1992: "socialist market economy with Chinese characteristics"
The combined effect of the Tien An Men protest and the collapse of Stalinism in Eastern Europe and the Soviet Union had a profound impact on the Chinese bureaucracy. After these events the Communist Party leadership decided to accelerate the process of "market reform". They began to see capitalist restoration as the solution to their own crisis, but they were determined that the process would take place under the firm control of the bureaucracy. In essence this meant that the bureaucracy was preparing the ground to transform itself into a new capitalist class. The fact that the bureaucracy was moving in this direction did not mean that it would necessarily succeed in completing the process of capitalist restoration. It is one thing to declare an intention; it is another to achieve it. Had there been a serious downturn in the capitalist west on a scale similar to the 1929 Crash things may well have turned out differently. But that did not materialise. The boom in the west was extended due to a series of factors that we have dealt with in other documents. This has only served to pile up new contradictions, preparing an even bigger crisis when it comes. But the Chinese bureaucracy does not understand this. It does not have a Marxist understanding of these processes, but reacts empirically to events. Capitalism was experiencing a boom on a world level while Stalinism was collapsing and that is all that they could see. The conclusions the bureaucracy had drawn from all these events were made clear in 1992. That year the XIV Party Congress met, and officially abandoned the idea that the state sector should dominate. They announced the plan to set up a so-called "socialist market economy with Chinese characteristics". In the same year Deng launched a new stage in the "reform programme", as they called it. He went on a tour of the special zone of Shenzen and made a famous declaration, "As long as it makes money it is good for China." This was another important turning point within the regime. Market mechanisms had already been operating for some time in China. What was significant about 1992 was that the Party officially decided to abandon its commitment to maintaining the state-owned enterprises as the dominant sector. They thus decided to shrink the state sector. Up until then what was taking place was the development of the private sector outside the state sector. Now they decided to proceed towards the privatisation of state-owned enterprises. They selected 2500 locally run state-owned enterprises and 100 centrally run companies for this conversion. By 1998 this was complete. In 1994 they extended the programme and they stated that they would maintain control over the 1000 largest state-owned enterprises while all remaining state firms would be available for leasing or sale into private hands. By the end of the 1990s state-owned enterprises employed 83 million people, but this represented only 12% of total employment and even in the urban areas only one third of employment. We see an enormous change from 1978 when 78% of urban employment was in the state sector. At the end of the 1990s the contribution of the state-owned companies to GDP had fallen to 38%. In September 1999 at the 4th Plenum of the 15th Party Congress they took another step. They called it the "Let go of policy" position, i.e. the state loosening up and renouncing its control. They proceeded to loosen up in medium and small state-owned enterprises. In July 2000, for example, the Beijing City government that covers a large area announced that state and collective ownership would be phased out in all small and medium sized state-owned enterprises within three years. By 2001 state enterprises accounted for only 15% of total manufacturing employment, and less than 10% of employment in domestic trade. China had survived the crash of the South-East Asian stock exchanges, partly because they still had a certain degree of state control of foreign trade and the currency was non-convertible. These two factors shielded China from the effects of that crisis. It actually emerged strengthened after it and assumed a dominant role within the region. Following on from this in the period roughly from 1998 to 2001 there was a further acceleration of the process. The direction of the process was now very clear. The Communist Party hierarchy had been completely convinced that private firms were more efficient than state-run ones. The only kind of state-owned industries they could imagine were those that existed under the bureaucratic plan, with all the mismanagement that these involved. They could not envisage efficient state-owned industries under workers' control. Some interesting figures are provided by a document called China's Ownership Transformation, published in 2005, which we quote below. The document was written by Ross Garnaut, Ligang Song, Stoyan Tenev and Yang Yao of the International Finance Corporation, Australian National University, China Centre for Economic Research and Peking University; published by the International Finance Corporation, a branch of the World Bank and available on the internet at www.ifc.org. The authors stress that privatisation started in earnest in 1992. Referring to 1995 it says, "the state decided to keep between 500 and 1000 large state firms and to allow smaller firms to be leased or sold". It explains that there was a good reason for this because in 1997 the 500 largest state firms - most of them controlled by the central government - held 37% of the state's industrial assets, they provided large revenues for the state and so on. The document, when referring to the period when they were speeding up the process, explains that "the trend reflected the belief that for an enterprise to be truly transformed it is necessary for the management to own the majority of shares". And in the Chinese tradition the slogan now became "the state retreats and the private sector moves forward". They invented the slogan to get the message across to the masses. Plenty of figures are provided which outline the process and reveal its accelerating pace. For example, the document explains that, "If this performance typifies that of the rest of the country [referring to a sample of six cities] then privatisation in China has already gone further than in many East European and former Soviet countries." full: http://www.marxist.com/china-long-march-capitalism041006.htm -- www.marxmail.org
