On July 1, 2021, Chinese President and Communist Party General Secretary Xi Jinping delivered a speech marking the centenary of the Communist Party of China (CPC). “Any attempt to divide the party from the Chinese people or to set the people against the party is bound to fail,” he said during the ceremony in the capital, Beijing. Xi said “the strengths of socialism with Chinese characteristics are attributable to the fact that Marxism works”. Saying that Marxism remained “the guiding ideology upon which our party and country are founded,” he pledged the CPC would continue developing it in line with changing conditions in both China and the world.
Xi’s speech encapsulates the complex nature of China’s socialist-oriented developmental journey. The country’s tremendous progress, including the more than fourfold increase in economic growth since the late 1970s and the recent elimination of absolute poverty, has been made possible due to a controlled integration into the global economy. Four elements of the Chinese system stand out: (1) social ownership of land, which in the countryside is still partly managed collectively by village communities; (2) state ownership of strategic sectors of industry, including banks, allowing for high rates of investment; (3) public control of money and finance; and (4) a robust planning architecture, complementing the market economy, overseen by the CPC through five-year plans.
The existence of a social structure of accumulation characterized by a mix of market and statist tendencies has resulted in a dynamic economic configuration. First, despite the clear evidence of rising income inequality and the formation of a propertied class, China has not witnessed a genuine capitalist class formation. Chinese elites’ power and wealth are interlinked with their political fortunes. Their wealth is not easily inheritable or transferable among industries or abroad; it majorly exists in the form of property that cannot be liquidated at will. It is closely tied to political conditions, which can change radically and unpredictably.
Second, the working population does not constitute a well-defined proletariat. In the state sector, which continues to occupy more than half of the economy, workers enjoy rights and protections; these are invariably subject to contestations. Even in the private sector, creation of an entirely fluid labor market, having the real attribute of an abstract commodity fully movable among industries, is highly incomplete. Third, one must take into account the still-powerful pre capitalist formations that shape socio-economic relations in China. Workers in the cities often have enduring ties to the villages from which they originate, where they and their families have communal obligations that undermine the capitalist valorization of their labor power.
The continued advancement of China’s sovereign project has been fundamentally aided by the CPC. China was able to overcome both the internal political avalanches of the late 1980s and the vicissitudes of an era marked by the predominance of neoliberal ideology, building institutions that consolidated the country’s core sectors, overcoming uneven development and tackling the tendency towards the deterioration of terms of trade. The Chinese state pursued the preservation of huge state-owned conglomerates, and the strengthening of a strong public financing system. Thus, the CPC able to isolate monetary policy from external capital flows, increasing the policy space for economic policies relatively independent from international financial vagaries.
The exchange rate of the national currency, the renminbi, is determined by the People’s Bank of China (controlled by the CCP), and the banks are indigenous and mainly state-owned. Thanks to these, China has been able to keep market forces under control and use them to encourage domestic economic development and improve the well-being of the population. Capital controls have been used on a stop-and-go basis, as the leadership of the country has tried to strike a balance between the needs of market forces and the goal of indigenous development, which is officially aiming towards socialism. A mix of flexible monetary, fiscal, industrial, and sectoral policies, along with the intensification of import substitution, shaped China’s transformation into the “factory of the world.”
The development of superior technological and industrial capabilities is conducive to the structural changes necessary to insulate the economic system from intense international, low-cost competition, and hence to resist the downward movement of prices and, therefore, wages. Between 1988 and 2008, China’s average per capita income grew by 229%, 10 times the global average of 24%. In 1994, a Chinese factory worker made $500 a year, only a quarter of the wage of her counterpart in Thailand. In 2020, the average annual income in China exceeded $10,000 – three times the figure for Thailand. These improvements are the direct result of a long-drawn-out process of socialist modernization headed by the CPC.
Yanis Iqbal is a freelance journalist