The class nature of the Chinese state

The Activist - Volume 9, No 1, 1999
By Doug Lorimer

[The general line of this report was adopted by the 18th DSP Congress, January 5-10, 1999. This text is taken from The Activist, volume 9, number 1, 1999.]

The purpose of this report is to motivate the adoption by the party of the "Theses on the Class Nature of the People's Republic of China" approved by the National Committee at its October plenum last year.

Since 1993 our party has held the position that the ruling Chinese bureaucracy has been presiding over the restoration of capitalism in China. However, our policy toward China has been ambigious: while taking an oppositional stance in our public press toward the ruling bureaucracy's restorationist course, we have left it unclear as to whether we continued to believe that China is still a bureaucratically ruled socialist state.

In a report to the October 1997 meeting of the National Committee on "The Evolution of Economy and State in China", the National Executive argued that the process of capitalist restoration in China was not the unintended consequence of concessions that the Chinese state was forced to make to secure foreign capitalist investment and access to the world market, but the consequence of a consciously restorationist orientation by the commanding personnel of the state -- the ruling bureaucracy organised in the Communist Party of China -- to replace China's nationalised, planned economy with a market economy and to convert themselves into private exploiters of commodified labour power, i.e., into capitalists. The report argued that:

While the process of capitalist restoration is not yet completed in China, there is sufficient evidence for us to conclude that this is the conscious orientation of those who hold political power in China, and that therefore China, like Russia and the former Soviet bloc countries of Eastern Europe, is a capitalist state.

The Theses that delegates are being asked to vote on today sets out the theoretical framework upon which this assessment is based and provide a historical analysis of how the People's Republic of China was transformed from a bureaucratically ruled socialist state into a capitalist state.

Change in policy toward Chinese state

As was pointed out in the October 1998 NC report on the Theses, much more is involved in this discussion than simply changing the class label we apply to the Chinese state. The October 1998 NC report dealt with the potential theoretical problems posed as a result of drawing the conclusion that the class nature of the Chinese state had changed, despite the fact that there had not been any fundamental change in the structure of the organs of state power in China. But much more is involved in this discussion than checking to see if the change in label is compatible with our theory. Above all, the change in label involves a change in our policy toward the Chinese state.

If we continue to classify China as a bureaucratically ruled socialist state then -- to be consistent with our past policy toward regimes that we have applied this label to -- we would continue to advocate that socialists in China and internationally should stand for a radical democratic reform of this state to be achieved through an anti-bureaucratic political revolution that would transfer control of the existing organs of state power -- that is, the existing governmental apparatus and armed forces -- from the political representatives of the privileged officials that make up the commanding personnel of these organs to a government consisting of revolutionary political representatives of the working class.

By contrast, recognising that the PRC is a capitalist state means abandoning this policy in favour advocating the revolutionary mobilisation of the Chinese workers and poor peasants to create new organs of state power, that is, a new governmental apparatus and new armed forces, that can break up and replace the existing organs of state power. This change in our policy toward China, which is the basic political conclusion of the Theses, flows from the analysis that is set out in the document -- an analysis which argues that a qualitative change has occurred in the class nature of the Peoples Republic of China, i.e., that it has become a capitalist state.

We have drawn this analytical conclusion not simply on the basis of evidence that the commanding personnel of this state subjectively aim to transform themselves, their relatives and cronies into capitalists, but on the basis of information that shows that these state officials -- from the highest to the lowest echelons of the state bureaucracy -- have become materially tied to the newly emergent class of capitalists in China. These officials are materially tied to this newly emergent bourgeoisie through the private and quasi-private businesses that are operated by their cronies and relatives, or directly by themselves. In many ways these material ties are more direct than those that exist between the commanding personnel of the organs of state power and the owners of capitalist businesses in developed capitalist countries like Australia. The officers of the People's Liberation Army of China, for example, own and manage factories employing around 600,000 workers -- factories which produce a vast range of non-military goods for export, from passenger aircraft to karioke machines. The total saleable value of the PLA's business empire is estimated by Western economic analysts at about $US10 billion.

The Chinese army officer corps' direct involvement in capitalist business activities in many ways parallels the direct involvement in capitalist businesses that characterised the Indonesian army officer corps during the 1960s. It would be absolutely fatal for socialists in China to believe that the commanding personnel of the PLA will not respond to any perceived serious threat to their bourgeois class interests as ruthlessly as the ABRI did in Indonesia in 1965-66 or the Chilean army did in 1973. That is why we believe that a reversal of the process of capitalist restoration in China cannot be achieved by the Chinese working class simply taking over the existing organs of state power and wielding them in its own interests. Rather, it will require a new proletarian social revolution in China, in which the existing organs of state power will have to be smashed and replaced by new organs of state power that are based upon the organised revolutionary mobilisation of the workers and poor peasants.

Criteria for determining qualitative change

When did the People's Republic of China become a capitalist state? Behind this question is a more fundamental one, i.e., what are the criteria that Marxists should use to determine that a qualitative change in the class nature of the PRC has occurred -- from a bureaucratically ruled socialist state to a capitalist state? In the Theses, we affirm that the qualitative change in the class nature of the Chinese state occurred after the bureaucratic regimes in the post-capitalist societies of Eastern Europe and the Soviet Union had become capitalist states. In the case of the Soviet bloc countries identifying that a qualitative change from bureaucratically ruled socialist states to capitalist states had occurred was relatively easy because this qualitative change was accompanied by the collapse of the ruling bureaucracy's political apparatus, i.e., of the ruling Stalinist party machine, and by the open repudiation of "socialism" by the ruling bureaucracies. In China, however, the Stalinist political apparatus remains intact and that ruling bureaucracy continues to claim that it is "building socialism".

