Is China capitalist?

China has evolved from an impoverished nation into an economic superpower during the past seven decades of Communist Party power.

The most populous country on the planet now has “an economy on course to topple the US as the world’s biggest”, said Bloomberg. But China's economic transformation has also raised questions about the extent to which the regime has adhered to socialist economic policy.

Impoverished past

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After taking power in 1949, then party leader Mao Zedong sought to boost China's economy through agricultural collectivisation and nationalised industrialisation.

But “by Mao’s death in 1976, it was clear these reforms had failed”, said the BBC. His social and economic campaign resulted in the deaths of tens of millions of Chinese citizens, “easily making it the biggest episode of mass murder ever recorded”, said The Washington Post.

However, extensive reforms introduced by Mao’s successor, Deng Xiaoping, began China’s transformation from “an impoverished nation into a global economic powerhouse”, said The Wall Street Journal (WSJ).

Deng brought collective farming to an end, and allowed farmers to sell surplus crops for profit. Foreign trade and investment were encouraged, and investors were given tax concessions in return for revenue and technical knowledge in special economic zones (SEZs) in Southern China.

“Never before in history have so many people escaped poverty in such a short time,” said Forbes.

Since 1978, China’s gross domestic product growth has averaged almost 10% a year, and more than 800m people “have been lifted out of poverty”, according to the World Bank. The country is now the world's biggest exporter, while on the domestic front, significant improvements have been made in health, education and other key services.

Capitalism’s role

The Chinese Communist Party “still describes ‘the realisation of communism’ as its highest ideal”, and maintains that China is not a capitalist state, said the WSJ. But in practice, its leaders “have long embraced capitalist methods and encouraged entrepreneurship”.

In 1980, with de-collectivisation already under way, would-be industrialists across the country started to set up small-scale businesses. The creation of SEZs – where “capitalist experiments were permitted” – accelerated “the increasing erosion” of the social systems of public ownership and a state-managed economy, said Forbes.

Deng had spotted “a gap in the market of ideas”, wrote Tomasz Kamusella, a reader in modern history at Scotland’s University of St Andrews, in an article at The Conversation. The Chinese ruler realised “that you can have capitalism without democracy”, Kamusella continued, “meaning that capitalism was ideologically neutral and could serve the needs of a communist regime”.

The policies enacted under Deng “kick-started the stagnant economy” and encouraged investment from foreign firms, said the BBC. As capital continues to flood into China’s bond and equity markets, the Asian nation last year overtook the US to become the top destination for foreign direct investment, according to the United Nations Conference on Trade and Development.

Current state of play

“Communism is alive and well in China,” according to political scientist Thitinan Pongsudhirak, “but with capitalist characteristics”.

While China is politically totalitarian, with free speech under tight control, its economy is now “market-consistent, if not market-driven”, wrote Pongsudhirak, a professor at Bangkok’s Chulalongkorn University, in an article in the Bangkok Post.

Kamusella on The Conversation agreed that under China’s unique economic model, “communist-capitalism is not an oxymoron any more”, so long as entrepreneurs and enterprises are subservient to the political order. And now “the often touted hypothesis about capitalism’s democratising effects must be put to the test”.

In Europe, “pro-authoritarian leaders are enamoured with Chinese economic and political success” and “hope to establish privileged links and collaboration with the communist superpower”, Kamusella wrote.

“The ideological struggle of the 20th century between the ‘free world’ versus ‘the socialist-communist’ camp is ongoing,” said Pongsudhirak. But “the struggle now features the United States-led Western alliance versus the China-centric global network of nations with authoritarian tendencies.”

The question then, said Kamusella, is “now that capitalism is the engine of China’s economy, what is communism today?”

A new era of economic socialism?

Since taking over leadership of the Chinese Communist Party in 2013, Xi Jinping has been “trying to roll back China’s decades-long evolution toward Western-style capitalism”, said the WSJ’s chief China correspondent Lingling Wei. At a meeting of the party’s central committee in November, a resolution was passed that defined President Xi’s system of thought as “Marxism of the 21st century”.

For a long time, a policy of socialism “with Chinese characteristics” allowed the ruling regime “massive philosophical leeway to run a society which, in many ways, was not very socialist at all”, said the BBC. Now, Xi is pursuing a policy of “common prosperity”.

“In Mr Xi’s opinion, private capital now has been allowed to run amok,” said the WSJ’s Lingling, and he is now “trying forcefully to get China back to the vision of Mao Zedong”.

When his party celebrated its centenary in July, Xi “donned a Mao suit and stood behind a podium adorned with a hammer and sickle, pledging to stand for the people”, she continued. “Such gestures, once dismissed as political stagecraft, are being taken more seriously by China watchers as it becomes evident Mr. Xi is more ideologically driven than his immediate predecessors.”

Xi has reportedly told fellow party members that the difference between his vision and Western-style capitalism is that in China, “capital serves the people”. Under his policies, he has claimed, low-incomes will be boosted, more citizens will join the middle-income social tier, and high earners will face a greater level of taxation.

There should be “no doubt” that the most rigorous socio-economic change since those brought in under Deng’s leadership “is now under way,” said Time. And the move could have “huge repercussions for the rest of the world”, said the BBC’s Asia correspondent Karishma Vaswani.

“A sort of top-down Utopian China”, the Communist Party now hopes to offer a “viable alternative model” to Western capitalism, wrote Vaswani. But “it does come with a catch: even more control and power in the hands of the party”.