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Social character of China and working class


<Index>

. From the 1949 Revolution to the 1978 “Reform and Opening-up”

China's birth as a workers’ state/ “New Democracy”: Chinese Class Cooperation/ Class collaboration of Bureaucracy and “socialism in one country”/ Stalin's Check on China: Seeds of Sino-Soviet Conflict/ Fantasy of “Class Coexistence”/ Political consciousness of the United States and the Kuomintang/ Realization of ‘Permanent revolution’/ Outcome of the Revolution/ Three Ways to Improve Productivity/ 1) The First Way to Promote Productivity: Helping Developed Countries by Revolution/ Productive force and Permanent Revolution/ Failing of Follow-up Revolution in Advanced Capitalist Countries/ Sino-Soviet Conflict and Breakdown of Economic Cooperation/ Mao’s Evaluation of the Sino-Soviet Conflict/ Isolated China/ 2) The Second Way to Promote Productivity: ‘Great Leap Forward Movement’/ Catastrophe, Mao's downfall and Right Turn/ Policies of Liu Shaoqi and Deng Xiaoping Leadership/ The Cultural Revolution of Mao Zedong Faction/ Deified Authority/ China in a state of panic: Background of the ‘Cultural Revolution’/ Changes in the ‘Three Kingdoms’ relationship/ China Helping the U.S.-made Blockade of the Soviet Union/ Mao's Death and the Power of the Pragmatic Faction/ Road to ‘Reform and Openness’

II. Changes in Chinese society as a result of 'reform and opening up': China's social character as a deformed worker state has not changed

1. Significant growth in productivity

1) Gross Domestic Product (GDP): Comparison with Korea and India/ Economic Crisis and China/ 2008 Great Depression/ Passing on to the working class/ China's Crisis Response/GDP per capita

2) The world's top 500 companies

3) Dollar and gold reserves: China's dollar holdings/ The tyranny of the hegemonic currency of dollars/ China's gold reserves

4) absolute poverty reduction


Ⅲ. China and the Left

IV. The duties of the Chinese and global working classes

 


II. Changes in Chinese society as a result of "reform and opening-up"

 

About 40 years have passed since the Deng Xiaoping leadership came to power in 1978 and implemented the so-called ‘market opening-up’. The country which Deng Xiaoping leads was facing great challenges. Most of the means of production were nationalized, but the level of productivity was almost the level of pre-capitalism.

The struggle against imperialism in colonial China was led by the Communist Party. By the defeat of the Kuomintang, which was a local imperialist puppet, the claws of imperialism embedded in China was pulled out. The victory of the Chinese working people in the struggle against imperialism combined with the former victory of the Russian Revolution. Thus, the victory of the struggle for national liberation developed into a social revolution, called the abolition of private ownership, in connection with world history.

The problem was productivity of the level of pre-capitalism. Figuratively speaking, a family earned a huge cauldron through a desperate struggle. But there was just a bowl of rice to cook. The improvement of productivity was desperately required. Without developed productivity, the achievements of victory of the anti-imperialism struggle and the abolishment of private ownership would soon face challenges, thereafter face crisis of counterrevolution.

“This development of productive forces ... is an absolutely necessary practical premise because without it want is merely made general, and with destitution the struggle for necessities and all the old filthy business would necessarily be reproduced." -Marx, German Ideology, [5. Development of the Productive Forces as a Material Permise of Communism]

The challenges that China, a deformed worker's state, had to solve were difficult. The conditions were very narrow, since the subsequent revolutions of advanced capitalist countries have been delayed indefinitely, and to make matters worse, the relationship with the Soviet Union was cut off. 

Under these conditions, China's leadership adopted ‘market opening-up’, which was capitalistic concessions. Just like NEP(New economic policy) of Soviet Union which was a desperate measure to revive the economy torn by cilvil war, it was forced rather than selected. 40 years have passed since then, and China has changed dramatically during that process.

* * *

Specific economic history is not we focus on. The theme of this article is to examine the social characteristics of China. Thus now, 40 years passed after ‘market opening-up’, the points of this article are: how china changed; is China a completely capitalism state as many people say or does it still have charaterstics of working class; thus what are the charateristics of clash which will be in the future; what attitude should working class take in that clash.