But even in the case of Soviet Union, closer examination of the process of the turn by the ruling bureaucracy toward orienting to the restoration of capitalism reveals that this occurred before the top echelons of this bureaucracy abandoned the political structures of the Stalinist regime. In the Theses we note that the "ruling bureaucracy at both the level of the individual republics of the USSR and at the all-union level had endorsed the replacement of the nationalised, planned economy with a capitalist economy" a year before the August 1991 political victory of the Yeltsin-led advocates of rapid denationalisation when "the USSR Supreme Soviet approved the Russian Supreme Soviet's `500-Day Plan' for the creation of a `market economy'," i.e., that the qualitative change occurred in September 1990. The Theses argue that the August 1991 coup against Gorbachev by the central leaders of the CPSU was an attempt by a section of the ruling bureaucracy -- based in the all-union institutions of the bureaucratic regime -- to retain the authoritarian control of the central state administration in order to use it "to carry out a gradual, centrally managed transition to capitalism in which they would be able to transform themselves, their family members and close associates into the owners of big, all-union capitalist corporations". Opposing them were those in the the ruling bureaucracy who were "connected with republican, provincial and enterprise administrations" and who "sought to free themselves from the tutelage of the central administrative institutions in order to carry out a rapid process of privatisation". The differences between these two wings of the ruling bureaucracy took the form of an open political conflict because the prior to the Soviet bureaucracy's turn toward restoring capitalism it had sought under Gorbachev to reform the bureaucratically-managed planned economy through a combination of introducing market mechanisms into the economy and the ending of repression of dissident political views, including the open expression of different views on economic policy within the bureaucracy itself.

In the Theses we state that the qualitative change in China from a bureaucratically ruled socialist state to a capitalist state occurred after this qualitative change occurred in the post-capitalist societies of Eastern Europe and the Soviet Union. The Theses state that:

The turn by the ruling bureaucracy in China toward sanctioning the transformation of the petty-bourgeois stratum that constitutes the commanding personnel in the organs of state power into owners of bourgeois property, like the somewhat earlier turn in the same direction by the ruling bureaucracies in the Soviet Union and Eastern Europe, marks the final triumph of bourgeois reaction within the state structures of these societies and the end of any activity on their part to defend the nationalised, planned economy as a source of their power and income. The state power these bureaucracies command has ceased to be "a weapon of proletarian dictatorship". It has become an instrument for the suppression of the resistance of the working class to the reintroduction and defence of capitalist property relations. These regimes are no longer highly deformed expressions of proletarian state power. They are now capitalist states.

Here we are noting a number of things. Firstly, that bourgeois reaction had already partially triumphed in all of the countries that had nationalised, planned economies but were politically ruled by Stalinist bureaucracies. State power in all of the bureaucratically-ruled post-capitalist societies was already under the command of a petty-bourgeois social stratum that, as we have pointed out in our party program, "was bourgeois in its attitudes and aspirations". The rule of the petty-bourgeois Stalinist bureaucracies, our program states, did not represent a "distorted, bureaucratic form of `socialism', but rather a stage on the road to capitalist restoration."

Secondly, the turn by these petty-bourgeois bureaucratic regimes toward replacing the planned economies upon which the ruling bureaucracies were parastic growths with market economies signalled the final triumph of bourgeois reaction in the political superstructures of these post-capitalist societies. Thirdly, the turn by these petty-bourgeois regimes toward replacing the planned economy with a market economy is therefore not signalled by these regimes sanctioning of the use of market mechanisms within the state-owned sector, for example making the incomes of the managers of state-owned enterprises dependent upon the individual profitability of these enterprises. If this were the criterion that we used to determine when these regimes became capitalist states, then we'd have to draw the conclusion that the Soviet Union became a capitalist state in 1935.

Nor is the turn by these petty-bourgeois regimes towards restoring capitalism signalled simply by the proclamation by these regimes that they want to create a "market economy". If this was the criterion we used, then we'd have to say that Yugoslavia became a capitalist state when the Yugoslav Stalinist bureaucracy headed by Josip Tito publicly declared that its goal was to create a "market economy", i.e., in 1965. What the Tito regime meant by a "market economy" was not what orthodox Marxists understand by this term, but rather an economy in which market relations between enterprises were combined with state ownership of the decisive means of production and bureaucratically centralised planning operated through economic rather than administrative means, i.e., through the central government's budget, tax and credit policies rather than through the direct allocation of productive resources by central ministries and planning commissions.

Instead, the criteria that we have used to judge whether and when a turn has been made by any of these bureaucratic regimes toward consciously restoring capitalism is whether the regime's officially proclaimed aim that it wants to create a "market economy" is accompanied or immediately followed by practical policies that allow the commanding personnel of the organs of state power to transform themselves into capitalist employers of labour-power. Thus, while the Yugoslav regime proclained in the mid-1960s that its goal was the creation of "market economy", this regime did not allow state officials, including enterprise managers, to become operators of private commercial and industrial businesses until 1989. Consequently we would reject any suggestion that the Yugoslav regime was a capitalist state prior to 1989.

In the case of China, we point out in the Theses that after the 14th congress of the Chinese Communist Party in 1992 "approved the goal of creating a `socialist market economy' ... More and more state economic assets have been transferred into the hands of joint-stock companies owned by government officials... The top officials in the central government have set their children up in private and quasi-private businesses in mainland China and in Hong Kong; [and] vast numbers of lower-ranking government officials in the coastal provinces and those with family-business connections in Hong Kong have gone into private and quasi-private business ventures with Hong Kong, Taiwanese and Western capitalist investors."

The significance of the 1992 turn

In the October 1997 NC report we noted that Li Peng, the Chinese prime minister at the time, in a speech he gave to the Beijing delegates attending the 15th CPC congress in September 1997, had explained that there had been two key changes in the regime's economic policy after the 1966-76 "Cultural Revolution".

