Capitalists in Communist China

Keming Yang

• Publisher: Palgrave Macmillan
• Year: 2012
• Print ISBN: 9780230284586
• eBook ISBN: 9781137291691
• Topic: Business
• Subtopic: International Business
• Index: Business

Since 1949, Chinese capitalists have experienced some dramatic shifts in their political and economic life. Keming Yang examines what such changes tell us about China's current political situation and future political development, making use of both historical and current interdisciplinary evidence.

1

The Political Significance of Capitalists in Communist China

The fate of industrial capitalists in China could not have been more dramatic: They were latecomers and underdogs in the world history of capitalism, starting to experience notable growth under the auspices of the last feudalist dynasties in the seventeenth century. As recently as the Second World War, only a small minority of them enjoyed some kind of independence and influence in the Chinese society at large, while the vast majority were truly ‘petty capitalists’. During the wars in the first half of the twentieth century, their voice was rarely taken seriously by warlords or political leaders. When the Communists came to power in 1949, they treated the capitalists in a friendly manner for a while but only for the purpose of helping the new regime win some time before removing the whole class economically, politically, and even to a certain extent physically from this regime. It could not be more ironic that several decades later the Communists found themselves with no alternative but to show their respect to the remaining capitalists and more importantly to create a new generation of capitalists, some of whom have even been selected to join the political elites. What has been going on? It is the objective of this book to make sense of such vicissitudes. As my intention is to give an analytical account rather than a comprehensive description of the whole process, it is necessary at the outset to clarify a few conceptual and theoretical issues before delving into the details in the following chapters.

Why do I call the new generation of private business owners ‘capitalists’?

This book is about the political life of capitalists in China, a nation politically dominated by a Communist party. In this chapter we shall leave aside the question of how communist the Chinese Communist Party (CCP) is, because to a certain extent the whole book can be taken as an answer to that question. Suffice it to say that the CCP still claims, at least in public, to follow the ideological principles of Communism – although how its leaders interpret the core principles of this ideology is another matter – and to monopolize the power of ruling.

An explanation is required here, however, for using the word ‘capitalists’, since the corresponding Chinese phrase,

(zi ben jia), is not commonly used in today’s China, at least not in official or public media. It first became a contested issue soon after the Communists took power in 1949. In the spring of that year, two-thirds of capitalist enterprises in the City of Tianjin (the industrial and financial centre in North China) were not running normally due to political alienation between the local Communist leaders and the capitalists. When Liu Shaoqi (

), then a top CCP leader, went there in an attempt to revive the local economy, some capitalists asked him whether people could stop calling them ‘capitalists’ because by definition capitalists ‘exploit’ the workers, which was evil. Liu did not find a better title for them but had a clear intention of encouraging them to keep their factories up and running. His solution was to redefine the nature of exploitation, saying, ‘[t]oday’s capitalist exploitation not only is not a crime but actually is a contribution’ (Li Zhancai,

, 2009: 124). As we shall see in the next chapter, the validity of Liu’s conforming words was short-lived – only four years after Liu’s speech, Mao Zedong launched a series of campaigns against the capitalists, which eventually removed the whole class from the new regime’s economic and political structures.

Even after the old generation of capitalists disappeared, fear of the disastrous consequences of carrying the title ‘capitalist’ – humiliation in public, physical tortures, confiscation of personal properties, and so on – has stayed in the minds of the people who remember those days. So when a group of people started off their journey of making profits from the end of the 1970s, with the approval of the CCP, it becomes a political question whether it is appropriate to call them ‘capitalists’. I am not aware of any documents issued by the CCP on this issue, but it is very clear that the official answer is a negative one. In the 1990s there was a small group of people who did believe that the new generation of private business owners had formed a new class of capitalists, but their voice was soon suppressed.¹ A few social scientists in China, very likely representing the views of the CCP, have tried to explain why the title ‘capitalist’ is not applicable to the new generation of people who profit through their employees’ work. For example, Zhang Houyi (

)² and Zhu Guanglei (

),³ have argued that this new stratum had nothing to do with the old generation of capitalists – those who survived the regime transition around 1949 but didn’t survive the subsequent political campaigns; China has socio-economic strata but no classes and therefore, China has no capitalists.

