Saturday, November 23, 2013

China’s plenum: state control as usual

by Michael Roberts

The Chinese Communist party’s Third Plenum ( finished last week and the detailed statement on what it agreed to do about China over the next five to ten years was released (

There is been much talk about ‘reform’ in the bourgeois media leading up to the Third Plenum.  And the initial reaction of the strategists of capital to the Plenum decisions was favourable.  It looked like the Chinese leaders were aiming to extend the role of capitalist markets and production in the Chinese economy.  The Chinese stock market rose.

But, in my view, the third plenum did not really commit to anything like  ‘free market’ capitalism.  At best, it agreed to a few limited steps towards the development of market forces in banking (more competition for the state-owned banks) and in agriculture (some commercial property transactions), vague talk about ‘liberalisation’ of capital controls and currency trading down the road; a few more ‘free trade zones’ for foreign companies to ply their trade; and allowing foreign companies to operate in more service sectors.  And of course, there is going to be a very limited relaxation of the terrible one-child policy for families (‘only-child’ parents can now have more than one child) and the control of the movement from rural areas of people into the cities (hukou) by allowing more fee movement into smaller cities.

But that is it.  Two things stood out that did not happen. There is no change in the general philosophy of ‘socialism with Chinese characteristics’ and thus the maintenance of the dominance of the state sector.  As I argued in my previous long post on the nature of the Chinese economy (, the pro-capitalist elements in the Chinese elite have pushed for the implementation of the proposals in the large World Bank report on China.  The bank’s first and foremost demand for ‘reform’ was the privatisation of the state enterprises.  The third plenum has made no move in that direction whatsoever.  The other clear message was that there would be no move towards any more ‘democracy’ or control of even local legal systems and decisions by the people.  On the contrary, the leadership is setting up even more repressive state security services to monitor and control the population and curb any dissidence.

So there is nothing really in the aims and policy proposals agreed by the Chinese political elite that changes the nature of Chinese economic, social and political model.  The majority in the leadership will continue with an economic model that is dominated by state corporations directed at all levels by the Communist cadres.  Markets will not rule and the law of value will not dominate prices, labour incomes or domestic trade.  Of course, the law of value does operate in China but mainly through foreign trade, capital flows (investment) and currency movements, but even here, it is under strict limits, with only gradual moves to relax those limits.  So, in my view, all the talk of the Third Plenum leading to a fully fledged capitalist China over the next decade is nonsense. There is no sign that the majority of the Chinese elite wish to develop such a capitalist economy, partly because they are doing very nicely out of the current model.

Can the elite continue with this ‘halfway house’ without provoking either a crisis and slump that will force them to follow the ‘capitalist road’ as the World Bank and the pro-capitalist elements want?  Will the elite face an eruption from below as the fast-growing working class urban population starts to flex its muscles for a say in running society?  Well, I think not – at least not yet.  China will continue to grow at 7-9% in annual real GDP terms for at least another decade.  The working population is still growing, although it will soon peak; there are still hundreds of millions of rural workers and peasants to be incorporated into the industrial machine; and China is increasingly sucking up as much the world’s raw materials as it needs to sustain its expansion.

John Ross of Shanghai University has pointed out that China’s industrial growth remains truly staggering (“On World Bank data China’s industrial production in 2007 was only 60% of the US level, whereas by 2011 it was 121%.  Therefore in only a six year period China has moved from its industrial production being less than two thirds of the US to overtaking the US by a substantial margin. …  In six years China’s industrial output almost doubled while industrial production in the US, Europe and Japan has not even regained pre-crisis levels.”
Ross on China industrial output since 2007
The great Chinese economic ‘miracle’ is not exhausted quite yet.

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