Making sense of China’s rise

Issue: 185

Thomas Foster

A review of China: Rise, Repression and Resistance by Adrian Budd (Bookmarks, 2024), £10

What is the history, politics and nature of the Chinese regime? Adrian Budd’s book, China: Rise, Repression and Resistance provides an excellent and in-depth answer. Regularly, liberal and conservative media publish articles detailing the threat of China to the West, pouncing on the next move of Xi Jinping, leader of the Chinese Communist Party (CCP). With Donald Trump threatening tariffs on goods from China and frequently calling for protectionist measures to defend industries, this was also a central issue during the presidential election in the United States. Since the 1990s, it has become increasingly clear that the Western ruling classes fear China’s challenge to their political and economic interests. They have witnessed China’s meteoric economic rise from a largely agrarian economy to an industrialised economy; they see its expanding political influence and its vying for dominance in Asia and beyond. The underlying logic is that Western capitalist classes do not want the Chinese capitalist class to diminish their own imperialist domination.

Budd’s book, of course, takes up a perspective from below, one that stands in the tradition of international socialism. It is a book that builds on foundational works such as Nigel Harris’s Mandate of Heaven (Haymarket, 1978) and Charlie Hore’s 2004 series of articles “China’s Century?” in this journal. It is a tradition that has no illusions in the Chinese regime—or the Western imperialist order—and calls out the Chinese political economy for what it is, a form of capitalism. China’s capitalist regime goes back to the year 1949, where it was created in the image of Stalinist Russia. Both carried the same hallmarks: exploitation of workers, imperialist aims and a layer of bureaucracy that sits at the top of society. The Chinese state has since welcomed private business with open arms, making it the world capital for dollar billionaires—it has 814 at the time of writing, 14 more than the US.

Rather than following Marx, whose goal was the self-emancipation of the working class, the CCP has focused on developing China’s strength within the global capitalist economy. It has relentlessly exploited workers to achieve rapid advances to try to compete with the West. Budd’s book charts a course from the 1949 revolution, covering China’s economic rise and emerging problems, Xi’s political project, workers’ struggle, oppression and social movements, and the US-China inter-imperialist rivalry. This review will look at some of the themes that Budd develops: what Chinese state capitalism looks like today, state control and the CCP, some structural economic weaknesses and Taiwan as a flashpoint of imperialist rivalry.

Chinese state capitalism today

There has been a transformation of China since the death of Mao Zedong in 1976, who led the 1949 revolution. The state created by Mao was modelled on the early Soviet Union, with a powerful bureaucracy operating as a state-capitalist ruling class, overseeing the exploitation of workers and the accumulation of capital. The drive to exploit and accumulate, as had been the case in the Soviet Union from 1928 onwards, was enforced by inter-state rivalry. China began rapidly opening up to private capital after Deng Xiaoping and the reform faction he represented won control of the CCP, with Deng becoming leader in 1978.

Currently, China is the world’s largest exporter, the largest energy consumer and second largest economy—accounting for 18 percent of the global gross domestic product (GDP). It has achieved this through “a combination of state production and state orchestration of private capital”.1 Many of China’s state-owned enterprises (SOEs) are major competitors in the global market, with the core “national champions” now giant corporations. As Budd explains, China has 124 corporations in the Fortune Global 500, which is a yearly ranking of the world’s top 500 corporations by revenue, whereas the US has 121.2 Of China’s top 25, 20 are owned by the state. However, the opening up of the Chinese economy has come with a shifting of dynamics. In 1976, the state operated as the sole capitalist and private capital contributed almost nothing to the GDP. As Budd points out, today, private capital contributes 60 percent of GDP, SOEs less than 30 precent. Private capital contributes 90 percent of exports.3

In capitalist economies, there is a spectrum of state involvement in capital accumulation. As Owen Miller and Gareth Dale note in their introduction to the new—and very welcome—edited collection State Capitalism and Development in East Asia since 1945:

At one point on the spectrum there are states that avoid any direct involvement in business, although they will inevitably be intervening in capitalist society in a myriad of other ways. Far down the other end are states that become so involved in capital accumulation that they completely eclipse private capital and act within their own borders as though they were a single huge conglomerate.4

Budd’s book makes an important contribution to this debate, explaining how the Chinese state has shifted on this spectrum. Among others, it has changed from being the sole capitalist to the dominant capitalist. Chinese SOEs now compete with national capitals abroad and are subject to some competitive pressures with private capital at home.

