The China trade (1983)

From the November 1983 issue of the Socialist Standard

Capitalism, according to the Communist Manifesto, batters down all Chinese walls. This is illustrated nowhere more clearly than by developments in the Chinese economy over the last few years, especially since 1979 — events more far-reaching in their implications than the holding of China’s first-ever fashion show in Peking, or the establishing there of a branch of Maxim's, the fiendishly-expensive Paris restaurant. The imperative need for modernisation of industry and “export-led growth" has caused China to be integrated far more fully into the global capitalist economy than ever before. Those aspects of Chinese society which once appealed so much to Western Maoists have disappeared, and the official propaganda now employs blatantly capitalist criteria and phraseology. Any pretence of an economy based on considerations other than profit has been dropped.

Since 1979, over five billion US dollars have been invested in China by overseas firms, and an even larger sum has been received in loans from governments and international banking organisations. A Joint Venture Law promulgated in July 1979 permitted the setting-up of joint Chinese/overseas-owned companies, with China not even insisting on a controlling interest. Over a hundred such joint ventures have now been established. In May this year, the tax payable by them was cut, and they were exempted from import duties on certain items. The overseas firms that invest are of course allowed to keep the profits they make — profits which can only come from the exploitation of Chinese workers. Regulations concerning overseas companies in joint ventures refer blithely to their “profit and other legitimate income".

The growing volume of overseas investment has necessitated involvement in various areas of international law, such as deciding on the tax and insurance position of the investing companies. Seminars on these matters have been held in Peking, with international experts instructing the Chinese rulers in the ways of the capitalist world. Glossy books and pamphlets have been published, detailing China’s attractions to overseas companies (such as low taxes and the absence of labour disputes). In June 1982. a United Nations sponsored China Investment Promotion Meeting was held in Guangzhou, attended by five hundred overseas businessmen and bankers. Documents of interest to invest in sixty-nine projects were signed there. Any developing country wishing to win investments has to do this kind of thing, and China is no exception.

Moreover, four Special Economic Zones have been set up, intended to offer even more goodies to overseas capitalist firms. The extra attractions include lower rents and even lower taxes. The largest Special Economic Zone is at Shenzhen on the border with Hong Kong. One company here has announced — for the first time in China since 1949 — the sale of shares, aimed mainly at individual investors in Hong Kong (Guardian, 6 July 1983). The dividends these shareholders will receive will, once again, come from the unpaid labour of the Chinese working class. Even outside the Special Economic Zones, local governments fall over themselves to offer incentives to investors. On Hainan Island in the extreme south of China, the Chinese partner in joint ventures takes lower profits than in a Special Economic Zone (the overseas firm gets more) and — astonishingly — workers are paid lower wages (Beijing Review, January 1982).

The chief exports relied on to finance the modernisation are coal and oil. China has vast coal reserves, but they are mainly far from the most industrialised areas and from seaports. So priority is being given to new railway lines linking coal-producing areas to the ports. As for oil-producing. China has to rely on joint ventures for the expertise and investment needed to carry out exploration in a number of potentially rich offshore areas.

Another method China is adopting to attract foreign exchange is to expand its tourist trade. New skyscraper luxury hotels — many of them joint ventures — are being built, dwarfing in both size and conception the homes of ordinary Chinese workers. The largest hotel of all, in Nanjing, is complete with swimming pool and rooftop helicopter pad. Even in less opulent surroundings, one night in a hotel can cost almost as much as an average worker’s monthly wage.

As far as China's internal economy is concerned, one change has been an end to the “big pot" system, whereby state-owned industrial enterprises turned over all their profits to the state, which then provided finance for individual enterprises from this communal fund. Nowadays, factories simply pay a proportion of their profits to the state in taxes and keep the rest of their profit to dispose of as the factory managers decide. This is claimed to have increased both factory profits and the state’s income, on the grounds that more efficient and profitable factories now benefit from higher profits, whereas before they did not. The point is not whether this is a “better" system than previously, just that it makes it quite clear that the Chinese economy, like capitalism everywhere, is based on production for profit.

Corresponding to this reduced role of the state in allocating financial resources has been an increased role of the banking system. Production is now financed more and more by bank loans, and bank managers are encouraged to use strictly capitalist standards in deciding whether or not to grant a loan; a loan which is likely to be unprofitable will be refused. Interest rates to private depositors have been raised, partly to ensure that the compensation paid to former private capitalists is placed with the banks and so is available for lending. In 1982, about a million pounds worth of treasury bonds were issued, paying a juicy eight per cent interest to individual bondholders. The capitalist nature of the Chinese economy should be plain for all to see.

The agricultural sector has also seen comparable developments, with far more emphasis being given to commune-members cultivating private plots of land and selling the produce on the open market rather than through the state distribution mechanisms. This was just the kind of activity which had been condemned for years as evidence of "capitalist tendencies”. Market forces are now more important than before in setting price levels in both agriculture and industry. Of course this can lead to price rises: for instance, one iron and steel company was found to be selling steel billets at 30 per cent above the state price, because demand outstripped supply in a familiar capitalist way.

The developments sketched above do not mean that the nature of Chinese society has changed fundamentally since the death of Chairman Mao. China was no less capitalist during the Cultural Revolution than it is today. It is the existence of commodity production, wage labour and class monopoly of the means of production that determine the existence of capitalism. And capitalism is abolished not by rhetoric about a worker’s state, but by a socialist revolution.

Paul Bennett