The West once again gets it wrong on China
The country’s remarkable economic achievements are attributable to socialist market economy, which gives full play to the advantages of both the socialist system and market economy, and have nothing to do with “state capitalism”
The United States equates China’s economy with “state capitalism”, saying socialist market economy is not real market economy but state-led protectionist and mercantilist economy, which, it claims justifies the imposition of high tariffs on Chinese goods.
This is not the first time a Western country has labeled China’s economic model as “state capitalism”. Some people are re-circulating the term in the West now to hide the real reason why the US has resorted to trade protectionism and imposed high tariffs on Chinese imports, namely, their concern over China’s development road and economic system.
The US is a self-proclaimed representative of free market economy and free market capitalism, but the government’s role has been particularly important in its economic development. Let us not forget, the US has resorted to protectionism from its founding to the end of World War II.
Using free market as a ploy to make profits
In the postwar period, too, the US administration has intervened in the economy to fulfill its self-interests even while promoting trade liberalization, as Keynesianism came to play the dominant role in US economic policymaking. For example, the US’ total government spending increased from 26.8 percent of GDP in 1960 to 41.3 percent in 2010, and the number of its government employees increased from more than 4 million in 1940 to more than 22 million in 2010.
Some experts on innovation say, despite advocating “small government” and “free market”, the US has been running massive public investment programs in technology and innovation for decades, which have brought the US great economic benefits. In fact, the US government has always been a central driver of innovation-led growth, from internet to biotechnology and even shale gas development. After the outbreak of the 2008 global financial crisis, the US once again resorted to state interventionism, and introduced huge financial rescue and fiscal stimulus packages to stabilize its economy.
Since taking office, President Donald Trump and his administration have been using interventionist policies, such as protectionism and immigration control measures, to realize their “America first” goal at the cost of the interests of people around the world. Which shows the “pure” free market economy and “true” laissez-faire that the US bandies about have never existed. Instead, capitalism as we see it today is closely related to “state capitalism”. So to label China’s socialist market economy as “state capitalism” is to confuse one thing with another.
‘State-capitalism’ theory a result of ill intentions
After the global financial crisis, some developed economies, such as the US and some European countries, faced severe economic difficulties while China and many other emerging economies maintained relatively strong growth. The resultant rise and fall in the relative strengths of China and the US made the contradictions among the developed economies, and those between the developed world and emerging economies, such as China, increasingly prominent.
Some politicians cannot accept China’s rapid but peaceful rise under the leadership of the Communist Party of China, so they use terms such as “state capitalism” to criticize it. The intention of such people is clear: to defend capitalism by pitting “state capitalism” against “liberal capitalism” and creating an atmosphere that would curb the development of developing and emerging market economies, especially China.
On the one hand, such observers try to divert and cover up people’s discontent with the profound defects of the capitalist system, and claim free market capitalism is facing a crisis because of the threat posed by “state capitalism”. On the other hand, they try to find faults with socialism with Chinese characteristics, so as to distort the attributes of socialist market economy with the aim of shaking people’s confidence in the socialist market system, and forcing China to abandon its development path. Their ultimate is to contain China’s rise.
Such people always use double standards when it comes describing the attributes of “state capitalism”. When Western economies need state support for capital accumulation, these people advocate protectionism and state intervention. But when Western economies enjoy competitive advantage, they forcibly promote free trade and require other countries to unconditionally open up their markets, so as to benefit from it. And when the Western economies’ competitive advantages fade out due to competition from other economies, including latecomers such as China, they go back to practicing protectionism.
A pretext for not accepting reality
Many observers and politicians have attempted to include China into the capitalist spectrum, or assumed that by adhering to the rules of market economy, China will automatically embrace the capitalist system. But when they realize socialism with Chinese characteristics, compared with capitalism, is yielding better results, some of them start identifying China’s socialist market economy with “state capitalism”, instead of admitting that socialism with Chinese characteristics and socialist market economy have achieved success beyond their wildest dreams. This is the essence of their “state capitalism” argument.
Western countries have always regarded market economy as their exclusive economic system, as is evidenced from Western economic theories. But market economy and capitalism are two different things, the former being a means to allocate resources, which can be combined either with the capitalist or socialist system.
Capitalist market economy and socialist market economy share common features in terms of resource allocation and commodity relations. For example, both have clear property rights relations and require market players to maintain equal and fair competition. And both allow the market to play a decisive role in resource allocation.
The macro-regulatory policies implemented by China conform to the laws of market economy and the rules of the World Trade Organization. Yet market economy is a social and historical concept with different characteristics under different social systems and stages of development. Socialist market economy is a new type of market economy, which, despite having the general characteristics of market economy, is fundamentally different from capitalist market economy in terms of ownership structure, distribution system and institutional mechanism. So it is erroneous to identify the Chinese economy as “state capitalism” just because China has State-owned enterprises and its government plays a role in some economic activities.