Budd argues that China deserves a new label, such as “open state capitalism” or “state-orchestrated capitalism”, describing the hybrid of state and private capitalism. The change from a state capitalism with minimal role for the market to one where domestic competition and markets are significant is reflected in how China plans its economic production, with a steady introduction of more regionalised competition. Although the state sets annual growth targets and broad policy guidelines, local authorities can interpret them how they want, resulting in duplication, waste and capacity under-utilisation. In this context, Budd cites economics professor Yasheng Huang, who describes the system as “one country, 32 economies”.5 The 32 regional administrations each have their own power bases and compete to attract investors. As Miller and Dale write, “State-run institutions are not only acting as capital, they compete with other at a variety of levels”.6

However, it would be a mistake to underplay the importance of the state in the Chinese economy, something Budd rightly avoids. While SOEs are legally separate from the state and also influenced by global market forces, they remain firmly connected to state power. This means they operate on market principles but remain somewhat insulated from the “vice-like imperative of profit maximisation”.7 SOEs play a critical role in dominating strategic sectors, including heavy industry and banking, generating outputs for infrastructure development and providing the CCP with a power base for local leaders. SOEs also pay 63 percent of total business tax, essentially subsiding special economic zones along the coastline with low-tax regimes.8

Tensions between the state and private capital

Private capital has hugely contributed to the state’s project of developing industrial production, helping the broader aim of national development. This has led to the rise of huge tech firms such as Huawei, Tencent and Alibaba, but it has also brought tensions as the CCP fears the emergence of a rival base of economic power. Budd argues that the CCP leadership has increasingly seen the growth of private capital as a “long-term challenge to the privileged positions of SOEs and potentially to the party itself”.9 Private capital is often associated with foreign capital, so its loyalty to the Chinese state and its project of national development is sometimes doubted. Xi tries to reassert CCP power over private capital and to reduce China’s dependency on global trade networks. In response to these policies, the share foreign firms have in exports fell from about half in 2012 to 27 percent today.10

The Chinese ruling class has also attempted to deepen China’s own base of technology, with its aim to strengthen production of key components of electronic devices, above all semiconductor chips. Budd argues that the CCP leadership is concerned over a lack of advanced development of Chinese domestic production. For example, there were ten industrial robots per 10,000 workers in China in comparison to ten per 100 workers in the US.11 China is vying for global technological leadership in key sectors, among them renewable energy, communications equipment and robotics. Yet, while strengthening domestic production is an urgent priority for the state, the Chinese ruling class is also committed to retaining its economy’s integration into global supply chains. This is more out of necessity than anything else. China produces around half of the world’s output of electrical products but requires imports of £292.56 billion worth of semiconductors to make this possible. As Budd writes: “That makes up 18 percent of its total imports, more than it spent on oil imports”.12 The CCP recognises the vulnerabilities that this creates and is aiming to “build a domestic consumer society less dependent on exports and a productive bass less at the mercy of foreign multinationals whose quest for profits could lead them to relocate to cheaper productive sites”.13 This is rooted in heightened rivalry with the West, as discussed below.

The CCP’s control of the state and economic production

There should be no doubt—the CCP remains firmly in charge of the state. In an interview with Socialist Worker, Budd explains that there exists “a core of decision-makers at the top echelons of the party” that is “very small both at the national and regional level.” He adds, “The core leadership is thousands in number and built around established families like Xi Jinping’s”.14 As Budd details in chapter three of his book, the CCP leadership forms the core of a ruling state bureaucracy whose social power is derived from effective control over nationalised property. Its interests do not lie with workers’ emancipation, but efficient economic management. It is a party of 99 million members who are capitalists, managers of SOEs, teachers and students and, finally, workers and peasants. The latter two “comprise less than 35 percent” of the membership.15 There is no genuine internal democracy. It abides by Mao’s statement: “As far as I am concerned, election is merely a fancy word, and I do not feel that there is any genuine election”.16 Elsewhere, Mao states: “Napoleon’s methods were best. He dissolved all the assemblies and he himself chose the people to govern with”.17 This is the political tradition that the CCP stands in.

