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“China’s economy is going through hard times. The most important expression of it has been the recent successive drops in the country’s main stock markets (Shanghai and Shenzhen). It had previously manifested itself as a Real Estate crisis (with several unfinished projects and other finished ones that couldn’t find any buyers), and a significant growth in construction companies and local government’s credit debts non-payment.”

Written by: Alejandro Iturbe.

China’s economy is going through hard times. The most important expression of it has been the recent successive drops in the country’s main stock markets (Shanghai and Shenzhen). It had previously manifested itself as a Real Estate crisis (with several unfinished projects and other finished ones that couldn’t find any buyers), and a significant growth in construction companies and local government’s credit debts non-payment

The Chinese economy is currently the second worldwide, with over 11% of the world GDP (only exceeded by the U.S.). Besides, it has great influence in the international trade because it is the second country in export volume and the third in import.

Despite the world economic crisis that began in 2007-2008, this economy maintained high levels of growth for several years. During this period, it acted as a “secondary engine” that buffered the deepening of the crisis.

However, this situation seems to be ending. For this year, there is a 7% growth expectancy (a high number for any country, but because of the specific characteristics of the Chinese economy, it means crisis).

This has a strong impact on the overall world economy. Immediately, it implies drops in the most important stock markets worldwide. In a more profound manner, an important drop in prices of food and commodities they import. Along with it, exporting countries enter recession (like Brazil and Argentina).

At last, it has a strong impact on the world economic situation as a whole, as we are still under the influence of the “descendant wave” of the crisis initiated in 2007-2008. In a report presented by the International Monetary Fund to the Finance Ministers and Central Banks of the G20 (published by the Wall Street Journal), they said it is “evaluated that the situation in China, added to other negative conditions in the international context, may lead to a weaker perspective of the global economy.”

Therefore, it is very important to deeply analyze the specific characteristics of the Chinese capitalist model, the genesis of the current situation and, at the same time, consider some hypothesis on the economic and political perspectives. I will try to avoid overloading the text with numbers and statistics, focusing on descriptions and concepts.

From a backward Semi-Colony to a Bureaucratized State

Before the revolution led by Mao Tse Tung in 1949, China was a semi-colonial country characterized by being backward, with a primarily peasant-based economy, whose territory was always plundered for the imperialist powers fought over it (especially Great Britain and Japan). These powers appropriated coast enclaves such as Hong Kong (Great Britain) and Macao (Portugal). To get an idea of the backwardness and poverty of the country, Mao’s great slogan for the revolution was for each Chinese to be able to eat a plate of rice a day.

After the end of World War II and the defeat and expulsion of the Japanese invading troops, the two components of the forces that had managed to free the country fought each other. On one side, the bourgeois sector of the Kuomintang Party (led by General Chiang Kai Shek) and on the other, the peasant-based Popular Army, led by the Communist Party and Mao.

The war ended with the triumph of the Maoist forces. Chiang and the Chinese bourgeoisie fled to the island of Taiwan, where they set up the Republic of China (capitalist), with strong support from U.S imperialism. In the meantime, after seizing power in the rest of the country’s territory, the CP built the Popular Republic of China. By expropriating the bourgeoisie and imperialism, it became a new Workers’ State in the most populated country on Earth.

From the beginning, it was a Bureaucratized Workers’ State, dominated by the dictatorial regime of the Communist Party and its leadership. Within it, Mao had the role of “supreme arbitrator” among the party’s different factions. The political regime didn’t allow any real democratic liberty for the workers. For fifteen years, Maoism was part of the Stalinist world apparatus, hegemonized by the USSR bureaucracy. However, in the 1960s, there was a split between both parties, and Maoism (maintaining its Stalinist matrix) started to build its own world political apparatus.

Despite the bureaucratic and dictatorial character of the State, central planned economy provided very important results. The most important were, without a doubt, ending hunger and diseases caused by chronic poverty. There were also great advances in education and in eliminating the most backward elements of women’s oppression (like forcing little girls to tie their feet to stop them from growing). At the same time, service and communication infrastructure clearly improved and an incipient industrialization process began.

