The rapid economic growth of China to one of the world’s leading powers has prompted debate on how this was achieved, from its extreme poverty to the prodigious development associated with its insertion into the world capitalist system. This book traces the evolution of the earlier relations between China under Mao and the capitalist world, before the explicit economic reorientation and while still proclaiming adherence to the revolutionary transformation to socialism.
The fact that the Chinese Communist Party (CCP) still proclaims socialism, and that before the Deng Xiaoping era China had relations with the capitalist world, means that the story is not a simple one, hence the debate on whether China today is capitalist or imperialist. This book doesn’t directly address these issues but seeks to provide the story of the early Maoist relations with the capitalist world, starting with the semi-underground trading arrangements set up by the CCP in British ruled Hong Kong in 1938, years before the conquest of political power nationally in 1949.
In the first full year of Maoist rule roughly 74 per cent of trade was with capitalist countries; two years later this had fallen to 21 per cent, with the share taken by the Soviet Union etc. dramatically increasing. Like the experience of the USSR surveyed in the previous post, China sought to trade its farm goods for advanced technology and equipment, plus chemicals and fuels, in order to build its industry.
As is well known, the 1949 revolution did not initially involve state takeover of all private capitalist enterprises and the Maoists were acutely conscious of their lack of economic experience, which had been limited to relatively remote rural regions. CCP policy involved repeatedly contacting foreign capitalists to explore trading opportunities, and the book records their meeting in Tianjin with the American Chamber of Commerce to discuss cooperation, although with no success.
This policy was very much encouraged by Stalin, with the Maoist leadership supporting trade with Japan despite the very recent and brutal war against their occupation. This and later engagements were far from smooth. For Stalin, geopolitical considerations of defending the Soviet Union were paramount while the Chinese sought to expose latent contradictions between Japan and the US; something which was to become a recurring theme as the US attempted to isolate the new regime and China attempted to wriggle free. Other capitalist states showed themselves to be more open to acceptance of it by way of developing trading opportunities.
The eruption of the Korean war set back Mao’s plans; when meeting with Stalin for the first and only time he told him that “China needs a period of 3–5 years of peace”. Their negotiations yielded a new Sino-Soviet Treaty in 1950 but relationships were not particularly warm as Stalin kept Mao hanging about Moscow for a second meeting in order to show him who was boss.
Most welcome was a loan from the Soviet Union, its need apparent from the government budget in the first three months of the new year being nearly balanced, having been in deficit by nearly two-thirds in the previous year.
The importance given to trade was made clear through the decision to break the unwritten rule – that commercial work should remain in the hand of trusted CCP members – and employ technical experts from the old Nationalist regime. The new Korean war-time conditions meant a return to clandestine trading activities, with the CIA estimating that “China was smuggling between two hundred and three hundred tons of strategic materials from Hong Kong to mainland China every night.” (page 82)
The launch of the “three Anti Campaign” targeting corruption, waste and obstructionism in 1951 was followed in 1952 by the “Five Anti Campaign” which mobilised the population against China’s corrupt bourgeoisie. Native private capitalists would no longer be protected as the CCP consolidated its control of the economy.
These campaigns also involved targeting the type of individuals that the Party wanted to recruit to agencies set up to assist its development of trade with capitalist countries, a problem that was to recur again, requiring the support of leading sections of the bureaucracy for the state bodies involved and their work. Zhou Enlai told the Chinese delegation to an international conference in Moscow that “You must make friends widely, don’t just make friends with progressives; make reactionary friends, too.” (page 89). The US opposed the conference but the Chinese delegation were able to sign its first contract with the British, while the CIA lamented that “our side can be expected to sustain loss after loss.” (page 91)
The CCP showed its elastic use of Marxist categories, developing “a new narrative for China’s place in global markets, one that centred on the theme of trading with capitalists as an anti-imperialist struggle.” (page 99).
In this vein, the end of the Korean war in 1953 was received by China as an opportunity to undermine the US blockade and use the Geneva Conference, organised to settle the peace at the end of hostilities, to enhance the new line of “peace in economics”. In that year the country’s volume of trade reached its highest level since 1930; exchange with the capitalist countries growing by 29 per cent on the previous year. China however was still not important globally, so this didn’t prevent its share of capitalist countries’ trade falling relatively as world exchange soared.