There was a mood among some in the West that, after the opening up to market forces and the change in the CCP’s attitude towards private capital, CCP control might too be relaxed amid a wider wave of liberalisation. But Xi represents an opposing sentiment, which is an attempt to reassert the CCP’s central role in Chinese society. That’s why, under Xi, the central leadership has tightened its grip over the state through measures such as an anti-corruption drive and increased surveillance. Yet, this is in tension with the intertwining of the CCP and private capital. Local CCP authorities engage in private economic activity, for instance through joint ventures with private capital or shareholdings in private firms. There are SOEs run by private capitalists and private enterprises run by party cadre; a constant revolving door exists between party and state officials and the private sector. What results is an enmeshing of the state, the part and capitalist elites, with a joint interest in enriching themselves—perpetuating a cycle of inequality and corruption. It gives rise to what Budd describes as a “new hybrid state-private capitalist class”.

It is a pattern that Tobias ten Brink, writing in the Miller collection mentioned above, also identifies. He states: “The Chinese variety of capitalism is characterised by intimate connections between state and private actors on different administrative levels”.18 Ten Brink argues that there’s no simple opposition between state and capital, public and private, with the boundaries increasingly blurred. However, at times, ten Brink underemphasises the ongoing centrality of the state and SOEs, with his analysis implying the distinction between private and state has little purchase. It is true that there is a grey zone of hybrid private-state relations, but the relationship remains deeply unequal. As Budd explains, the state has invited private capital “to be better controlled, not to take over the party and state”.19 For instance, since 2018, all companies listed on the Chinese stock market are obliged to have a party cell. These cells operate through independent power structures within companies and have a dual function of policing workers and monitoring private capitalists. The surveillance laws that Xi introduced in 2017 and 2019 require every citizen and organisation to support national security. Its impact has been to turn private organisations and civil society into “an extension of the surveillance state”.20 Control has particularly intensified in key industries, including tech, media and entertainment—industries that can influence mass opinion or harbour opponents to the regime.21

China’s economic weaknesses

China’s yearly growth rate has fallen from an average of nearly 10 percent a year between 1982 and 2011 to 6-7 percent in the 2010s.22 The latest figure is 4.8 percent.23 The rates are being maintained by huge economic injections, but each “generates smaller and smaller increases in economic activity”.24 Most recently, in October 2024, the CCP pledged to “significantly increase” debt to revive its spluttering economy, with a stimulus package set to be announced of up to
£1 trillion.25 Budd’s book dives into the structural economic problems facing China. In its push to compete with rivals, China has taken on huge amounts of debt to maintain an average yearly investment rate of around 40 percent for nearly 40 years, in comparison to the Western average of 20 percent.26 It means there’s more “dead labour embodied in plant and machinery” and less “value-producing living labour-power”, implying “diminishing returns on investment”.27 The Chinese National Bureau of Statistics has itself recorded how units of credit required to increased GDP by one unit has steadily increased.28

The result is huge overaccumulation of capital. It is a problem that has worsened since the 2008 economic crisis, to which the Chinese state responded with a huge stimulus package, injecting £1.54 trillion into sectors already
suffering from overcapacity: steel, concrete and infrastructure. New motorways and highspeed rail networks have been built, many miles of which are under-used, with empty motorways or empty trains. There is a huge number of unfinished and empty apartments, with “ghost cities” emerging, which are huge urban development projects that fail to attract firms and people. In 2022, the overall industrial capacity utilisation—the level of production facilities being used—was just 75.6 percent, a few percent lower than the US or Eurozone.29

Because investment is increasingly credit-dependent, there are growing debt burdens. Local authority debt has increased from 17 percent of GDP in 2008 to 76 percent in the latest figures; corporate debt increased from 94 percent in 2008 to 165 percent.30 In the past decade, local government bosses began to set up Local Government Financing Vehicles (LGFV), “investment companies that raise bank loans or sell bonds to finance infrastructure and property development”.31 They hold a total debt of £7.35 trillion, roughly half of China’s GDP.32 Today, many LGFVs, which are structured in a similar way to the Collateralised Debt Obligations that helped trigger the 2008 financial crisis, are struggling to repay their debt. This has created fears that if large numbers default on repayments, it could have a devastating ripple effect on the rest of China’s financial system. China’s corporate sector is “one of the most indebted in the world”, with an estimated up to 25 percent of loans never being repaid.33 The concern for the CCP, whose legitimacy depends on being the guarantor of rising affluence, is that significantly constraining or bursting the debt buddle may cause a wider economic collapse.

