Introduction
According to the prognosis made by Western commentators, China is supposed to provide the world's crisis-ridden capitalist system with the second breath it needs so badly.
Ironically though, these are the same commentators who, only five years ago, had made the same prognosis about the former Eastern block, following the collapse of the USSR and Eastern European regimes. At the time, few among them gave so much as a thought to China, even though the so-called "liberalisation" process had been in operation there for 12 years already. For good reason, too. With a Gross Domestic Product per head less than one fifth that of Russia, China was clearly considered too poor, despite its huge population, to be promoted as a worthwhile new extension for the world market, let alone as credible medicine for capitalism's poor health.
So, has China risen out of poverty over the past five years? Obviously not. Rather it is the ex-USSR which has sunk deeper and deeper into political and economic chaos, thereby failing to provide the fabulous business opportunities that western pundits had forecast. This has left the wise men in the City and Wall Street with no choice but to seek another avenue for substantiating the idea that, after all, there may be some way out for capitalism from its senile state. But reasons for optimism about the future of capitalism, in other words new potential markets, are in short supply. Hence the sudden switch to China. The argument may not be any more credible now than it was five years ago, but it is the only one that the advocates of capitalism can produce - a sign that times are hard indeed for the capitalist system and its apologists.
To make the argument sound more credible, however, the world's financial authorities have resorted to a well-known and proven method - if you are not managing to score, just move the goal posts. So, in the early 90s, the World Bank devised a new way of measuring the economic wealth of a country using what they called "purchasing power parity". The purpose of this new measure was to reduce the economic gap between the rich and poor countries - but only of course, on paper. So, in 1993, China's GDP per head, using the new method rocketted up to $2,120 as opposed to $490 with the old measure, making China suddenly over twice as rich as Britain. There are no limits to the wonders of crooked statistics!
Back in the real world though, there is no way for China to deliver the miraculous reprieve for capitalism which is heralded today. And actually the world's capitalist classes are perfectly aware of this. What makes them more optimistic about using China as a show case, however, is the fact that, so far in any case, the Chinese regime seems to have avoided the deep economic chaos and social catastrophe that has overcome Russia in the recent years. And this means that even if no-one can seriously believe in the prospect of China bailing out the world capitalist system, there is at least the possibility of seeing the Chinese economy, unlike its Russian counterpart, operating a smooth reconversion within the world capitalist market - of course not as one of the rich players, as the dream merchants of the World Bank would have us believe, but as a Third World power fully integrated into the mechanisms and institutions of the world imperialist order.
The roots of today's developments
Whether China's reconversion will actually be completed without major crises is another question. There are many reasons to expect it to be much less smooth than Western commentators hope, if only due to the extreme poverty of the country. But the fact is that since the ground was laid for the development of a capitalist market in China, back in the early 70s, when Mao Zedong was still around, the Chinese economy has been growing without experiencing major political or social crises - or at least those crises that did occur, such as the Tiananmen Square demonstration in 1989, have been kept well under control by the regime.
This fact, as opposed to the chaotic reconversion process in Russia, can be traced back, at least partly, to the origins and nature of the Chinese state set up by Mao Zedong and his followers in 1949. For generations of left-minded activists in the West, Mao's regime exemplified a special "Chinese Road to Socialism", different from the road taken by the Bolsheviks in Russia. This even split the communist movement right down the middle for nearly two decades, although in most industrialised countries the Maoist organisations, as they were called, never achieved an influence or a mass basis comparable to that of the old Communist Parties.
In the Third World, however, Mao's China represented something else in that it was seen first and foremost as a model of a national revolution which had succeeded in breaking the domination of imperialism. As such, it inspired generations of radical nationalist activists. Among these, some, like the many Maoist Communist Parties in Asia or South America, recognised the need for some form of social transformation. But others, like the leaders of the Algerian Liberation Front of the 50s, for instance, wouldn't have dreamt of calling themselves "socialists" in the first place and in fact never did.
In both cases, however, the assumptions made by the admirers of Mao's regime were wrong. Its "socialism" was never more than a matter of terminology which was conveniently used to demand sacrifices from the population and conceal a heavy-handed dictatorship. In contrast to the Russian revolution, the Chinese proletariat - particularly the urban working class - played no conscious role in the revolution which brought about Mao's regime.
Whereas in Russia, the power of the Soviets set up and controlled by workers, soldiers and landless peasants, overthrew the power of the alliance between the capitalists and the landowners, and subsequently defeated the armies sent by the Western powers to crush the revolution, in China the victory was won by an army over which the proletariat had no control whatsoever. Whereas in Russia, the structures of the new society were effectively purged of any form of bourgeois content and exploitation right from the outset by the mobilised proletariat, in China the new regime started off as an alliance between all "patriotic" classes, including the bourgeoisie, which was imposed from above on the proletariat by Mao's army. It was only later, in order to avoid a major economic collapse and for lack of any other choice, that Mao eventually resorted to wholesale nationalisation of private industries and land, and even then not without making all sorts of concessions aimed at winning the cooperation of the capitalist class.
As to Mao's success in breaking the domination of imperialism, this again has to be qualified. Much like Castro in Cuba, Mao first sought some form of accommodation with imperialism, but to no avail. It was the refusal of the US imperialist leaders to recognise Mao's regime, their blockading of China, their subsequent war against North Korea and finally the unilateral withdrawal of American and British companies from China which eventually forced the Chinese leaders to take over all foreign assets in China.
Mao's regime was not set up on behalf of the proletariat, let alone by the proletariat, but against its interests and aspirations. It represented one of the possible ways for the Chinese bourgeoisie to establish and consolidate its rule. The events of the last two decades in China are therefore consistent with policies and social choices which date back to the days of Mao's revolution and can only be understood by retracing the nearly 30 years of almost continuous civil war which came to a close with Mao's seizure of power.
The weakness of the Chinese bourgeoisie
Many in the left have argued that Mao's policies and social choices were the only ones possible in the context of China's economic and social backwardness - in other words that the Chinese working class was too weak to play a leading role in society. Yet, history demonstrated the exac opposite - namely that in stark contrast to the weakness and cowardice displayed repeatedly by the Chinese bourgeoisie, the Chinese working class proved it was the only force capable of transforming Chinese society and resolving its contradictions.
In fact, paradoxical as this may seem, were it not for the emergence of the Chinese urban proletariat on the political scene as a revolutionary force, Maoism would not have emerged as a possible means for the weak Chinese bourgeoisie to break up the feudal social set-up which paralysed Chinese society, and to shake the increasingly tight economic grip of the Western powers.
Unlike in Europe, the Chinese bourgeoisie did not emerge through a long evolution lasting several centuries. There was no space for such a class in the highly centralised society under the Manchu imperial dynasty which ruled China in the 19th century. A huge state bureaucracy of educated mandarins ran the country and, along with the traders and landlords, preyed on the peasantry, acting both as tax collectors and usurers. This created an endless cycle of increasing misery, which drove the peasants to regular rebellions which were repressed by the local warlords using their own private armies. The imperial dynasty and its bureaucratic machinery depended on the warlords for their safety and the warlords depended on the imperial state to get their share of the tax bounty. In between, the parasitic layer of urban mandarins, instead of evolving into a new bourgeois class, remained tightly dependent on the feudal organisation, too dependent to develop social aspirations of its own.