I do not find such explanation convincing, because I do not understand why this new generation of private business owners – let’s use this title before the issue is settled – have to have any connections with the old capitalists in order to be qualified as capitalists. In other words, why can’t they become capitalists in their own right? Whether they are capitalists or not should not depend on their connections with the old generation of capitalists but depend on what they do. Doubtlessly, these two generations are different in some important ways. Most members of the new generation are not the offspring of the old one; rather, they come from a variety of social backgrounds and the institutional environments are entirely different. However, they do share a fundamental property that defines what a capitalist is, that is, investing capital in products or services so that profits could be made as personal gains. I have no intention of getting into a debate over the definition of capitalist. Here, Karl Marx’s specification should be sufficient and familiar to many Chinese social scientists: the capitalist is the personal embodiment of the capitalist production process, that is, the process of using capital to generate surplus values:

The objective content of the circulation [money starting and returning to his pocket] … is his subjective purpose, and it is only in so far as the appropriation of ever more wealth in the abstract is the sole driving force behind his operations that he functions as a capitalist, i.e. as capital personified and endowed with consciousness and a will. Use-values must therefore never be treated as the immediate aim of the capitalist; nor must the profit on any single transaction. His aim is rather the unceasing movement of profit-making. This boundless drive for enrichment, this passionate chase after value, is common to the capitalist and the miser.

(1977: 254)

As a capitalist, he is only capital personified. His soul is the soul of capital. But capital has one sole driving force, the drive to valorize itself, to create surplus-value, to make its constant part, the means of production, absorb the greatest possible amount of surplus labour… . The time during which the worker works is the time during which the capitalist consumes the labour-power he has bought from him. If the worker consumes disposable time for himself, he robs the capitalist.

(Ibid.: 342)

In short, a person is a capitalist if he invests in the process of generating profits by employing workers’ labour. Except for those strictly self-employed, this is exactly what the new generation of business owners have been doing. They may not obtain the initial financial support for starting the process from any member of the old generation of capitalists, but as we shall see further in Chapter 3, they could use their own savings or borrow money from their relatives and friends. They may come from all walks of life, including peasants, blue-collar workers, teachers, fresh graduates, red guards returning to the home cities, government employees and even officials, but so did the previous generation. They all can turn themselves into capitalists by making profits out of the surplus value produced by their employees. The majority of them pay their employees the lowest wages possible in order to maximize their profit, most of which is then reinvested in the process. It would be extremely difficult to explain how some of them have expanded their businesses without such process. With regard to the pursuit of profit and the expansion of business by reinvesting the profits produced by workers’ labour, there are essentially no fundamental differences between the two generations; therefore, there should be no doubt whatsoever that this newly emerging group of business owners are capitalists. Some academics in the West do not hesitate to use ‘capitalist’ in their publications; for example, Bruce Dickson calls those private business owners who are also members of the CCP ‘Red Capitalists’ – they are red because of their CCP membership, but Dickson didn’t explain why we could still call them ‘capitalists’ – it is very likely that he took it for granted.⁴ Private business owners in today’s China would not mind the word ‘red’, but I seriously doubt they would be happy to hear people calling them ‘capitalists’.

The reason for not accepting this commonality and therefore not using the word ‘capitalist’ must be political. This is a politically charged issue in China because capitalists constitute a class, and if they do exist in today’s China, there will be class struggles between the capitalists and the workers’ class. Since Deng Xiaoping became the paramount leader of the CCP, the Party wants the Chinese people to forget class struggles and focus their attention on improving their material life. In relation to ‘capitalists’, the word

(bo xue, exploitation) is not used in public discourse either after Deng announced that no debating (on issues such as exploitation or capitalism vs socialism) was one of his innovations. CCP leaders after Mao learnt the lesson that the legitimacy of their political dominance would benefit from political harmonies, not contentions. Given such mandate, it is no wonder that social scientists in China would argue for the disappearance of capitalists.

It is truly remarkable that a political party holding Marxism as its guiding ideology is working very hard to avoid Marxist terminologies. A series of alternatives to ‘capitalist’ is available. Jiang Zemin, the CCP’s former General Secretary, made the announcement that ‘the newly rich’, like all their fellow citizens, were ‘constructors of socialism’; they are also called ‘business owners’ (

, qi ye zhu), ‘private entrepreneurs’ (

, qi ye jia),⁵ or ‘the newly wealthy stratum’ (

, xin fu jie ceng). Clearly, the stability of ruling overrides ideological commitment. And private business owners in China welcome such strategy because they are very conscious of their image in the society. On the one hand, the most influential members of this group have worked very hard to legalize and legitimize private property; for example, All China Federation of Industries and Commerce (quan guo gong shang lian) made several requests to the National People’s Congress to add an article protecting ‘private properties’ in the Constitution. On the other hand, they realize that even the newly obtained amendment to the Constitution cannot provide the assurance that they would not be discriminated against anymore. One strategy is to call themselves or their organizations ‘min ying’ (civil) (

) rather than ‘si ying’ (private) (

), such as the National Research Association of Min Ying Enterprises. The capitalists in today’s China know they are capitalists, but they don’t want to carry such a title before their political, economic and social statuses are firmly established. They may enjoy the wealth, but they cannot show their pride at being a capitalist.