The first change was what Li called the "important decision to take economic development as the centre of the party's basic line". This was an allusion to the December 1978 CPC Central Committee plenum, at which the supporters of the party's pre-Cultural Revolution general secretary, Deng Xiaoping, were returned to key leadership positions within the party and the government. Li described the decision "to take economic development as the centre of the party's basic line" as "the first great step in the emancipation of the mind". That is it was the first step in the freeing of the bureaucracy from Mao's ultra-Stalinist policy of "putting politics in command", i.e., Mao's policy of subordinating economic development to the totalitarian utopia of securing total, unanimous and vocal support from every individual citizen for every pronouncement by the deifed autocratic leader of the regime.

According to Li, the second great change in the orientation of the regime was signalled by Deng Xiaoping in his highly publicised tour of southern China in January-February 1992. During the tour Deng singled out for special praise the economic dynamism of Guangdong province -- at the time the most marketised in China. In 1992, only 35% of industrial production in Guangdong came from state-owned enterprises, 27% from quasi-private, socalled "collectively-owned", enterprises and 38% from privately-owned firms.

By 1992 Hong Kong capitalists employed 3 million manufacturing workers in Guangdong, compared with only 680,000 workers in Hong Kong itself. Guangdong's economy was described by the US business magazine Forbes as a "marriage made in heaven combining the business acumen, technology and capital of Hong Kong industry with the bottomless pool of cheap Chinese labour". An article in the October 31, 1988 issue of the US Business Week journal described how this capitalist paradise was built upon the remorseless exploitation of child labour, forced overtime, and government strikebreaking. It reported, for example, that in the Guangdong factories owned by Kader Enterprises Ltd, Hong Kong's largest toy maker, Chinese workers, many of them women as young as 12 years old, worked for 14-hour days, seven days a week, for the equivalent of $US21 a month, who slept six a room in company dormitories. The article quoted a Kader executive saying: "We can work these girls all day and night, while in Hong Kong it would be impossible. We couldn't get this kind of labour, even if we were willing to meet Hong Kong wage levels".

In praising Guangdong's economic performance as a model for the rest of the country to emulate, Deng was giving his approval to the "entrepreneurial" practices of the province's government officials. An example of such "entrepreneurship" was provided in a September 1991 Associated Press report of how a "Mr Yuan Lisong" used his official position to enrich himself by privatising state wealth. According the AP dispatch, Yuan, 48-year-old member of the Communist Party, was the deputy mayor of Dongguan City, one of the hottest centres of foreign investment in Guangdong province. He was also the managing director of the Fook Man Development Company, a Hong Kong-based firm with millions in the bank. He also sat on the board of three other Hong Kong-based companies, and was part-owner of a 500-room hotel in Los Angeles. The article observed that ordinary Chinese called such officials "fake foreign devils", after the 19th-century nickname for Chinese compradors in the British-run opium trade. According to the AP report, the "Communist" deputy mayor didn't object to this label. " `We're making money', he answers, slapping his thigh and slipping off his loafers."

In his speech to the Beijing delegates attending the 15th CPC congress, Li Peng stated that Deng's 1992 remarks praising the "entrepreneurial" activities of Guangdong provincial officials "resulted in China's moves to establish a socialist market economy as a goal in economic restructuring suggested by the 14th National Party Congress later that year". That is, at the 14th CPC congress in September 1992, the ruling circles of the Chinese state made it clear to state officials all across China that they should work toward creating a "socialist market economy" like the one in Guangdong province, i.e., a capitalist economy in which the most politically influential capitalists are members of the ruling Chinese Communist Party bureaucracy.

This qualitative change in the orientation of the regime of course did not fall from the skies. It was prepared by a whole series of quantitative changes in the regime's economic policies which increasingly shifted the primary source of income of increasing numbers of bureaucrats from their successes as managers of the state economy in meeting the administratively set targets of the state economic plan to their successes in privately accumulating money through illegal, speculative activities in the expanding markets created during the 1980s.

Did the qualitative change occur in 1978?

This analysis of when the qualitative change in the class nature of the Chinese state took place has been challenged by Comrade Chris Slee in his pre-conference discussion article "When Did the Chinese State Become Capitalist?", printed in Activist No. 9. Comrade Slee notes that the December 1978 Central Committee plenum "is generally considered as marking both the rise to power of Deng and the start of the market reforms" and that from this meeting on "the market reforms proceeded step by step, beginning in agriculture and extending progressively throughout the economy". He goes on to point out that: "Corruption spread as the bureaucracy strove to accumulate wealth and turn themselves and their relatives and cronies into capitalists." Comrade Slee observes thaty this was the "ultimate result" of a "long process". He then sums up his argument with the following comments:

The point at which the state became an instrument to promote capitalist restoration was probably the rise to power of Deng Xiaoping in 1978. This was when the market reforms began. While initially disguised by socialist rhetoric, the logic of such a program when implemented by an authoritarian and corrupt bureaucratic regime was to lead to the restoration of capitalism.

It is certainly true that the objective dynamic of the introduction of more and more market relations into a nationalised, planned economy that is managed by a bureaucracy freed from any institutionalised checks by the workers, will be an expansion of official corruption (i.e., private accumulation of large amounts of money by the state officials), which in turn will lead to attempts by these bureaucrats to "turn themselves and their relatives and cronies into capitalists", as well as growing pressure from them for the bureaucratic regime to give official sanction to this process. But it is not logical to locate the qualitative change in the class nature of the Chinese state at the point when the process of introducing more and more market relations into the planned economy began, rather than at the point when this process of quantitive changes reached its "ultimate result", that is, when the state gaves official approval for bureaucrats to "turn themselves ... into capitalists". This would be as illogical as arguing that because the "ultimate result" of someone contracting a potentially fatal illness in 1978 was that they died in 1992, therefore, the qualitative change in the deceased person's physiology, i.e., death, occurred, was not in 1992 but in 1978, when they contracted the illness.

