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From The Socialist newspaper, 7 February 2007

The writing on the Chinese wall

Can China achieve the transition from 'communism' to capitalism? How long will its turbocharged economic growth last and what are the consequences for the world economy and China itself? PETER TAAFFE reviews The Writing on the Wall - China and the West in the 21st Century by Will Hutton (Little, Brown)

An unmistakeable message from Will Hutton's important book is that China is heading for revolution, although the author merely predicts serious 'convulsions'. Another conclusion is that the rest of the capitalist world, led by US capitalism, is heading for the same outcome in the long run if it continues to pursue the present unrestrained neoliberal policies - privatisation, the driving down of wages, the weakening of trade unions, etc.

A useful historical résumé is provided on the evolution of China, both of its economy and its state forms. Unlike other recent books, Hutton recognises the achievements of China under the planned economy - albeit controlled by a bureaucratic elite led by Mao Zedong.

In transition

The picture that emerges is that this huge country, embracing one fifth of humankind, even after a long 25-year road back to capitalism, is still in 'transition' towards this goal. This arises from the historical legacy of the Maoist-Stalinist state machine of the past, large elements of which still exist, and the spectre that haunts the Chinese elite of what a 'big bang' return to capitalism like Russia in the early 1990s would mean for China.

Hutton writes: "The Chinese economy and the Chinese Communist Party are in an unstable halfway house. An economy that is neither socialist nor properly capitalist: run by a party that is neither revolutionary nor subject to the normal constitutional checks and balances." A health warning should be issued to all readers of Hutton's book when he describes 'communism'. It is not the genuine democratic, liberating ideas of Marx, Engels, Lenin and Trotsky but its perversion through Stalinism and Maoism in China.

Moreover, he mistakenly writes that China is "Leninist corporatism" (meaning the state) which is a contradiction in terms. Lenin was opposed to all aspects of capitalism and their 'states' and based himself upon the self-activity, democracy and leading role of the working class in the struggle for socialism. Also, a major motivation in Hutton's criticisms that China is not yet "fully capitalist" is the irritation of foreign capital that the impediments to their further super-exploitation of the country's resources have not yet been completely dismantled.


Nevertheless, the abundance of factual material provided by the author helps us to understand better the contradictory reality, which does not fit neatly into a labelling of China as 'capitalist' or 'non-capitalist', and is extremely useful. Hutton states baldly that China is "neither a communist nor a capitalist economy". The 'direction of travel' is clear; towards capitalism but China has not arrived at a 'typical' capitalism.

He points out that the World Bank in a study in 2001 seemed to indicate that the state had relinquished control of more than 90% of the economy. However, "once the labyrinth of the share structure had been unravelled the opposite was the case: the state had de facto control of 84% of the listed companies. In 2005 it still retained control of 81%." After more than a decade of stock market development in China's $2 trillion economy it has succeeded in creating "fewer than 200 genuine private companies", according to the economists Guy Liu and Pei Sun who conducted the study for the World Bank.

Hutton caustically remarks: "This is hardly a triumph for privatisation." The general conclusion is: "More probably, about two thirds of China's largest 180,000 enterprises are de facto state-controlled." Control by the party is, moreover, exercised by the predominantly state-owned banks, which are the only effective source of external capital for most domestic firms. The reality, of course, in the purely capitalist sectors owned and controlled by foreign capital in the coastal provinces and elsewhere, is different.

Many of the features of the contradictory character in the economy are brought out by Hutton. In addition to this, the Financial Times reported recently that the State Assets Supervision and Administration Commission "put out a list of seven sectors over which the state must have 'absolute control', through dominant state-owned enterprises". This included armaments, power generation and distribution, oil and petrochemicals, as well as telecommunications, coal, aviation and shipping.

Heading for a crash

The combination of huge foreign direct investment (FDI) together with China's high internal savings rate - partly a consequence of the dismantling of the 'iron rice bowl', which provided a safety net to the Chinese people - has helped to fuel the colossal industrial boom. But Hutton, quite correctly in our view, is now afraid that China's turbocharged growth is heading for the buffers.

This growth, which has been hailed as the "most spectacular" in history, according to recent analysis is no greater proportionately than that experienced by the Asian tigers in the post-1950 boom. It has, nevertheless, in the last decade and a half acted as a partial escape route for world capitalism. China has acted to prop up the American dollar by the acquisition of dollars in the form of Treasury bonds, which in turn has plugged the yawning deficit of the US economy.

Hutton, as The Socialist has consistently argued, now sees the "unsustainability" of this situation. The US cannot allow the trade deficit to widen even more - almost 7% of gross domestic product (GDP) last year - which is plugged by China and others absorbing paper dollars. If China was to use these savings to acquire US assets - firms, equipment, property, etc - it would provoke a backlash and protectionist measures in the US. Nearly 40% of American consumer demand is currently met by foreign producers. If the US's foreign debts continue to pile up at the present rate, this will amount to 150% of its GDP. Hutton contends that this could also mean that China and other foreign investors would eventually own 50% of the United States' capital stock!

On the other hand, China cannot continue along its present path as this would "sooner or later", as Hutton argues, provoke either a banking crisis or simply a crisis of overinvestment and excess supply, or some combination of both. Add to this the possibility of systemic shocks of a geopolitical character, such as an armed confrontation with the US over Taiwan and it is no wonder that Hutton expresses concern, which at times assumes panic proportions in this book.


His solution is the adoption of what he calls "enlightened" values, by which he means capitalist democracy. However, this 'democracy' is highly truncated today in the 'advanced' capitalist world, with the rights of the working class and the poor systematically undermined through Bush and Blair's 'war on terror', for instance, or of the domination of the political arena by capitalist parties, which all look the same and are heavily financed by big business.

Ironically, if Hutton's 'pluralistic' enlightened values were applied to China today - with the right to vote, freedom of independent class-based trade unions, a free press - such are the piled-up contradictions that this would unleash the very situation that Hutton dreads; a "new Tiananmen" or revolution. Whether the Chinese elite batten down the hatches or open up society a little further, the prospect of new convulsions, a new revolution like Tiananmen in 1989, is posed anyway.

There are many other important aspects of both developments in China and of the policies of neo-liberalism worldwide which Hutton deals with and are worthy of more lengthy treatment. We hope to do this elsewhere but those readers who can afford it would be rewarded by critically reading this book and pondering on the earth-shaking events which flow from China's further development.

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In The Socialist 7 February 2007:


Sold to big business

Can the Left reclaim Labour?

Merseyside Campaign for a new workers' party

Website of the Campaign for a New Workers' Party

Civil servants' strike

Interview with Mark Serwotka: "This is just the beginning of the campaign"

Welsh strikers close down Assembly

Socialist Party NHS campaign

Anger at union leaders' timidity

Manchester nurses strike against health cuts


Change the system not the climate!

Bush's bio-fuel bull

Socialist Party news and analysis

Has Manchester struck it lucky?

Socialist Party campaigns

Camden council blames cuts on 'spending gap'

Don't privatise social housing!

Tenants pay when things go wrong

Coventry - a victory for determination

Socialist Party Marxist analysis

Rising anger and discontent in Europe

International socialist news and analysis

Darfur - another failure of Western 'conflict resolution'

Sri Lanka: Keep up the protests

Socialist Party Marxist analysis

The writing on the Chinese wall

Workplace news

Stop the Valentine's Day pay massacre !

Striking back at the privateers

Corus deal threatens new cost-cutting

Cabin crew angry over BA deal

May Day greetings


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