Class character of People’s China: interview with research economist

 June 14, 2024

This interview with Rémy Herrera, a research analyst at the National Center for Scientific Research (CNRS) at the Sorbonne in Paris, the largest such research institution in France, was first published in the magazine Harici (Istanbul, Türkiye), and the newspaper Cumhuriyet (Istanbul) in May 2024. Translated from the French by John Catalinotto. 

Rémy Herrera has written extensively on the economic structure of People’s China.

Q: Let’s begin with your books on China. Based on your research and observations during your visits to China, how do you interpret the Chinese miracle that everyone is discussing?

RH: Many commentators on the very high rate of growth in China’s gross domestic product (GDP), which has been observed for several decades now, use the term “miracle” to describe this phenomenon. I, for one, believe that this is no miracle, but rather the result of a development strategy that has been patiently conceived and effectively implemented by the country’s leaders and senior officials in successive governments, under the authority of the Communist Party.

We read and hear everywhere, in academic circles and the mainstream media, that the “take-off” of the Chinese economy is due solely to its “openness” to globalization. In my view, it’s necessary to add that such accelerated growth was made possible only by the efforts and achievements of the Maoist period. This opening up was firmly and continuously controlled by the Chinese authorities, and it is under this condition that it can be considered as having contributed to the country’s indisputable economic successes. It is because it has been subject to the constraints of satisfying internal objectives and domestic needs, and fully integrated within a coherent development strategy, that this opening up to globalization has been able to produce such positive long-term effects for China.

Let’s be clear: without the elaboration of such a development strategy, which is clearly the work of the Chinese Communist Party — let’s not forget that — and without the energy deployed by the Chinese people to implement it during the revolutionary process, the country’s insertion into the capitalist world system would inevitably have led to the destructuring of the national economy, or even its destruction altogether, as is happening in so many other countries in the South, or in the East. One fundamental point must be borne in mind: for more than a century before the victory of the Revolution in October 1949, “opening up” had meant above all submission, devastation, exploitation, humiliation, decadence and chaos for the Chinese people.

Q: How does China’s success differ from Western development models?

RH: The success of the Chinese government’s development strategy and the many benefits it has brought to the country’s people contrast sharply with the failure of neoliberal economic policy measures applied in Western countries, which have had catastrophic consequences for workers in the North, whether in economic, social, or even moral and cultural terms.

Let me give you a specific example. One explanation for the strength of Chinese state-owned enterprises (SOEs) is that they are not managed in the same way as Western transnational corporations. The Western ones — listed on the stock exchange and oriented towards the logic of shareholder value which demands the maximization of dividends paid to their private owners, shareholder value and rapid returns on investment — operate by squeezing a chain of subcontractors, whether local or relocated abroad. Chinese state-owned groups don’t behave like this. If they were to behave in such a rapacious manner, they would be acting to the detriment of local small and medium-sized enterprises and, more broadly, of the entire national industrial fabric. But this is clearly not the case.

Most of China’s large state-owned enterprises are (or have become) profitable again because their guiding compass is not the enrichment of private shareholders, but the priority given to productive investment and customer service. In the final analysis, it doesn’t matter if their profits turn out to be lower than those of their Western competitors as long as they serve, at least in part, to stimulate the rest of the domestic economy, and go beyond a vision of immediate profitability when higher strategic, long-term or national interests so dictate.

Q: Can this model be defined in terms of the neo-classical or neo-Marxist model?

RH: First of all, I don’t think the Chinese see their development strategy as a “model.” Nor do they seek to impose or export it. They simply believe that certain lessons can be learned by the peoples of the world, but that it is up to them to define the objectives and means of their own development in their own specific historical, social and cultural conditions. This also differs markedly from the Western vision, which would like its “model” to be followed by every country in the world.

Neoclassical models have no application in China. If you’ll allow me, I’d like to add that neoclassical economics, which today constitutes the hegemonic or mainstream current in economics, basically serves no other purpose than to attempt to provide a theoretical and supposedly scientific justification for neoliberal political practices whose ideology is situated at the opposite end of the spectrum from measures for social justice and the development of public services. In reality, neoclassical economics is not a science, but science fiction or, as I put it in a recent book (“Confronting Mainstream Economics for Overcoming Capitalism,” Palgrave Macmillan), an ideology with scientific pretensions.

