A Spectre of "Capitalist-Socialism" is Haunting China

The 20th National Congress of the Communist Party of China concluded with Xi Jinping acquiring a third term as General Secretary of the Party. The "hope" of fulfilling the objective of further capitalist growth was confirmed, since (the declaration is textual) “China cannot develop isolated from the world which needs China for its development”. This will be “the new philosophy of development on all fronts, continuing the reforms to develop the socialist market economy”. This, despite the fact that economic growth has undeniably worsened and in the face of talk about the ongoing trade war between the United States and China.

Once again, control of the market by the Chinese state was confirmed and the attempts at long-term planning will continue, even though this clashes with the serious valorisation difficulties that capital is encountering everywhere today. This is leading to financial instability which in turn is exacerbating international competition and bringing a growing danger of armed clashes. Already in 2015, China experienced a deep financial crisis with the bursting of a stock market bubble and the collapse of almost 50% of the value of its shares. The attempt to balance both the "decisive role" that state intervention should play — through the market — with the "profitable" activities of private companies, is based on the fundamental premise of a constant and progressive increase in the valorisation of capital. Otherwise that crucial element, the “resource” which constitutes the basis of the “capitalist-socialist economy” and which prompted — between 2015 and 2021 — trillions of dollars of investment by “funds of industrial orientation" would not exist. Thus: an inextricable union between the State, capital and the market, where the Party has maintained strong control over the private sector, at least until now. Today, however, when private investment in fixed capital is slowing down, when low productivity growth and high levels of debt — shared between state and private financial institutions — weigh negatively on the calculations of “capitalist-socialism”, the cracks are widening. The much-vaunted policies of social justice and equality are especially problematic, something that is more than evident in the precarious condition of health care, care for the elderly and pension rights which, given the ageing of the population, are nothing short of alarming.

Here is an economic, scientific, technological and military power that is aiming for further national development by extending its influence — which can only be imperialist — in the international arena. The goal is stated explicitly: to give the "Chinese nation a position that will raise it firmly in the East". And China looks above all to the Eastern Pacific, an area where it considers it can establish its own economic-political hegemony. The means to do so include "manned recoveries" of islands in the South China Sea, large-scale, live-fire missile manoeuvres around the coast of Taiwan, with a simulated air and sea blockade of the island. Another imperialism, the American one, is getting nervous about this … Meanwhile, on the border between China and India, where the construction of military infrastructure is underway, clashes have also intensified. Furthermore, Beijing has its own special policy of economic and commercial coercion towards states whose policies offend it. In particular, taxes and customs duties on imports-exports are employed, varying from one country to another. An intricate system of high and low rates, preferential and special tariffs (updated annually) are applied in trade with countries more or less "welcome" to Beijing. To date, 19 bilateral "free trade" agreements have been signed with about thirty countries or regions.

At the same time, surveillance technologies, police force training and intelligence collaboration are offered to countries around the world, including Ecuador, Uzbekistan and Zimbabwe, as long as they are sympathetic to Chinese economic arrangements.

China is a ‘non-capitalist country’ ... yet with capitalists!

In other words, the same relations of production that exist in every capitalist country underpin “capitalist-socialism with Chinese characteristics” but the surplus value (extracted in China, as everywhere else, from the exploitation of the proletarian labour force) occurs under the control of a Party that purports to be "communist". With the most important means of production in the hands of the State and its overbearing hierarchies and bureaucracies, financial capital, largely from abroad, is directed towards the "growth of the country at the service of the real economy". Instead of allowing financial capital to “destroy value” (as happens in the West ...), Beijing — by investing in the production of goods — boasts of making it “produce value on an enlarged scale”! This belongs to the lowest depth of presenting capitalism in China. Give it a social mask to try to hide the abyss of violence and adversity into which capital is pushing the human species, both in the West and in the East.