But these advances stemmed from an extremely backward base (that remained agrarian). They also faced two obstacles that set insurmountable limits.

First, the Stalinist perspective (adopted by Maoism) of the possibility of building “socialism in one country”. Marx had fought this idea (in the XIX century) and in a country as backward as China, it was even more impossible.

The second obstacle was a bureaucratic and arbitrary centralization of the planned economy by the CP leadership, which in many occasions reached a delirious level. That’s  what happened during the so-called Great Leap Ahead (1958-1961) when they imposed the creation of a million “mini-steelworks” in peasant farms. The metal obtained was of the poorest quality and practically unusable, which meant a great loss of effort, work and materials. Another example is the “forced collectivization” of fields (carried out during these same years, based on the Russian Stalinist model of the 1930s) which caused millions of deaths by starvation.

Because of these profound contradictions, planned economy experienced big oscillations, so the Chinese bureaucratic apparatus and its leadership were always very unstable. There were confrontations and permanent displacements among its different factions (for example, during the Cultural Revolution)(1).

The Capitalist Restoration

By the end of the 1960s and the beginning of the 1970s, the country’s economy was stagnated. In this context and in the midst of a debate on how to face the situation, Mao died in 1976. The struggle among factions increased. Finally, in 1978, Deng Xiaoping’s sector triumphed and shot his opponents’ main leaders (known as the Gang of Four).

Deng was an expression of the bureaucracy’s most right wing faction. He began the capitalist restoration process in the country, hand in hand with U.S. imperialism (in 1979, Deng was the first Chinese communist leader to travel to the USA and have an interview with President Jimmy Carter). A symbol of the restoration was that, by the end of 1978, Coca-Cola announced its project to install a  production plant in Shanghai.

Deng implemented two main policies. The first was the elimination of the agrarian production communes, replaced with the “Household Responsibility System” that authorized families to directly sell and make profit out of their own crops. The most dynamic and favored sectors started to accumulate small capital. They began to search new forms of agrarian exploitation (with the approval of the 30-year lease right and the authority to transfer these rights). They also started to invest in small commercial and industrial companies, originating an incipient rural bourgeoisie.

For two decades, this meant the expulsion of millions of peasants who lost their means of support and feeding and had to migrate to big cities to look for work as wage earners. The process affected over one hundred million people (added to a pre-existing migration due to forced collectivization). That way, an immense and docile “industrial reserve army” was formed. They accepted very low wages and became the social base for great investments and a quick industrialization.

The second measure was the creation of four “free-trade zones” for investments in the cities of the southern coast. The initial objective was to make cheap products for the internal market (textiles and clothes, radios and small steel works). However, this production quickly started to be exported and compete with the so-called “Asian tigers”.

An Unprecedented Historical Combination 

China’s capitalist restoration has a common characteristic and a different one compared to the process in the USSR and Eastern Europe. The common element is the restoration was carried out by the Communist Party themselves (in the Russian case, it was led by Mikhail Gorbachev). The difference is that in the USSR and Eastern European countries, the mass movement overthrew the Stalinist restoring apparatus (the symbol of this process was the fall of the Berlin Wall). In China, this triumphant post-restoration mass process happened (by the way, neither did in Cuba).

So, an unprecedented historical combination occurs: the Stalinist apparatus, that had led the revolution and built the Bureaucratized Workers’ State, restored capitalism and remained in power after doing so. But now they no longer defend the economic and social basis of a Workers’ State, they are in the service of imperialist capitalism.

From a formal point of view and of its mechanism, the regime and its apparatus are still the same: bureaucratic and dictatorial, disguised behind red flags and “socialist” language. However, the social content is completely different now. For example, the number of important cadre and members of the CPC that are bourgeois or belong to bourgeois families is enough proof.

In China, we have what Brazilians call the “worst of all possible worlds”: a bloody “red” dictatorship with one of the fiercest and most exploitative form of present capitalism.