I am convinced, on the other hand, that Marxism has not yet been scientifically overtaken. Today, it has no serious competitor. It remains relevant, not least because we still live in a world where the capitalist system remains dominant on a global scale, even if its changes have been substantial, and need to be carefully accounted for. Despite the many attacks on Marxism since its foundation, and the repeated announcements of its death, it is enduring, resilient, “indestructible” dare I say, and the indispensable theoretical benchmark for anyone thinking about the ways and conditions of a better world.

Despite the demise of the USSR and the Soviet bloc, within which it had all too often become dogmatized and sometimes turned against itself, Marxism remains indispensable today, an irreplaceable point of reference for those fighting for socialism. So it’s hardly surprising that it is still an important theoretical reference for China.

Q: Has China grounded the practice of its economic model on theoretical foundations?

RH: I’d say that China’s development strategy, whose objective remains that of continuing and deepening the socialist transition, is based on a theoretical combination of elements drawn both from the great philosophical currents of traditional Chinese thought (particularly Confucianism and Taoism, but not exclusively) and from a modernized and mixed Marxism, reinterpreted in the Chinese way. But it’s important to understand that this theory is closely associated with the analysis of practical experience. All of this has led to relevant solutions to the challenges of the present day, and especially to answers to the many contradictions that arise from them.

The Chinese concept of “new-age socialism” is patient, enduring, pragmatic and effective, not Manichean; it takes the long view and is not afraid to confront oppositions and contradictions (those of individual initiative or entrepreneurship, for example), seen more as complementarities and potentialities than as exclusions and substitutions.

One of the lessons to be learned from Marxism “à la chinoise” is the idea of harmony between opposites, within human beings, between human beings, and between human beings and nature. Chinese political discourse emphasizes “social harmony” and “stability” as essential values, and “conciliation” and “consensus” as the means to achieve them. These are all notions that differ from the “class war” espoused by Western Marxism, and which the latter often regards as suspect, since they are generally characteristic of conservative regimes. This overlooks the particular meaning they take on in Chinese thought, as “conciliation of opposites” and “positive dialectics.”

This means, for example, that there are dynamic balances to be found within the individual between personal interests and social needs, between individual and collective interests, and between needs and moral requirements. In simple terms, we could say that since Mao, the Chinese have believed in a form of progress based on a spiral development that tends to blur contradictions. In this context, socialism ceases to be a project oriented towards perfection — a vision foreign to Chinese thought, which rejects absolutes — and becomes a construction process in motion.

Q: How would you assess the similarities and differences between China’s economic model and those of the Soviet Union and the Eastern or Balkan countries post-World War II?

RH: For a few years immediately after the victory of the October Revolution in 1949, the People’s Republic of China followed a “Soviet-style” economic model. However, it abandoned this model after the break with the USSR in the early 1960s. China, which joined the Council for Mutual Economic Assistance (CMEA or COMECON) in 1950, left in 1961 and decided to forge its own development strategy, by itself and for itself. And clearly, it was far more effective than those of the Soviet Union or the countries of Central and Eastern Europe.

China experienced a series of economic problems between 1978 and 1982, reflecting the difficulties of the post-Mao transition and the implementation of the so-called “opening” structural reforms. The 1985-1986 period saw, in particular, the implementation of the 1984 fiscal and tax reform, which represented one of the turning points toward a market economy.

Then, with the collapse of the USSR and the Soviet bloc, a very brief experiment, quickly cut short and abandoned, which could be described as “neo-liberal,” was tried, but the result was a sudden and brutal economic downturn in 1990-1991, accompanied by an explosion in corruption — against which the Chinese central government has been fighting ever since with great energy and, it must be recognized, with some success. Fortunately, China has rejected this neoliberal option, which is destroying so many economies around the world. It preferred to stay on the course of socialism, which today ensures the well-being of the vast majority of its population.

Q: To what extent are Western Marxists who allege that China is adopting capitalist methods accurately judging China’s financial/wealth growth?