After the 1st chapter of <From the 1949 Revolution to the 1978 “Reform and Opening-up”>, the 2nd chapter is <Changes in Chinese society as a result of "reform and opening-up">. We examine those changes in order of 1. Growth of productivity 2. Growth of capitalistic forces 3. Dominant form of ownership.

 

1. Significant growth in productivity

For 40 years, China's productivity development was remarkable because of ‘market opening-up’, which was partial capitalistic concession. This development appears through figures such as ‘Gross Domestic Product(GDP), world 500 conglomerate, gold·dollar reserves, poverty rate’.

 

1) Gross Domestic Product (GDP)

From 1978 to 2017, China's real GDP grew by 9.5% annually. Meantime, nominal GDP per capita increased by about 155 times from 385 yuan(in 1978) to 59660 yuan(in 2017).(Bank of Korea, China economy opening-up 40 years: Results and Prospects.

 

This has greatly changed China's position in the global economy. As shown in the table below, In 1978, when the share of global economic GDP in the U.S. and Japan, which were first and second at the time, was 27.7% and 11.8%, respectively, China was only 1.8%. However, in 2017, when the U.S. and Japan were 24% and 6%, respectively, China became 15.2%, dragging Japan down to become the world's second-largest in terms of GDP.

  Global GDP share by country

Country

1978

2017

USA

27.6 [1]

24.0 [1]

China

1.8 [-]

15.2 [2]

Japan

11.8 [2]

6.0 [3]

Germany

8.6 [3]

4.6 [4]

United Kingdom

3.9 [5]

3.3 [5]

France

5.9 [4]

3.2 [6]

* [ ] is rank

* From: World Bank

  In terms of GDP, China overtook Japan in 2010. In 2020, it nearly caught up with the United States. In 2008, GDP of China was only 31% of that of United States, but in 2020, it was 71% of that of US.

 

Comparison with Korea and India

It is also interesting to compare China with Korea, which recorded remarkable economic growth to the point of being called the 'miracle of the Han River,' and India, a country with a vast territory and population comparable to that of China.

China's average annual growth rate for 40 years between 1978 and 2017 was 9.5% annually. Meanwhile, Korea's economic growth rate averaged 8.94% annually over the 40-year period from 1963 to 2003, when the five-year economic development plan was implemented. Between 1978 and 2017, which is the same comparative section as China, it was 6.48%. In this regard, China's economic growth rate was faster than that of Korea, and during 1978-2017, China's growth rate was about 1.5 times that of Korea.

Until the 1980s, there was no significant difference in income levels between China and India (June 2018 issue of the Economic Information Center). However, as of 2020, India's per capita GDP is $1,883 and China's is $10,160. India's per capita GDP is less than one-fifth of China's (Gross National Income per Country, KOSIS).

The difference between China and India may also be that unlike China, India has not been able to cut off the over-exploitation of imperialism that has continued for the past two centuries. The Minister of Foreign Affairs of India says that as follows.

“India had two centuries of humiliation by the West in its predatory form it came to India in the mid-18th century. An economic study tried to estimate how much British took out of India, it ended up at a number of $45 trillion in today’s value,”S Jaishankar in US, British take close to $45 trillion from India today's value

 

Economic Crisis and China

It is also meaningful to look at China's growth rate during the major economic crisis when the economy fell sharply.

As shown in the table, during the “IMF foreign exchange crisis, global financial crisis, and COVID-19 pandemic crisis”, the global economy fell sharply downward, recording 2.61%, 0.07%, and 4.40%, respectively.

* 1997 Drop: Asian financial crisis

* 2008 Drop: Global financial crisis

* 2020 Drop: COVID-19 financial crisis

However, during the same period, China recorded growth rates of 7.6% (1998), 9.4% (2009), and 2.3% (2020). Among them, the comparison in 2009 is significant. Immediately after the 2008 financial crisis, which was considered more serious than the Great Depression in the 1930s, when most countries, including the U.S., grew negatively, China alone grew nearly 10% (9.7% in 2008 and 9.4% in 2009) (KOTRA 2021).