It was the development of the plundering activities of the colonial powers which changed this relatively stable setup. In the first part of the nineteenth century, the colonial powers, led by Britain, started to expand to China. Sea ports flourished as ships from Britain, France, Germany and the USA arrived to buy silk and tea and other luxury items. A rich Chinese merchant class, specialising in foreign trade, developed, establishing their own exclusive clubs and monopolies.
In 1840, the British and the French started the so-called "opium wars" aimed at forcing China to accept opium as payment for goods. Leading the way were the British, who today are so intent on keeping their own borders closed allegedly against the drug trade. Britain ruled the waves - and the opium dens. Indeed they became the world's biggest drug barons by far, the Camorra and the Mafia all in one, swamping China with the cheap opium harvested from India and imposing their monopoly of the lucrative opium trade by means of what became politely known as "gunboat diplomacy". This involved half a century of periodic wars and military expeditions through which the British - together with the other colonial powers - imposed their own terms for trade, land concessions in the main coastal towns, the right to build their own factories and, in the case of Britain, the ownership of part of Hong Kong and a lease on the rest due to end in 1997.
By 1845, however, the huge Taiping peasant rebellion broke out against the Manchus, whose rule was by now only guaranteed by the colonial powers. The rebels actually managed to establish their own government over a large area in the Yangze valley for eleven years. Land was seized and the silk trade reached new heights, while the Taipings tried to suppress the opium trade. This first attempt to wipe out the combination of feudal and colonial power remained isolated and was eventually suppressed. But it took twenty years, the full might of the British and French armies and 20 million dead, before the rebellion was finally defeated.
In 1900, another uprising, the Boxer rebellion as it was called, was crushed once again by the intervention of the colonial troops. Among the insurgents forced into exile by the repression was a young man by the name of Sun Yat-sen who soon came into contact with new ideas abroad, including that of the 1905 Russian Revolution. That year, he launched the "National Peoples' Party" or "Kuomintang", primarily as an organisation against colonialism, but also for the overthrow of the imperial rule and its replacement with a bourgeois republic, on the basis of what became known as the "Three Principles": national autonomy, democracy and a guaranteed income for all.
Within another six years, the Kuomintang was staging a new revolutionary uprising. This 1911 revolution took the form of a military coup within the army which the imperial troops sympathised with and were not prepared to act against. The remnants of the Manchu dynasty abdicated and Sun Yat-sen proclaimed a republic in Nanking. But to build out of this an all-China state capable of uprooting feudalism in the countryside and defeating the feudal warlords was another matter altogether. They would have needed to expand the base of the new republic to the rural and urban impoverished masses by mobilising them against the feudal classes. But the nationalist Chinese bourgeoisie, having developed in the shadow of the Western powers, had been stunted from birth. They proved incapable of taking such an audacious and risky step. Instead, they sought the aid of more "enlightened warlords" and fell prey to them. Sun Yat-sen was soon forced to hand over power to a general of the old regime while competing warlords took the opportunity offered by the collapse of the imperial power to consolidate their own fiefdoms all over China, aided and abetted in many instances by the imperialist powers.
The emergence of the working class
If the Chinese bourgeoisie was unable to pull China once and for all into the modern world, unite it, and end feudalism forever, there was another class in the wings, getting ready to play just such a role. This was the growing Chinese proletariat.
When World War I broke out, Chinese exports found new markets fuelling a rapid industrial growth. By 1916 there were 1m industrial workers and double that number by 1922. These workers were concentrated in a few main ports and towns, like Hong Kong, Shanghai, Canton (today's Guangzhou), Hankow and Tianjin. During the war nearly a quarter of a million Chinese workers had been sent to Europe, mainly to work in the war industries. There many learned to read and write, but more importantly they learned about trade unions and marxism, and the Russian Revolution. By 1919 unions had been set up in the Chinese railways and ports, often by these returning workers.
After the Versailles Treaty ended the war, the Chinese poor found that nothing had changed. The same foreign military garrisons ruled in the ports and concession areas, including in those concessions which had belonged to the now defeated Germany. This led to a new wave of anti-foreign protest, mainly led by students and culminating in huge demonstrations in Beijing on the 4th May 1919. The homes of pro-Japanese ministers in the Beijing government were stormed and many students arrested. It was a series of sympathy strikes in Shanghai and elsewhere which forced their of those arrested. The urban working class was becoming aware of its strength.
The conditions of work for factory workers were akin to the early stages of the industrial revolution in England. Women and children worked 12 to 16 hours a day without provisions for safety or hygiene, for wages which would not feed a dog. An apprentice system provided small businesses and shopkeepers with a constant supply of child labour working 18-20 hrs a day in exchange for a bowl of rice and a board to sleep on.
Small strikes grew into larger ones. In 1920, the Mechanics' union in Canton won a major strike and in 1922, in Hong Kong, Chinese seamen won a victory over British owners, getting recognition and a wage rise. In May 1922, the first national labour conference was attended by delegates representing 230,000 union members. And on Mayday 1924, there were 100,000 workers marching through Shanghai and 200,000 in Canton. Red flags appeared above working class quarters and leaflets spoke of revolution. The resistance to the colonial powers and the warlords was now becoming centred around the struggles of the urban working class.
In fact peasants too, had already begun to organise themselves, facilitated here and there by activists belonging to the recently formed Communist Party. In the South East province of Kwangtung, in particular, a local schoolteacher, P'eng Pai, who had been won over to Marxism in Japan, had started as early as 1921, to organise the peasants and even launched a local newspaper. By 1923, a quarter of the population in the neighbouring districts had joined the peasant unions to fight for a rent reduction and the abolition of compulsory free labour for the landlord.
While the Communist Party was growing slowly, the main beneficiary of this mobilisation was the nationalist party, the Kuomintang (KMT), which was capitalising on the deep anti-colonial feelings across the country. Sun Yat-sen, the KMT leader, had been impressed with the success of the Bolsheviks in driving the imperialist exploiters out of Russia. He therefore readily welcomed the help offered by the Third International. The members of the Communist Party joined the ranks of the KMT and Russian advisers helped the KMT to set up a military academy which organised and trained a new, disciplined KMT army, with many of its units under the command of officers who were communist.
The proletarian banner is raised
On May 1st 1925, the 2nd National Labour Conference and First provincial National Assembly of Peasants took place in Canton. For the first time in Chinese history peasants and workers joined ranks in a demonstration. The assembly halls of schools were thrown open to them for ten-day sessions. Students and political workers addressed their meetings. Peasants heard for the first time of the mechanical instruments which could relieve their toil and wandered through libraries glimpsing a life they had been cut off from until then.
A few weeks later the KMT army, led by cadets trained by the communists, and helped by workers militias, overcame the 200,000-strong forces of the British-backed reactionary warlords who tried to win control of Canton.