Among many admirers of “capitalist-socialism”, Sivini Giordano pedals some of these confused idealist constructions in The Material Constitution of China. The historical reasons for the growth of Chinese capitalism outside the financialised world-economy”.(1) The title is enough to understand what “shit” (sorry, but even Marx used this word!) we are immersing ourselves in. We have also been following the enlightened thought of Qiao Liang (ex-general of the Chinese People's Army) in The Arch of the Empire,(2) a book that we had to quickly leaf through in order to avoid developing dangerous mental disorders. In another book (Bradanini, China, The Irresistible Ascent)(3), the author — who was a trade adviser and then ambassador to Peking and is now president of the Center for Studies on Contemporary China — is enthusiastic about a country that has emerged from underdevelopment “ensuring its immense population prosperity and with public services superior to many capitalist countries (think of the almost non-existent unemployment)” (p. 128). Here we learn that among the Chinese "people" in 2020 there were four and a half million with an annual income exceeding one million dollars and then 878 billionaires, all either formally enrolled or, in any case, close to to the Party. A further 600/700 million people are considered to be middle class, with an income of between 10 and 50 dollars per day. The others — whenever they are lucky enough to be exploited by “socialist capital” — reflect on the “socialism in wealth” promised by Deng Xiaoping with empty pockets.

The distinctive element of Chinese "capitalist-socialism" is supposed to be that financial capital is placed at the service of the real economy which allows for the production of value contained in goods (here is "wealth"!) on an enlarged scale while in the "financialised world-economy” productive capitalist entities (of goods and therefore of value) are tributaries of the financial ones which parasitically speculate and destroy value. By contrast, the overriding principle on which China depends and with which it must comply is increasing productivity and the constant growth of wealth, as mentioned above.

At the same time, however, there is an hegemonic financial empire that disturbs Beijing's designs. The USA stands accused of having made abundant credit concessions in dollars (printed at a rapid pace) thus forcing other currencies in the world into subjection, by exercising control over commodity production and international capital flows as well as interest rates. Facts that prevent China from "freely” doing the same ... As regards capital flows, being able to divert them to its own advantage has become one of the preoccupations of the Beijing government which seeks to offer investment opportunities on favourable terms for global finance capital. As it is, Beijing's foreign exchange reserves total more than four trillion dollars.

Beijing's other stratagem is securing a vital space in international markets. (We repeat, this is always in the context of nationalisation of some industrial sectors and a constantly changing plan of production.) Clearly, there can be no mention of eliminating the law of exchange value. That would be blasphemy: for China it is essential to maintain first place in the world for export-sale of goods, which account for about 4/5 of the foreign currency earnings of the Celestial Empire. And what is the complaint in China? That demand for cars is too low(4), that GDP is not growing enough, indeed after 28 years it is decreasing (just over 6%), threatening the further development of what is nothing more than (right Marx) “production for the sake of production” of commodities and the “creation” of surplus value for capital. This, on top of the increasingly serious and disastrous environmental consequences.

A sore point: unemployment

Official Chinese statistics limit themselves to speaking of “registered urban unemployment” and ignore the unemployed in rural areas as well as a part of the migrant workforce following the progressive urbanisation of huge masses of peasants. Those who estimate 20% of the workforce to be unemployed are close to reality, especially given that in their search for cheaper labour many industrial companies are moving production to the poorest countries in Asia: India, Vietnam and others in Southeast Asia. Thus, in order to preserve its "legitimacy and authority", the Chinese government has recently been forced to grant a form of subsidy to help migrants without jobs and wages. For Beijing, it is important to preserve the image of a large and indomitable country: thus the official data on unemployment hovers around a total of 5%. But now another problem is emerging: the number of students and graduates is increasing (at least 3 million), who are about to swell the already worrying army of unemployed, so much so that the government has recently been forced to increase the recruitment of new graduates in the armed forces... Chinese “capitalist-socialism” defends itself!

For capitalism the immense Chinese population (1.4 billion individuals) should principally be considered as the main material for capital valorisation, i.e. for the result proper to the capitalist mode of production. But even in China (both with private and state ownership of the means of production) that fall in the average rate of profit which torments capital is making itself felt, causing a mismatch between the new value produced by living labour and the need for a greater portion of that surplus value to be recycled in the form of constant and fixed capital investment. This is while the relative value of labour power, which the capitalists see in terms of wages, diminishes. Thus consumption of goods does not match the greater quantities that are produced or could be produced.

