For the second and third in our series of short communist responses to common questions about China, we split one common question into two. We are often asked: “Is China a capitalist or a socialist country?” This is possibly the most common and most complicated of the frequently asked questions about China, so we’ll cheat a little bit here and provide a longer answer by splitting it into its two component questions. First, addressed here, is the question: “Is China a capitalist country?” Then, in a forthcoming post, we will address the question: “Is China a socialist country?” In contrast with the first post in the FAQ series, which consisted entirely of responses from our Chinese members and friends, this and subsequent entries incorporate such individual responses into articles collectively authored by both our Chinese and our international members.
As always, we encourage readers to reformat these answers for use across platforms. If you’ve designed pamphlets or infographics using these materials, please send them to us (e-mail: firstname.lastname@example.org) so that we can archive them here and repost on social media!
China is capitalist. It is capitalist both because it is fully integrated in the global capitalist system and because capitalist imperatives have penetrated all the way down to everyday life. The population in China, as elsewhere, depends on the market for survival, either directly or indirectly. In other words: you need money to survive. Since money is the lifeblood of capitalist production (in technical terms, we say that it is the necessary form of appearance of value), this dependence on money for survival is the clearest signal that a population has been incorporated into global capitalism.
But part of the problem you run into with this question is that the basic definitions are often unclear. So, let’s backtrack a bit and start with the fundamentals: Capitalism is a form of society that obscures its own social character, treating relationships between people as purely economic relationships between different things that are bought and sold. In other words, it is a society that pretends not to be a society. At the heart of this system is the requirement of infinite growth. It has always been an international system and it has always needed to both expand its geographic boundaries and to incorporate more and more aspects of human social interaction into the market. Within this society, the survival and prosperity of every individual is fused to the survival of “the economy.” Money is the expression of all this: it is how we calculate “growth,” it is the way that relationships between people are reduced to market transactions, and it is our everyday measurement of how well we can live or if we can afford to live at all.
For most people in China, as elsewhere, the money they need to survive takes the form of wages paid for work. It doesn’t matter if these wages are disguised as “sales” (i.e. for street vendors), “donations” (i.e. for livestreamers) or as some sort of “bonus” or “social insurance payment” (common names for additional wages earned by industrial workers in China). These people are forced to depend on wage income because they have no collective control over production itself, and production is the source of the goods they need to survive and live a full life. Even when unemployed, people in this group (called the proletariat) still need money to survive, so they end up depending on others’ wages (i.e. borrowing from family), going into debt (i.e. depending on loans from the wealthy) or subsisting on meager unemployment or pension payments from the state, which are just second-hand wages (or second-hand profits) since welfare funds are paid for by taxes, including an income tax.
Government of the Rich
For a small share of the global population, the money they use to survive is obtained from profits, which are returns on money invested in some sort of business. This doesn’t just mean casual investment of spare cash. To receive enough to survive on, you must already have a large sum of money to invest. In other words: you have to be rich. In China, this latter group (called the bourgeoisie or simply the capitalist class) is split into two important sub-categories: those “inside the system” (体制内) and those “outside the system” (体制外). In both cases, the “system” is the party-state, which is an organization of the Chinese members of the global capitalist class.
In the party-state, capitalists hold all major decision-making power. At first glance, this might seem different than the “democratic” governments of other countries, even if we recognize that these democracies are, in fact, oligarchies where the rich exert indirect control through political middlemen. But direct rule by the rich is almost universal for countries in the first stages of capitalist development—at least for those that have successfully triggered periods of rapid growth. The first countries called “state capitalist” or even “state socialist” (in the late 19th century) were places like imperial Germany and Japan, where the wealthy had more or less direct control of the state and used it to implement wide-ranging developmental projects and forms of social welfare, often in an effort to undercut opposition from below. This included outright state ownership of key industries, such as railways, as well as the emergence of enormous monopolies that were thoroughly integrated with the state—in some cases even tasked with printing the official currency and running the national bank. Similarly, rapid development in places like South Korea, Taiwan and Singapore in the later 20th century took place under one-party dictatorships that implemented state-led economic plans.
