Sun Jul 14, 2024
July 14, 2024

Capitalist Restoration in China

China has astonished the world with its fast economic development. On occasion of the 17th Congress of the Communist Party (CPC), president Hu Jintao stated, “Thirty years ago, Popular Republic of China started its experience of opening and reforms. Initiated in 1978, it has been crucial decisions what determined the fate of contemporary China. Historic changes were made for socialist China.” In this article we mean to prove that such historic changes were bureaucracy’s last move in the direction of capitalist restoration.

A situation of social instability

In November 1978, parallel to the dispute inside the CPC about who the heir of Mao is, between the “reformist” Deng Xiaoping and Hua Guofeng[1]a vanguard movement surfaced in the main cities of China, dedicated to democratic renovation of the Chinese social and political system. The Democracy Movement consisted basically of working class youth and students of the so-called “lost generation”, created by the Cultural Revolution[2]. The movement was expressed by means of the dazibao – mural journal – placed on the Wall of Democracy and several papers and bulletins of political and literary groups who used to gather thousands of people on the Tiananmen Square every day. While this theoretic process flourished – based mostly on Marxism – a great number of hungry peasants started arriving in Peking from different parts of China, with the illegal return of students who had been sent to camps for their “re-education” and demanded regularization of the residence visas. In January 79, a great crowd demonstrated in Peking in demand of end to hunger and oppression, democracy and human rights now. .In February the main railway in Shanghai was blocked by students without a visa. These movements merged in demonstrations and self-defence. Every time a leader was imprisoned, publications of Democracy Movement stood in his defence and the struggles grew stronger.

Initially, the Deng sector, which in the early ‘78 had launched a “movement for the emancipation of the mind”, tolerated the Democracy movement and used it to reinforce the internal dispute in the party. In December, however, when his position overcame at the 3rd Plenary Meeting of the Central Committee and the demonstrations started spreading; Deng began to see that they could be a danger to “stability and unity”.[3]As from April 79, when some publications began to challenge Deng himself, activists were being arrested and sentenced to as much as 15 years’ conviction. In October, the Wall of Democracy was closed. At the same time, a shade of democratic freedoms was projected when elections to local organisms of People’s National Congress were admitted.

It was against this background that Deng Xiaoping began to put into practice the “opening to the western world” in order to tackle the serious economic and political crisis that hit the country after ten years of social chaos caused by the Cultural Revolution.

Four modernizations

Deng initiates “historic changes for socialist China” with a new theory that was to be taken up by the CPC as continuity of Maoist thought. It is, in short, it is all about exposing class struggle as the engine of history and the overcoming of the first stage of socialism by means of the development of the productive forces in a harmonious society where everybody: proletarians, peasants and the enterprising one are part of the working class.

In practical terms, measures known as the “four modernizations” were applied – of agriculture, industry, Armed Forces, science and technology. The final target was to strengthen socialism by means of some market mechanisms to dynamise economy, instituting the so-called “market socialism”.

These measures were compared to New Economic Policy (NEP) implemented by the Bolsheviks in 1921, when measures of capitalist nature were implemented in the scope of distribution, essentially the purchase of food and raw material for industry in substitution of forced requisition in the period of “war communism”. But the fundamental bases of a Workers’ State – collective property of the means of production, centralized planning and state control over foreign trade – remained untouched.

In China, the measures adopted in 1978 were meant to strengthen capitalist economy at the price of the socialist base of the State. Four Special Economic Zones were created in the southern coastal area to stem out of foreign investments, where state control over foreign trade had been eliminated. Rural communes were dissolved with the introduction of the system of family liability and the establishment of agricultural market. Together with the dissolution of the communes, in the early 90s, the creation of Municipal Rural enterprises was passed, the EMR, which employed over 100 million of rural salaried workers.

These measures of industrial development tended to attract foreign investments and strengthened all links with imperialism started during Nixon’s 1972 visit, when he granted China the status of “most favoured nation” and suspended the commercial embargo. But capitalist restoration started in the countryside, as this was the prevailing sector from the economic point of view and of population. The increase and liberation of agricultural prices and the creation of EMR were fundamental for the emergency of a new bourgeoisie stemming out of the rich peasantry and bureaucracy converted to capitalism. The famous slogan of “getting rich is glorious” launched by Deng in 1978, was the main guide for the action of these sectors.

{module Propaganda 30 anos – MORAL}Capitalist measures were extended to the urban sector in 1985 with the reduction of public provisions and decentralisation of decisions, forcing local governments to lure investments establishing associations, mergers, closure of state owned companies and transfer of their assets to private capital.[4] In 1987, a system of “contracts” was adopted, allowing state-owned companies to negotiate directly with overseas companies. At the same time, the end of restriction regarding the size of private enterprise and the Law of Bankruptcies in 1988 there came an end to the life-long guarantee of employment for the working class. Taken as a whole, these actions broadened the participation of the private sector in the industrial production.