RH: In the debates between Western Marxist authors, a clear majority assert that the Chinese economy is now capitalist. David Harvey, for example, believes that, since the 1978 reforms, China’s economy has undergone “neoliberalism with Chinese characteristics,” where a type of market economy has incorporated more and more neoliberal components operated within a framework of centralized control that he deems very authoritarian. I disagree with him.

Leo Panitch and Sam Gindin, for their part, analyze the implications of China’s integration into the circuits of the global economy, seeing it less as an opportunity to reorient global capitalism than as China’s duplication of the “complementary” role once held by Japan, providing the United States with the capital flows it needs to maintain its global hegemony; hence a trend towards the liberalization of financial markets in China, leading to the dismantling of instruments for controlling capital movements and undermining the power base of the Chinese Communist Party. I think these authors are wrong.

Other Marxists, certainly rarer but no less important, both Chinese and foreign, continue to defend the idea that the political-economic system currently in force in China, although comparable to or close to “state capitalism,” would leave open a wider range of possible trajectories for the future. For my part, I would go so far as to argue that the Chinese system still contains key elements of socialism. Starting from this point, I believe that the interpretation of the nature of this system becomes compatible with that of a “market socialism,” resting on pillars that still distinguish it quite clearly from capitalism.

For my part, I’d say that, while there are of course capitalists in China (and billionaires abound), it’s impossible to describe the Chinese system as capitalist. There are certainly elements of “state capitalism,” but I’d rather call it “market socialism,” or even better, “socialism with the market.” I think we should take the Chinese seriously when they talk about “socialism with Chinese colors.” It’s not just propaganda; it’s a reality, their reality.

On the monetary and financial front, for example, it’s worth noting that China’s public authorities have not only successfully confronted the power of the financial markets, but have also built a “great monetary wall” by defending the national currency, the yuan. They have succeeded in placing currency at the service of development. Powerful strategic planning, whose techniques have been relaxed, modernized and adapted to today’s requirements — which is what makes it so effective — is a distinctive feature of a socialist approach. State control of the currency and all the major banks is an absolute requirement, as is close monitoring of the activities of financial institutions and the behavior of foreign firms operating on national territory. Once again, in China, the state controls capitalism, not the other way around. So far, at least.

Q: What is the significance of Deng Xiaoping for China currently? Is there a connection or a break in Xi Jinping’s political and economic decisions with Deng Xiaoping?

RH: Deng Xiaoping’s definitive ascent to the pinnacle of power began in August 1977, with the Eleventh Congress of the Chinese Communist Party and the subsequent push for far-reaching economic reforms from the end of 1978. Deng’s idea was not to renounce socialism, but to find ways of lifting the great mass of Chinese people out of poverty, and to ensure that the country became a “middle-income” society, or a society of “moderately satisfactory well-being.”

The old socialist structures were transformed, market mechanisms were generalized, elements of capitalism were introduced, inequalities began to increase, but the system did not become capitalist again. Since Xi Jinping, the development strategy has been reaffirmed as socialist, and the orientation of the country’s general policy is more in favor of the less fortunate sections of the population and the least developed regions of the country.

One difficulty in grasping this “Chinese-style socialism” is the refusal of its leaders to interpret this socialism as the generalization of shortages or a “sharing of misery.” What the leaders of the Chinese Communist Party sought to do, and succeeded in doing, in Mao’s time, was to lift the great mass of the Chinese people out of their misery, and then, in the Deng Xiaoping era, to lead them into a society of “average affluence.” As a logical extension of this revolution, they now wish to pursue a socialist transition during which the vast majority of the population will be able to enjoy prosperity − including a wide range of consumer goods − and abundance. Wouldn’t this prove that socialism can, and must, surpass capitalism?

Q: Also, evaluate China’s economic growth precisely.

RH: It’s not true to say that China’s high GDP growth rate is due to capitalism, which, as we often hear, has been in place since 1978. Quite the opposite is true. It is because the Chinese state, under the authority of the Communist Party, has succeeded in preventing capitalism from taking control of the country that growth has been so strong, and that its positive spin-offs have to a large extent been redistributed to the people.