In Shanghai a new wave of action against the unbearable industrial conditions began, starting with strikes in the cotton mills. The shooting of strikers and murder of a worker by a Japanese foreman sparked off huge protests. When arrests were made and the demonstrators marched to the police station to demand the release of the prisoners a panicked British officer ordered the police to shoot - killing 12 students.
The Shanghai working class retaliated immediately by staging a general strike on May 30. Even the servants in the foreigners' homes joined in. The strike spread to Beijing in the North and Hong Kong in the South. In Hankow on June 11, British sailors fired on a demonstration, killing 8 and wounding 12. In Canton, seamen walked out on June 18. Three days later almost all Chinese workers in foreign companies on the concession area had joined them. On June 23, students, workers and military cadets staged a demonstration. Once again British and French soldiers opened fire, this time with machine-guns, killing 52 demonstrators and wounding 117.
A boycott of British goods and a general strike were declared immediately. 100,000 Hong Kong workers evacuated the city and formed a solid barrier of 2,000 pickets around the city to prevent the movement of foreign goods. The rest moved en masse to Canton city where they cleaned out gambling and opium dens and set up strikers' dormitories and kitchens. A strikers' Delegate Conference - with one delegate per fifty strikers - was set up with a 13-strong executive committee. This body became the embryo of the first workers' soviet in China. A hospital and 17 schools were maintained and a strikers' court to try violators of the boycott. The island of Shameen, which was in effect a foreign colony, was completely cut off and all entrances to concessions guarded. Peasant pickets patrolled the coast to make the blockade complete.
The nationalists against the working class
At the end of June 1925, the KMT proclaimed a new national government of China, having consolidated its rule in the province around Canton. But what amounted to workers' rule in Canton posed a problem for the KMT leadership. The nationalist bourgeoisie was becoming worried about the possibility of the situation getting out of hand. They wanted the communists out of the KMT and the workers and peasants to go back to work and to forget all these notions of soviets and self-rule. A Shanghai millionaire came down to personally advise Chiang Kai-shek, the new leader of the Kuomintang who had replaced Sun Yat-sen at his death in March 1925.
In March 1926, Chiang's troops occupied Canton. They were welcomed as heroes by the workers. But Chiang had come to crush the uprising. All political activists attached to the Canton KMT units - mostly communists - were arrested, the headquarters of the Canton strike Committee was raided and its weapons confiscated and all Soviet advisors in the city were place under house arrest.
Then at the next conference of the KMT in May 1926, Chiang demanded that the Communist Party hand over a list of all its members in the KMT. Having barred communists from holding leading positions in the KMT and limited their numbers in all party bodies, Chiang proceeded to take over direct control of the government's finances, the political department, the arsenal, the general staff, the military and naval schools - the Canton government became Chiang's personal dictatorship.
The events in Canton did not stop the strike wave however nor the spectacular development of the peasant movement. And Chiang Kai-shek was planning his next move, this time towards Shanghai, China's industrial and commercial capital, where he intended to put an end to the workers' uprising. Despite the violent repression of strikes by the Shanghai authorities under the rule of warlord Sun Ch'uan-fang, the illegal communist-led Shanghai General Labour Union continued to grow in strength in late 1926. On 17 February 1927, Chiang's troops occupied Hankow and advanced to 50 miles outside Shanghai leading the Labour union to call a general strike. Within 48 hrs 350,000 workers had left their jobs. The workers expected the KMT troops to advance directly into Shanghai and back them up. They did not.
Li Pao-chang, the garrison commander, did not wait and neither did the police of the International Settlement and French Concession before they launched a bloody repression. Students and strikers caught leafletting or even reading leaflets were shot or beheaded on the spot. Anyone arrested by the foreign police was sent out of the concessions for execution. On 20 February the New York Herald Tribune reported: «...The executioners bearing broadswords and accompanied by a squad of soldiers, marched their victims to a prominent corner where the strike leaders were forced to bend over while their heads were cut off. Thousands fled in horror when the heads were stuck on sharp-pointed bamboo poles and were hoisted aloft and carried to the scene of the next execution.»
Finally, the communist leaders fixed 6pm on February 22nd for an uprising, supposed to coincide with the arrival of the KMT troops who everyone still believed were advancing on the city to help the insurrection. Said the China Weekly Review: «It is even rumoured that conservative Kuomintangists were not altogether displeased by General Li's bloody rampage because it struck at the power, as well as the heads, of the radical Communist wing of the party.» In fact Chiang had been stopped his advance for the time being for the sole purpose of giving Li the time to kill as many of the activists as possible. General Li was rewarded by Chiang with the command of the Eighth Nationalist Army just a few weeks later.
By the end of the year, Chiang had broken with the Communist Party, liquidated the communists in Shanghai, suppressed the peasant rebellion and formed a national government in Nanking before making a triumphant entry into Beijing.
The responsibility of the Comintern
Of course, that Chiang should have turned against the working class was to be expected. As a representative of the interests of the Chinese national bourgeoisie, he could not tolerate an urban proletariat organising its own organs of power and using its social weight to run the cities and mobilise the peasant masses against the landowners. A confrontation was bound to occur. The problem for the Communist party was to prepare itself and to prepare the proletariat for this inevitable confrontation. Yet the CP leadership and Comintern constantly dismissed the possibility of a confrontation and thereby disarmed their own members and the working class.
Behind this evasion of their responsibilty to the Chinese proletariat was a political choice on the part of the rising bureaucracy in the USSR who used the prestige of the Comintern to impose this choice on the Communist Party leadership.
The 2nd Congress of the Comintern had stated: «The Communist International must establish temporary relations and even unions with the revolutionary movements in the colonies and backward countries, without, however, amalgamating with them, but preserving the independent character of the proletarian movement, even though it be still in its embryonic form». Lenin had even injected a specific warning «to wage a determined war against the attempts of quasi-Communist revolutionists to cloak the liberation movement in the backward countries with a Communist garb».
But Stalin desperately wanted the nationalist Chinese bourgeoisie to be an ally of Russia, so he proceeded to endow it with a revolutionary capacity. At the same time, the possibility of a revolutionary victory in China, which could re-invigorate the exhausted revolutionary movement in Russia represented a real danger for the survival of the soviet bureaucracy. Stalin therefore promoted the notion of rigidly separated stages in the revolutionary process and the idea that the Chinese bourgeoisie would lead the anti-imperialist revolution to its conclusion.
The KMT was first described as the party of the nationalist liberal bourgeoisie with whom the communists were in temporary alliance. «The KMT should be the central force of the national revolution and should stand in the leading position» resolved the Chinese CP's third congress in 1924. Effectively, the CP from then onwards, relegated themselves to playing the role of the left wing of the KMT, and this policy continued even after the KMT started attacking the working class. In 1925, Stalin described the KMT as «a revolutionary bloc of workers, peasants, intellectuals and urban democracy [ie the bourgeoisie] on the basis of a community of class interests of these strata in the struggle against the imperialists and the whole militarist-feudal order». That there was a "community of interests" between the working class and the national bourgeoisie in combatting the imperialists and the feudal order was obvious, but it was certainly not a "community of class interests" for as soon as the question of the social future of China was raised, there could be no common ground between the two classes. Yet, it was with such crude sleights of hand that Stalin pretended to give a theoretical basis to his betrayal.