Comrade Slee, however, appears to be arguing that China became a capitalist state in December 1978 because this was when, as he puts it, "the pro-capitalist Deng Xiaoping faction consolidated its hold on power and initiated its program of `market reform'." This argument implies that the "Deng Xiaoping faction" of the Chinese bureaucracy was consciously committed in 1978 to the restoration of capitalism. But the only evidence Comrade Slee cites in support of such a claim is that (a) from the late 1950s on it constituted what Comrade Slee calls a "rightist faction", opposing what he describes as the "irrational policies" of "Mao's ultraleft factuion"; and (b) that "the market reforms began" when the Deng Xiaoping faction "consolidated" its hold on power in 1978.

The problem with this line of argument is that the facts do not support it.

Deng himself had become part of the central leadership of the ruling Chinese bureaucracy in the mid-1950s when he was appointed general secretary of the Communist Party of China. After having served for 20 years as a political commissar in one or another of the party's rural peasant armies, he had distinguished himself in the early 1950s as one of the leading organisers of China's post-capitalist planned economy. In his capacity as party general secretary he was the reporter at the CPC's Eighth Congress in 1956 on Nikita Khrushchev's denunciation of Stalin at the CPSU's 20th congress earlier that year. Deng endorsed Khrushchev's report, calling for eliminating the "cult of the individual" from Chinese party life, and proposed a party constitution that deleted any reference to Mao and his "thought" as the party's guide (such a provision had been put into the CPC's constitution at Mao's insistence at the previous party congress in 1945).

From the late 1950s Deng became closely associated with Mao's deputy in the ruling bureaucracy's hierarchy, Liu Shaoqi. The two them clashed sharply with Mao in 1959, when Mao's economic adventurism in the Great Leap Forward -- which called for a doubling of China's agricultural and industrial output in one year -- brought the country's planned economy to the brink of collapse and led to the death through starvation of around 25 million peasants. In the wake of this disaster and with the backing of the majority of the CPC's central leadership, Liu and Deng forced Mao to stand aside from effective involvement in the administration of the party and government, with Liu replacing Mao as China's president. From 1960 to 1966 Liu and Deng directed China's economic policies back toward the methods used during the country's First Five Year Plan in 1953-57.

In 1966, at the beginning of the so-called Cultural Revolution, Mao succeeded in having both Liu and Deng removed from their leadership posts and denounced as "rightists", as "persons in authority taking the capitalist road", as the "No. 1 and No. 2 Chinese Khrushschevs", and as "renegades, traitors and scabs". Liu was among the 34,000 former party officials who were officially acknowledged in 1979 to have been "persecuted to death" (i.e., tortured to death) during the 1966-76 Cultural Revolution. Deng was sent to a forced labour camp during this period.

The nature of the differences between the Mao and Deng factions

It is thoroughly misleading to apply the label "ultraleft" to the Mao faction of the ruling Chinese bureaucracy and the label "rightist" to the Liu-Deng faction. These labels imply that these groupings were simply two different political tendencies within the working-class movement, instead of two factions within the leading circles of a petty-bourgeois social formation commanding state power.

The characterisations "ultraleft" and "rightist" obscure the real axis of the differences between these groupings. They imply that the differences between these two factions revolved around the tempo and methods to be used to advance toward socialism, rather than what policies and methods would best serve to maintain and enhance the power and privileges of a state bureaucracy that had no interest whatsoever in advancing toward socialism -- toward a worldwide classless society of freely associated producers.

The policies and methods that Mao stood for from 1958 until his death in 1976 were certainly dressed up in ultraleft verbiage, but this bureaucratic despot was as little inclined toward the political conceptions of anarchism as his mentor Stalin. Mao's policies and methods were certainly "irrational" from the point of view of building socialism, but they were not irrational from the point of view of preserving and strengthening the rule of a bureaucratic caste in a country that was much poorer than the Soviet Union in the late 1950s, or even than the Soviet Union was in the 1930s when similar policies and methods were employed by Stalin. Mao sought to emulate Stalin's methods of mass terror, totalitarian control over every aspect of the lives the entire population and the imposition of military-style production forced-marches on the peasants, the workers and the bureaucracy itself.

The policies and methods that Liu and Deng stood for and that Mao claimed were evidence that were "capitalist roaders" and "rightists" were broadly similar to the standard operating procedures adopted by the Soviet bureaucracy after Stalin's death in 1953, and particularly after Nikita Khrushchev's official announcement of "de-Stalinisation" in 1956. These involved replacing mass terror, totalitarian regimentation, and forced-marches in production with more limited forms of police repression of political dissent, relaxation of state control over people's private lives, greater freedom of cultural expression, and attempts to increase production through the use of material incentives in the form of higher pay and more access by workers to consumer goods.

For Marxists the measure of a post-capitalist society's progress in advancing toward socialism is the systematic improvement of the material and cultural living standards of the urban and rural workers and their active involvement in deciding and administering state policy. From this standpoint, the Mao faction could in no way be considered to be to the "left" of the Liu-Deng grouping.

Both the Mao and the Liu-Deng groupings were equally committed to preserving the administration of state power in the hands of a privileged caste of party and government officials that was hierarchically organised like the officer caste of a bourgeois army, with each individual official's salary, amenities, access to consumer goods, services, and information being determined by the particular rank which they were assigned in the administrative hierarchy -- which in turn depended upon unquestioningly obedience to their superiors. Where they differed was over how to maintain the rule of this bureaucratic caste.