Further evidence of the commonality of the two generations of capitalists, although being notorious, is the fact that all of the evils that the CCP identified with regards to the old generation in campaigns such as

(wu fan, five-anti), including bribing government officials, tax evasions, cheating on materials, and so on, can be found among today’s private business owners as well, and is actually of a much more serious nature and on a much larger scale. It is indeed very difficult not to call them ‘capitalists’ if we do not have to appear politically correct within the framework of the CCP’s official ideology.

A final justification for calling the private business owners ‘capitalists’ is related to the foreign firms that have been operating in today’s China. There is no objection in China to calling the bosses of these foreign firms ‘capitalists’, but there are no fundamental differences between their pursuit of profits and that of the domestic private business owners – as a matter of fact, the Chinese business owners have made a strong demand for being treated in the same way as the foreigners. If so, there is every reason for treating them all the same as ‘capitalists’. Obviously, the CCP would find it very inconvenient to explain how a new generation of capitalists has grown under its leadership.

Capitalists and Communists: friends or foes?

China’s capitalists have never had their day. This is remarkable given that most other major civilizations in the world, at one historical moment or another, have witnessed a rigorous growth of a class of capitalists. Indeed, the immaturity and powerlessness of the Chinese capitalists has long been the subject of a research enterprise for Chinese economic historians,⁶ and tackling this question is seen as an en route towards explaining China’s almost unique lag in the processes of modernization and democratization. The scope and the focus of this study are much narrower – it examines the history of capitalists in China in the most recent six decades and in the context of the Chinese Communist Party (CCP) being the dominant political party. My aim is to understand the interaction between the two fronts of development, economic and political, through the lens of the changing political statuses of the capitalists.

Historically speaking, the relationship between the capitalists and the communists was characterized by mutual suspicion and mistrust, to say the least. Even today, with the CCP having adopted a series of strategies of co-opting the new capitalists (Dickson, 2008), it would be naïve to believe that there shall be no more tensions between the two sides, although the CCP-controlled public media have tried to portray a rather harmonious picture. While to characterize such a relationship and to determine the implications of the relationship for China’s political development are the tasks for the whole project, it is useful here to start by giving a brief account of the ups and downs of their relations before introducing the specific questions to be answered in the rest of this book.

The CCP was born in a time of wars (the War of Northern Expedition, the Anti-Japanese War and the Civil War). It was after winning the last war, a civil war against the Nationalist Party (Guo Min Dang) that it became the sole ruling party. For the Communists, fighting these wars was not merely a military struggle; they fought with a very strong ideology in mind – Marxism, Leninism, and later Mao Zedong Thought. But fighting the wars was only a special phase in the whole process of establishing a socialist and ultimately communist society. The Nationalists were the enemy not just in the military sense; ideologically, they represented the interests of the landlords in the rural areas and the capitalists in the cities, together constituting a retrogressive force in the history of China and the whole of human history. According to the version of Marxism adopted by the Chinese Communists at that time, human history moves in the following historical phases: primitive, slavery, feudalism, capitalism, socialism, and finally communism. Therefore, that they eventually won the war was not simply because they gained support from the peasantry or because of Mao’s and his marshals’ military genius, but most importantly because they represented the more advanced force of human history. Such an ideology of historical development was also behind the CCP’s policies of transforming the capitalist enterprises after they became the ruling party in China, even though the desire of keeping the whole national economy under control was a strong motivation as well.

As capitalists followed the principles of capitalism, they were the enemy of the communists, ideologically if not militarily. During the civil war, some influential capitalists, particularly those with close personal or business connections with the then incumbent Nationalist government, such as the notorious Four Big Families (Jiang, Song, Kong and Chen), were indeed on the side of the Guo Min Dang. However, the vast majority of capitalists had neither interest nor clout in engaging in any politics; all they wanted was a peaceful environment in which they could run their busin...

Table of contents

• Cover
• Title
• Copyright
• Dedication
• Contents
• List of Figures
• List of Tables
• Preface
• Acknowledgements
• Note on Chinese Characters and Sources
• 1 The Political Significance of Capitalists in Communist China
• 2 The Demise of the Old Capitalists in the New Society
• 3 The Growth of the New Capitalists
• 4 Wealth and Power, Business and Politics
• 5 Between the Communist State and Private Enterprises: Private Business Associations
• 6 Capitalist Candidates in Local Elections
• 7 Weapons of the Wealthy
• 8 The Capitalists, the Workers, and the Communist State
• 9 Elite Corporatism
• Notes
• References
• Index