The Russian bureaucracy's reaction to the Canton coup by Chiang's troops in March 1926, was instructive. They pretended nothing had happened and suppressed all news of it. The Comintern actually stated in April 1926, that this was a positive development furthering the world revolution and that reports to the contrary were imperialist lies. On the pretext that communist independence from the KMT at this point - when they had been put in a strait jacket by Chiang - would mean abandoning the banner of the revolutionary KMT to the bourgeoisie, the Comintern insisted that communists bow to the conditions imposed on them.
The second and last major confrontation, in Shanghai, was met with the same attitude. It was put in a nutshell by one Communist Party militant who wrote after the event:
«Our party sent the masses out onto the streets and left them there for three days without paying any attention to them. We did not lead them forward, ordering an offensive along the path of the uprising. We did not even put up any defensive struggle. The workers' capture of rifles and the executions of traitors were mostly spontaneous acts...
«What we did was to bend all our efforts to negotiate with Niu Yung-chien, Yang Hsin-fu, Yu Ya-ch'ing, Wang Hsiao-lai - simply to negotiate, trying to use the conflicts among these various [bourgeois] groups. Such tactics amounted to this: the workers were on strike but were waiting for the permission of the big bourgeoisie before going any further. The petty bourgeoisie was left out in the cold, without any leadership, without directives. We hoped that after conditions guaranteeing the victory were created [ie the successful outcome of negotiations], we hoped after this to begin preparations for an uprising. This amounted objectively to betraying the working class.»
And this betrayal, with the terrible bloodshed that followed across the country as the KMT and warlords combined to uproot once and for all the very idea of a proletarian revolution, deprived the Chinese working class of a whole generation of militants. Less than twenty years later, when the KMT was on the verge of collapse due to its own corruption, it was precisely the absence of that generation and of its tradition that prevented the Chinese working class from taking the forefront of the political scene. This opened the way for Mao's conquest of power - meaning another defeat for the Chinese working class.
Retreat to the rural areas
Stalin's response to the crushing of the revolution was to take a sharp ultra-left turn. Overnight, CP activists were ordered to prepare for armed insurrection here, set up soviets there and start a revolutionary war elsewhere. This policy was all the more criminal as, once the main forces of the proletariat had been crushed, every one of these "revolutionary" gestures was bound to lead to more bloodshed. But what did the Russian bureaucrats care? Now that the threat of a revolutionary wave was receding, they could afford to sound radical - for the record. And they were not stopped by the fact that this meant political and physical suicide for thousands of the surviving Chinese communists.
Meanwhile, the disorientated ranks of the CP were split. A majority of the old founding core of the party led by general secretary Chen Duxiu was opposing Stalin's attempt at blaming them for the defeat of the revolution. They retaliated by accusing the Third International of having pushed the CP and the working class into the tow of the Kuomintang - thereby endorsing the position argued for years by Trotsky and the International Left Opposition. Soon this group was expelled and joined the small Chinese Trotskyist group.
Another faction, led by Mao Zedong, developed a completely opposite position. Taking Stalin's stageist theory to the extreme, it argued that in the conditions of China the urban working class could not play a leading political role. The CP, he argued, had to leave the towns, set up guerillas in remote rural areas, mobilise the support of the peasantry by imposing a land reform in these "liberated territories" which would then expand automatically across the country. This argument was not just demagogic in its formulation, which was intended to appeal to those demoralised by the defeat of the revolution. It also pointed to an altogether different class orientation. Given the inability of the peasantry to develop a class consciousness, it meant that a middle-class elite could substitute itself for the conscious intervention of the proletariat as a whole. This was turning communism on its head. More importantly it was putting the proletariat - rural as well as urban - in the tow of the middle-classes, however radicalised. It was a programme for a radical nationalist bourgeois revolution, not for a proletarian revolution.
The political debate was never actually concluded. By forcing many activists into hiding in the countryside, the repression allowed Mao to implement his plans. Small "red bases" were set up together with rudimentary peasant committees in a few areas in the southern provinces of Jiangsi and Fujian. There was more talk about the redistribution of land than actual deeds. Contrary to myths circulated later, this embryonic red army did not ride a wave of mobilisation among the peasantry. They were never strong enough to give the poor farmers the confidence to implement a land reform by dispelling fears of later reprisals - at least not until 1946.
Until that date, the "red bases" and subsequently the red army survived much like the many warlord armies which lived off the peasantry across the country - with the difference that the CP groups were more spartan and more careful not to alienate the peasantry by demanding too much from them. They did recruit however, but not among the peasantry. Most of their recruits were deserters who had been forcibly enrolled in the KMT and warlord armies, or people who had fled from urban repression.
In so far as it remained weak, the red army was tolerated by the warlords and the KMT troops. Paradoxically, it was its relative success in Kianxi in 1934 which forced the red army into retreat, the famous "Long March" as it became known. Because by that time, the red army had become too strong to be ignored by the KMT troops and too large to live off the local peasantry without alienating it.
After retreating in front of the KMT troops for a whole year and covering a distance of 6000 miles, what was left of the red army - probably around 10,000 men, but figures vary - eventually reached the remote impoverished northern region of Shanxi where they settled in late 1935. It was an under-populated land, difficult to reach, and difficult to toil. But this worked in Mao's favour. He got his soldiers to work the land, to set up small manufactures, thereby making the red army self-sufficient.
The "red patriots"
When, in 1932, Japan invaded Manchuria and Shanghai, the CP had issued a statement on behalf of a so-called "Chinese Soviet government", declaring war on Japan and calling for a united front with the Kuomintang against the invaders. This, of course, was a purely token gesture. But it did establish the CP's reputation as a champion of patriotism - which it used extensively later on.
Then, in July 1937, Japan launched their invasion of China. Chiang Kai-shek was obliged to mobilise an army to fight. However the richest families were exempt from conscription, and the conditions were so poor for the already half starved peasant conscripts that half of them died before they even reached their postings. The initial campaign was a disaster.
From 1937, however, an alliance was signed between the Kuomintang and the CP. In exchange for the KMT renouncing any military action against the CP, Mao agreed to give up any attempt at overthrowing the KMT government and stop any further land reform. The red army was renamed the 8th Route Army - although there was neither 1st nor 7th Route Army, but probably this sounded better - and placed under the authority of the Kuomintang Northern Command. The CP was basically giving up its whole programme for the benefit of being officially recognised by the nationalist bourgeoisie as an integral part of the patriotic front and having Chou En-lai sitting next to Chiang Kai-shek at the KMT headquarters, brushing shoulders with the leading figures of China's capitalist class.
The war did, however, enable the Chinese CP to increase their weight and influence. Their partisan militias fought the Japanese from behind their lines in the North East soon deserted by the retreating KMT troops. This guerilla war was only sustainable because of the networks developed amongst the villagers and peasants. They were able to appear, attack and disappear, often down tunnels which had been dug below the villages.
