Capitalism in China Today


Zhang Kai



In recent years, China is restoring capitalism. On 25 February 2005, the State Council issued a document “On encouraging and supporting individually or privately run business in the non-public sector” (Wen Hui Bao, 28 February 2005). From then onwards, private enterprises have started to take over the sectors of heavy industries, infrastructure and public services. Statistics show that among 27% sectors, private enterprises constitute over 50%, and some even over 70%. According to China Market Economy Development Report 2005, conducted by Beijing Normal University, China has been further integrated into the global market economy system after its accession to the WTO. The report further stated that China’s marketization index was 69% in 2001, 72.8% in 2002 and 73.8% in 2003.

One of the means of accumulating capital used by private entrepreneurs is to bribe government officials or management of state-owned enterprises, for the purpose of buying national assets at a cheap price. According to some official research institutes, national assets of around 40 billion yuan (USD 1 = RMB 8.2 yuan) every year have been lost (Apple Daily, 17 August 2005, quoting China Economics Times). Private capital has speedily expanded under the existing market economy system. According to Wenzhou branch of People’s Bank of China in Zhejiang Province, the scale of private loan has reached 41 billion yuan at the end of 2004. Expansion of private capital has led to rampant usury. Wenzhou City government announced that if any interest rate of personal loan was four times more than what People’s Bank of China regulated, it was defined as an illegal usury. Moreover, the local government claimed that they would continue to tackle with the expanding underground financial activities.

        On the other hand, disputes on land and property between people and local governments have increased. The Property Law of the Constitution clearly states that private property must be protected, however, in reality, people’s land and property are always seized by local governments with little compensation, which is much less than the actual value of their possessions. Worse still, the Supreme People’s Court announced that starting from 11 August 2005, all courts at different levels will no longer handle any civil lawsuit of demolition and compensation. In other words, if the people are not satisfied with official arrangement and compensation, they can just complain but get no legal support (Apple Daily, 13August 2005).

        Nowadays China still claims that public ownership is the main body of national economy. Yet this cannot be applied to state enterprises. Chen Qingtai, the Deputy Director of the Development Research Center of the State Council, disclosed that state enterprises have undergone the second reform that they would be wholly listed to the stock market. Chen estimated that the proportion of state capital in GDP would gradually decrease, from one-third to 20% (Wen Hui Bao, 30 May 2005). As Leon Trotsky remarks, state ownership is the primary condition of the workers’ state. Based on Trotsky’s point of view, due to the decline of state ownership, China is actually restoring capitalism. Furthermore, in June 2005, Li Rongrong, the Director of the State-owned Assets Supervision and Administrative Commission of the State Council, pointed out that half of the state-owned enterprises had gone into bankruptcy. Now the number of state-owned enterprises is 150,000, of which the medium and small scale is 147,000, the large scale is only 3000.

        Shortly after 1949, China carried out the planned economy, which was nonetheless formulated and controlled by bureaucrats, but not by the working people. The last two decades of economic reform has led to overheated economic growth. Recently China has adopted macroeconomic control policy to solve the problem, but there are loopholes in national investment and production plan, for example, non-public enterprises have borrowed a total of 3,000 billion yuan of loans from banks. Wang Jian, the Deputy-Secretary General of the Association of Macroeconomics of the National Development and Reform Commission, explained, “according to the statistics, in the whole investment of 2004, 65% came from non-public enterprises. In the first quarter of 2005, it increased to 70%. Non-public enterprises have taken away bank loans. If they have any problem, such as they cannot sell their products and cannot repay the loans, our government will no longer be able to help them. If this happens, the enterprises will surely go into bankruptcy and our banking system will be much affected. Overproduction may become widespread. In the coming years, China may have to confront this issue which is the real challenge to the macro-economic control policy”.

        Now the wholly owned foreign enterprises are allowed to run business, which constitutes 65% of foreign investment in China and dominates the market. In 2004, the products of foreign enterprises constitute 55% of export industries, particularly dominating the high-tech industries (Yu Yang’s “China, whose economy is on the rise?”, quoted in Wen Hui Bao, 29 March 2005). In addition, China provides foreign companies a lot of privileges, for example, the actual tax rate is merely 11%, whereas for domestic companies it is around 23%. According to Zeng Puiyan, the Deputy Premier of the State Council, two-thirds of foreign companies have earned great profits in China. As the statistics show, from 1990 to 2004, foreign investors have sent around 250 billion yuan of remittance out of China (Wen Hui Bao, 9 September 2005).