There are mitigating factors, as Budd explains, such as most of the debt being largely owed by the central state, local government or SOEs to state-controlled financial institutions. These institutions, which the CCP can exert pressure on, are not subject to the same competitive pressures as most Western banks. The problem the Chinese ruling class is facing is that reducing debt-fuelled overaccumulation will harm China’s growth rate at a time when it is trying to enhance its competitive advantage over its rivals in global markets, orientate more towards internal markets and reduce dependency on global supply chains. As a result, potential for a major debt-related crisis remains on the horizon.

Taiwan and China’s imperialist rivalry with the US

The rivalry between the US and China is intensifying—and Taiwan has become a flashpoint of the competition. US imperialism is fighting to maintain its leadership on the global stage against its biggest challenger. The US has stationed over
60 percent of its navy in the Pacific in the past decade.34 At the time of writing, China was conducting military drills off the coast of Taiwan in response to Taiwanese president William Lai vowing to “resist annexation”.35 This is just the latest drill simulating an attack on Taiwan by land, sea and air. However, it would be a mistake to focus on Chinese imperialist ambitions and neglect those of the US, still the most powerful imperialism on the planet. Budd highlights a key turning point the year 2022, when US President Joe Biden declared military support for Taiwan in the event of a Chinese invasion. This was a qualitative shift after decades of “strategic ambiguity”. Both the US and China are increasingly aggressive in their competition. China senses an opportunity since, after US military defeats in Iraq and Afghanistan in the 2010s and, more recently, its failing proxy war in Ukraine, the vulnerabilities of the US are being increasingly revealed. 

As China’s own economic strength has developed, it has become increasingly bullish in its military and political aims. One of these is reunification with Taiwan. Budd views this as a central assertion of CCP state power. After 1949, the old Chinese national government, the Guomindang, retreated to the island. Reunification would erase the last remnant of the pre-revolutionary regime. More generally, China has expanded its network of influence. A critical part of this is China seeking to have more control over its immediate neighbourhood, undermining US dominance in Asia. Yet, the US ruling class is desperate to maintain its leading position—and the privileges that come with it. This lies behind the recent sabre-rattling as it fights to prevent China from becoming a peer competitor. Budd cites a Biden administration report from 2022, titled
Indo-Pacific Strategy. This report states that US ambitions in Asia are “not to change the People’s Republic of China”. Instead, the US wants to “shape the strategic environment in which it operates, building a balance of influence in the world that is maximally favourable to the US, allies and partners”.36

Amid this rivalry, Taiwan is not just a military hotspot, but also an economic one. The US and China are also competing over control of production of essential components for electronic devices, particularly semiconductor chips. The
Taiwan Semiconductor Manufacturing Company is the world’s largest producer. The US has come to see Taiwan not just as a bulwark against China’s growing military power in Asia but also as an important element in a global network of US-allied semiconductor manufacturers. Nonetheless, there is a deep economic overlap between China and Taiwan, with over half of Taiwan’s foreign direct investment going to China.37 China’s headline export, the Apple iPhone is manufactured by a Taiwanese-owned company, Foxconn, that employs a million Chinese workers.38 These economic ties have not moderated military tensions, but they do illustrate the complexity of the overlapping patterns of geopolitical and economic competition at work in the region.

Resistance from below

There are also sources of hope emerging from China. Budd details workers’ struggle, student protests, feminist and LGBT+ activism, and mobilisations over environmental concerns. In 2007, there were 360,000 strikes. This doubled to 700,000 the next year, increasingly steadily in 2008, 2009 and 2010. In 2011, the number of strikes dropped to 450,000, but “over the next three years there was a steady increase before an explosion of strikes in 2015 and 2016”.39 Millions of workers struck in automobile, textiles and electronic industries. At the end of 2010, 70,000 workers struck in the Dalian Industrial Zone. Keeping in mind that the trade union federation in China is an extension of the state, the strike wave “represented an upsurge in unofficial strike as worker-activists bypassed official unions”.40 It was only intense state repression that diminished worker activity. Political resistance has not just taken place in the workplace. Budd describes how feminists, LGBT+ activists and environmentalists are fighting back. At this point, his analysis makes one point clear: Any notion that the Chinese working class faces an impossible task against an all-powerful party is misplaced.