The same thing happened in the countryside. Even if the land was still state property, in 1986, the Law of Gestation of the Land was passed in 1986, authorising the leasing of the land for up to 30 years and was extended to up to 60 years in 1988. Finally the transfer of the leasing was legalised in 1991 and so a private market of sale and purchase of concessions established.

All these attacks were barely responded by sporadic actions of the Chinese working class. In the first place, because the rural population approved of the recovery of economic activity in the countryside but also because Deng Xiaoping asserted absolute respect to what he called the four principles: a) follow the path of socialism but learn from the experience of capitalist countries. b) Maintain the “dictatorship of the proletariat”, c) maintain the leadership of the Communist Party and d) preserve the thoughts of Marx, Lenin and Mao. Restoration was carried out in the name of Marxism.

Then, the laws of the market led to a runaway inflation, to unemployment in cities and to social inequality reaching almost unimaginable levels. The price of refurbishment of new private restaurants was equivalent to annual salary of a Chinese worker. To cope with economic difficulties that tended to lead to reduction of the growth of Internal Gross Product from 12% in 1988 to 4% in 1989 and 1990, the government announced in May 1988, general liberation of prices. This caused panic and important social riots that ended with the rebellion in the Tiananmen Square.

The massacre of Tiananmen

On 21st April 1989, the students of the University of Peking rebelled. They launched a manifesto with democratic demands to end the repression, for the freedom of the expression and press and they denounced the corruption and illicit enrichment of members of the party.

Furthermore, first independent workers’ organisations, the “gongzilian”. On May 21st, the autonomous Workers’ Federation of Peking distributed a communiqué demanding freedom of organisation, participation in political and economic decisions, workers’ control over the Communist Party and over state owned factories. After the repression of the movement, the railway workers and founder of the Federation, Han Gongfang, was imprisoned and in 1993, expelled to Hong Kong

At the peak of the movement, between 17th and 22nd May. Workers from the steel and ironworks of Peking, postmen, drivers and other branches started a strike. Between one and two million people walked across the Tiananmen Square, political centre of organisation of the movement. On the 20th May Martial Law was decreed and on June 4th, tanks invaded the square causing the death of a not clearly defined number of demonstrators, which may be assumed as several thousands across the country.

The resistance maintained for several days could not revert the situation. The students, a vanguard of the movement, did not manage to combine their demands of democracy and those of the workers and peasants, who demanded an end to unemployment, better wages and an end to the rise of the cost of living. Deng Xiaoping, who ever since Kissinger’s visit in 1971, cooperated with imperialism, accused the students of being tools in the hands of imperialism and the CIA:

Consolidation of restoration

After the defeat of the resistance to the restoring project, bureaucracy could move ahead in a most decided manner. In September 1989 they applied the liberation of prices, something they had tried before. In October 1992, the 14th Congress of the Communist Party of China eliminated sectors where public investments were prohibited, making it clear that it was necessary to “develop diverse forms of property (state and private) from side to side”. Local bureaucracies started making all kinds of concessions to capital and took advantage of the situation in order to become partners in the new business. State owned companies reduced their participation in economy from 73% in 1988 to 35% in the late nineties.

But the main engine for the economic recovery was the attack against the working class. In 1994, the Labour Law was passed, implanting salaried labour, the end of the regime of employment and relieved the state from its responsibility for social security putting an end of workers’ revolutionary achievements – the system known as “iron pot”, life-long employment, social security and an aid for rent. Education and health have been privatised.

In 1999, Chinese economy, now totally integrated into international market, had to stand against its first crisis of super-production. The Chinese government managed to cushion it by means of state aid for companies and increasing foreign debt, which shot up by 27% in 2001. Even so, there was a 2% downslide in exports and 11.4% in foreign investments while the Gross Product kept on growing at a yearly average of 8% during 1998-2002.

Most of the weight was shoved onto the workers and state-owned companies who, unable to compete with private capital, went bankrupt. The idle productive capacity of factories reached 40%, generating 40 million layoffs. In the countryside, the EMR began massive suspending payments for they depended a lot on state purchases. The end of these factories and the concentration of land generated 250 million landless and the exodus of 100 to 150 million of peasants to the cities, which turned into a gigantic reserve army known as “floating population”, which further affected the already thinning our working class of state-owned companies. Without a job in the countryside and not residence visa in the cites, due to the “Hukou” that makes them illegal in their own country, migrants accept to work for lower wages and without any social rights. They work an average of 13 hours a day every day of the week and receive half of what the state workers get. Furthermore the, the plague of outsourcing is spreading onto the Chinese working class. Irregular (precarious, temporary, etc) jobs are open to 80 million of unemployed from 1990 to 2002. At the same time, regular work generated barely 1.7 million vacancies.[5]

In this way, to parallel and separate working movements emerge. On the one hand, the traditional working class, of the state-owned factories that is being disintegrated; on the other, a new sector, in the southern states of the country, emerging from migrants from the countryside. The former struggle against the loss of their jobs and their social achievements while, workers from private factories protest against the degrading labour conditions and despotic managements.

