Socialist Appeal - British section of the International Marxist Tendency: the Marxist voice of labour and youth.

Six months into China’s new Politburo Standing Committee under Xi Jinping’s Presidency, it has become abundantly clear that the next ten years under his rule will not resemble the relative social stability and rapid growth of the past ten years. Xi Jinping and the Chinese Communist Party stand at a crossroads, facing that classic dilemma of all ruling classes - either to open up to democratic reform or clamp down on growing dissent. Daniel Morley and Congyue Dai analyse the current economic, political, and social tensions in Chinese society.

Six months into China’s new Politburo Standing Committee under Xi Jinping’s Presidency, it has become abundantly clear that the next ten years under his rule will not resemble the relative social stability and rapid growth of the past ten years. The cart will not keep on rolling down the same path.  Xi Jinping and the Chinese Communist Party stand at a crossroads, facing that classic dilemma of all ruling classes - either to open up to democratic reform or clamp down on growing dissent.

Underneath the bland, controlled and seemingly unchanging edifice of Hu Jintao’s Presidency China has been anything but unchanging. Millions have joined what is by far the world’s largest proletariat and started producing more and more commodities. Of particular interest to Marxists is the rebirth of the Chinese labour movement which is growing in confidence and organisation day by day. This fact is of infinitely greater significance in determining the new regime’s approach to reforming itself than the pleas of enlightened liberals.

According to China Labour Bulletin (CLB), the three months from June to August 2013 saw 183 strikes, 7% up from the previous three months and more than double the amount in the same period in 2012!

CLB has also noted a development of tremendous significance - more and more strikes are taking place in bigger and bigger factories. The concentration and socialisation of capitalist production is a law that is expressed in China with particular force. This is leading to larger and more powerful strikes in more significant urban centres. Guangdong, probably the most economically developed and important province, now sees ⅓ of all the strikes in China.

“One trend of particular note in the strike map data is the increasing number of disputes in larger enterprises, those with 100 to 1000 employees. The proportion jumped from 35 percent in the months of June, July and August 2012 to 60 percent in the same period this year. In addition we noted five strikes involving more than a thousand people. In the manufacturing hub of Dongguan, for example, more than a thousand women workers staged a strike against wage cuts on 14 June and blocked the roads outside Hop Lun, a Swedish-owned garment company...And in September, five of the 38 incidents recorded, saw more than 1,000 workers take part. In Jixi, Heilongjiang, for example, more than a 1,000 steelworkers at the Beigang Group staged a strike and demonstrated in front of the local government on 16 September. The workers were protesting against wage arrears, and put up banners reading “we have to survive; we have to eat, pay our wages!” The following day on 17 September, it was reported that about 6,000 workers at Shili Electronics in Dongguan blocked the roads in protest against unpaid social insurance contributions. They were confronted by hundreds of riot police and several workers were reportedly beaten.”

CLB then adds that “the percentage of incidents in small and medium-sized companies, those with fewer than 100 employees, dropped from 58 percent to 31 percent,” most likely because “more and more small enterprises are simply going out of business or merging with larger firms. A report in Forbes China on 20 June noted that, due to a lack of creativity, innovation and government support, small and medium-sized companies in China are increasingly facing the threat of bankruptcy.” In other words, the organic development of capitalism into monopoly capitalism finds its reflection in the organisational strength of the Chinese proletariat - exactly what Marx explained more than 150 years ago.

The experience gained and the growing size and militancy of the mobilisations demonstrate the increasing confidence of the Chinese working class, whose fear of the Chinese state diminishes with the workers’ increasing organisation. And this fearlessness has an objective basis - “workers in China now seem to be facing a more “friendly” police force and fewer arrests. In the summer of 2012, about 47 percent of the recorded incidents saw a police intervention, and almost 17 percent ended with some arrests or detentions; in 2013, however, the numbers dropped to 12 percent and five percent respectively.”

How do we explain the decrease in repression? Is the Chinese state reforming itself into a liberal one, as the western intelligentsia so dearly wishes? Clearly not, Xi Jinping’s new regime is going after internet dissidents more than ever and has increased internal security spending to total more than that spent on military defence. Or perhaps it is even turning to the left and beginning to support workers rights? There is some evidence that the government controlled All-China Federation of Trade Unions (ACFTU) has actually supported workers on strike, as in the case of the strike at International Paper. Does this indicate that the Chinese Communist Party is finally beginning to return to its roots at the head of the working class?