The Liu-Deng grouping, like Stalin's successors in the Soviet Union, favoured allowing a certain amount of intellectual freedom and political dissaffection among the masses as long as this did not take organised form. Bureaucratic rule was to be protected by a policy of selective repression of open public expressions of political dissent for which the specialised apparatus of the secret police would in the main be adequate. By contrast, Mao favoured the methods of bureaucratic rule applied by Stalin in the 1930s, i.e., the instilling of demonstrative political conformity on the entire population through the compulsory participation of every citizen into "criticism and self- criticism" circles where they were required to give public professions of faith in the "great leader" and to regularly denounce as "counter-revolutionaries" those not deemed sufficiently profuse in their praise of the "great leader". The latter aspect of this system of totalitarian social control provided a vehicle for careerism by enabling people to denounce as a "counter-revolutionary" their immediate superior in their work or party unit, in the hope of taking their post.

With regard to the systematic raising of the material and cultural living standards of the workers, Mao's position was thoroughly reactionary. He was for severely limiting the material and cultural living standards of the masses. Indeed, so contemptuous was Mao toward the material and cultural needs of the masses that he cited the priority Liu and Deng had given in the period 1960-66 to expansion of consumer goods production and their emphasis on improving the technical skills of workers, as the main evidence that they were "persons in authority taking the capitalist road". While Liu and Deng advocated a policy of relative literary and artistic freedom, Mao's attitude to the cultural needs of the masses was well-captured by his remarks to a conference on education in 1964, at which he declared:

We shouldn't read too many books. We should read Marxist books, but not too many of them either. It will be enough to read a dozen or so... If you read too many books, they petrify your mind in the end.

Mao's approach to literature and public education provide two concrete illustrations of how this glorification of ignorance was to be applied as state policy. In 1960, some 1300 periodicals were published in China. By 1973 this had been cut to around 50. Book publishing during Mao's "Cultural Revolution" was reduced to the works of Mao, technical manuals, party documents, and a few novels, mostly written by committees of Maoist bureaucrats, on the theme of the Maoists' "heroic" struggle against the "capitalist roaders" in the party.

Under Mao, the universities were closed for five years. When they were reopened in 1972 the length of study was cut from five years to three. And of these three, one year was now to be devoted to manual labour and another year to the study of current party documents and Mao's writings.

The differences between the Liu-Deng and Mao groupings in the 1960s, however, were not confined to issues of domestic policy. They also extended to foreign policy, in particular to the question of what attitude China should take toward US imperialism's escalating war against Vietnam.

When the US began bombing North Vietnam in February 1965 and sending large numbers of combat troops to South Vietnam, the Beijing party committee organised a mass demonstration against the US at which Peng Zhen, the head of the Beijing party committee, publicly promised Chinese aid to the Vietnamese revolutionaries to drive the US out of Vietnam. Mao, however, downplayed the US actions and, in an interview he gave to the pro-Chinese US writer Edgar Snow, declared an acceptable solution might see US troops remaining "around Saigon as in the case of South Korea".

Around this time, leaders of the Japanese Communist Party traveled between China, Vietnam and North Korea, attempting to organise united action in defence of Vietnam. Peng Zhen and Deng Xiaoping supported this proposal, but Mao opposed it and was able to block its implementation. In his 1972 book The Long Revolution, Snow revealed that Mao told him in 1965 that Liu Shaoqi and Peng Zhen had wanted to revive the Sino-Soviet alliance in support of Vietnam and this helped convince Mao that Liu and Peng had to be purged. Indeed, Peng and the Beijing party committee were to be the first victims of Mao's "Cultural Revolution".

The `Cultural Revolution'

The "Cultural Revolution" was actually initiated by the Liu-Deng faction within the CPC Politburo, when they appointed Peng Zhen to head up a "Cultural Revolution Group" consisting of five top officials, only one of whom -- Kang Sheng, the head of the secret police -- was a supporter of Mao. The initial "Cultural Revolution Group" called for the mass mobilisation of students under the leadership of the children of party officials. Since party officials had not been permitted to have children until after the end of the civil war in 1949, most of their children were still of high school age. The initial Red Guards that were organised to carry out the "Cultural Revolution" were consequently made up overwhemingly of high school students. They were mobilised by the local party authorities to attack the "four olds", that is, the "old ideas, culture, customs and habits of the exploiting classes". Ex-capitalists became the main target of these Red Guard attacks, with many of the former capitalists having their homes ransacked, while museums and art objects were also senselessly damaged.

In May 1966, however, Mao and his supporters seized the initiative. The original Cultural Revolution Group was replaced by a new group dominated by Mao's supporters and headed by his long-time private secretary Chen Boda and Mao's wife, Jiang Qing. In June 1966 Peng Zhen was accused by them of trying to restore capitalism and was ousted from all his official posts. The Beijing party committee was deposed and its offices militarily occupied by the PLA. A significant degree of control over the press and radio was placed in the hands of the new Cultural Revolution Group, which they used to launch an all-out campaign to build up the cult of Mao.

In August 1966, the CPC Central Committee met for the first time since 1962. Half of its members did not attend the meeting and Mao and his ally, Defence Minister Lin Biao, packed the session with pro-Maoist PLA officers. The meeting voted to call on Chinese students to "struggle and overthrow those persons in authority who are taking the capitalist road", i.e., party and government officials who supported the Liu-Deng group.

The Liu-Deng group within the CPC leadership had the support of the overwhelming majority of regional army commanders, and party and government officials. These men and women had been the CPC and PLA cadres who had led the peasant masses in the 1946-49 civil war to overthrow the bourgeois Guomingdang regime and in the subsequent anti-landlord agrarian revolution. They had led the workers in breaking the resistance of the capitalists to the nationalisation of industry, banking and commerce and had been the chief organisers of the planned economy. They therefore enjoyed a certain measure of authority and prestige among the workers and peasants. Since the existing Red Guard formations were led by the children of these officials and made up of high-school students drawn from the families of workers and peasants, the Mao faction could not count on them as reliable shock-troops for a campaign of mass terror against these officials. Nor could the Mao faction mobilise the workers and peasants themselves to do this job, since the Mao group's goal was impose severe restrictions on the living standards of the workers and peasants.

