China is fundamentally socialist, not capitalist

In socialist economies, the interests of private capital don't prevail over the interests of the ruling party

Photo by Robert Nyman on Unsplash

I wrote a post on Twitter/X recently, claiming that China is fundamentally socialist, not capitalist. The post generated intense debate. I eventually elaborated on my claim in a lengthier post. You can read the lengthier post below, fully copied in its original form:

This post created intense debate, so I think I should flesh out in greater detail what I mean when I say that China is fundamentally socialist rather than capitalist.

In socialist economies, the state/public controls or owns a majority of the means of production. In capitalist economies, by contrast, private individuals/corporations control or own the means of production.

This makes China, fundamentally, a socialist economy. And it makes the United States, fundamentally, a capitalist economy.

Of course, there are many elements of China's economy that are capitalist — for example, a clear presence and function of private capital and the lack of labour power. Likewise, there are many elements of the US economy that are socialist — for example, the presence of social security and welfare programmes.

In the modern world economy, socialism and capitalism are not clear binaries. All countries fall somewhere in between, and uniquely display features of each system. China is certainly one of them. Keyu Jin gets this across really well in her book, "The New China Playbook: Beyond Socialism and Capitalism." The literature on state capitalism also describes the Chinese economy quite well.

I personally see capitalism and socialism as two massive trees, each with different branches.

My view is that the tree that forms the basis of China's economy is fundamentally socialist. The point I've made about the state controlling the means of production is a very important one: the interests of private capital don't prevail over the interests of the ruling party.

We see this especially in the financial sector. The Chinese state has complete control over the financial sector and the direction of credit, in a way we don't see in any Western capitalist economy. This has been on full display in recent decades: the Chinese state has directed money and investment forcefully in line with long-term goals. The Chinese private sector is clearly subordinate to the state.

The Chinese political leadership also has explicit socialist roots and ideology — it officially embraces Marxism and Leninism. The CCP (or the CPC, if you will) is clearly organised around Leninist principles: a tightly organised elite party with powerful central authority.

From a socialist perspective, one can criticise China for weak labour rights and weak welfare programmes compared to Western states. However, both of these should be understood in the context of China's role in the world economy and China's development trajectory.

Many Western states and corporations contribute to the lack of labour power in China. Low-paid jobs have effectively been outsourced from the West to China for decades now, benefitting consumers, corporations and workers in the West. In fact, if it wasn't for China taking all the low-paid jobs, labour power wouldn't be as strong in many Western countries. My home country, Norway, is a perfect case in point, where labour and private capital have been on a honeymoon for decades because we can import most manufactured goods from China rather than make them at home.

Regarding welfare, this must be seen in the context of China's development trajectory. China's GDP per capita is 1/6 of the US, and they are actually super efficient with resources when we take this into consideration. Life expectancy in China is in fact higher than in the United States. It is true that many welfare programmes aren't as strong in China as in the West, but at this stage, the Chinese state prioritises delivering on acute material needs and economic development (e.g. housing, infrastructure, job creation, poverty reduction). And they are delivering really well on this: China has lifted more people out of poverty than the rest of the world put together in the last 50 years and infrastructure in China is now among the most advanced in the world.

In summary, while China incorporates capitalist elements, its economy remains fundamentally socialist in structure and control.

To pre-empt questions and comments about democracy in China (they always emerge), you can read my thoughts about that here.