On the contrary. The CCP and the Chinese state, rather than championing the working class, are terrified of its growing strength and finds itself obliged to concede some ground to it. The movement from below is growing faster than this cumbersome apparatus can keep up, and is, as CLB points out, embarrassing the ACFTU into passive support. Forever chasing after GDP figures and worrying about shadow banking, the Chinese state has forgotten that decades of double figure growth results in an equally expanding working class.

State repression and totalitarian ideological control of things such as the internet cannot resist these forces; economic and social relations are more powerful and fundamental than political ones. For every trade union activist arrested, thousands more are created in the storm and stress of Chinese industry, where hundreds of millions of workers live and work side by side. For every website blocked, thousands more Chinese workers gain access to the internet. For every Sina Weibo (equivalent to Facebook or Twitter) account shut down, how many more spring up to report new strikes, anti-pollution protests or to complain about government corruption?

It is for this reason that the Chinese state is taking a more passive role and giving workers some room to organise - because they can’t hold them back. But this does not mean, as Han Dongfang from CLB imagines, that the Chinese state is gaining greater legitimacy and can be gradually reformed until it represents workers’ best interests. The Chinese state’s power is now based entirely on the growth of Chinese capitalism on the world stage, and the state apparatus from top to bottom is thoroughly corrupted by capitalist interests. As Han himself points out in the same article, “I repeat: workers in China are no longer victims but fighters. They are not only fighting back instinctively, they are now more organized and in the future will be more strategic in their approach. They are no longer satisfied with just fighting for a one-off deal, but are starting to fight for a long-term solution” (our emphasis).

Fighting both flies and tigers

The flagship policies of Xi’s early Presidency have been the ‘Chinese Dream’ and the anti-corruption campaign. The former is a take on the USA’s ‘American dream’, and is just as empty, false and serves the same purpose - to lull the proletariat to sleep with illusions of future prosperity and freedom. The anti-corruption campaign represents an attempt to cover the regime’s left flank by superficially clamping down on capitalism’s most flagrant injustices whilst in substance introducing more and more pro-bourgeois measures. It is very telling that these are Xi’s main policies - a superficial attack on the rich coupled with propaganda for the inaccessible bourgeois lifestyle.

Along with countless local party chiefs, or ‘flies’, the anti-corruption campaign is distinguished by some very high profile casualties, or ‘tigers’, including the very powerful Zhou Yongkang, an outgoing Politburo Standing Committee member and head of internal security, and Jiang Jiemin, head of the State-owned Assets Supervision and Administration Commission, i.e. the head of privatisation in China!

This coincides with Xi’s invocation, in debased form, of Mao’s Mass Line policy. CCP officials are, under his direct gaze, performing self-flagellation in front of the masses for their bourgeois sins. These sessions are broadcast on TV, with Xi Jinping of course present, not making the confessions but carrying out the interrogation of other officials, who admit to things like being too preoccupied with growth and money, and not the good of the people. Of course, the whole thing is stage-managed and they are careful not to reveal anything too scandalous, however when it comes to the trials of leaders such as Bo Xilai, Zhou Yongkang and Jiang Jiemin, the revelations of corruption and obscene wealth are unavoidably damaging to the party’s credibility.

The anti-corruption campaign will not fool people into believing the government is self-correcting. The Chinese people are aware that the chasm separating the classes has grown to unbridgeable proportions under capitalism, and that the state officials have long since passed to the other side. The daily reports of obscene corruption by both small and large party officials, instead of boosting faith in Xi’s leadership, serve only to underline the inbuilt injustice at every level of capitalist society. According to the Economist, “One microblogger echoed a wider cynicism towards officialdom: “Why don’t they start by criticising the size of their bank balances and personal assets?””

And how big those bank balances have become. A New York Times investigation found that the close family of Wen Jiabao, China’s Prime Minister until November 2012, had wealth amounting to around $2.7bn thanks to his connections. The recent trial of Bo Xilai revealed to the Chinese people that this prominent ex-member of the ‘Communist’ Party had taken bribes in the form of, amongst other things, a luxury villa in France. According to Bloomberg, the family of the new President and anti-corruption hero Xi Jinping has “interests including investments in companies with total assets of $376 million; an 18 percent indirect stake in a rare-earths company with $1.73 billion in assets; and a $20.2 million holding in a publicly traded technology company”.