I would add that, even if you absolutely want to believe that the Chinese system is capitalist (which I don’t), it would be wrong to maintain that China’s strong growth has only been observable since 1978, because the country’s economic growth was already very strong in Mao’s time, much stronger than in other countries with administered economies at the time, and even than in many industrialized Western countries. Western leaders want to hide this reality, because it’s unbearable for them to acknowledge that a socialist country can succeed, and succeed even better than capitalism.

I would say that the aim of the Chinese Communist Party is not to appropriate everything economically, but rather to retain political control over everything − which is really not the same thing. Chinese leaders have said it over and over again: The coexistence of public and private activities, stimulated by each other within a mixed, hybrid system, is the means chosen to develop the country’s productive forces to the maximum − including by attracting foreign capital and importing advanced technologies − and thus raising its level of development, with the stated aim of improving the population’s living conditions, and doing this not by abandoning socialism, but by deepening the socialist transition process that began in 1949.

Paradoxically, China is still a developing country, as its still modest GDP per capita shows. This process will be long, difficult and fraught with contradictions and risks. Its trajectory remains largely undetermined. But, and I think it’s worth stressing this, the persistence in this system of many features that are still clearly distinct from capitalism, and which, in my view, are part of the implementation of a socialist project, as well as elements with the potential to reactivate it, means that we should take the speeches of China’s political leaders seriously.

Q: Did China’s recent meeting with President Biden signal a shift from its economic dominance to a more pronounced political presence in the international arena, particularly in Africa, Latin America, and the Middle East, and with its stance on Russia? Is China looking to become the focal point of the multipolar world?

RH: China has no ambition to become the world hegemon, replacing the United States. That’s neither its will nor its mentality. On the other hand, it is clear that China is striving to contribute to the construction of a multipolar world, as opposed to the unipolar world over which, until now, the United States has reigned unchallenged (and, we must recognize, by using extremely aggressive tactics). China’s political leaders aspire to universal peace and balance in international relations. But it is quite clear that they will defend their country’s sovereignty, without submitting to any further foreign domination.

As regards the “trade war” between the U.S. and China, I demonstrated, in an academic article written with Chinese co-authors (entitled “Turning One’s Loss into a Win? The U.S. Trade War with China in Perspective,” in Monthly Review), that the labor time incorporated into trade between the two countries since 1978, relative to the same volume traded, was greater in the case of China than for the USA. This reveals an unequal exchange in value between them, in favor of the USA and to the disadvantage of China.

In other words, the fact that China has recorded growing bilateral trade surpluses over the last few decades needs to be qualified by the observation − which we have calculated − that it is above all the United States that has benefited, in terms of labor time incorporated into exports.

In such a paradoxical context, the outbreak in 2018 of the trade war against China could be interpreted as an attempt by the U.S. administration, then led by President Donald Trump, to curb the slow and steady deterioration of the U.S. advantage observed for decades in trade with China, its main emerging rival.

Q: How is China arranging international economic relationships for a world with multiple powers in opposition to U.S. dominance? Considering the Shanghai Cooperation Organization and BRICS as examples, could a global payment method be established to counterbalance the dominance of the U.S. dollar in the near future?

RH: China has understood that the two fundamental pillars of  U.S. domination of the capitalist world system are military and monetary. That’s why it has played an active role in building networks of strategic alliances, such as the Shanghai Cooperation Organization, and economic alliances, such as the BRICS group [Brazil, Russia, India, China, South Africa]. It also understands that these two pillars are mutually dependent, and therefore vulnerable. That’s why it has also launched a series of bold, innovative initiatives.

In another of my books (“Money,” Palgrave Macmillan), I present some of them. China, for example, intends to challenge the prevailing order on the oil market, where it is the world’s leading importer. In 2018, it decided to promote oil futures contracts in yuan, accessible to foreign investors on the Shanghai International Energy Exchange, in order to compete with the hitherto unchallenged benchmarks of London Brent and New York West Texas Intermediate (the standard for defining crude oil prices and futures contracts on Wall Street).