On the back of this the CCP elaborated the concept of the “five principles of peaceful coexistence”, which entailed containing American imperialism and hastening the demise of capitalism. Meanwhile relations with other capitalist countries such as Britain and France could be improved.
In 1958 China opened its first significant trade exhibition in Canton from April 25 to May 25 hosting 1,200 people from nineteen countries. Later in the year Britain decided unilaterally to eliminate the differential (greater restrictions compared to the Soviet Union) in controls on exports to China, followed within weeks by a host of other countries including France, West Germany, Italy and Holland.
Not long after this Mao launched the Great Leap Forward, by which he hoped to mobilise the population to overcome existing material constraints and rapidly accelerate the industrialisation and modernisation of the country. It was a project that seemed directly to contradict the foundations of the Marxist doctrine he claimed to hold, which recognised that the underdevelopment of the forces of production could not be overcome by sheer will. In the event, they couldn’t, and the initiative failed in its objective, including that of catching up with Britain in fifteen years.
Part of it was meant to involve a key role for trade with foreign capitalism. Like the Soviet Union, taxation of agriculture – in effect the peasant – was to provide the resources to feed the growth of the working class which would also allow for increased trade with foreign capitalism. Unfortunately, this period saw political considerations lead to a major spat with Japan and a fall in trade until the early 1960s.
This, however, was only one aspect of the harmful effects of the Great Leap Forward on the conduct of trade policy. Decentralisation of decision making led to import orders from capitalist markets in the first six months exceeding by twice the ministry budget for the whole year. Targets were missed, foreign currency reserves fell and the risk arose of defaulting on contracts. The central state struggled to regain control while “chaos” reigned in Chinese ports causing “crippling” delays. (page 145)
Japanese business and others started to complain about Chinese price “dumping”, pirating of designs and copying of Western patents. Other South-East Asian countries complained of special financial inducements, while China encouraged ethnic Chinese in these countries to boycott Japanese goods, although British diplomats in a number of them reported scant evidence of this happening.
At the same time relations with the Soviet Union started to fall apart and China launched an artillery attack on the Nationalist Kuomintang-occupied Island of Jinmen. For Mao this was part of the effort to rally the people to the demands of the Great Leap Forward.
Zhou Enlai again intervened to support the organisation of the work of the Ministry of Foreign Trade, including to ensure contracts with foreign capitalist were honoured. At a meeting of staff he told them that “[we would] rather ourselves not eat or eat less, not use or use less, and fulfil the contracts already signed.” (page 149). The Ministry had for years been aware of the need to defend China’s credit rating and Zhou was concerned that dumping was affecting relations with capitalist countries, including India, which was concerned about “dumping” of cotton on the market.
Zhou acknowledged that international trade with capitalists was a form of class struggle, ‘but China could not afford to struggle blindly.’ The Ministry had to differentiate between different capitalists in order to serve China’s diplomatic objectives and avoid behaviour that would undercut relationships. (page 150).
Zhou emphasised the political purpose of trade but the Ministry was caught between the demands of the Great Leap Forward (GLF) and commercial requirements. He repeated the mantras of zili gengsheng (revival through one’s own efforts) and repudiated the concept of shangzhan (“commercial war”), emphasising heping jingji (“peaceful economics”. (Page 152) ‘“The Great Leap Forward must also accord with objective realties”, he said. “Foreign trade cannot jump 40–50 percent all at once,” he told ministry officials.’ (page 152).
Unfortunately, ‘Zhou’s call for a more moderate trade policy in late 1958 proved too nuanced for the brute force of the GLF’. New, more modest, targets for exports and imports were set but ‘still exceeded the actual 1958 values by 19 percent and 3 percent respectively.’
Inevitably contracts were not fulfilled. Like the other aspects of the GLF, ‘the situation became absurd. Regions without a single walnut tree had been ordered to harvest the nuts for export.’ (page 153). The demands of the GLF for “more, faster, better, more economical” continued into the new decade.