 


2008 Great Depression

The 2008 financial crisis resulted in a bubble in U.S. real estate mortgage loans, also known as the "Subprime mortgage crisis." Overproduction that exceeds profitable demand and over-loans that employ clever private techniques called "advanced financial techniques" eventually collapsed beyond the limit. Several financial dinosaurs, including Lehman Brothers, went bankrupt, and the economy stopped. In two years, 73 million jobs were lost, and unemployment soared.

The panic has hit the United States and European 'PIGS' countries (particularly Portugal, Italy, Greece, and Spain). There were frequent riots that raised fundamental questions about the system, including the ‘Occupy Wall Street’ in U.S. The "apocalypse of capitalism" was casually raised and raised in the mouths of mainstream economists.

"The current crisis will be bigger and longer than the Great Depression ...Since the Lehman Brothers crisis in 2008, all governments have done is to turn private debt into government debt. We are in structural trouble at the moment. Some say, 'Capitalism is over.'Kang Man-soo, Kyunghyang Newspaper, June 15, 2012

 

Passing on to the working class

The U.S. government released $700 billion to save the bank on the brink of bankruptcy and printed $4.5 trillion over the next six years. Most of the money labeled "rescue" was used to revive financial asset owners by buying bad loans on Wall Street. At the peak of the financial food chain, $182 billion (approximately KRW 218 trillion when calculating the dollar as 1,200 won) was invested in the American International Group (AIG), which oversees financial fraud. An investigation was carried out to blame for the financial meltdown. However, not a single Wall Street CEO, who was the main culprit, was arrested (BBC, September 15, 2018). The investigation was only a cover to cool off the indignation of the working class.

Meanwhile, the money printed in bulk by the Federal Bank does not have value in itself. Value is produced only through labor. That's why the gap between the "nominal" value and the actual value represented by the huge currency printed by the U.S. Federal Bank had to be filled by the global labor class, including the U.S. labor class. In order to fill the vacuum of the value created by the capitalist government's reckless printing of money, the working class had to bear double the pain of unemployment, increased working hours, inflation, and reduced social welfare. The capitalist class "rescued" capitalism again by peeling off the leather of the working class.

 

China's Crisis Response

Meanwhile, the 2008 economic crisis also shocked China. China was called the factory of the world. China's exports fell sharply as economic panic hit the U.S. and Europe, its main consumers. Then China also expanded its finances. It announced a $585 billion stimulus package. However, most of the money donated by the Chinese government was given to the real economy, including social infrastructure construction. China's stimulus package was different from the U.S. method of mass-spreading printed currency to get the capitalist class first and to fill the vacuum in value created by it to the working class. As if the surplus grain accumulated in the warehouse was released in a drought, the Chinese government released the actual value accumulated by state-owned companies and state-owned banks.

As a result, in 2009, when the United States 4% of the world as a whole falls to 0.1%, China recorded positive growth of 9.4% in 2009. China was also affected by the global panic, but the Chinese economy showed a very different movement from the profit-based economy for a small number of private capitalists.

 

GDP per capita

GDP per capita divided by population is also meaningful. Through this, a new story comes out.

GDP rank

Country

GDP

(Million $)

Population
(Approx.)

GDP
per capita

1

USA

25,346,805

335M

76,027

2

China

19,911,593

1B 450M

14,096

3

Japan

4,912,147

125M

39,243

 

In terms of per capita GDP, China is 1/5.4 of the United States and 1/2.8 of Japan. Therefore, in terms of gross national product, China can be seen as chasing the United States to the chin, but it can be seen that the per capita GDP "related to productivity" is only one-fifth of that of the United States.

 

2) The world's top 500 companies

Fortune, the longest-running international economic magazine established in the United States in 1929, announces the world's top 500 companies every year. In 2021, 135 companies in China were among the top 500 companies. As shown in the table below, only 10 were on the list in 2000. However, in 2020, 20 years later, 124 companies rose and in 2021, a year later, 135 companies rose.

Fortune Global 500 by Year

 

 

Meanwhile, at the same time, the number of US companies decreased from 179 in 2000 to 122 in 2021. With the number of companies in the top 500 companies, China overtook the U.S. by three in 2020, and the gap widened to 13 in 2021.