Against this backdrop, China and Russia − countries forming an economically dynamic (and militarily dissuasive) alliance likely to represent a credible counterweight to the United States − have decided to launch a new currency, called “petro-yuan-gold,” and open up prospects for establishing it as a global reference alternative and replacing the dollar as the dominant currency. The petro-yuan-gold is a project for a global currency based on oil, a key commodity, and anchored to gold − a feat no longer within Washington’s grasp.

China’s advantage lies not only in its high GDP growth rate, but also in the fact that it happens to be the world’s leading producer and buyer of gold, with Russia coming in third, ahead of the U.S. [5th] In 2018, Beijing took the initiative of promoting a vast oil-yuan-gold exchange on the global energy exchange. Then it was the turn of metal-yuan-gold. China proposed to exchange yuan received in gold for oil deliveries and metal purchases. These events will have a considerable impact on the global system.

Q: Could China, having persuaded Iran and Saudi Arabia to engage in diplomatic talks, achieve similar success in resolving the conflicts between Russia and the West, as well as the ongoing Israeli-Palestinian conflict?

RH: China has certainly played an increasingly important and positive role in calming current international conflicts in recent years. We recently saw this during the war in Ukraine between NATO − led by the USA − and Russia, and then in the war between Israel − supported by the USA and the European Union − and Palestine. Just a few days ago, China made its voice heard in an attempt to halt the start of a dispute between Iran and Pakistan. China is arguably the voice of many countries in the South, which are not seeking the path of war, but that of development. This is another reason why it is so important to carefully analyze what China wants and what it is saying.

China’s international strategy is based on the affirmation of five principles, which are: 1) respect for sovereignty and territorial integrity; 2) mutual non-aggression; 3) non-interference in internal affairs; 4) equality and mutual benefit; and 5) peaceful coexistence. It takes bad faith not to recognize that their declarations in favor of peace and peaceful conflict resolution are respected. And remember that, in its modern history, China has never practiced an expansionist colonial policy.

Today, China has no desire to resurrect a “Cold War” climate, which would be contrary to its conception of peace between nations. It rejects any form of military alliance, and has never participated in a military coalition – not even against Daesh [ISIS]. It has never set up a military base abroad, with the exception of one in Djibouti, which it describes as a “simple logistical installation” in a particularly sensitive location for maritime traffic. This is in stark contrast to the Western powers, above all the United States, which have engaged in multiple coups d’état and military interventions. Cooperation is the watchword of Chinese policy, with a “win-win” principle and priority given to supporting development.

Q: Could China take a more proactive stance in advancing regional and global peace amidst the U.S. war economy? How should the Belt and Road Project be appraised in this situation?

RH: The military-industrial complex plays an essential role in the U.S. economy, but it has also reached an extremely worrying dimension, threatening what the West likes to call “democracy” − which it respects less and less at home, and almost never outside its borders. The United States, which accounts for more than half the world’s military spending and has more than 1,150 military bases worldwide (I calculated this in an article entitled “Notes on U.S. Bases and Military Staff Abroad,” in Innovations), is in an economic crisis and is increasingly pushing the whole world towards total war.

The U.S. administrations are beginning to aim more and more explicitly toward shifting the axis of new confrontations to the Far East, and especially to Taiwan. China must resist this U.S. provocation and resist this march to war, but of course it also wants to defend its territory and its interests. One of these interests is Taiwan. Reunification therefore remains a priority for Beijing.

The U.S. administration is stepping up the arms race that was once used to bring the USSR to its knees. But this dangerous escalation can no longer impress an economically healthy China that possesses sufficient weapons of deterrence.

More generally, the important thing to understand is that capitalism, trapped in a systemic crisis, can no longer find solutions through the logic of maximizing immediate profits, and is thus becoming more dangerous. With corporate bankruptcies and mass unemployment, stock market crashes and bank destabilization, the probability of a worsening systemic capital crisis is extremely high. All the conditions are in place for the system’s contradictions to become even more pronounced, especially as few reforms have been carried out since the 2008 crisis.