        While China goes capitalist, the people have generally become selfish and money-minded. Officials and capitalists have complicity in taking over public property through illegal means. Peasants and workers therefore suffered a lot. This can be shown in the following examples: (1) Workers’ life and health are in danger. Factory owners always force workers to work under dangerous working conditions. This has led to a lot of cases of death and casualties. A recent typical case is Xingning Coal Mine of Guangdong Province. The local officials were offered bribe from the coal mine owners to allow miners to work underground, even though experts warned that there would be serious leakage. Eventually, 123 coal miners died. And in Shanxi Province, due to heavy mining, one-seventh of the ground has been emptied and may collapse, which endangers the lives of millions of people (Ming Po, 28 August 2005). (2). Capitalists exploit the nature just for making profits. They produce toxic wastes and pollute air and water. People cannot drink clean water any more. Ecology is totally in crisis. (3) Capitalists produce fake and toxic food products. They irrigate the land with polluted water, and put banned industrial additives into food products. This greatly do harm to people’s health. (4) After the medical reform, public hospitals force people to pay expensive fees for medical treatment and medicine. Research shows that 50% of patients are too poor to see a doctor, whereas 30% are unable to receive treatment in hospital even though they are in desperate need. In the countryside, among the children who died of illness, half are too poor to get medical treatment. (5) Universities, secondary schools and primary schools illegally collect extra school fees. Over the past ten years, a total of 200 billion yuan has been illegally collected. Just in 2003, over 2.1 billion yuan have been illegally collected. In 2004, secondary and primary education has become no. 2 of the top ten profitable sectors, just after property and estates. And the medical one sector ranks no. 8 (Ming Po, 21 February and 3 September 2005).

        According to the statistics given by the United Nations Development Programme, the Gini coefficient of China is 0.45. The poorest 20% of the whole population constitutes only 4.7% of income or consumption. In contrast, the richest 20% of the population occupies 50% of income or consumption. The Ministry of Labor and Social Security recently warned that the gap between the rich and the poor has reached the serious “yellow” sign. It will turn to the dangerous “red” sign if the situation becomes worse in five years (Ming Po, 20 September 2005). The State Statistics Bureau estimates that the annual income of urban people will be over 10,000 yuan. In contrast, rural people have only an annual income of 2,936 yuan. The former even has 8-9% growth but the latter has only 4-5% growth every year.

        China going on to capitalism has caused high unemployment, expensive medical system, coercive demolition, landlessness, and others. There are widespread grievances among people. Many have come together to protest and demonstrate. In mid July 2005, Zhou Yongkang, a Politburo Member of the Central Committee of the CCP, expressed worriedly that mass incidents have already affected social stability. The number of mass incidents increased from 10,000 in 1994 to 74,000 in 2004. And the number of involved people also increased from 730,000 to 3,760,000 (He Yang’s article quoted in Apple Daily, 25 July 2005).

        Because of public pressure, the media also generate debates on the state enterprises reform. According to Yao Zhongqiu, a researcher of Cathay Institute for Public Affairs in Beijing, the dispute between Lang Xianping and Gu Chujun in 2004 has generated heated debates about the state enterprise reform. Lang proudly claimed that 95% of people in the internet supported him. This clearly shows that most people oppose the reform because they consider that the drain and loss of state enterprises are due to corrupt officials and greedy private entrepreneurs.

        Recently the failure of medical marketization reform has become the focus point of criticisms. The formal report of the Development Research Center of the State Council concludes, “since the reform and open-door policy, China’s medical system … has disclosed more and more serious problems. On the whole, the medical reform is unsuccessful.” Actually, many officials from the Health Bureau have already negated the medical marketization reform in the internal discussions since the end of 2004 (Apple Daily, 17August 2005).

        The CCP leadership still controls the power of drafting and implementing the national policies. The people, including producers and consumers, have no power. Only if people resist, seize the power, and remove the autocratic bureaucracy, can the wrong policies be fundamentally corrected and the rights of the people be safeguarded.



18 October 2005