Meanwhile Chiang Kai-shek's regime was conspicuously busy sinking into deeper corruption and profit making. In fact the KMT appeared to the population as both impotent and unpatriotic. In contrast, the disciplined and effective guerilla war waged by the CP increased their prestige and attracted large number of patriotic young recruits, who swelled their numbers and were trained as cadres. The territories under their control increased to the point where, by 1945, they included 95 million people while the party itself had grown to 1.2 million members.
Riding a mass mobilisation
While in theory the alliance between the Kuomintang and the CP was still on after 1945, the military confrontations resumed. But this time, the KMT army suddenly found itself endowed with enormous quantities of military supplies - those taken over from Japan and those provided by the USA and the actual physical help from the US marines. While the CP held on to its positions, the balance of forces had now shifted much too far against them.
Faced with the risk of a military defeat, the CP leadership resorted to another turn to a radical programme of expropriation and redistribution of the land in the "liberated areas" in the hope that this would trigger a mass mobilisation among the peasantry and weaken the KMT's military strength.
And indeed the response of the peasants this time was overwhelming. There was a rapid exodus of the rich landlords, afraid for their lives. Where they did not flee they were often killed in revenge by the peasants who took their lands by force, hardly needing any encouragement from the Communist army. In fact in many cases it was the communists who tried to protect the landlords. In this way the villages were "turned over" as it was called, and peasant committees were set up to administer the villages under the supervision of one or two communist cadres.
The intervention of the USA on the KMT's side also allowed the CP to stir up anti-imperialist and particularly anti-American feelings amongst the population. Chiang Kai-shek's relationship with the US began to make him increasingly unpopular. All the more so as KMT officials often managed to steal a large part of the emergency aid provided by the USA for the areas which were devastated by war and famine.
US mediators, under general Marshall, attempted to achieve some kind of agreement between the CP and the KMT. But their idea of an agreement involved the recognition of the KMT's power by the CP, which the latter could not concede. In fact, the US side was not entirely unanimous on this issue. Quite a few among the US government and army advisers pointed to the corruption of Chiang's regime as a major risk for future political stability in China as opposed to the responsibility and discipline displayed by Mao's troops and officials. But in the end, whatever the consequences, US strategists were not prepared to recognise an army - even an openly nationalist bourgeois army - which owed its success to a mass mobilisation. The risk of this success encouraging similar movements elsewhere in the Third World was too much for them. The negotiations came therefore to an end in January 1947, while Chiang Kai-shek and his general staff moved to Taiwan from where they directed the fight of their armies on the mainland.
The economic collapse of China after 1947 and the widespread terror and corruption practiced by Chiang's police and army, led many Chinese intellectuals to acknowledge that Chiang was not going to be the answer to their problems. Chiang now ruled the large cities through a reign of terror, directed just as much against liberal students and intellectuals who criticised his policies. For hundreds of thousands of people in the cities the problem was no longer one of Communism or Dictatorship, but survival. Schools declared a strike in Beijing. Other cities joined this strike wave. Crowds in Shanghai stormed rice shops, fuel shops and restaurants. The police were not even prepared to arrest them, being in the same desperate boat themselves. This did more to bring elements of the bourgeoisie over to the side of the communists - as the lesser of two evils - than any reassurances that Mao may have given.
Towards the seizure of power
The bourgeoisie, however, with all the links it had with the landowning classes, was terrified by the revenge taken by the peasants against the landowners. In order to retain their support, the CP did have to find a way of reassuring them. And since by the end of 1947, the military balance of forces had shifted in their favour, the CP leadership felt they no longer needed the mobilisation of the peasantry to help their advance.
So the CP leadership decided to put an end to the unruly behaviour of the peasant rebellion. They made another about-turn on the land issue. The old policy of alliance with the patriotic landlords was resumed and detailed guidelines were issued to spell out the distinction between the feudal landlords on the one hand and, on the other, the rich farmers and rural bourgeoisie.
In 1917, in Russia, the urban poor had made an alliance with the rural poor. But in 1948, the Chinese CP abandoned the rural poor in order to rally the support of the urban rich. This sums up the difference between a proletarian revolution and a nationalist revolution, even one that claims to base itself on the "people".
By the end of 1947, therefore, the wildfire of the peasant uprising was stopped before it had time to reach even half of the Chinese territory. This was the time chosen by the wisest among the Kuomintang officers to make contact with the PLA, the CP's "People's Liberation Army", as it was now called, in order to negotiate their surrender - in exchange for their integration into the military apparatus of the PLA.
This shift among the Kuomintang's military cadres explains why, from 1948 onwards, the major battles won by the PLA involved no actual fighting - the officers and troops of the Kuomintang simply changed sides, thereby bringing new strength to the PLA. Thus, by the end of 1948, the units led by Lin Piao, reinforced by aircraft and tanks formerly belonging to the Kuomintang, marched on Beijing and Tianjin. In December, the nationalist general in command of the region established secret contact with Lin Piao and on 22 January he handed over Beijing to Lin Piao's troops who entered the town without having to fire one single shot.
By 1st February, the whole of Northern China was under Mao's control and his army had been joined by 600,000 Kuomintang soldiers based in the North. It took only a few months for the rest of China to fall into the hands of the PLA, with more provincial commanders joining the victorious army with their troops and equipment. And on 1st October the People's Republic of China was proclaimed in Beijing.
Significantly the red flag adopted by the new regime featured five stars - the largest represented the Communist Party, and the four others represented the workers, the peasants, the middle class and the patriot capitalists, that is the very same class which had been behind the Kuomintang's bloody repression of the proletarian revolution of the 20s. Significantly too, on his arrival in Beijing, Mao was welcomed by general Li Chi-shen, the butcher of the Canton workers in 1927.
Against the urban masses
In fact, not just the army but the whole state machinery of the Kuomintang changed sides in the last period of the war. When the new regime took power it inherited the 10-million strong bureaucracy of the previous regime which was asked to carry on its duties. This was true even at the highest levels. In the new body overseeing the army sat thirty former Kuomintang generals. Among the 16 judges making up the Supreme People's Court for the Central and Southern regions, thirteen had held high positions under the previous regime, presumably thanks to their zealousness in prosecuting political opponents. The police remained in place too. Even the Kuomintang's political police, so infamous for its cruelty towards CP activists, was almost entirely integrated into Mao's own political police. No-one was left out by the new regime.
No-one, except the working class. At no point, neither before nor after the seizure of power, was the Chinese working class called upon or encouraged to play an active part in the events.
Having neglected the towns for over a decade, the Chinese CP had of course no urban structures ready to organise any kind of uprising. But it could rely on widespread sympathies, if only due to its victories first over the Japanese troops and then over the hated Kuomintang generals. Besides it had the resources to send thousands of clandestine agents into the towns who could have brought back confidence to the ranks of the working class and started rebuilding organisations among workers.
If the CP leaders failed to do this, it was as a result of a conscious social choice, not due to lack of resources. In fact they did send large numbers of emissaries into the towns. But their brief was only to establish contacts with the middle and upper ranks of the Kuomintang state bureaucracy in order to win their passive, and if possible active support in exchange for the assurance that they would retain their positions once the PLA was in control.