Instead, the Mao faction mobilised new Red Guard formations under the leadership of university students and unemployed urban youth. These young people had no family connections with the great majority of the regional PLA commanders or party and government officials. Nor were they from worker and poor peasant families. They were overwhelming the children of former capitalists, landlords, rich peasants, and urban petty proprietors. The reactionary social motives driving these "anti-capitalist-roader" Red Guard groups became very evident in January 1967 when they stormed factories, farms and offices and beat up and tortured the workers and poor peasants as well as the officials and managers.

Throughout early 1967 bloody street battles raged across China between the different Red Guard formations. By July 1967 open civil war threatened when the regional army commander of the industrial city of Wuhan sent his troops to oust the Maoist Red Guards from the city in defiance of the orders of Defence Minister Lin Biao. In the wake of this incident, at Jiang Qing's initiative the Cultural Revolution Group called for "dragging out the capitalist roaders in the army". This call directly threatened not only the regional PLA commanders, but also Lin Biao, who had belatedly called for a restoration of public order.

Fearing that the army officers might turn against him, on September 5, 1967 Mao sent personal messages of support to the regional PLA commanders, ordering them to disarm the Red Guards. Jiang Qing rapidly did an about face, making a public speech in which she called on the PLA to fire on "mass organisations or individuals" that refused to obey military orders.

From late 1967, Mao ordered that governmental authority throughout China was to be placed into the hands of "revolutionary three-in-one committees", which were to consist of the local PLA commanders, "good cadres" and representatives of the "revolutionary masses". Since it was up to the local PLA commanders to decide who the "good cadres" and the representatives of the "revolutionary masses" were, this formula provided a means for power to be restored in the regions to the party and government officials who had previously been attacked by the Maoist Red Guards.

In early 1968, fierce battles again errupted between the different Red Guard groups and civil war once again loomed when Lin Biao attempted to assert his authority over the local PLA commanders and a number of them refused his orders and supported the "anti-four-olds" Red Guards against the "anti-capitalist roader" Red Guards. In June 1968 Mao again backed off, and ordered the Cultural Revolution Group to stay out of provincial factional fights and gave the local army commanders full authority to reestablish order. A month later, under pressure from Defence Minister Lin and Premier Zhou En-lai, Mao reluctantly ordered the Red Guards to be dissolved altogether. "Mao Zedong Propaganda Teams" staffed by workers and led by army officers took over the university campuses, and former Red Guards were ordered to disperse to the countryside, ostensibly to "learn from the peasants". From late 1968 Mao's ulra-Stalinist "politics-in-command" methods of rule became institutionalised in all areas of social life.

Beijing's rapproachment with US imperialism

In foreign policy, the period after 1968 was marked by steady reproachment between the Mao regime and US imperialism on the basis of mutual hostility toward the Soviet Union. At the end of November 1968 the Mao regime took the initiative to begin secret diplomatic talks in Warsaw with representatives of the incoming Nixon administration. Henry Kissinger, Nixon's foreign policy adviser and later his Secretary of State, made his first favourable comment regarding China in December 1969. Throughout 1970 Mao and his premier, Zhou Enlai, gave a number of foreign press interviews, all but inviting Nixon to visit China. In 1971 Kissinger made a secret visit to Beijing, which paved the way for Nixon's public visit in February 1972.

This rapproachment between the Mao regime and US imperialism was accompanied by clear demonstrations from Mao that he was willing to collaborate with Washington in preserving pro- imperialist regimes in power throughout the Third World. In March 1971, China provided military aid and strong political support to the US-allied Pakistani military dictatorship's genocidal war against the Bangladesh independence movement. In April 1971 Beijing gave material aid and political support to the Sri Lankan government's suppression of a Maoist-led youth rebellion. In July 1971, the Mao regime supported the Sudanese military dictatorship's witchhunt against the Sudanese Communist Party and the Sudanese trade union movement, a witchhunt carried out under the slogan of crushing all "Communists, traitors to the fatherland, and enemies of God". In September 1973, the Mao regime was one of the first governments to recognise General Pinochet's military dictatorship in Chile after the CIA-organised coup against the social-democratic government of Salvador Allende. When Mao died in 1976, the rabidly anti-communist Pinochet declared three days of official mourning for Mao with flags on all public buildings at half-mast.

Deng, like Mao, was above all a Chinese nationalist. This is why his post-Mao regime followed the same nationalistic foreign policy as Mao's, which included covert and overt collaboration with US imperialism to support the maintenance of capitalist regimes that were willing to be friendly to Beijing. But an examination of the domestic policies advocated by Deng Xiaoping and his allies within the Chinese bureaucracy and implemented by them when they were in power in 1960-66, provides no evidence that they were "rightists" who favoured a restoration of capitalism in China. This was simply a Maoist slander, proven by the fact that Mao himself approved the reinstatement of Deng in January 1975 to the highest governing body of state power in China, the party's Politburo Standing Committee, as the party's Vice-Chairman -- a position that put Deng in day-to-day control of the party and government. In that capacity, he quickly moved to reinstate to key positions of leadership in the central party apparatus and the central government ministries all of the supporters of the Liu-Deng grouping who had survived the purges of the previous decade.

In April 1976, Mao denounced Deng as a "unrepentant capitalist roader" and had him and his allies purged a second time. The concrete accusations made against Deng by the Maoist-controlled media after this second purge indicate that the policies Deng and his supporters had sought to implement in 1975-76 were similar to those they had applied in the 1960-66 period. Deng was accused of seeking to revive post-Stalin Soviet-style economic planning with its greater emphasis on consumer goods production rather than all-out concentration on heavy industry. He was accused of favouring pay increases for workers, proposing the importation of foreign machinery in order to modernise industry, opposing the Maoists' rigid censorship of art and literature, and their policy of limiting spending on university education and deporting urban high-school graduates to work in the countryside. In the decade after 1968, some 14 million urban high school graduates had been sent to work for indefinite periods in the villages as a means of avoiding increased spending on university education.

