The Transformation of China’s Economy: From State Control to Capitalism

Lecture

This is a lecture based on article from In Defense of Marxism from 2006.

https://marxist.com/china-long-march-capitalism041006.htm

I. Introduction: Framing the Chinese Experience

Objective:

To analyze the transformation of the Chinese state and economy from the late 1970s to the early 2000s, with a focus on the empirical and theoretical dimensions of capitalist restoration under bureaucratic leadership.

Key Questions:

• How did China transition from a planned economy to a market-driven system?

• What role did the Communist Party bureaucracy play in this transformation?

• Can China still be considered a workers’ state? Or has it become a fully capitalist society with “Chinese characteristics”?

II. Overview and Periodization of the Transformation

1. Deng Xiaoping’s Reforms (1978–1984):

• Initiation of “market mechanisms” to boost productive efficiency.

• Creation of four Special Economic Zones (SEZs) near Hong Kong and Macao.

• Decentralization and promotion of foreign direct investment (FDI).

• Agricultural decollectivization via land leases to peasant families—effectively a privatization in practice.

2. The Shift to Labor Commodification (1983–1987):

• Introduction of labor contracts, ending guaranteed “lifetime” employment.

• Surge in private employment and small-scale private enterprise.

• Emergence of Town and Village Enterprises (TVEs)—nominally public, functionally capitalist.

3. The 1989 Turning Point: Tiananmen and Political Limits

• Popular protests (especially among students and workers) erupted due to inflation, layoffs, and rising inequality.

• Violent repression marked a counterrevolutionary moment, halting political reform but accelerating economic liberalization.

4. Acceleration and Ideological Shift (1992–2001):

• 1992: Deng’s “Southern Tour” and the declaration of a “socialist market economy with Chinese characteristics.”

• Large-scale privatization of state-owned enterprises (SOEs) begins.

• Legal and institutional reforms to support private property and capitalist enterprise.

5. WTO Accession (2001):

• Integration into the global capitalist system formalized through membership in the World Trade Organization.

• Rapid dismantling of state monopolies in trade, banking, utilities, and industrial sectors.

III. Theoretical Framework: Marxist Concepts Applied

1. Deformed Workers’ State vs. Bureaucratic Capitalism:

• Drawing from Trotsky’s analysis of the Soviet Union, China is understood as having once been a deformed workers’ state—one in which the working class did not hold power, but where the state controlled the means of production on its behalf.

• The shift described in the article is framed as a “cold counter-revolution”—a restoration of capitalist relations without the violent rupture typical of bourgeois revolutions.

2. Property Relations and Superstructural Lag:

• The article emphasizes Marx’s dialectical insight that the legal and political superstructure eventually adjusts to changes in the economic base.

• Despite remnants of state planning, China’s legal reforms—from protecting private property to enabling foreign capital access—represent a shift in the dominant property regime.

3. Bureaucratic Transition and Class Realignment:

• The party-state bureaucracy is portrayed not merely as midwives of capitalism but as its future ruling class, using privatization, asset stripping, and legal reform to transform themselves into capitalists.

4. Comparisons and Contrasts:

• With Bukharin’s NEP: Deng’s reforms echo the belief that market mechanisms would enhance socialism—a belief which underestimated the autonomous logic of capitalist accumulation.

• With Germany/Japan: The transition is likened to the bureaucratically managed capitalist development seen in these countries without bourgeois revolutions.

IV. Key Themes and Insights

1. Market Reforms as Class Strategy:

Reforms were never ideologically neutral; they reflected and advanced the material interests of the bureaucracy as it morphed into a nascent bourgeoisie.

2. Repression as a Guarantee of Transition:

The suppression of worker-student alliances (e.g., Tiananmen 1989) was pivotal to ensuring the continuity of capitalist reform under authoritarian conditions.

3. Duality of the State:

While still retaining control over strategic sectors (e.g., banking, utilities), the Chinese state has served primarily as an instrument for building capitalism, not resisting it.

4. The Working Class as the Key Force for Reversal:

Although disempowered and atomized during the transition, the article posits that only the working class has the objective interest and power to re-socialize production.

V. Conclusion: Is China Capitalist?

The International Marxist Tendency answers unequivocally: yes, China has become capitalist—its ruling class is capitalist, its dominant property relations are capitalist, and its economy functions by the laws of value, profit, and exploitation.

However, the transition was unique:

• It was administered by the former ruling party of a workers’ state.

• It was gradual, technocratic, and bloodless, except for moments like Tiananmen.

• It has not yet produced a fully autonomous national bourgeoisie, but one that is still dependent on and interwoven with the state.

Letters from Tomis