Even the classic cases of capitalist development in “democratic” countries such as the United Kingdom and the United States took place in eras where the political system was entirely populated by the wealthy, whether landed aristocrats in England or the early industrialists and slaveowner plantation elite in the US. These were “democracies” in which the vast majority of the population (women, slaves and men without property) could neither vote nor stand for office. In other words, they were effectively also “party-states” in their own way, even if different factions of the wealthy organized into competing “parties.” In all cases, the state is the government of the wealthy.
China today follows in the same footsteps, but in conditions of even more intense global competition. So it is not surprising that the union between Chinese capitalists and state power is similarly intense. In the Chinese party-state, all upper-level positions (roughly county level and above) are staffed by guanliao (官僚), a term often translated simply as “bureaucrats,” but which actually designates only these higher-level government posts—almost universally held by wealthy individuals who, in any other country, would clearly be seen as capitalists. The guanliao form the official core of the group of capitalists who are “inside the system.” But almost all major capitalists in the country can also be categorized as lying “inside the system,” including those who hold no official bureaucratic post but are nonetheless party members, such as Jack Ma. Similarly, all major companies, including “private” ones, have party members placed in upper management.
One objection that might be raised is that the party can’t be called a capitalist organization, when most party members and most lower-level civil servants (called gongwuyuan – 公务员) are not themselves capitalists. But this is true everywhere. As in any country, the bulk of membership in political parties and state bureaucracies will always be drawn from the proletariat, who are the majority of the population. However, the fact that most registered Democrats and/or state employees in the US are workers hardly makes the Democratic Party a “workers party” helming a “workers’ state.” Just like the Democrats and Republicans, the Chinese Communist Party and the party-state it helms are ruling class institutions, adapted to settle disputes between major capitalists and help keep the economy running smoothly, which mostly means keeping growth rates up, keeping inflation down and suppressing any unrest. Those “inside the system” have privileged access to the resources controlled by other capitalists inside the same system and have some influence in the collective decisions made by the party.
Nor is this a system on the decline. The exact opposite is true, as the past two decades have seen an active attempt to recruit more and more capitalists into the party, visible in the 2002 reform of the party constitution that enabled “entrepreneurs” to join (and gave after-the-fact endorsement to the many party members who had already used their positions to become capitalists in the 1980s and 1990s). Similarly, the wealthy who refused to submit to the leadership of the more powerful capitalists in control of the party or who pursued their own interests in a way that threatened to produce instability for everyone else were targeted in various “anti-corruption” campaigns, often resulting in their imprisonment and execution. The result is that, today, those “outside the system” are mostly smaller capitalists who have not (yet) joined the party, or oppositional larger capitalists who have refused to do so—often because they are able to have one foot in China and one foot overseas.
This is important, however, because it is a reminder that capitalism is global, meaning that the capitalist class is also global. Capitalists in China are only one fraction of this class. Even if they’re able to solve some of their own internal conflicts through the party apparatus—and even this ability is unlikely to last forever—they still face harsh competition from capitalists elsewhere. This competition is often expressed as “geopolitical” conflict or as a “trade war.” In a simpler way, it is already evident in the very existence of multiple, competing nation-states, each overseeing a “national economy,” often riven by its own internal divides between capitalists. At root, though, these are all battles between competing groups within a single ruling class.
State and Nation
Most of the confusion about whether or not China is a capitalist country is to be found in two related errors: the first is the incorrect assumption that individual countries somehow choose economic systems which are then largely confined to those countries, making it possible to speak of “socialist” countries, “capitalist” countries and any number of possible variations; the second is the assumption, already mentioned above, that “the state” and “the market” are two fundamentally separate institutions, and that capitalism is defined by the dominance of the market, whereas “socialism” is defined by the dominance of the state.
Both errors are rooted in a misunderstanding of what the “state” is. In the first error, it is assumed that the nation-state is a natural or inevitable form of human community and that the economy is subordinate to it. It’s easy to imagine, then, that people in a given territory, so long as they agreed, could just reorganize their economy to their liking. They could, for instance, choose some sort of Northern European-style social democracy with free healthcare and lots of investment in education, infrastructure and renewable energy. In this way of thinking, it is only greedy, stupid, or confused people who prevent this from happening.