With the CCP’s model of debt-fuelled growth seemingly running up against its limits, contradictions are growing. As these grow, it is likely that repression will grow too. However, this will not erase the disillusionment of working-class people. We should recall that a similar dynamic or economic malaise and growing repression was present in many Arab countries in the run-up to the 2011 revolutions. The bubbling discontent remains. The 800 million strong Chinese working class has the collective power to completely transform Chinese society. It is in workers’ anger, courage and creativity that the prospects for change lie. As Budd makes clear: “resistance can erupt from the most unpromising of circumstance”.41


Thomas Foster is a journalist for Socialist Worker.


Notes

1 Budd, 2024, p39.

2 Budd, 2024, p43.

3 Budd, 2024, p39.

4 Miller and Dale, 2023, p5.

5 Huang, 2003.

6 Miller and Dale, 2023, p40.

7 Budd, 2024, p44.

8 Budd, 2024, p43.

9 Budd, 2024, p63.

10 Data from Romei and Minto, 2012.

11 Budd, 2024, p64.

12 Budd, 2024, p64.

13 Budd, 2024, p64.

14 Foster, 2024.

15 Budd, 2024, p73.

16 Mao, 1967, p460.

17 Mao, 1976, cited in Harris, 1978.

18 Ten Brink, 2023.

19 Budd, 2024, p76.

20 Budd, 2024, p93.

21 Budd, 2024, p87.

22 Data from World Bank, 2024.

23 Data from IMF, 2024.

24 Budd, 2024, p66.

25 Reuters, 2024.

26 Budd, 2024, p48.

27 Budd, 2024, p48.

28 Budd, 204, p49.

29 Budd, 2025, p49.

30 Budd, 2024, p51.

31 Budd, 2024, p51.

32 Budd, 2024, p51.

33 Budd, 2024, p52.

34 Economic Times, 2018

35 BBC, 2024.

36 Budd, 2024, p183.

37 Budd, 2024, p184.

38 Budd, 2024, p184.

39 Budd, 2024, p105

40 Budd, 2024, p108.

41 Budd, 2024, p121.


References

BBC, 2024, “Taiwan Military on High Alert as Chinese Drills Encircle the Island” (14 October), www.bbc.co.uk/news/live/cjwdgp02enet

Budd, Adrian 2024, China: Rise, Repression and Resistance (Bookmarks).

Economic Times, 2018, “US Navy to Have 60% Surface Ships in Indo-Asia Pacific region”, Economic Times (12 July).

Foster, 2024, “Explaining the Role of China today”, Socialist Worker (8 July), https://socialistworker.co.uk/features/explaining-the-role-of-china-today

General Administration of Customs People’s Republic of China, 2024, “Exports by Type Enterprise and by Customs Regime”, General Administration of Customs People’s Republic of China”, http://english.customs.gov.cn/Statics/6c8645bc-5f37-4ad2-8790-5257a382b6cb.html

Harris, Nigel, 1978, The Mandate of Heaven: Marx and Mao in Modern China (Quartet Books Limited).

Hore, Charlie, 2004, “China’s Century?”, International Socialism 103 (Summer)

Huang, Yasheng, (2003), Selling China: Foreign Direct Investment During the Reform Era, (Cambridge University Press)

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Republic of China”, www.imf.org/en/Countries/CHN

Mao, Zedong, 1967, Miscellany of Mao Tse-Tung Thought (1949-1968), Part II (United States Joint Publications Research Service).

Miller, Owen, and Gareth Dale, 2023, “The Emergence and Development of Capitalism in East Asia: The State Capitalist Approach”, in Owen Miller (ed), State Capitalism and Development in East Asia Since 1945 (Brill).

Reuters, 2024, “Exclusive: China Considers Over $1.4 Trillion in Extra Debt Over Next Few Years”, Reuters (29 October) www.reuters.com/world/china/eyeing-us-election-china-considers-over-14-trillion-extra-debt-over-next-few-2024-10-29/

Romei and Minto, 2012, “Chart of the Week: Who Makes China’s Exports—Local Companies or Foreign?”, Financial Times (10 September).

Ten Brink, Tobias, 2023, “China’s State-Permeated Capitalism: A Global Political Economy Perspective”, in Owen Miller (ed), State Capitalism and Development in East Asia Since 1945 (Brill).

World Bank, (2024), “GDP growth (annual %)—China”, World Bank, https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG?locations=CN