The state failed to meet its grain target but exceeded its export targets as the last-ditch efforts of the Ministry of Foreign Trade to do so were successful. Food stocks declined precipitously in 1959 and early 1960 and a crisis was imminent: ‘people were already starving in some places. The bottom was falling out of the Great Leap Forward.’ (page 158)
Relations with the Soviet Union finally collapsed and the Ministry of Trade had nowhere to turn except the capitalist world for the imports necessary for modernisation and the grain necessary to save lives in the famine. The Maoist regime was led to discover that Soviet “revisionism” was worse than US imperialism. One task considered an immediate priority was consequently taken to be wiping out the debt to the ‘socialist countries’, necessary in order to defend China’s “international reputation” (guoji shang de shengyu).
The Chinese state struggled to procure the grain necessary to avoid greater catastrophe, especially while trying to keep the famine a secret. Billed as a great step forward to socialism, and while denouncing “revisionism”, the Great Leap Forward precipitated the requirement for grain imports from the capitalist world throughout the first half of the 1960s. (Although the degree to which other factors were responsible is controversial). It compelled compromising on the principle of avoiding capitalist debt, which up to then had had the effect of limiting China’s fuller entry into the world capitalist market.
The necessity to regularly import grain from the capitalist world, and maximise exports to it in order to earn the foreign currency to pay for the grain, while husbanding its reserves, meant that foreign trade could no longer be ‘tightly scripted, discrete transactions conducted at arm’s length’. Jason Kelly states that ‘It presaged a much more consequential shift in China’s relationship to the global economy that would occur during Reform and Opening.’(page 176)
Trade then increased, first with Japan, then with Western Europe, so that trade with the capitalist world that had been 18 per cent of the total in 1955 reached 70 per cent by volume in 1964. The CCP also moved away from the Great Leap Forward, Zhou Enlai telling the National People’s Congress in 1962 that ‘“blindness” (mangmuxing) to objective laws had marred China’s socialist construction.’ (page 184)
China was, however, about to go through another tumultuous upheaval before learning the same lesson again. The Great Proletarian Cultural Revolution (1966-1976), of which the late socialist Neil Davidson said ‘every word was a lie’, launched an antibureaucratic campaign against potential capitalist restoration that included familiar target such as ‘bourgeois specialists’ and ‘venerable masters’.
Launched by a section of the CCP bureaucracy it was ended by same, although in-between it witnessed mass assaults on the state apparatus, so that its origin eventually allowed for the manner of its ending. The Cultural Revolution hit China’s trade but the “figures seem mild in relation to the chaos . . . These were significant declines, but not catastrophic” and “were not caused solely by the Cultural Revolution.” (page 189)
These developments, including skirmishes with the Soviet Union from 1967 but more seriously in 1969, led to rapprochement with the United States. The logic of socialism in one country, the unity of the Communist – more accurately Stalinist – World, took a giant step towards its ultimate conclusion. China’s planners thus forecast a significant increase in trade with the capitalist world in the fourth Five-Year Plan (1971–1975), including import of whole plant equipment, and later for thousands of foreign workers to come to work in the country.
Many of these developments to closer ties with the capitalist world, and without all the talk about it undermining that world, preceded the changes introduced by Deng Xiaoping, who until 1973 was repairing tractor parts in Jiangxi Province following his purge. The following years saw the post-Mao leadership of Hua Guofeng launch an even larger, too large as it turned out, import programme, while other CCP leaders worried that China was embracing capitalist markets ‘too enthusiastically.’ (page 208)
Deng Xiaoping, speaking to Party officials in 1978, sums up the history presented in the book: “when Comrade Mao Zedong was alive, we also wanted to expand economic and technological exchanges between China and the outside world, including developing economic and trade relations with some capitalist nations, and even the introduction [into China] of foreign capital, joint ventures, etc.” (page 209).
The book chronicles the early history of one aspect of China’s relationship with capitalism and illustrates incidentally the Marxist understanding of the necessary preconditions for the achievement of socialism and the inevitable failure of trying to leap over them or seeking to achieve this goal in a single country. The book is, of course, not written from a Marxist perspective and given the size and importance of China, and its rich history over the last 70 or so years, it can be no more than a partial history. It is nevertheless very interesting for its exploration of one aspect of China’s less recent economic development.