As to the urban masses, they were expected, and if necessary ordered to keep quiet as was made quite clear, for instance, by this instruction issued by Lin Piao in January 1949, before his troops entered Beijing and Tianjin: «The people are asked to maintain order and continue in their present occupations. Kuomintang officials or police personnel of provincial, city, county or other level of government institution are urged to remain at their posts.»
Not only was there no question of calling on the urban proletariat to rise against the Kuomintang administration, but it was the Kuomintang administration and police that the PLA leaders called upon to maintain order in the towns - and this could only mean maintaining order against the working class in particular.
Even before the official proclamation of the new regime, the CP wasted no time in spelling things out for the benefit of the working class. Thus in August 1949, faced with a wave of stoppages in the Shanghai factories, the PLA military command issued a set of detailed procedures for «the mediating and settlement of labour-capital disputes» which, among other things, stated that «the capitalists alone have the right to hire and fire workers and employees». It also included a system of compulsory arbitration which effectively made all strikes illegal. These procedures were later to become the basis for China's labour laws.
Indeed Mao was determined to avoid the difficulties experienced by the Kuomintang in the 20s, when the urban proletariat had risen and started setting up its own organs of power. In doing so, Mao was acting as a consistent and responsible representative of the interests of the Chinese bourgeoisie, and as an enemy of the working class.
The social base of the new regime
Far from encouraging the working class to assert their rights, the new regime embarked immediately on demands for more production, more hours and more sacrifices including accepting low wages. This was the main purpose of the unions which were set up in the first months following the seizure of power. And as the working class did not prove too forthcoming, Mao's propaganda machine proceeded to manufacture the expected enthusiasm. The papers were soon covered with "news" such as this: «When the owner of the Hung Chang Textile Factory decided to stop work for three months, workers found ways to help him keep the factory going; they agreed to accept cheaper food in order to reduce the factory's expenses. Encouraged by this co-operation, the owner decided to continue production» or, in another example, «There are many cases of workers voluntarily proposing wage cuts in Shanghai and other cities in order to get over temporary difficulties».
Besides taming the working class, Mao's more immediate problem was actually to win over the active support of the Chinese bourgeoisie. It was one thing to have rallied their support against the Kuomintang. In that Mao had succeeded without question. But it was quite another thing to convince the Chinese capitalists that his regime could be trusted, not just as a transitional replacement for the Kuomintang, but as a regime worth investing in, in other words as their own. And as it turned out, this task proved to be beyond Mao's capacities.
Yet the new regime did not spare any effort. Right from the early days of his march to victory, in 1945, Mao had written that «Because the target of the revolution is not the bourgeoisie in general, but imperialist and feudal oppression, the programme of the revolution is not to abolish private property, but to protect private property in general; the result of this revolution will clear the way for the development of capitalism.» Then following the seizure of power, all sorts of incentives in the form of tax rebates, state orders, cheap loans, etc.. were offered to encourage the industrial bourgeoisie to take part in the national reconstruction. Even the British-owned and Hong Kong-base Far Eastern Economic Review gave Mao the good marks he deserved, stating in January 1950 that «the new regime has so far brought prosperous living conditions to all and sundry; the bankers and traders have no reason to complain; private trade is doing well and profits are high».
But the Chinese capitalists remained unconvinced. Some magnates who had fled to Hong Kong for safety, returned, but they were the exception rather than the rule. The government's call to buy National Bonds with a guaranteed 5% return fell on deaf ears. The systematic census of all economic facilities and skills was deliberately sabotaged. In short, every attempt at restarting the industrial machinery was made infinitely more complicated and difficult by the capitalists.
Of course, had the CP chosen to rely on other social forces, things would have been different. It would have been much faster for the working class to provide the data for the census of industrial resources - instead of it taking all of five months to draw up a list of Canton's 3115 factories, for instance. Had Mao chosen to expropriate the capitalists, his regime would not have had to beg in vain for money. By relying on workers' committees to control production, the CP would not have needed to recruit and train a new layer of bureaucrats from among the middle-class students in order to assist and control the economy. Precious time and effort could have been saved by the new regime. But it would also have meant mobilising the working class - precisely the one thing that the CP wanted to avoid in order to win recognition from the bourgeoisie.
Not only did the capitalists indulge in a constant demonstration of ill will, they also embarked on a profit drive, but in their own way, not the way offered by Mao. They used all the tricks in the book. They lied about their profits and assets to tax officers; they launched large-scale speculative runs on the most vital commodities, creating artificial shortages and pushing prices to unprecedented levels; and they cheated on the quality of the products they sold to the state, when they did not actually steal the raw materials the state provided for them. The young students who were meant to control the capitalists soon found that it was more profitable to turn a blind eye on what they saw and corruption started to spread like wildfire.
It did not take long before the situation threatened to become catastrophic. All the ills of the old Kuomintang regime were re-emerging fast. And as the poor were again getting poorer, discontent was bound to re-appear. By the Autumn of 1950, US troops were approaching the Chinese border following the outbreak of the Korean war in June. Meanwhile, encouraged by the US intervention, the Kuomintang was busy looking for allies in China. The regime needed to develop a war economy, it could no longer afford to take the risk of paying the social and economic cost of wooing reluctant capitalists.
The turn of the screw
Since 1948, agricultural production had been stagnant, as the land reform had been virtually stopped. State functionaries were ordered to go out and relaunch it. But this did not work, first because the reform was too biased in favour of the rich farmers. And second, because the functionaries in charge of enforcing it had too many links with these same rich farmers. So the army was called in to "encourage" the functionaries' zealousness.
Farmers accused of being feudal landlords, sometimes simply because the functionaries were behind in their quotas of expropriations, were sentenced for being "enemies of the people". They were jailed, sent to concentration camps and often shot in public - along with political opponents. It was a bureaucratic nightmare, arbitrary and inhuman, in which millions were killed needlessly - even if a large number of the dead probably belonged to the same layers which had taken an active part in the infinitely more bloody repression of the late 20s. In the end, however, 100 million hectares were redistributed to 70 million poor families.
At this stage, farmers were only encouraged through various incentives to join cooperatives. But only 15% of them had done so after four years. So in 1956, 120 million peasant families were ordered to regroup into co-operatives amidst a wave of violence by infuriated farmers who destroyed farming equipment and trees, killed cattle and even some state functionaries. At the cost of considerably worsening the exploitation of the peasantry, agricultural production eventually increased - although most of the increase was to be used for exports, to buy industrial equipment for the heavy industry planned by the regime.
The urban population became a target too. In order to get the bourgeoisie to toe the line, corruption had to be uprooted. From 1952 onwards, the vast urban milieu of petty-bourgeois, intellectuals, students, etc.. from which the state functionaries were recruited was terrorised into fearing corruption more than poverty. Everyone had to take part in endless public self-criticism sessions, without knowing in advance whether they would come out free or sentenced. Tens of thousands of books were burnt publicly in the large towns, to uproot the also corrupt influence of foreign and capitalist literature. And again, this provided a convenient pretext to get rid of political opponents or simply of personal rivals - a letter of denunciation was often more than enough.