The Deng regime's `market reforms'

Comrade Slee cites only one argument in support of the idea that the Deng faction was already "pro-capitalist" in December 1978 when they returned to all the key leadership positions in the party and government that they held in 1975-76: December 1978 was when the "market reforms began". But such an argument presumes that the "market reforms" implemented in the years immediately after December 1978 were in themselves "pro-capitalist". Again, the facts do not support such an assumption.

In December 1978 the Deng leadership approved only one "market reform": allowing peasants on the rural communes to have household vegetable plots and to sell the vegetables grown on these plots in local town markets. The same "market reform" was forced on Stalin in 1935 after his forced collectivisation of peasant farming had failed to provide any incentive to the peasantry to increase agricultural output.

In September 1980, the Deng leadership approved its second "market reform", when the State Agriculture Commission authorised the rural "people's communes" to contract work to individual peasant families. This was actually a concession forced on the regime by the spontaneous movement toward decollectivisation of farming that had been gathering momentum among the peasantry since February 1978. As the household contracting system spread, the rural communes, which were run by government-appointed officials, lost control to the peasants of concrete production issues such as cropping and labour allocation. This spontaneous movement by the peasants intensified throughout 1981-82 and was accompanied by a spontaneous revival of markets for agricultural produce and rural handicrafts. In January 1983 the regime formally approved the decollectivisation of peasant farming and by the end of 1984 the rural "people's communes" were a thing of the past.

If the act of formally approving the spontaneously-initiated decollectivisation of peasant farming is taken as proof that the Deng regime at that time was a capitalist state, theoretical consistency would demand that conclude that Yugoslavia became a capitalist state in 1953 when the Tito bureaucracy opted for the same policy. But then, how would we square such an argument with the traditional Marxist position of opposing the forced collectivisation of family farming?

Titoite Stalinism and the Deng regime

A comparison of the policies of the Deng regime up to 1992 with those implemented by the Tito regime in Yugoslavia after 1948, when it broke with Stalin, shows many similarities. Indeed, the similarities are not coincidental. In 1981 the Deng regime began avidly studying Yugoslavia's bureaucratically-controlled system of atomised "workers' self-management" and its post-1965 combination of state planning and markets. By 1984, the Deng regime had begun implementing a whole range of Titoist-style policies. These included allowing state industrial enterprises to keep up to 70% of their investment funds under their own control and to make their own decisions about the bulk of what they would produce. Like the Tito regime, the Deng regime also allowed the limited employment of workers in small family-owned industrial, commercial and service businesses as well as the setting up of joint ventures between state-owned enterprises and foreign capitalist investors.

Limited forms of workers' participation in enterprise management were also introduced. These took two forms. The first was annual workers' congresses (which were to review enterprise budgets and production plans, welfare and bonus funds, safety issues, wage systems and management structures and make recommendations on these to the higher levels of economic administration). The second was the authorisation of the election of factory managers by work collectives. However, as under the Titoist system of "workers' self-management" such elections were not by secret ballot and in a context where no independent forms of workers' political organisation were allowed, such elections could easily be controlled by the bureaucracy.

Like the Tito regime in Yugoslavia, the Deng regime in China in the 1980s allowed a considerable relaxation of Stalinist ideological control. As with the Tito regime, this relaxation extended to the official publication of anti-Stalinist Marxist literature. In 1984, for example, the Chinese CP's Institute of Marxism-Leninism began publishing writings by Isaac Deutscher, Ernest Mandel and Leon Trotsky.

The 1989 crackdown

At the same time, the Deng regime, like the Tito regime, was determined not to allow any forms of political organisation independent of the bureaucratic caste's control, most particularly any form of independent political organisation by workers. A graphic example of this was provided by the brutal crackdown the Deng regime launched in June 1989.

By 1988, there were clear signs that the Chinese masses were no longer the terrorised population they had been at the end of the Cultural Revolution. Workers, students and intellectuals began to stage public protests against the most conspicous examples of official corruption and against the impact that rampant inflation of market prices was having on their living standards. Opinion surveys showed there was massive disapproval of the country's political institutions. In response, party general secretary Zhao Ziyang called for a crackdown on "bureaucratic racketeeing", and the regime launched an official campaign of adulation for Mao which found broad resonance among workers who identified Mao's regime as a period when China was free of inflation, corruption, and public displays of extreme social inequality.

In the final days of 1988, racist demonstrations and eventually riots erupted on Beijing and Nanjing campuses as thousandas of male Chinese students attacked African students for dating Chinese women. At the same time, leading intellectuals began to issue calls for the release from prison of Wei Jingsheng, a Beijing zoo electrician who had been jailed in 1979 for forming an independent organisation to campaign for freedom of political speech and association.

In April 1989, students mourning the death of Deng's premier, Hu Yaobang (who was seen by intellectuals as the leading advocate of political liberalisation within the party's top leadership), poured into central Beijing's Tiananmen Square. Some 10,000 students assembled in the square and demanded entry to Zhongnanhai, the heavily guarded residential compound of China's top officials, to discuss political freedoms, education funding and the disclosure of the financial records of the top officials and their children.

On April 26 the regime's main press organ, the People's Daily, ran an editorial based on a statement by Deng which denounced the students as "hooligans" led by "evil" people intent on formenting "turmoil". In response, the students formed the Beijing Students' Autonomous Federation and the next day the number of demonstrators in the square reached 100,000. By early May, the social base of the demonstration broadened to include many office, shop and factory workers, with up to 150,000 in Tianamen Square each day.

In response the regime decided to change its tactics. Zhao Ziyang, with Deng's approval, made a conciliatory statement, calling the students' demands "reasonable" and urging a "democratic and legal" response. This statement was aimed at encouraging the dispersal of the demonstration, but it made the regime appear weak and divided and only caused the protest movement to spread to other cities.