The consequences of increases in relative surplus value

In China we are witnessing a development of the productive forces which (starting with microelectronics) is progressively reducing the size of the workforce, i.e. the one and only source of the surplus value necessary for the life of capital. The rate of surplus value initially increases but then — because it is relating to a smaller number of productive workers — it cannot increase enough to be able to "compensate" for the greater quantities of constant and fixed capital required by the development of the productive forces. Capitalist valorisation and accumulation enter a crisis for which there is no economic solution within the existing system. The reduction of the labour force on a world scale affects the "essence" of the production of surplus value despite the fact that it strengthens its relative form: its dynamic diminishes as the (exploitable) quantity of living labour decreases while productivity increases strongly due to the scientific and technological advance of production processes. Capital clings to the maximum extortion of relative surplus value in the illusory hope of countering the ongoing fall in profit rates.

That mass of money-capital which is expanding — under the guise of “interest-bearing capital” — clings to the “production” of financial securities that speculate using credit. These revolve more around consumption than the production of commodities (where the average rate of profit is faltering...) and increase the mass of fictitious capital which provides no valorisation — either direct or indirect. Money cannot be transformed into capital if it abandons all links with the exploitation of labour power. A lethal situation is being created for capitalism which, even if it imagines this to be "socialisation", is losing its links with both the national and transnational chain of value creation.

The Chinese concept of "market socialism" purports to be based on planning of both the production of goods and the organisation of public services. Extended internationally this would mean land and natural resources would be considered part of the public domain and economic relations between states would be based on the win-win principle of mutual benefit accompanied by the "healthy" policy of the systematic pursuit of peace. Underpinning all this is the need for healthy company balance sheets — both public and private — a goal actively pursued by reducing costs in every sector, thus guaranteeing competitive production conditions whilst also obeying wider strategic interests. China still enjoys the advantage of low labour costs, which affect (although less today than in the past) a very small percentage of the total price of Chinese exported products. We are talking about an average of only 10% …

Capitalist relations of production in China

Capitalist relations of production have expanded at a frenetic pace, making up for centuries of backwardness, especially in rural areas. Now the entrepreneurial system has ended up organised in accordance with the capitalist principles of the World Trade Organisation, of which China has been a member since 2001. Some of the state-owned enterprises themselves have then gone on to be organised on a share-owning basis, always under the control of the Party. The greatest attention is paid to updating the processes of producing commodities through the introduction of robotics. Meanwhile, the role of fictitious capital is growing enormously, including the deluded acceptance of a partly fictitious valorisation which is beginning to alarm global financial markets.

Ultimately, the administration of an economy whose strong point ought to be capitalist production is dominated by the political sphere. Economic achievements are fundamental for moving up in the Party and within the bureaucracy. Everything revolves round a productivist dynamic linked to the principle that "whatever its origin, capital must find a welcoming and uncritical habitat to support the system of production."

Chinese workers are completely subjected to wage labour and the commodity form conferred on each product. Even the notional participation of employees within the state-owned companies and their management is limited to the Supervisory Board and the formality of the Workers' Congress, while the banking system and the financial markets are strictly directed and controlled by the Party and the State. This is all about manoeuvring: the Party acting as government and State; state capital (presented as public) and private capital competing within a domestic and, above all, foreign market. The Communist Party, which has more than 90 million members, has a strictly hierarchical set-up. At its side are the Youth League and the Trade Unions, all firmly institutionalised.

The Chinese Federation of Trade Unions collaborates with the Party in controlling over 300 million registered workers who are obliged to accept that productivity is the number one priority within an industrial framework where there are many irrationalities, unequal application of the law, widespread bureaucracy, waste of resources, corruption.