When it came to the capitalists, the regime proved to be much more lenient. Late in 1952, American and British companies, followed by most foreign companies, had responded to the US blockade by leaving the country - although most of them were never even threatened with nationalisation. This forced the regime to add these companies to the already large state sector made of former Japanese companies left without owners after the war.
Then, by 1954, the regime offered private capitalists the possibility to enter into joint ventures with the state in exchange for some control and constraints on the use of profits - although they were guaranteed that 25% of the net profit would be used to pay dividends and top salaries. The offer was primarily aimed at bailing out debt-ridden factorties threatened with closure. But the regime's plan, once again, was that by using a mixture of pressures and incentives, the capitalists would see the advantage of these joint ventures and go along with the scheme, thereby resolving the problem of under-investment. Again, this did not happen. Instead the bourgeoisie invented new ways of hiding their assets. By the end of 1955, it was decided to speed up the process. But even then, shareholders retained their dividends while the former owners and directors, retained their positions in the joint ventures. And in 1980, one million shareholders still received regular dividend payments from Chinese state companies.
With the working class, however, the regime used fewer precautions. During the Korean war conditions and wages in factories worsened drastically. There were more and more reports of executions of workers accused of "sabotage" - which was often the official cover-up for strike action, or even simple protest. A labour book was introduced, similar to that used for black workers by the South African apartheid regime. Everything in the life of the worker was recorded in his book. Effectively it meant the militarisation of workers who could no longer change jobs without the agreement of the managers. Moreover elected workers' courts and special tribunals were set up in each factory in order to deal with indiscipline, lateness, low productivity, etc... Terror settled in the workplaces too.
In 1957, the impact of the regime's generalised terror started to be felt. Millions of peasants fled from the drastic exploitation in the rural co-operatives, flocking into the towns where they could find neither work nor shelter. And despite being turned away, and sometimes jailed, they came back again and again rather than returning to the hell they came from. Meanwhile from late 1956, student unrest started developing, first in support of democratic demands and then against the privileges of the state dignitaries. Sections of the working class joined in, for instance in Guandung, in the South, where 13 strikes supported by demonstrations took place in late 1957, and in Manchuria, where miners staged sit-down strikes in their pits. The student demonstrations, encouraged by the strikes, gathered momentum, attacking government buildings and even, in one instance, taking a general hostage. A social crisis was threatening to break out on top of the on-going economic crisis. After a few months of hesitation, Mao's response was to turn the screw once again, but this time even further.
This pattern of events whereby the nationalist regime tried to sort out economic and social problems by resorting to terror thereby achieving a short-lived respite which soon was replaced by more of the same economic and social problems, repeated itself throughout the subsequent period, until the late 60s after the end of the so-called "Cultural Revolution" - which was itself the last period of wholesale terror in China, so far at least.
The factors and contradictions which led the regime into these repressive cycles were never resolved. They were and are the expression of the country's poverty, despite the progress made since 1949: the huge masses of migrant labour trying to escape the unbearable conditions of the countryside by flocking into the towns; the corruption of functionaries and privileged for whom bribes are often the only way to achieve the comfort to which they aspire; the periodic rebellions of students and intellectuals partly against the lack of democracy and partly as a result of the absence of any real avenues for social promotion.
The fact that these contradictions have had such a drastic impact in China was partly due to the desperate and ineffective efforts of Mao's regime to develop a fully-fledged industrial economy by over-exploiting the rural and urban masses. But fundamentally they are features common to all Third World countries under capitalism. In fact they are still present today after 17 years of "liberalisation", only even more conspicuously than they were under Mao's regime. And there is every reason to think that new, and maybe deeper crises will develop out of these contradictions in the future, not despite the "liberalisation" but as a direct consequence of its impact.
The "liberalisation" turn
The changes in the period following the "Cultural Revolution", namely the economic "liberalisation", were not due to Mao's death - in fact he was still alive when the turn occured. Nor were they due to the emergence of "new" figures. Deng Xiaoping, who is hailed today as the father of this liberalisation, had been a leading figure of the CP for a long time before that and, in fact, started his liberalisation drive in 1978 with a repressive wave in response to student demonstrations - in the same old way.
In reality, the turn was initiated from outside China, when US imperialism, then stuck in the marsh of the Vietnam war, decided to drop its containment policy against China and to resume contact with the regime with the aim of reaching a global political settlement in the Far-East - and obviously, such a settlement had to include China as the second largest power in the region after Japan.
The possibility of resuming a normal political and trading relationship with the West re-opened a whole range of options for the Chinese bourgeoisie which had been closed since the early 50s - in terms of profits of course, but also in terms of resuming the "normal" existence of a propertied class under the capitalist system.
Of course the Chinese capitalists had been bullied by Mao's regime, sometimes even with some brutally, into accepting the sacrifices it demanded from them. But on the other hand these sacrifices were aimed at developing the economy for the benefit of China's privileged layers. Unlike in Russia, the Chinese bourgeoisie never disappeared as a class. Right from the beginning its members held a large number of leading positions in the state production and administrative machineries. They were and remain part of the privileged layers of the regime under and after Mao. And if only for this reason, there was a concensus in their ranks to accept the inconvenience of the situation and the relative limitations put on their movements as individuals.
This concensus, however, was based on the critical situation created by the imperialist blockade against China back in the days of the cold war. Once this critical situation ceased to exist, there were no longer any reasons to maintain the previous restrictions on the privileged themselves. This is exactly the meaning of the economic "liberalisation".
Over the past years, the privileged layers have been busy trying to recoup as much as they can from the state economy in order to re-establish themselves as capitalists who can use their private wealth to play anywhere on the world market, hence the privatisation process. At the same time, the Chinese bourgeoisie aspires to regaining the profits it used to make out of serving as intermediaries between foreign capital and the Chinese market. Hence the opening up of China to foreign investments and trade.
What is more, and this highlights once again the real social nature of the regime set up in 1949, the old family and personal links between the former capitalists who remained in China within the state machinery and those who settled abroad, in Hong Kong, Taiwan and Macau in particular, but also in almost every far-eastern country and in North America, are re-emerging. Not that these links ever disappeared, but they were kept secret for a long time, whereas now they can be used openly as a means of enhancing one's status and wealth.
Profits for grabs
The first move made in 1978 was the ending of the Commune system in the villages. A new "Household Responsibility System" was introduced, whereby the village collective leases plots of land to families, who manage the land as if they owned it. In return the families must pay taxes, sell a quota of their crop to the state and contribute to the village welfare and investment funds.
In theory, although this system makes any kind of planning meaningless, the property of the land is retained by the village collective. In practice, since the length of the leases was increased to 30 years in 1992, the number of lease-holders hiring their plots to someone else is growing. In addition to the often unequal distribution of the land, this is creating a level of land concentration in the hands of rich entrepreneurs who run a number of farms on a capitalist basis.
Besides, the village collective - in other words the local strong men - can lease land to any outside enterprise, particularly to property developers. This has been a cause of unrest in some regions where farmers complained about the fact that there was no more land available for farming as large plots had been leased to industrial companies or, worse, to build luxury hotels or golf courses. This is becoming in fact quite a sizeable problem since the total acreage of cultivated land is no longer increasing.