In imagining the country as a community, though, real conflicts of interest are ignored. What if “bad” people are not what is preventing the “good” choices from being made? What if, instead, many of the bad things in society actually benefit those in control of society? In reality, it’s actually worse than this: the bad things are made necessary for everyone because they’re necessary for “the health of the economy” on which we are all forced to depend. If inflation gets too extreme it means your wage buys less. If growth slows it means it’s harder to find or keep a job. We are all chained to the economy. In wealthy countries these chains are looser. More concessions are always possible. If you’re at the very top of the system, you might even feel as if you aren’t chained to it at all. But as soon as it begins to slide down a cliff, those chains become an undeniable reality. If it sinks, we sink with it.
But the poor sink first. That’s why, as soon as an economic crisis breaks out, the state is mobilized to “restore the health of the economy” by bailing out the rich. Those at the bottom might get some support, but it will always be a fraction of what the wealthy receive. Since the wealthy are the ones in control of production, “rescuing” the economy means that their interests will be prioritized because they have cultivated a situation in which all of our interests are dependent on theirs. This is a clear demonstration that the country is not a “community” of shared interests. It is one territory in a global capitalist system. That territory is mostly owned and controlled by the rich. It is not your country, and it never has been. It is theirs.
The state is the expression of this ownership (but that’s not the same as just saying that the rich “own” or “control” the state). More specifically we can say that, since capitalist society pretends that it is not a society, its unity appears to us as an expanse of separations.[i] The apparent separation of the “political” from the “economic” is what produces the nation-state as we know it today, which is the specifically political form taken by capitalist social relationships. In simple, functional terms, we can think of the state as the way that certain capitalists in certain places negotiate their disputes, forge temporary allegiances against competition from capitalists elsewhere, coordinate to repress uprisings of the poor and attempt to save the economy from its own extremes. In a broader sense, it is also the way that relationships between people appear to be “naturally” regulated by things like lawmaking and citizenship. In an even broader sense, this results in the idea of the “nation” as the “natural” form of human community. But the nation-state did not preexist capitalist society. It evolved within that society because it served a function for it. This isn’t conspiratorial—it’s not a bunch of rich people getting together and scheming about the best ways to trick people—it is instead adaptive, in the evolutionary sense, where features helpful for certain purposes become more important over time and those that serve no function slowly wither away.
Since we are all chained to the economy, we are also chained to the capitalists in control of the economy in the places that we live. This means that there is a real interdependence that lies beneath the myth of the nation-state, since the failure of one territory’s capitalists also means that regular people suffer. This is what is being talked about whenever there is a debate about how to “create jobs” in an area. It’s also why developmental programs led by capitalists in a certain country do, in fact, lift many people in those countries out of abject poverty, even if they do so unevenly. In recent decades, China has repeated the sort of “economic miracle” seen in many other capitalist countries in the past, often using similar methods: the construction of public utilities, national road and rail systems, the (sometimes forced) relocation of the poorest ruralites and the extension of basic education and healthcare.
But this interdependence doesn’t really take the form of a universally shared “national” interest. Instead, it is a complex chain of shifting and competing dependencies, inset within a global hierarchy of social power. On the one hand, it is always inherently international. This is visible in the simple fact that the success of so many factories in China (and therefore the prospects of China’s own capitalists) depends on both investment and consumption demand from wealthier countries. Similarly, capitalists in these wealthy countries benefit from this relationship both in the direct sense of deriving profits from this production, and in an indirect way, since a steady supply of cheap consumer goods for workers in rich countries helps to mute unrest by creating a credit-fueled veneer of prosperity.
On the other hand, these dependencies are also often sub-national, in the sense that certain regions in a country often benefit far more than others. This means that interests can diverge within individual countries as well, since the success of rich coastal cities might not spill over into the poor landlocked regions in the interior, even if these poor areas still benefit in a distant way from the fact that they lie within a “wealthy” country. Similarly, the success of a country’s capitalists is enabled by the exploitation of workers in their own country just as much as workers elsewhere. The accumulation of vast wealth by Chinese capitalists was obviously enabled by the exploitation of Chinese workers, even if plenty of this wealth also got distributed to multinational corporations headquartered in Japan, South Korea, Europe and the US. Even though the workers do ultimately get back some share of this enlarged social wealth, it is only a small fraction of the total. More importantly, they have no control over society’s productive power despite being necessary to production.