Outside the Party, every other circle and association is regarded as a potentially subversive force. Nevertheless, its "supporters" inform us that the Chinese people — nicely divided into opposing classes — nevertheless enjoy "freedom and participation" within the ideological boundaries defined by the Party! They are even allowed to question (although, always and only inside the Party) that very power hierarchy which presides over the distribution of wealth. Here – it is said – is the difference with Western democracies where, even if the governments are incompetent or corrupt, they remain equally legitimate since they are chosen by the people through free elections.

"Socialism" reshapes its roots without denying them...

The Party's control over the economy and society has not prevented some neoliberal measures, even if Beijing has had to "remodel" its "socialism" to accommodate them! Many ganglions of power — both in the political and economic spheres — are already strongly influenced by the interests of elitist groups, both national and international.

There are huge economic and financial resources at stake, and this is why SASAC(5), a holding company where the top managers have been chosen by the Party on the basis of their international experience, has been appointed to oversee the activity of public companies. Beijing, in the name of the Chinese people, aims to exercise as complete sovereignty as possible not only over the control of natural resources, ways and means of communication, but above all of the global monetary and financial system. If it is to achieve these objectives China also needs to strengthen its military power, including the most advanced weapons.

Finance without borders

US financial capital has had few constraints on its entry into China, and is able to "acquire total control of listed and previously banned companies". On the move are Wall Street investors (BlackRock and Vanguard) and financial institutions (Goldman Sachs, IP Morgan, etc.). Pension funds and other “financial instruments” have also been launched. This is a more than evident penetration of international financial capital which — according to Beijing — would strangle the Western economy but not the Chinese one! Which — in truth — demonstrates how the contradictions that are sharpening within Western capitalism are also developing in China. The production of goods and their export has come up against the woeful constraint of production costs that international competition tightens around the neck of capital.

State capitalisation

The surplus product is concentrated in the hands of the State which in turn is controlled and run in the complete service of the bourgeois elite whose power has become preponderant, and whose class interests its serves while it operates to maintain a high level of capital accumulation.

The State is committed to guaranteeing as far as possible the conditions for capital that is invested in the production of goods to realise the profits necessary to continuously stimulate the geographical expansion of the market, without which it could not survive or maintain its own existing accumulation and reproduction. These objectives require a massive step-up in technological innovation, something that the capitalist producers see as a possible (completely illusory!) contrast to the fall in the average rate of profit which is beginning to give alarming signals in China too. So much so that Beijing clings for ways and means to lead the financial sector into supporting businesses in the productive sector, profitable businesses whose "production" of surplus value can avert clear signs of crisis whilst imposing an imperialist expansion all over the world in order to draw oxygen for one's own survival. The crisis is thus spreading globally and the clash between one and the other of the imperialist centres becomes inevitable. At least until the communist revolution causes capitalism to disappear, even the one that wears the threadbare clothes, dripping with blood, of a false "socialism".

And finally, here is the new social philosophy of China, as already formulated by Keynes who argued for "a socialisation which with the increase of investments will bring us closer to full employment and will place the public authority in close collaboration with private initiative".... The important thing – and Beijing is stressing this today – is being able to access world trade, international capital and the knowledge and technologies of the most advanced countries with all credentials in order. Yet, once every unproductive company is eliminated, it is impossible to remain on the market … The agony of capital is increasing all over the world, including the Celestial Empire.

Battaglia Comunista


Image: commons.wikimedia.org

(1) Giordano Sivini, La costituzione materiale della Cina, le ragione storiche della crescita del capitalismo Cinese fuori dall’economia-mondo finanziarizzata (pub. Asterios) 2022

(2) Qiao Liang, L’arco dell’Impero. Con la Cina e gli Stati Uniti alle estremità (pub.LEG Edizioni) 2021

(3) Bradanini, Cina: L’irresistibile ascesa (pub.Sandro Teti), 2022

(4) China is the world’s largest light vehicle manufacturer but only around 3% are exported. [trans.]

(5) The State-owned Assets Supervision and Administration Commission of the State Council (SASAC) is directly under the management of the State Council.

Saturday, January 7, 2023