China: The Rising Force in our Region
Posted on Monday, November 08 by Australian SP Added to Irish Socialist Party site, 14th Nov. 2004

Background feature on history of and current situation in China

1949 Chinese Revolution: The gains of ‘49 squandered by the Communist Party bureaucracy.

Marxists describe the momentous Chinese Revolution of 1949 as the second greatest event in world history, after the Russian Revolution of 1917. One billion people rose up and smashed capitalism and landlordism and expelled imperialism from the country. Long suffering peasants, who toiled on the land as virtual slaves for centuries, took control of their land. The new regime was able to implement an economic plan based on state ownership of the means of production. The immense advantage of nationalized and planned industrialization combined with the redistribution of the land and the organization of collective agriculture is proven by comparing China to capitalist India. Between 1948-68, during the most brilliant period in the development of world capitalism, the standard of living for India’s masses fell by 20%. Yet in China from 1955-75 life expectancy rose by 16 years and by 1975 China produced 1700 pounds of grain per acre, 60% more than India.

Yet unlike the workers-led revolution in Russia, the 1949 Revolution was won by a peasant-based army led by Communist Party (CP) leaders like Mao. This evolved from the crushing defeat of the 1920s when the working class was deserted by the leadership of the CP which had been responsible for its defeat. Mao and the CP turned to the countryside and for two decades organized and led peasant war against the landlords and imperialism.

Mao (like Castro 10 years later) envisaged a programme of national capitalist development once he took power. However the ideas in his head did not determine his direction, rather the class forces active in struggle. After World War Two the Japanese imperialist were crushed and the Western powers incapable of intervening in China such was the anti-war mood in their working classes. Once the Chinese capitalists fled Mao’s Red Army, he had no choice but to bring into state ownership the abandoned factories. On the land the peasants physically took the land and dealt with the landlords.

From the outset, the regime was bonepartist in character – resting on the peasant masses while raising itself above society, balancing and maneuvering between the classes, and crushing all opposition.

Rather than nationalization under the direct, democratic control of the working class leading the scattered peasant masses, the new economy was run by a bureaucracy that zigzagged between one policy to another in order to maintain power. Lacking the internationalism of the Bolsheviks in Russia, the horizons of the CP were restricted to China alone.

The attempt at hyper-industrialisation through‘Great Leap Forward’ in the 1950s (with mini-smelters in every backyard creating shoddy steel) and the so-called ‘Great Proletarian Cultural Revolution’ in the 1960s were essentially strategies by Mao to mobilize the masses in the controlled way to defeat his opponents in the bureaucracy and keep power. Both were economic disasters that undermined the gains of the Revolution.

1980 Deng begins market ‘reforms'

By 1980 the bureaucratic mismanagement of the economy meant that US$32 billion of equipment and millions of industrial workers were left in enforced idleness. In the same year, 20 million tons of the wrong sort of steel were made and so wasted.

The new leader after Mao died, Deng, announced a shift towards the reintroduction of market relations, at first in a limited way and then more widespread. In the words of the London Financial Times: “The CP has (since 1980) worked hard to obfuscate the full significance of its reforms…Thus although the country is manifestly capitalist, Beijing still insists it is building ‘socialism with Chinese characteristics’.

By the Chinese summer of 1988 inflation was running at 50%. Credit growth was cut to 10% in 1989 and urban wages held down while unemployment reached its highest level for a decade. This provoked the student and worker uprising in Beijing in 1989 that was crushed on June 4th. Our party, through its international, the Committee for a Workers’ International (CWI), fully supported this movement both politically and through participation by its members inside China. One of the most popular student posters during these protests was one which listed the family trees of 27 leading officials whose relatives had made fortunes from nepotism and graft (the “princelings”).

After the clampdown, the CP briefly slowed down the reintroduction of market or capitalist relations, but then stepped them up at an even higher pace.

The rise and rise of capitalism in China

At the start of 1992 there were 100 foreign investment zones in China, by the end of that year there were 8,700. Resting on massive cheap and unorganized working class, a strong and ruthless state machine, and a government not fully in control of the forces it had unleashed, the economy boomed for the benefit of newly welcome foreign companies and a new capitalist elite and middle class inside China itself.

By 2003 China consumed half the world’s concrete, a quarter of its steel, a third of its iron ore and was the second largest importer of oil. It is a ‘vacuum cleaner’ for raw materials, which Australian exporters have benefited from.