Of course, the U.S. still leads in total sales. In terms of sales by country, the U.S. is ahead of China. The total sales of the listed companies is $9.65 trillion, higher than that of China (8.92 trillion) in the United States (Edaily, August 3, 2021).”

In this case, it should also be considered that China's population is about 4.4 times larger than that of the United States. Then, China's per capita sales, limited to the top 500 companies, are only about one-fifth of that of the United States, similar to GDP.

 

3) Dollar and gold reserves

Money and currency are different. Money, such as gold, is a means of exchange for goods and at the same time a product of its own value. However, the currency, which is a coin or bill issued by each country because of the convenience of distribution, does not have its own value. It is a certificate of exchange for goods of the same value, which is distributed under state guarantees. So, if more currency is issued than the actual value, inflation, the depreciation of the currency, appears.

The same is true of the dollar, which stopped gold exchange in 1971. The U.S. dollar is a key currency used in most of the world's commodity trading. The Federal Reserve Bank (FRB), a den of U.S. financial capital, uses the right to issue dollars to put the world's real assets in its hands at a lower price than the actual value. In other words, if they increase the issuance of dollars to lower the value of the dollar and purchase overseas real assets with dollars that have fallen in value, they will purchase the target cheaper than it actually is. This unfair trade continues because the U.S. is a superpower that won World War I and II and still forces dollar circulation with its powerful economic, political and military power. Therefore, each country always has a certain amount of dollars for the purchase of essential goods such as oil.

In this regard, "How much dollars and gold do a country have" is a measure of the country's economic power.

According to the table below, as of 2021, China has the sixth largest gold in the world after the United States, Germany, Italy, France, and Russia. By the way, the dollar is overwhelmingly No. 1 with $3.33 trillion.

China's dollar holdings

Considering that it was $212.2 billion in 2001 and $800 billion in 2005, China's foreign exchange reserves were indeed very steep upward. This may be due to the continued increase in dollar-type direct investment in China, a cheap world factory, but above all, to a large trade surplus every year (China's view of a surge in China's foreign exchange reserves, KIEP, April 17, 2006).

As shown in the table below, China holds dollars mainly by buying U.S. government bonds.

 

The tyranny of the hegemonic currency of dollars

It is very disadvantageous to use assets, that is, to hold them in the currency of dollars without investing in production or purchasing real assets.

First, the value of the currency in reserve melts every year as much as inflation without doing anything. In addition, the U.S. Federal Reserve printed a formidable amount of dollars and poured them into the market after the 2008 economic crisis and after the March 2020 economic crisis. The rise in global property and other asset prices over the past few years and the tsunami-like inflation is a consequence (see Capitalist World System on the brink of death).

Second, according to the previous KIEP, the difference between the investment return and the foreign exchange reserve's annual return is about 2%. In other words, if China don't invest their currency in a profitable place and just hold it, they sit down and lose 2% every year. If China's foreign exchange reserves are calculated at about 3.3 trillion won, it means that China suffers a loss of 66 billion dollars (82 trillion won) every year.

Third, the dollar, unlike gold, is a currency that relies on payment guarantees from the U.S. Federal Reserve Bank. So if the relationship becomes extremely bad in the future, the dollar China holds may turn into meaningless paper. This is the case in which U.S.-centered Western imperialism froze Russia's overseas dollar assets after the Ukrainian War (Yonhap News, March 1, 2022, Hankyung, May 25, 2022)

It is difficult to explain clearly why China should hold such a huge amount of dollars at such a disadvantage. However, it is presumed to be due to the relationship between the two countries. In other words, 'China has a significant trade surplus with the United States. If the relationship with the U.S. goes awry, it will hurt the Chinese economy. So they take a certain loss through holding the U.S. dollar.’

China's losses will be a huge benefit to the United States, especially financial capitalists. Above all, U.S. is benefiting greatly from China serving as a dollar reservoir on such a huge scale. Otherwise, large-scale inflation would have hit the U.S. earlier than any other country due to large-scale currency spraying.