Workers’ resistance

A major symbol of the former was the struggle of the workers of the Daking region, main centre producing oil in the country and symbol of the social construction in China. In March 2002, 50 000 oil workers, walked out into the streets for their social rights and unpaid wages. They held a week-long sit-in in the Oil Administration offices while 30 000 metallurgic workers from Liaoyang, in the same region, walked out into the streets in demonstrations that lasted for months.

Demonstration extended to the provinces of Hailongjiang, Liaoning, Sichuan and Hebei, with roadblocks, pickets and demonstration to demand the basic basket and resignation of corrupt and incompetent managers. The movement put an end to partial concessions and imprisonment of five of the leaders of the movement, who had started the construction of an independent trade union, the Provisional Trade Union of Daking, before the March actions, thus indicating that they were not spontaneous.[6]

Among the new working class examples are many and terrific. The industry of Civil Construction is going through a boom: streets, shopping centres, residences and installations for the Olympic Games are going up, but workers as often as not can be a year without collecting their salaries. In 2002, in Peking alone is entrepreneurs’ debt for wages reached nearly $300 million. Even the state-owned factories fail to pay. For example, the workers of a line of underground for the Olympic Games went on strike after 6 months without collecting their dues.[7]

Situation is not very different in factories. In December 2007, workers of Aigao Electronics of Dongguan went on strike against the increase in the price of refurbishment, which is normally discounted from their salaries  When they tried to walk out in a demonstration, they were attacked by hundred of policemen and dogs.

In August 2007, at the Feihuan Electronics, German factory of components of cell phones, half of the 10 000 workers went on strike against the threat of not being paid unless they could meet the deadline target production. Finally, the workers of the DeCoro engine factory went on strike against 1o of their workmates being beaten up by their Italian employers (a humiliation) when they protested against salary reduction in October 2005.

These are just a few examples of the struggle of the Chinese working class, now fragmented and always violently repressed with its leaders in jail and their independent trade unions dismantled. Their magnitude is expressed in official statistics. According to  Ministry of Public Security, “massive incidents, demonstration or rebellions reached the number of 74 000 in 2004, of 10 000 a decade ago, and 58 000 in 2003”. In 2005, 4 million Chinese participated in 78 000 protests.[8] .

According to Han Dongfang, current editor of China Labour Bulletin in Foz of River Perola, at least once a day conflicts take place that draw together factories with over a thousand workers each. “These strikers are self-organised, the do not belong to the official trade union”, said Han in January this year. In this region, where one third of the goods for export is produced, workers get broken bones or lose 40 000 fingers a year.[9]

Olympic Games and the earthquake: the shock absorber and the accelerator of social dissatisfaction

The fact that in August this year Olympic Games were held in Peking contributed to cushion the tensions that exist in China. In the first place because of the civil construction boom, this temporarily absorbed the millions of migrants of the “fluctuating population” swarming into cities. Secondly, because of the gigantic propaganda of the Chinese government, creating an atmosphere of national unity and patriotism. In this way, exposing for instance slave labour of youngsters and children in clandestine brick plants of Dongguan could not have the same hearing as exposing a similar fact that happened in Shanxi last year.

On the other hand, the earthquake, which took place on 12th May this year in the rural region of Sichuan may have the opposite effect.. The official toll is of 69 127 fatal casualties and destruction of 15 million homes. The government set aside $2 billion for the affected regions and decided on a $10 billion reduction of the annual budget, insufficient to make up for the estimated loss of $20 billion.

The collapse of 7 000 schools, which claimed the lives of at least 10 000 children, shook the population. It is suspected that poor quality materials were used to build these schools, for other public buildings  did not suffer such damage. Parents demand confirmation of these suspicions, but hey can get no legal backing.

On the other hand, the international financial community recalled that the region is not industrial and contributed with barely 4.2% of the National Gross Product.. Sichuan “is an important province in terms of population and farming, but their participation in the industrial production is relatively small,” said Sun Ningchun, economist of the Lehman Brothers.