An accidentally leaked People’s Bank of China report revealed that 16-18,000 CCP officials have fled China since the mid 1990s, taking about $160bn with them! This means that “each official stole, on average, an estimated 50 million yuan (more than $7 million). Precisely because this is only an estimate, one can imagine the real numbers are actually much bigger. Some media have reported that the wife of the Deputy Chief Engineer of the Ministry of Railways, Zhang Shuguang, recently caught for corruption, owns three luxury mansions in Los Angeles, and has bank savings of as much as $2.8 billion in America and Switzerland. This gives a glimpse of the broader picture” (World Crunch).

Contrary to what liberal publications such as the Economist and the Guardian say, corruption cannot be dealt with by undertaking liberal reforms, such as “the development of an independent judiciary and media”. Under capitalism, every institution is ‘stripped of its halo’, and ‘independent’ judges and journalists, the more freed they are from government control, become all the more the stooges of capital. Freedom and privatisation in capitalist society is nothing more than subservience to the market. The real source of the corruption of Chinese officialdom is the all conquering power of the market; thus privatising the media and freeing the judiciary merely legalises and formalises corruption, just as US Congressmen are legally corrupted by the armies of corporate lobbyists.

The Shanghai free trade zone

If anyone allowed themselves to be fooled by the ‘leftist’ noise of the anti-corruption campaign and had doubts that the direction of Xi Jinping’s administration was towards greater privatisation, we need only point them in the direction of the recent announcement of the Shanghai Free Trade Zone.

This newly announced zone will be focused around the free, international movement of capital with regards to China’s financial institutions. The main measures promised (there is still, as is customary with China’s government, a lot of uncertainty as to the details of the regulations in this new zone) are for Yuan convertibility (i.e. the ability to settle payments and trade freely in China’s currency on world financial markets) and a removal of the cap on interest rates paid to depositors, as has also been recently trialed in Wenzhou. The entire point of free-trade zones in China is to test the next steps on China’s inevitable march to a fully capitalist economy. More free trade zones are touted for Wuhan, Guangzhou and Ningxia.

Of course, the Chinese government’s philosophy is to ‘tame the beast’, and institute capitalism and the integration into the world market in a planned, controlled way, in order to preserve the status-quo. Nevertheless, the unashamed bourgeois nature of these reforms is clear, and indicates the plans Xi Jinping and Li Keqiang (the Prime-Minister) have for China as a whole.

Hu Xialian, the deputy governor of the state controlled behemoth the People’s Bank of China, recently wrote a remarkably frank article outlining the thoroughly bourgeois nature of the Chinese government’s motivation for pushing Yuan convertibility. In it, she says,

“The expansion of renminbi cross-border business also creates higher requirements for the level of financial services and financial infrastructure. …therefore it is necessary to speed up the improvements to the financial system,” she writes. “Products need to be more abundant, market operations more efficient, the market system more complete and market supervision more effective. We must open the domestic financial markets in a gradual and orderly way, and speed up the establishment of a comparatively developed and mature market system.”

It couldn’t be clearer - the real direction of the CCP and Xi Jinping is not Mao’s ‘mass line’ and the involvement of the masses in dishing out social justice to the corrupt officials and emergent bourgeois class, but the superficial use of such campaigns as a fig-leaf for ongoing privatisation and general opening up of the economy to ‘market forces’.

The market dictates to the state

As the Chinese government has accepted capitalism as the driver of Chinese growth, it has at every step been forced to concede more and more ground to the necessary laws of capitalism. Their attempts to ‘control’ the market and circumvent crises only further absorb the government in capitalist relations. Like a man drowning in quicksand, the thrashing of limbs only reveals the utter helplessness of the situation.

The fiscal stimulus of 2008 has led to a ballooning of government debt. The government does not even know how much debt is floating in the system; by their own estimates it is between 30% and 60% of GDP. The local governments, who were obliged to borrow from state owned banks to then finance infrastructure (and other) spending, are now caught in a chain of payments larger than they can cope with. This has forced them, against their own central government’s regulations, to issue debt in the form of bonds. These bonds are then repackaged and used in ‘Wealth Management Products’ (WMAs), which are also, as with local authority bonds, ‘financial innovations’ to get around China’s bank regulations. WMAs are products that allow Chinese people to invest savings and get higher interest rates than normal bank accounts allow, since the interest rates on those are capped in another attempt to ‘control’ capitalism.

