a psychiatric hospital where he was forcibly subjected to drugs and electric shock “therapy.”

Various imperialist agencies, including the Hong Kong-based China Labor Bulletin (connected with Radio Free Asia) and the pro-capitalist China Democracy Party, are hypocritically promoting the struggles of the Chinese proletariat as a means of undermining the CCP. While most worker activists are well aware of the negative effects of capitalist market “reform,” many have illusions in the sugar-coated promises of the “democratic” agents of imperialism. Leaders of localized struggles victimized by Stalinist repression, who see no alternative to allying with pro-capitalist “reformers,” can easily end up acting as agents of capitalist reaction.

For Workers’ Political Revolution!

The triumph of counterrevolution in the Soviet bloc was the greatest defeat ever inflicted on the international workers’ movement. Today the question of whether the Chinese deformed workers’ state will suffer a similar fate is acutely posed. The accumulation of social tensions along ethnic, regional and, most importantly, class lines, make the status quo unsustainable. Yet, unlike Soviet workers during the perestroika period of the 1980s, tens of millions of Chinese working people are well aware that the growth of capitalist market relations threatens to tear their lives apart. While plebeian discontent is rising, China’s increasingly powerful bourgeoisie is also chafing under the restrictions on capitalist development imposed by the Stalinist bureaucracy. The imperialists and their ideologues look forward to the overthrow of the demoralized CCP and the transformation of China into a “normal” capitalist neo-colony, open to the ravages of “globalization” and the wholesale privatization of the means of production. The only alternative is a proletarian political revolution to topple the corrupt CCP, expropriate all capitalist property and establish institutions of genuine workers’ democratic rule.

A revolutionary organization with roots in the militant Chinese proletariat could rapidly win the allegiance of the hundreds of millions of working people who already perceive the growth of capitalism as a deadly danger. The Chinese working class has repeatedly demonstrated that it possesses both the social power and the will to resist the rise of a new capitalist social order. This is a critically important factor. In China today the central issue is the struggle to create the nucleus of a new, revolutionary workers’ party—a Trotskyist party—armed with an internationalist program of resolute struggle against the ravages of imperialism and committed to the unconditional defense, and the extension, of the gains of the Chinese Revolution. A Chinese workers’ political revolution would represent a far greater blow to the world imperialist order than the original “loss” of China in 1949. It could ignite a revolutionary wave across Japan, Korea and the rest of Asia, that could radically transform global social and political reality, opening the road to a socialist future for all of humanity.