So while private property of the land is still non-existent in theory, in practice there are a number of ways through which profits can be accumulated through the lease system, not least by the local notabilities who run the collectives and manage to get their cut on the most profitable operations.
The same grey area, as far as property rights are concerned, exists in what are known as collective enterprises. These are factories, workshops, shops, etc.. set up by a village or a town collective under its own responsibility. This sector has registered the fastest growth in Chinese industry over the past decade. It now employs 112m workers, or slightly more than the state companies, and produces 25% of the country's exports.
The collective sector is outside the jurisdiction of the state economic administration, which means in particular that none of the social benefits (housing, schooling, health, etc..) attached to working in state companies apply. Nor do safety standards or regulations concerning working hours. Labour costs are therefore among the lowest.
In theory, again, the collective remains the sole owner of these enterprises and the profits should normally go into the collective's investment funds. But there is nothing to prevent the collective's officials from giving themselves a symbolic managerial job and a big salary. Nor is there anything to prevent a collective enterprise from issuing shares and bonds or borrowing money from individuals. Using these devices and a few others, a rich entrepreneur can effectively have all the advantages of private ownership in dozens of such collective enterprises and some have actually already built real empires.
As to the big state companies, their status has not really changed yet with a few important exceptions. The decision was made in 1992 to turn half the state companies into shareholdings. But since then, economic hiccups and lack of investment have lead to the virtual closure of a number of these companies resulting in the whole plan being put on ice.
There is one area, however, in which privatisation has made considerable progress - the PLA's own industrial empire. This, unlike most of the collective sector is real big business. The PLA consists of 3.2m soldiers. But in addition one million soldiers were transferred to "productive activities" over the past ten years. And this on top of the army's existing war industries. The whole of this industrial empire has been privatised, either directly (through the issue of shares) or through the setting up of private subsidiaries. Last year, it was estimated that the PLA "co-ordinated" 20,000 private commercial companies. Among them are three of China's largest companies: Poly Technologies which is the PLA's weapon company; Norinco, an engineering spider web including over 3,000 factories; and CITIC, the largest private financial company in China. The list of the directors and executives of these companies reads like the Who's Who of the regime: including a number of relatives and allies of Deng Xiaoping's hinself and of the PLA top brass. These are the real rich and they are already well-established.
Finally comes the most celebrated aspect of the "liberalisation", the foreign companies. There has been much talk about foreign investment but not much money has actually come in. For instance, in 1993, out of $111bn committed by foreign companies, only $25bn was effectively invested. In total, foreign investment represents less than 2% of total investment in China - hardly the regenerating flood which is usually pictured by financial commentators. And on that figure, it is estimated that as much as a third could be capital illegally exported by wealthy Chinese to Hong Kong and then re-imported to get the benefit of the tax and loan incentives reserved for foreign investors.
As to the nature of these investment, a good example is provided by the case of Shanghai. In 1993, half of all foreign investment in Shanghai was in office buildings. By 1998, a program including 49 skyscrapers should be completed, bringing the total of available new prime office space in town at that point to 3.8m square meters. Given that for the whole of 1993 the total take up of prime office space was 36,000 square meters, at that rate it will take 105 years to fill these fancy buildings! Meanwhile Shanghai's slums and shanty towns are spreading by the day. That is how useful foreign investment is in re-invigorating the Chinese economy!
What future for China?
The direct consequence of the present free-for-all for profit is disorganisation. So far the regime has reacted to the most visible problem, particularly the rise of inflation, by clamping down brutally on credit for a short while and then relieving the pressure. The problem is that the control it has on the financial system, and in fact on all aspects of the economy, is more and more limited, and therefore so is its ability to intervene effectively.
In addition to the market mechanisms which have been introduced, all sorts of centrifugal forces are paralysing the state's intervention. Every local authority, down to the village collective, is now creating all kinds of new taxes according to their needs - and according to the greed of the officials and capitalists who get their cut on the way. But in most cases they only pay part of the taxes, if any at all, to the central government. In 1994, the negotiation between the Finance Ministry and the authorities of Shanghai to determine how much tax should be paid to central government took no less than a full month. And these is no guarantee that any of that money will be paid.
China's recurring contradictions, as seen over the past four decades, are again threatening to re-surface. The land reform has generated a large layer of unemployed workers in the rural areas. Already it is estimated that 150 million migrant workers are constantly moving from town to town looking for work. Behind them the same number are still in the countryside and will increasingly flock towards the towns as life becomes more unbearable for them.
The farmers themselves are far from being as prosperous as the land reform was meant to promise. The past two years have seen growing demonstrations of farmers protesting against the shortage of land, the growing burden of semi-legal taxes imposed on them by local officials and the increasing habit of the post office to pay postal orders with "green bills" that is IOUs that cannot be used as money.
In the working class, conditions are deteriorating rapidly as state enterprises lay off hundreds of thousands while the vast flow of migrant workers pushes wages down everywhere else. Welfare provisions are disappearing rapidly since they are not compulsory outside the state sector. The largest towns are now taking on the traditional appearance of the large Third World conurbations, with their endemic poverty and curb dwellers.
Meanwhile a small minority of well-heeded privileged are building fabulous fortunes. Corruption is spreading everywhere and the periodic public executions of criminals for embezzlement, bribery, etc.. seems to have no effect whatsoever.
As to the younger generation, they cannot have forgotten yet the massacre of Tianamen square, only six years ago.
All the ingredients for another of China's recurring crises are piling up. But this time, the regime will probably find it difficult to resort to its old terrorist methods and tighten the screw once again. Too many people, including among the regime's privileged are no longer willing to accept the constraints of the past. This means that there may not be, this time, the possibily even of a temporary reprieve to stop the rapid degradation of the social situation.
This is the real impact of re-introducing market mechanisms in China. It is depriving the country of the one original feature it had inherited from the 1949 revolution - its state-owned economy and a relative protection from the vagaries of the world market. Despite the unacceptable dictatorship imposed by the regime, this feature set China aside from the rest of the Third World for over 30 years, allowing it to develop collective facilities and as standard of living for its population which were far ahead of anything that existed in comparably poor countries such as India for instance, in which the world market had remained all powerful.
What today's developments show, however, 46 years after Mao's revolution, is that state ownership was not enough to protect the Chinese masses against the capitalist world. A proletarian revolution, in 1949, would have made the task of restarting the economy much easier at that time, because it would not have had to resort to the bureaucratic terror of the Maoist years and it would have wiped out once and for all the parasitic capitalist class which is re-emerging today with a vengeance. But in addition it would have truly shaken the world. The fears of the US strategists of the Cold War were well-founded. But if even a bourgeois revolution in China was a threat for the capitalist world, how much more effective would have been a proletarian revolution aimed not at confining itself within the borders of China, like Mao's nationalist revolution did, but at spreading itself across Asia and further?
Let us hope that the hundreds of millions of Chinese workers and poor farmers will remember the bloody cost of nationalism when they rise again.