The urgent need remains to stop the “regulation” of the global system by war, under the hegemony of the United States. The defense of peace is the priority. Consequently, we need to pull the plug on the infernal war machine operated by the financial oligopolies, by imposing public and democratic control on them.

This brings us back to the vast Silk Road project, which has already been partly implemented: in fact, land routes − “The Belt” − and sea routes − “The Road.” Cooperation primarily concerns the countries of Asia, because these are China’s neighbors, or more distant countries, as in the Middle East, which lack the investment they need to develop, and also because China sees the advantage in promoting the development of its own western provinces, which are lagging behind those on the east coast.

Africa is involved

Africa is also involved, because it is the African countries that are most affected by “underdevelopment” (as the West calls it). This cooperation is not perfect, as it focuses on the supply of raw materials, but the quid pro quos are there and important for African countries, with China providing infrastructure in exchange: hospitals, roads, etc.

The Silk Roads extend as far as Europe, and this is what is irritating, coming from a strategic competitor. Since European economies have, in principle, the means to develop, why are some of them receiving so much Chinese investment? The reason is clear: in stagnation or even decline, victims of neoliberal policies of austerity, spending cuts and debt reduction, and privatization imposed by the European Union, some European governments are willing to sell their assets to the highest bidder, and see Chinese investment as a means of development.

China has also invested outside the European Union, notably in the Balkans, which are also being left behind. Not surprisingly, 17 Eastern and Southern European countries, including 11 members of the European Union, have joined the Silk Road initiative.

The Silk Road does not stop at the Eurasian continent and Africa. Cooperation is already well advanced with the countries of Latin America and the Caribbean, especially the poorest ones. Development support is provided mainly through low-interest loans from the Silk Road Fund (a sovereign wealth fund) and state-owned banks. But China doesn’t want to be the sole funder, and would like to encourage all countries with the means to do so, and who don’t impose politico-economic conditions (unlike the World Bank or the International Monetary Fund), to take part in these loans targeted at [building up] the infrastructures that are the foundations of rapid development.

This is also the reason for the creation of the Asian Bank for Infrastructure and Investment (BAII), which today has some 100 members (including France, Germany and Britain, but not, of course, the USA, which cannot control it, as it does with the IMF and the World Bank, while China, despite being the BAII’s biggest shareholder, expressly excludes any right of veto).

All in all, in the space of just a few years, the Silk Road has taken off in leaps and bounds: 124 countries have signed agreements, as have 24 international organizations, representing two-thirds of the world’s population. It’s important to emphasize that the Silk Road is intended to be exclusive of all political considerations. “Open to all countries,” its sole objective is co-development. But there are also partnerships focused on economic cooperation and the construction of multilateral trade zones, as in the case of the Global Regional Economic Partnership, which will constitute the largest zone of its kind in the world, corresponding to three billion inhabitants and 30 percent of world GDP, and which will challenge the hegemony of the United States, especially as trade and investment will no longer be conducted in dollars, but in national currencies.

Ultimately, capitalism itself is becoming unsustainable. Intended by its very nature for infinite accumulation, it is incompatible with a finite planet. Its logic generates ever greater inequalities and destroys all forms of social cohesion. China has taken the gamble of using the dynamic mechanisms of capitalism to emerge from its underdevelopment, by strongly controlling them. However, it is these dynamics that now need to be limited.

Market socialism “à la chinoise” will have to gradually distance itself from capitalism if it is to embody a genuinely alternative path for humanity. This is indeed its ambition: According to Chinese leaders, and even more clearly today, borrowing from capitalism has been no more than a way of “crossing the river,” and will never be more than a long “detour” in the socialist transition on the road to communism.

Some recent books by Rémy Herrera related to China:

– (2023) “Dynamics of China’s Economy” (co-written with Long Z.), Brill & Haymarket, Leiden & Chicago

– (2023) (ed.) “La Chine est-elle impérialiste?” (with Wen T., Lau K.C., Sit T….), Éditions Critiques, Paris

– (2022) “Money – From the Power of Finance to the Sovereignty of the Peoples,” Palgrave Macmillan, New York

– (2022) “Confronting Mainstream Economics for Overcoming Capitalism,” Palgrave Macmillan, New York