Argument on SOEs untenable, baseless
Moreover, it is grossly erroneous to equate state-owned enterprises with “state capitalism”, as SOEs are just a means to ensure large-scale production through modern methods. In fact, state-owned enterprises first appeared in Western capitalist countries.
In the postwar period, some capitalist countries nationalized enterprises on a large scale, and established a large number of SOEs in many sectors. Even when the wave of privatization was at its peak, many Western countries retained a sizable number of stateowned enterprises. In fact, even after the outbreak of the 2008 global financial crisis, some Western countries took measures to nationalize a number of enterprises to offset the effects of the economic slowdown, which shows the West also uses state-owned enterprises as a means to resolve the basic contradictions of capitalism.
However, it should also be noted that the natures and functions of state-owned enterprises vary in different social systems. In Western economies, state-owned enterprises are essentially controlled by a few big capitalists backed by governments and operate to make more and more profits. In a socialist market economy, however, SOEs are owned by the people, and serve as an important tool for promoting modernization and safeguarding the common interests of the people. They shoulder multiple responsibilities, from providing public services, developing strategically important industries and protecting the environment to promoting science and technology, safeguarding national security, facilitating fair resource distribution and realizing common prosperity. These traits distinguish them from their counterparts in capitalist market economies.
Is this Western envy or jealousy?
The fundamental reason why some Western politicians target China’s SOEs for criticism is that these enterprises have become bigger and stronger than Western politicians’ expectations, and are helping China to develop into a comprehensive modern socialist power to realize the Chinese Dream of national rejuvenation.
Yet there is no inherent logic in using the role of the government to identify the Chinese economy with “state capitalism”. The relationship between the government and the market depends on the evolution of the economic system, with the two being mutually complementary and indivisible. This is the development law of market economy.
Capitalist market economy and socialist market economy both need effective market regulations — which only the government can provide — for the supply of public goods, maintenance of macroeconomic stability, improvement of the social security system and strengthening of economic security.
In a capitalist market economy, which is based on private ownership, the government is not only the spokesperson for capital but also serves the interests of capital. As a result, it is difficult for the government to ensure economic and social development serves the interests of the entire society, so as to resolve the basic contradictions between socialization of production and private ownership.
Govt represents people in socialist market economy
In contrast, a socialist market economy is dominated by public ownership, in which the government represents the people and serves their interests. This makes it possible for the government to implement regulations for social and economic development in order to meet the people’s increasing needs for a better life, and achieve prosperity for all.
The difference between socialist market economy and capitalist market economy, as such, is not whether the market or the government plays a decisive role in the allocation of resources, or whether state-owned enterprises exist. Instead, it depends on whether the government and market are serving capital or the people.
Those that equate the Chinese economy with “state capitalism” claim that an economy in which the government intervenes to serve the interests of capital and private ownership will be seen as following the “free market system” irrespective of the extent of its intervention. In contrast, a socialist market economy for them is equivalent to “state capitalism” regardless of the aim and magnitude of the government intervention.
This shows such observers identify Western countries with the “free market system” even if their governments support enterprises with policies and financing. But if an emerging market economy does the same, it is labeled “state capitalism”. Which is a typical example of economic hegemony.
Since launching reform and opening-up four decades ago, China has developed the socialist development road, theory, system and culture with Chinese characteristics, fulfilled the basic economic requirements to build the primary stage of socialism, allowed public ownership to develop along with private and other forms of ownership, and transformed from a planned economy to a dynamic socialist market economy.
Fostering development of high quality
Moreover, since the 18th National Congress of the CPC, China, under the strong leadership of the Party with Xi Jinping as the core, has more vigorously helped the market to play a decisive role in resource allocation. Simultaneously, the government has taken concrete measures to improve the property rights system, further deepen economic reform, and improve the socialist economic system with Chinese characteristics, in order to promote high-quality economic development.
China is committed to building a community with a shared future for mankind and improving global economic governance, by safeguarding and promoting economic globalization and free trade. In this regard, it has taken a series of measures to greatly ease access to its huge market, build a more attractive investment environment, strengthen intellectual property rights protection and expand imports.
A socialist market economy gives full play to the advantages of market economy and the socialist system, and helps build an organic bond between the government and the market. It also ensures sustainable development and market stability, which have benefited the Chinese people and contributed to human development and progress across the world.
These are the great achievements of socialist market economy and socialism with Chinese characteristics, and have nothing to do with “state capitalism”.
The socialist economic system with Chinese characteristics is the result of Chinese wisdom, the Party’s leadership and Chinese people’s efforts to build a prosperous but sustainable social and economic system, and thus a great innovation in economic development history. Chinese people, led by the Party, have embarked on the road of socialism with Chinese characteristics. And they most certainly will achieve success after greater success.