The trouble is, the infrastructure spending of the local authorities has not created for them an economic boom, as the global market is saturated and China’s growth is slowing down. Official data show that by the end of 2012, China's iron and steel, cement, electrolytic, aluminum and glass industries have a capacity utilization of only 72%, 73.7%, 71.9%, 73.1% and 75% respectively. They cannot run at close to 100% because then they could not profitably sell all they produce. Therefore the local authorities will not, and indeed already are not, taking in enough in tax revenues from a hoped-for booming economy to fund this spending. There is a massive shortfall and this is the reason they have been obliged to start issuing bonds, breaking government regulations.

In turn, they are reliant upon their other main source of revenue, land sales (which are also often illegal). At the moment local authorities are essentially illegally seizing collectively owned peasant land in order to sell on to speculators and developers. This is euphemistically referred to as ‘land-for-equity’, a name which glosses over the reality of millions of peasants deprived of land and forced to move into cities and become migrant proletarians, often in far away provinces and therefore lacking in the rights and benefits which are given only to those belonging to each province.

This policy is to be formalised and legalised at the upcoming Third Plenary of the 18th Party Central Committee. But at the same time the central government is consciously trying to cool the property market, for fear of sub-prime mortgage style defaults. In doing so, they may end up triggering defaults of local authorities, dependent as they are on ever rising land prices to plug their fiscal gaps.

In this way, it is being proven that the market, with its unavoidable crises, is dictating to the government and not vice-versa. As Nomura economist Zhiwei Zhang points out, “Local government debt has been growing at a speed of nearly 20% a year in the last couple of years. If this trend continues, it will definitely bring about systemic risks for China's economy”

If the Central Committee approves this law it will speed up the redistribution of land and wealth away from the peasantry, and thereby increase the outbreaks of already regular peasant struggles, as was seen in the occupation of Wukan in 2011. These peasant disputes are very close to the working class, as they often involve families whose predicament has also forced some of its members to seek waged work in the cities. It is notable that this same Central Committee is also likely to raise the retirement age and contributions from workers to their pensions. In Europe, such moves have been a major source of class struggle. The cocktail of more land seizures, pension ‘reform’, a slowing economy and already increasing strike rates is hastening the arrival of the much dreaded ‘social explosion’.

The coming class struggles

It is becoming clearer and clearer that China cannot avoid capitalist crisis and a revolutionary movement. The strike figures testify that something is brewing, and China is long overdue a revolution. But what will its character be?

As we have pointed out in previous articles, the coming Chinese revolution will have a clear class division from the outset. Inevitably its first aims will include democratic reforms, however the driving force will be the working class leading behind it the peasantry. The bourgeoisie class in China is already too enmeshed in the status quo and the state apparatus and it cannot solve the question of Democracy which is historically a bourgeois task. They already are the ruling class. They will instead lineup with the state apparatus and oppose the workers. The main methods of the revolution will be mass strikes and peasant uprisings.

Although Chinese capitalism is strong, its ruling class has been left politically immature and stunted by history. It is still paying the price for its belated development in the late 19th/early 20th Centuries, when it was so weak that it couldn’t even oppose the antiquated and tottering Qing Dynasty. Instead, the Chinese revolution had to sweep the emergent capitalists from power too. The return of capitalism has led to almighty growth but once again could not be led by any Chinese capitalist class which did not exist. Instead it was led by the state apparatus from which a small and fragile Capitalist class gradually spawned off.

This means that the Chinese capitalist class lacks political experience. It is excluded from power and has to resort to bribing officialdom. Whereas the ruling class of, say, America and Britain, had centuries to perfect the art of controlling politics, including corrupting workers leaders, the Chinese bourgeois has no such experience. It has no say in how the strike wave is dealt with or the trade unionists corrupted, and the state lacks any means for involving the reformist elements of the workers’ movement in running the bourgeois state.

This means that a revolutionary explosion can take place with no warning and with the bourgeois having no tried-and-tested means of influencing the upper layers of the working class. And all this is taking place in the context of a crisis ridden world capitalism that is restricting the one tried-and-tested safety valve Chinese capitalism does, or did, have - exponential growth.

As the strike figures show, in the anvil of the struggles in China’s almighty workshop the new proletariat is gaining that most indispensable of conquests - class consciousness and organisation. No amount of state repression has been or will be able to stop the rise of this objective process. Long live the Chinese working class, long live the Chinese revolution!

Originally published on In Defence of Marxism