One Big Company?
Before concluding, it will be helpful to approach the question one final time from a slightly different angle. Above, we emphasize the lived reality of dependence on money for survival and give some explanation of the way that the capitalist class is structured in China. This explanation is something of an oversimplification, though, because capitalism can actually make use of many different types of labor deployment (some of which, like slavery, might not force people into dependence on a money “wage”) and many different forms of organization among the ruling class (sometimes, for example, a class of non-capitalist or semi-capitalist landed elites is equally important to government). In order to illustrate the flexibility of capitalist production when it comes to questions of government, let’s use simple thought experiment:
Often, China is spoken of as if the government was in complete control of production and the population were brainwashed into obedience. This is absolutely not true in any sense and myths like this have a long, racist history stretching from the “Yellow Peril” narratives of the 19th century through to similarly orientalist portrayals of the country in today’s media. But we can take this extreme distortion of the facts to make a point about the nature of capitalism. Let’s re-imagine the question in these terms: what if China were, in fact, organized as a single large monopoly corporation? What if the state really was in control of all the productive forces? What if these forces weren’t even organized into individual “enterprises” that competed with one another for profit, but had their activity planned by a central planning agency? Again: none of this is true! But let’s imagine. Certainly, you might think, it would no longer be correct to say that China is capitalist, if this were the case.
However, even this non-existent “China Inc.” scenario changes very little. This hypothetical nation-wide monopoly, within which every Chinese citizen would be an employee, would still be a capitalist firm. That’s because, at the end of the day, it would still be competing with other firms on the global market. Its survival would remain dependent on the survival of capitalism as a global system.
Think about it for a moment: there already are large capitalist monopolies—fully “private” companies like Amazon and Walmart—that command quantities of resources and populations of workers comparable to small countries. Inside these companies, there are no markets guiding transactions. Resources are moved between departments according to large-scale plans formulated in corporate headquarters distant from the actual worksites.
But these are hardly “socialist” institutions. Ultimately, their internal plans are geared toward growth, which can only be guaranteed if the company successfully competes against others in the global market. In other words: they’re just forms of corporate accounting. And extensions of corporate accounting to more spheres of the economy is not in any way a challenge to capitalist society. In fact, it is capitalism’s own long-run trend! One of Marx’s most consistent predictions is that the “social scale” of production will increase. The example he most frequently gives is a tendency toward precisely this sort of monopolization. But this does not mean that such monopolies contain a pre-made socialist planning infrastructure in embryo. They are forms of class domination, plain and simple. Marx saw this as an important trend not insofar as monopolies give communists ready-made machinery for coordinating production, but because the increasing scale of production also means that more workers are drawn into interaction with one another across the world in more complex ways, making the social character of production more visible even as it poses difficult strategic questions for any potentially revolutionary movement—evident in the case of global food and energy systems, for example, where immediate destruction would lead to mass starvation and death, while the failure to dismantle such systems in the long term will lead to environmental devastation with even worse results. At every stage in the general increase of the scale of production, the possibility and even necessity of alternate, socialistic methods of coordination become more and more obvious. But, again, such methods are distinct from and opposed to the existing methods of coordination visible in today’s monopolies. This is precisely the reason that Marx saw revolution as a necessity. Corporate accounting and capitalist statecraft never simply evolve into socialism.
One might then suggest that the solution lies in “delinking” the Chinese economy from the global market. At first, it might seem like this fixes the issue: all the planning that was conducted to serve the global market—and which could therefore be thought of as “capitalist” planning, as occurs in existing monopolies—is severed from this market, leaving only the planning apparatus intact. Even if not “socialist,” this planning seems as if it would, at least, cease to serve capitalist imperatives. But this makes about as much sense as arguing that Amazon or Walmart could “delink” themselves from the global economy.
