Aspects of Chinese capitalism Analysis by Maxim Petrov

US House of Representatives Speaker Nancy Pelosi's visit to the island of Taiwan attracted much attention worldwide. China considers the island part of its territory. The US does not formally argue with this. But at the same time, it views Taiwan (the Chinese Republic pursuing a political course independent from China) as a military ally against Beijing and has promised Taipei  (the capital of Taiwan) military aid in case China tries to annex the island by military means.

The sharp conflict and skirmish between Washington and Beijing have provided additional motivation for many observers to talk about the nature of the PRC's political and social system, where the ruling Communist Party has a monopoly of power.

China is often referred to as a country where "tradition reigns" and there is a "dominance of the common over the personal," or its social system is described as "communism" or "totalitarianism."

This is why it is a great revelation for many people to learn that modern China is quite an ordinary capitalist country.

Capitalism in a country ruled by a communist party? Is that possible?

The term "capitalism" means a system based on private enterprise and private property, wage labor, and market relations in the economy, which does not exclude government regulation. So, more than 70% of GDP in the PRC is produced by the private sector, where the vast majority of the population works. The public sector covers only 23-28% of GDP, although it consumes up to 80% of bank loans. The leadership of the Communist Party is largely composed of people whose relatives and friends are billionaires and millionaires who run private and state-owned companies.

All this has nothing to do with the Bolshevik ("communist," totalitarian) Marxist-Leninist models of economy, in which the state usually controls 90-100% of GDP production and sets prices for basic commodities. In contrast, since the reforms of Deng Xiaoping and other leaders, capitalist relations - private property, wage labor, and the market - have long prevailed in the PRC.

The Chinese state controls about a quarter or a third of the economy (energy, metallurgy, railroads), invests trillions of dollars in housing, and lately more in R&D (Research and Development), digitalization of the economy, supercomputers, artificial intelligence, semiconductor manufacturing, the military-industrial complex and space research, and is building universities. But all of this is reminiscent of the policy of dirigisme - state regulation and economic modernization in capitalist France and the FRG after World War II.

Indeed, China's leader Xi Jinping has immense power in his hands. He is the current general secretary of the Central Committee of the Communist Party of China since 2012, chairman of the People's Republic of China since 2013, and also chairman of China's Central Military Commission. But many other capitalist countries have had authoritarian regimes in the recent past.

Today's Chinese are people for whom economic and personal success matters a great deal. Of course, not everyone is like that, but the PRC is a society where citizens' loyalty to the state is based on economic growth and is bought that way. Branko Milanovic, the former chief economist at the World Bank, where he worked for more than 20 years, calls this system "political capitalism." The servile dictatorship of the Communist Party ensures its legitimacy not through elections, but through concern for the growth of the economy and the welfare of most citizens. The party-state apparatus constantly monitors society in an effort to solve existing social problems. This is a strength of the regime, which, according to some polls, suits most Chinese. But it can also be a great weakness if growth slows down, as long as economic crises under capitalism are inevitable.

Andrei Larkov, one of today's greatest Korean and East Asian specialists, who knows China well, points out that according to Chinese sociologists' calculations, with a growth of less than 6%, the PRC could be on the verge of a working-class and middle-class revolt. This does not sound much like a society in which there is a priority of the common over the personal. At least most Chinese people are loyal to the regime because it ensures their personal prosperity, and this is the foundation of modern Chinese capitalism. By the way, this year China's economic growth has slowed significantly, and this threatens a political crisis.

In the case of modern China, what kind of traditions are we talking about? Traditional is usually defined as socio-cultural worlds that exist on the basis of ancestral traditions ("our grandfathers did it, and we will do it too"). This would be the case of medieval countries, where the same agrarian and handicraft technologies were used for centuries and most of the population were peasants. The PRC is very far from that. Capitalist society cannot be traditional at all for the simple reason that it is based on innovation, scientific and technological modernization, and urbanization, all of which are taking place in China. Contemporary China is a rapidly developing society that is experiencing rapid scientific and technological progress and swift urbanization - the movement of people from the countryside to the city. This brings China closer to other capitalist countries much more than it moves away from them.

Moreover, the Chinese Confucian cultural tradition, based on the supremacy of older men, was largely destroyed during Mao Zedong's reign. In those days, students and young workers beat up university professors and even elderly party leaders. The PRC is an individualized society, less individualized than, for example, Russia, but still much more individualized than China's neighbor, South Korea.

Lankov points out that Chinese society is much more atomized than South Korean society. The example of the South Korean society is not accidental, as the North Koreans are much more atomized and individualistic than the South Koreans. It would seem that it should be the other way around, but no! The paradox is that societies dominated by the systems built by the Bolsheviks - systems based on the total domination of the state bureaucracy in all other spheres of public life, as well as on collectivist morality ("we all build socialism together and work for the common good under Party control") are usually much more cynical, individualistic, selfish than their neighboring East Asian countries, which have followed a different path. In short, one cannot speak of the PRC as a society where "subordination to tradition" takes place.

Last but not least is the current ruler of China, Xi Jinping, who is breaking down the remnants of tradition. In particular, he has defeated the seven clans that ran the country before him (the old men who were at the head of the seven party groups) and broken the mechanism for the regular change of the country's leader and party every 10 years (so far, it seems). Incidentally, the PRC's harsh objections to Pelosi's visit are partly related to this. Xi Jinping needs to get the party's approval for a third term at the next party congress to be held in the autumn, and for this he needed to assert his image as a strong ruler.