China is the engine of growth in Asia, taking in 31% of the regions exports. Its imports from the US prop up, in effect, the largest economy in the world and allow (for now at least) Washington to run its massive twin deficits of its current account and budget.

The CP looks towards the old South Korean and Chilean dictatorships as its role model: Rampant capitalism under the control of a strong dictatorial state. Even now, the role of the State remains key in the Chinese economy. Since 1997 it has invested US$18 billion a year in infrastructure projects and attempts to keep some control over the forces it has unleashed both economically and occasional purges of the more corrupt CP ‘bosses’. Unlike the situation in Russia and Eastern Europe after the victory of peoples’ power movement in 1989-91, the ruling party remains in power and the ability of imperialism to ‘vacuum clean’ China’s resources is not unlimited. In fact in 2001, for example, US corporations made more profits from affiliates in Mexico with 100 million people than from China with 1 billion people. Banker Jack Perkowski called China: “the Vietnam War of US business – because so many promising young careers had been lost there”.

That is why the CWI still leaves open the question of the exact class character of the China. The majority view in our ranks is that it China is still a deformed workers’ state with substantial and increasing characteristics of a capitalist society. It is a different situation than in Russia and Eastern Europe – proved by the nervousness that remains amongst foreign investors. A minority view in the CWI is that China is already a capitalist society. The CWI encourages and facilities this open discussion inside our ranks.

The reaction to the new capitalism in China

Opposition to the effects the effects of capitalism was stunted after the defeat of 1989. As a result the conditions of the working class are horrendous. The average manufacturing wage is US61 cents an hour. 7,000 miners died in accidents in 2003. The cutting of subsidies to the rural masses – to be fast-tracked by the entry of China into the World Trade Organisation – will lead to an expected flow of 300 million people into the cities, putting downward pressure on wages.

However the working class and peasants have been affected by the changes since 1980 – many can pick up Hong Kong TV or access the internet (although the CP try to censure it) and many have mobile phones. There are almost daily reports of strikes, occupations, rail lines blocked, company property damaged and clashes with the police. The main issues are unpaid wages and redundancy, and corruption by management leading to bankruptcy and plant closures.

The re-entry of the working class as an organized force into Chinese society will change everything. The CWI is doing all it can to assist this process.

The suppression of the benign Falun Gong movement and the continued repression of the ethnic minorities in Tibet and Xinjiang shows the fear of the CP of a Yugoslavian-style break-up of China. The CWI stands for self-determination for all the peoples of Tibet and Xinjiang leading to independence if they so wish. However we support the unity of all the workers and peasants of China and the establishment of a democratic socialist federation of states in the region.

Partially reflecting its growing imperialist power in the region and partly an attempt to divert attention away from any economic slowdown, the CP maintains its fiery rhetoric towards Taiwan. The economic division between the two states is gone now and Taiwan has over 50,000 factories on the mainland. The difference now is an inter-imperialist rivalry which has Washington and Canberra worrying – they politically support Taiwan but are much more reliant on the Chinese economy.

A Crash looming for China?

The growing Chinese economy has been a boon for the US and East Asian countries, not to mention Australia. Canberra is currently in negotiations with China seeking a Free Trade Agreement (FTA) to lock in exports to its fastest growing trade partner. For China a FTA with Australia offers a more secure supply of resources and energy sources. The Financial Review also claims: “Strategically, it will help balance China’s intra-Asian focus, especially since Australia also has an agreement (FTA) with the US.”

There are problems looming for the Chinese economy. Much of the banking sector is insolvent. Loans outstanding equaled 50% of Gross Domestic Product in 1978 – it was up to 145% by 2003. One academic argued: “China – a country that was debt-free when it started its reforms – was headed for a debt level associated with Latin American countries of the 1980s or Japan at the end of the 1990s”. Exports are the key to Chinese growth but the massive balloon of debt for capitalists, the state and consumers in the US (and capitalists and consumers in Australia) will burst or deflate at some stage. As exports flag, domestic consumption will be key to continue high growth in China, but the low paid workers and the underemployed and unemployed cannot buy back all the goods they produce. The CP believes that social unrest will mushroom if growth is less than 7%. The Financial Times argued: “For most economies 7% would be no hard landing. For China and its trading partners, it would feel like one…is a sharp slowdown now inevitable? The answer is: almost certainly yes”.