Even if this were a political possibility, there are simple, practical limits that make the proposition absurd: since the bulk of planned activity in these companies is geared toward making profit and serving the market, “delinking” would leave the vast majority of their internal planning mechanisms useless. The entire corporate structure is built around capitalist imperatives such as making a profit and serving the market. Remove them, and the “plan” collapses. Preserve them, and the “plan” will immediately seek to relink to the global economy or, if this is not feasible, to simply fracture and again give birth to capitalist imperatives at the local scale, recreating a market within the “delinked” sphere based on competition between spin-off enterprises or departments within the monopoly (regardless of whether they are “state-owned”).
The same basic problem applies to the prospect of “delinking” the Chinese economy from that of the world. In fact, such a delinking is even less feasible in this case, given the degree to which global production as a whole depends on Chinese industry and, more importantly, the reverse: the degree to which Chinese industry depends on the global market. An enormous portion of production in China is currently geared toward serving the global market, either directly or indirectly. In 2019, China’s total bilateral trade in goods totaled some 4.6 trillion USD (about a third of its GDP that year), meaning that China imported or exported goods roughly equivalent to the entire GDP of a country like Germany. Even if China were a single large monopoly dominated by planning mechanisms, this sort of delinking would be effectively impossible, because a huge portion of that monopoly’s business is serving the international market.
But, of course, China is not a single large monopoly and its economy is not dominated by planning mechanisms. Chinese firms are structured very similarly to firms elsewhere in the world. Growth and profitability are their bottom-line goals, and the entire structure of these corporations is oriented around securing these goals. Given this reality, “delinking” is even more laughable, because it would require thousands of Chinese enterprises to willingly leap into bankruptcy. This is no more likely to occur in China than it would be in any other country in the world.
Let’s review the basic points: China is a capitalist country. This is evident in the fact that everyone needs money to survive and therefore has to depend on “the economy.” Most of the population is proletarian, which means that they don’t have any control over production and therefore must work for wages to survive. Only the minority of the population who are extremely rich, called the capitalist class, can instead survive off the profit from their investments, which demonstrates their ownership of production. While this dictatorial ownership is the core feature of capitalist rule, nation-states emerge as the political expression of this social power. The state serves as a necessary means for capitalists to coordinate and compete with one another, but it also helps to maintain the baseline conditions for capitalist society to exist in the first place. This includes repression (police, prisons, the military, etc.), the maintenance of a legal system founded on property rights, and the mobilization of public investment (in infrastructure, healthcare, education, etc.), all involving the creation of a myth of shared “national interests” rooted in “national culture.”
In China, the capitalist class rules directly through the party-state. Capitalists hold all the leading positions within the communist party and the government. Similarly, most large capitalists who hold no bureaucratic position are, at minimum, party members. This allows them to be “inside the system,” where they have preferential access to resources (through credit), greater protection from competition with capitalists in other countries (through tariffs and subsidies) and a seat at the table for all the major decisions (through the party infrastructure). Those left “outside the system” are mostly smaller capitalists who have not yet joined the party, rebel capitalists who refuse to submit to the others and/or capitalists more aligned with foreign interests. In reality, the party infrastructure is messy and often violent, since capitalists have competing interests. But even if it were perfectly coordinated and coordinated, enrolling all Chinese capitalists as members, this would still only represent one fraction of the global capitalist class in competition with others.
[i] This idea of “unity in separation” is central to the communist critique of capitalist society. It’s often used to describe the way that most of us are part of the same class (the proletariat) and subject to very similar fundamental conditions of life (we need to make money to survive), but at the same time we can’t really experience this basic unity without first confronting the ways that we are clearly different, often expressed in terms of identity. The liberal viewpoint emphasizes this difference and takes identity as its starting point, denying any underlying unity. What appears to us as debates between “liberals” and “conservatives” are mostly debates about how these identities are weighted and organized within society. Often, “Marxism” is portrayed as being a “class reductionist” viewpoint. In this caricature, communists just want people to forget about their real differences, recognize the underlying unity that exists in those fundamental conditions of life, and work together. But this is a strawman—a weak version of an opposing argument that someone invents just so that they can easily tear it down. The real communist position is to emphasize “unity in separation,” recognizing the reality of both that really-existing unity and the many separations of circumstance and identity that divide us. In fact, the two are interdependent. Separation is the form that unity takes under capitalism.