On May 18, newly installed premier Li Peng held a nationally televised meeting with the students' representatives. When the student' representatives refused to backdown, Li stormed out the meeting, and the following day announced the imposition of martial law in Beijing. But as had happened with the April 26 editorial, this get-tough stand backfired. Tens of thousands of Beijing working-class residents came out to their neighbourhood intersections to block the advance of PLA units toward Tiananmen Square. The workers pleaded with the soldiers and their officers not to act against the student protesters. By and large the troops were sympathetic to these pleas. Meanwhile, at the top of the PLA, two marshals publicly praised the students' patriotism and seven other generals drafted a statement, signed by over a hundred senior officers, urging the PLA not to fire on the masses. In response, the military's advance through Beijing toward Tiananmen Square stopped.

On May 24, Zhao Ziyang resigned as party general secretary and the student leaders announced they would end their demonstration on May 30. The day before this, however, the most radical protest leaders -- mainly workers rather than students -- began to be arrested by the secret police. The arrests were triggered by a new development, one which galvanise the entire ruling bureaucracy behind Deng's demand for a military crackdown on the spreading protest movement.

On May 29, groups of workers began to demonstrate with a very different agenda from the students' demands. They focused on job security, wages, opposition to the burgeoning private enterprises, and the limitations on their power to control their workplaces. Where the students and intellectuals tended to see the solution to corruption and authoritarianism in further steps toward political liberalisation and privatisation of the economy, the workers were more inclined to think that excessive "market reform" and lack of worker power in the factories were undermining the social gains they had made under the nationalised, planned economy. Where the students had erected the "goddess of democracy", combining aspects of the traditional benevolent Chinese deity Guanyin and the US Statue of Liberty, the workers marched under portraits of Mao.

Moreover, the workers' demonstrations were accompanied by the ruling bureaucracy's worst nightmare: workers began to form independent associations to agitate for their demands and the most radical protesters in Tiananmen Square -- mostly workers -- declared they would stay in the square until June, when the next session of China's nominal legislature, the National People's Congress, was due to convene next door in the Great Hall of the People.

In the face of the workers' challenge, the ruling bureaucracy closed ranks and the PLA was ordered to crush the Tiananmen Square protest.

The vast majority of the estimate 1000 people killed in the Tiananmen Square massacre of the night of June 3-4, 1989 were not student protesters in the square itself, but workers in the encampments at major intersections ringing the square. And in the police crackdown that followed the regime made a clear distinction between the student and worker leaders. In an effort not to alienate the intellectuals too much from the regime, the student leaders who were caught were given jail terms. The 50 or so workers' leaders who were caught, however, were summarily executed.

The post-1989 retreat from `market reforms' and the 1992 turn toward capitalist restoration

At the same time as sending a clear message to the workers that it would not tolerate any independent political activity on their part, the Deng regime sought to neutralise the workers' discontent by announcing a ban on the children of high officials engaging in private business, a crackdown on official corruption, measures to tame inflation of market prices, and a redirection of investment toward state-owned enterprises and away from private and quasi-private enterprises. This moderate and in certain respects rhetorical anti-market turn was maintained for two and half years, while the ruling circles of the Chinese state tried to work out a new course that would overcome the explosive social contradictions generated by the "market reforms" they had introduced into the planned economy during the 1980s.

Without workers' democracy and therefore organised working-class control over the economy, the "market reforms" introduced during the 1980s had created a ready-made mechanism for the private accumulation of large amounts of money by state officials. The reforms had created two parallel systems of pricing. The output of a state enterprise's production that was sold to other state enterprises was at administratively-set prices inherited from the Maoist period. These prices were generally much lower than those on the burgeoning markets, where scarcities were driving them up. Output using inputs purchased on the market at the higher market prices was supposed to be sold on the market at the market prices. However, unlike parallel lines which never touch, these two parallel economies were in contact with each other every day. There was therefore an enormous incentive for the managers of state enterprises to obtain all their production inputs at the administratively-set prices, but to sell all or most of their output on the market at the much higher market prices, and to pocket the difference. Through this mechanism, enterprise managers could accumulate large illegal private fortunes, which they "laundered" by channelling them into privately-owned businesses run by their relatives and cronies.

As such pro-capitalist tendencies within the ruling bureaucracy became more and more widespread, pressure mounted on the regime to allow them to become "legit". The signal that the regime intented to give official sanction to the transformation of bureaucrats into capitalists was Deng's remarks during his tour of southern China in January-February 1992. This new course -- toward a full-scale restoration of capitalism -- was given formal endorsement later that year by the most representative gathering of the ruling Chinese bureaucracy -- the Communist Party congress.

This is why we judge that a qualitative turn was made in 1992 by the Chinese regime. The regime turned away from an orientation of using more and more market mechanisms to overcome the contradictions of bureaucratic management of a nationalised, planned economy toward an orientation of replacing the statised, planned economy with a capitalist economy throughout the whole of China. This turn in the regime's orientation signalled a qualitative change in the socio-economic policy of the state power toward the hitherto illegal transformation of bureaucrats into capitalists.

From tolerating the transformation of bureaucrats into capitalists in certain regions of China, such as Guangdong province, as a by-product of the state's attempts to correct the failings of the bureaucratically planned economy, in 1992 the socio-economic policy of the state power switched to one of approval of the transformation of bureaucrats into capitalists across the entire country as an essential means of replacing the nationalised, planned economy with a full-blown market economy.

This analysis of how and when the People's Republic of China became a capitalist state -- which is the one outlined in the Theses the NC is asking delegates to adopt -- is not only consistent with a historical materialist explanation of the transformation of a petty-bourgeois Stalinist regime into a political instrument of capitalist restoration. More importantly, it's consistent with the facts, with the actual evolution of the economy and state policy of the People's Republic of China.