Despite sweeping market reforms, China remains a socialist system in which the state, not capital, ultimately sets the terms of developmen, writes Owen Schalk. Photo by Radu Micu/Flickr.

Few questions provoke more confusion—and sharper disagreement—on the left today than whether China is capitalist or socialist. The country’s hybrid system, combining extensive state control with deep integration into global markets, resists easy categorization. But how one answers this question carries real political weight: it shapes whether China is seen as a counterweight to Western capitalism, a participant in it, or something else entirely.

In October 2020, Chinese President Xi Jinping stated that “Reform and Opening Up”—the process of economic liberalization initiated by the Communist Party of China in 1978—is “an ongoing task [that] will never end.” Xi stressed that “without Reform and Opening Up, China would not be what it is today, nor would it have the prospects for a brighter future… Openness brings progress, while isolation leads to backwardness.”

Following Mao’s death in 1976, the Communist Party, under Deng’s leadership, launched Reform and Opening Up. The government dismantled rural communes, opened 14 Special Economic Zones in coastal regions to attract foreign investment, granted greater autonomy to local governments and private capital, initiated a wide-ranging process of scientific and technological exchange with foreign countries (notably the US), and introduced managerial techniques from capitalist economies in pursuit of rapid economic growth. Deng sought growth and modernization at any cost. “If we can’t grow faster than the capitalist countries,” he said, “then we can’t show the superiority of our system.”

In 1984, Deng used the term “Socialism with Chinese Characteristics” to describe China’s new development path. Three years later, Premier Zhao Ziyang asserted that China remained in the “primary stage of socialism,” the initial phase of building a communist society, in which private capital would necessarily play a large role. At the 13th Party Congress that year, the Communist Party of China adopted the term “planned market economy” to describe its model.

On the left, one’s views on Reform and Opening Up condition what one thinks about present-day China. Some, like Zhun Xu and Minqi Li, consider Reform and Opening Up to be capitalist restoration. British-American academic David Harvey has termed the post-1978 liberalizations “Neoliberalism with Chinese Characteristics.” Others analysts—for example, Carlos Martinez, Chengu Enfu, and Wen Tiejun—argue that China continues to adhere to the socialist road.

Describing China’s economic development under Reform and Opening Up as capitalist is certainly not inaccurate. At the Third Plenary Session of the 11th Central Committee in 1978, the Communist Party of China stated that “modernization” had supplanted class struggle as the party’s central principle; at the same time, China integrated into global capitalist resource flows and division of labour. As China’s government abandoned the language of class struggle and embraced the country’s role as workshop of the capitalist world, Chinese workers were subjected to hyper-exploitation by foreign and domestic capital.

The commodification of housing, health care, education, and other public goods is a reality of life in China today, as is rampant inequality. Meanwhile, state sector in China employment plummeted from 113 million in 1995, to 81 million in 2000, to 64 million in 2007. Today, the ratio of workers employed in China’s private sector is roughly equivalent—in fact, slightly higher—than private sector employment in the US.

On the other hand, the Chinese state retains public ownership of land. Private capital is incentivized to follow the state’s Five-Year Plans, which have the stated goal of transforming China into a “modern socialist nation.” State-owned enterprises, or SOEs, play the role of social enterprises serving public interests and strengthening the real economy (that is, the non-financial sector), which can thereby largely guarantee people’s employment and livelihoods. Internal Party Committees operate within SOEs and private companies, including foreign companies, with the mandate of ensuring capital serves the state’s long-term goals. China’s public infrastructure, including its world-class and ever-expanding railway system, is operated as a public good and does not turn a profit. State planning has helped achieve poverty alleviation on a scale never before seen in human history, lifting close to 800 million people out of extreme poverty over 40 years.

Evidently, policy in China is not dictated by short-term profit and the anarchy of production. In this sense, describing the Chinese state as capitalist seems to miss the mark.

China’s state is not capitalist in nature, as it is neither governed by the domestic or international capitalist class nor driven by the logic of profit for its own sake. Despite notable internal divisions, key continuities can be traced from the Mao period to the present, including the primacy of state planning, the prioritization of the common good over private gain, and the ebbing and flowing—yet ultimately persistent—emphasis on Marxist economics.

There is a tendency among some China observers to treat 1978 as a sharp dividing line in the country’s development. Closely related is the view that Reform and Opening Up marked a complete rupture with the Mao period—a total reorganization of social and economic relations.

Chinese Marxist scholar Wen Tiejun rejects this “1978” demarcation, advancing instead a “Ten Crises” model of Chinese development. In this account, Reform and Opening Up was not a singular turning point but one of several major state responses to economic crisis over the history of the People’s Republic. These crises stem from the war-torn underdevelopment inherited in 1949, China’s subsequent reliance on external economic assistance—first from the Soviet Union, then the US—and the tensions and contradictions generated by post-1978 capital accumulation. Each crisis prompted direct state intervention that addressed immediate pressures while laying the groundwork for future contradictions. Wen’s analysis includes hyperinflation at the founding of the People’s Republic, the interruption of Soviet aid in the 1960s, structural crises associated with reform, the 1997 Asian financial crisis, the global financial crisis of 2008, and environmental crises linked to capital accumulation.

By presenting such an analysis, Wen hopes readers will “grasp the historical continuity” of Chinese development from 1949 to the present, rather than focusing solely on party infighting and factional power grabs. Writing in Monthly Review, Ken Hammond summarizes Wen’s perspective on Chinese economic development:

Wen’s narrative of China’s course since 1949 reveals both continuities and ruptures, from the ongoing quest for foreign investment and technology, the fraught process of primary accumulation, to the extraction of surplus value from labor. These were accompanied by shifts in emphasis from mobilizational movements to expert-led management. He is clear that much has been achieved, but just as clear that the future will contain its own contradictions and challenges.

Reform and Opening Up marked the beginning of a new kind of socialism, one far more open to private capital accumulation than earlier socialist models. In this combined capitalist-socialist system—what the Communist Party of China calls “market socialism”—the emphasis remains, ultimately, on the socialist dimension. As author Helena Sheehan, visiting professor at Peking University, writes: “Both in China and abroad, people ask if China is capitalist or socialist. When I am asked, I answer that it is both. I think that China is engaging in a massive world historical experiment in a new relationship between capitalism and socialism, somehow using capitalism to build socialism.”

In an interview with Canadian Dimension, Sheehan restated her position on China. “I believe it is basically socialist, but in a complicated way,” she said. “The current leadership of the CPC and many Chinese people I know believe they are on a path to socialism. I think it is quite precarious, but I put my hopes on that being the case. It is one of the few hopeful prospects in this bleak world these days.”

Minqi Li, a political economist at the University of Utah and author of China and the 21st Century Crisis, holds a more critical view. Over email, Li told Canadian Dimension: “The Chinese industrial sector is dominated by domestic and foreign capitalist enterprises. State-owned enterprises are virtually nonexistent in agriculture. Construction and most service sectors (such as wholesale and retail, hotels and restaurants, business and professional services, residential services, and technology services) are dominated by private enterprises.”

After 1978, the Communist Party of China abandoned internationalism and Third Worldism in favour of pursuing economic development at all costs. This meant discarding many pillars of the Mao era—internationalism, class struggle, communal production—and effectively exchanging a vast, low-paid labour force for access to international capital, along with the technology, scientific expertise, and managerial techniques required for state-led development on an immense scale.

Reform and Opening Up did not represent the definitive triumph of capitalism, and China’s state today cannot be accurately described as........

© Canadian Dimension