 

China's gold reserves

China's official gold reserves in 2020 are known to be 1948 tons. However, experts estimate that China, the largest producer of gold, actually has more than twice as much gold and more than Germany, the second-largest producer.

“China has not revealed the exact amount of gold it has in order not to go against the U.S. sentiment. April 2015 According to Bloomberg Intelligence's own tally, the People's Bank of China's gold reserves are about 3,510 tons, more than double the 1,054 tons it announced in April 2009. This is more than 3,384 tons of Germany, the world's second-largest in WGC statistics. It is now estimated that the People's Bank of China has much more gold than this.

The U.S. Market Watch expects China's gold reserves to be two to three times higher than the 1926 tons announced by the Chinese government. Currently, China is the largest producer of gold, producing 300 to 490 tons a year, equivalent to 11.5 to 18 percent of the world's annual production of 2,700 tons. On the other hand, it is questionable whether the U.S. still has more than 8,000 tons of gold.” -- Weekly Chosun, March 30, 2022

In terms of gold, dollars, and U.S.-China relations, the above report has considerable probability.

In the wake of the war, U.S. and NATO imperialism imposed extreme economic sanctions on Russia. The Russian dollar was frozen to a halt. Nevertheless, the Russian economy is struggling, but it does not collapse. This is because Russia has real assets, namely gold and natural resources. Gold is the real power and master key of the economy.

From the appearance of Russia, one can guess why China, which is also in front of the U.S. claw, is announcing a reduction in its gold reserves. This may be because China wants to hide that they are still building up their strength in front of a much stronger and more violent strongman. As Do Kwang-yanghoe means, "Hiding one's abilities and waiting for the right time."

 

4) absolute poverty reduction

Last year, 2021 was the 100th anniversary of the founding of the Communist Party of China. In 2021, the Chinese government promoted the achievements of the Communist Party of China regime. Absolute poverty eradication was one of them.

"After many years of hard work...At the 100th anniversary of the Communist Party of China's founding, it solemnly declared that China's all-out war on poverty alleviation had won, and by the current standards, all 98.99 million rural poor were freed from poverty, and all 832 poor counties and 12.8 million poor villages completed their mission to eliminate absolute poverty.China has reduced poverty by more than 10 million per year for the last eight years...People who are out of poverty are no longer worried about eating and wearing, and compulsory education, basic medical care, and housing safety will be guaranteed. China has realized 770 million people have left poverty since reform and opening up under international poverty standards, which cost 1.9 dollars per day to the World Bank." - Consul-General Wang Lu-shin: For the happiness of Chinese farmers, March 24, 2021

On April 6, they released the "Encyclopedia on China's Practice to Fight Human Poverty." The encyclopedia explained the specific achievements, saying that poverty was nearly extinguished by the movement carried out in the eight years since Xi Jinping took office. It is a project targeting the absolutely poor population of "rural, women, the elderly, the disabled, and children" who have been alienated from the benefits of economic development, and has significantly improved living conditions such as medical care, housing, and education.

According to the encyclopedia, the following achievements were made.

Increase in average disposable income of rural poor: 6079 yuan (approximately 1.04 million won) as of 2013 125.88 million yuan (approximately 2.15 million won) as of 2020

The compulsory education rate for children in poverty is 94.8%, and more than 99.9% of the poor are subscribed to China's basic medical insurance, and the water supply rate is 83%

China Women Development Program supports 10.21 million poor women's education and technical training, 8.7 million women support government-funded mortgages, invest in women entrepreneurship programs, and provide free medical and emergency surgery costs to 192,000 women with cervical cancer and breast cancer

Establishment of free medical counseling and care services for 36.89 million elderly people aged 60 or older living in poor areas

The establishment of a living subsidy and care subsidy system for the severely disabled, providing benefits to 24 million people with disabilities, providing free rental housing to 1.785 million households with disabilities, hiring 80,000 education experts for disabled children, and training for disabled children

* * *

As seen in GDP, 500 companies, dollar and gold holdings, and absolute poverty reduction, China's economic power has rapidly increased over the past 40 years due to its "market opening-up" policy, and the majority of the population has escaped absolute poverty.

At the same time, however, capitalist forces have also grown to a serious level in Chinese society.

12 June 2022


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