Inflation of food

This entire situation is aggravated with the maintenance of a high rate of inflation and low salaries. The Retail Price Index registered an annual growth or 8.5% in April this year, with an increase of 21% for the price of food and 30.9% in oil. In February inflation reached 8.7% a year, the highest since 1996.[10]

At the same time, the salary was among the lowest in the world. In 2004 it was at an average of $0.6 the hour, twenty times smaller than the smallest salary in the USA, 16 times smaller than that of South Korea and half of Brazil. In order to halt the protests, local authorities announced salary readjustments, for example in the province of Guangdong. Spokesmen for the capital capital, however, rejected this position, as did Chen Xindong of the Paribas BNP, who declared, “a higher salary will certainly contribute to push inflation up.”

The rates of growth in China are still unbeatable at 9.7% average in 2001 to 2006 and it is still the most attractive country for foreign investors. In May, there has been an increase of 38% with respect to May 2007.

At present, however, China is quite dependant on exports, responsible for the 30% of Internal Home Income. With the fall of the consumption in the USA, causing the spectacular fall of the estate business and an increase of unemployment, the first symptoms can be felt in China. In the first four months of last year, the rate of economic growth fell from 11.7% last year to 10.6% this year. At the same time, industrial production also shrank from 18.3% to 16.4%. Exports had a much worse fall, of 6.4% in relation to the four first months of 2007.

According to Li Xiaochao of the National Institute of Statistics, “faced with the uncertainty of economic growth we must be prepared to avoid sharp falls of growth as much as sustainable rise of prices”. This preparation is to be expressed  as a policy of freezing wages., with the announcement  of the elevation of compulsory bank deposits to prevent the increase of inflation, the target of which is 4.8% for 2008.[11]Rent and family consumption have been sliding through the years – from 25% between 1988 and 2006 –  and such measures indicate the continuation  of this tendency, for since low wages are the main attraction for private investors and the source for the Chinese capacity to compete around the world. If we add the growth Chinese foreign debt (which shifted from $45 billion in 1989 to $ 322 billion in 2006) to all the above ingredients and combine it all with the possibility of a world crisis, explosive situation will surface in China. This is so, because development base on two factors – cheap labour and foreign investments – is fragile, similar to “other known miracles that imperialism put up at different moments”, and that drives a country to “have economy increasingly depending on imperialism”.[12]

It equation is difficult to solve, demonstrated in the statement by Dominique Strauss-Kahn, chairman of the IMF, in relation to China: “as we know from past experience, this type of issues sometimes ends in war.”[13]

Chinese working class, with all their revolutionary tradition and with the arrival of new contingents that have been tested in the struggle against capital will be the ones to say the last world when they build their independent organisms and the struggle against the dictatorship of the CPC and the towering exploitation. Once again, Marx’s words expressed in the Communist Manifesto are confirmed 160 years after they were written: bourgeoisie produced, above all, their own gravedigger. 


[1]Mao Zedong, main leader of the 1949 Chinese revolution died in 1976; Deng Xiaoping, member of the “old guard” of the CPC. Set aside during the Cultural Revolution and rehabilitated in 1973. Vice-prime minister in 1976, he overcame in the internal struggle against the gang of the 4 for the succession to Mao’s position. Hua Guofeng, indicated by Mao as his successor, was the representative of the party left”.

[2]Cultural Revolution (1966-1976); produce of the Maoist theory of the continuity of class struggle in socialism to justify the elimination of the members of the “9 undesirable social categories”: ex landowners, former rich peasants, counterrevolutionaries, bad elements, right-wingers, renegades, spies, revisionists and intellectuals. The aim was to channel the young students. The red guards – to fight against the bureaucratic sectors opposed to Mao.

[3]Robin Munro, Chen Erjin and the Chinese Democracy Movement in Chen Erjin, China: Crossroads Socialism. Verso Editions, 1984

[4]Wang Hui, as origenes do neoliberalismo na China (origins ofneoliberalism in China) original published in Le Monde Diplomatique, 12/10/2007

[5]Martin Hart-Landsbeg & Paul Burkett, China, Capitalist Accumulation and labor), Monthly Review.

[6]Roland Lew, Rebellion in the Rust Belt, IV Online Magazine, September 2000

[7]Simon Gilbert, China’s Strike Wave,, 29/06/05

[8]Robert Weil, Conditions of the working classes in China, Monthly review, June 2006

[9]China’s Pearl River Delta: 40 000 fingers lost annually, 1 000 workers strike a day (Pearl River Delta

[10]Wholesale inflation accelerates in May, cn 11/6/ 2008

[11]China’s economic growth slows as food prices soar cn, 16/04/2008

[12]Martin Hernandez, O veridicto da historia (The verdict of history), Editora Sundermann, 2008. Sobre a China (On China), read pages 73 to 84

[13]Food price inflation formidable challenge for China 2008


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