The rise of China – now the major economic and geopolitical challenger to US imperialism – plays a defining role in world relations today.
The Committee for a Workers’ International has described China as a peculiar form of state capitalism. China was formerly a planned economy, following the heroic Chinese revolution of 1949 that abolished landlordism and capitalism. From its inception, however, it was not a healthy workers’ democracy; instead the rule of a bureaucratic elite under the control of the Chinese Communist Party (CCP) held sway. From the late 1970s/early 1980s, amidst economic slowdown and stagnation, inevitable under the sclerotic regime of the bureaucracy, the CCP consciously seeded the development of the capitalist market through foreign direct investment and the creation of special economic zones. The process of marketisation was enormously accelerated in the aftermath of the collapse of Stalinism in the former Soviet Union and Eastern Europe.
Today, there exists a large Chinese capitalist class alongside a powerful nationalised state sector under the direct control of the CCP. Unlike in the former Soviet Union and Eastern Europe, where the Communist Parties relinquished state power to the oligarchical capitalist elite, in China the CCP held onto the state. This CCP dominated state machine oversees and, to a significant degree, is attempting to direct the development of the Chinese capitalist economy. This gives the CCP the ability to intervene in the economy in a way and to a degree that is beyond that of other capitalist rivals. However, as the article below from Lence Law argues, China still faces multiple crisis on multiple fronts that only working-class struggle and a thorough-going workers’ and socialist revolution can resolve.
Introduction
After the end of the COVID-19 pandemic, China’s ruling class has faced a series of crises. These include both internal crises that exist within the system of capitalism, as well as external blockades and confrontations from imperialism, particularly the US. The internal and external factors influenced each other and have led to a general state of “freezing” in China’s social, economic, and geopolitical situation. Major issues, such as local government debt – the CCP announced in November 2024 a $1.4 trillion stimulus aimed largely at the local government debt crisis – and shrinking domestic demand, have not led to an immediate collapse as some Western media predicted.
However, these issues maintain their existence and are slowly worsening, with this process gradually accelerating as the government ran out their policies, resources, and credibility. This article argues that, apart from genuine concessions from the Chinese bureaucratic bourgeoisie (including those forced by proletarian struggles) that can improve workers’ income and living standards, there are no other means to stop this crisis process. [The term bureaucratic bourgeoisie is used here as a description of the CCP controlled state who also run the nationalised sectors of the economy]
Since the beginning of 2024, China’s exports of electronic vehicles have started to occupy the global market. Before this, other advanced industries, represented by the photovoltaic industry, had also put significant pressure on the US and European markets. However, at the same time, the “official resource” released with a “revised statistical method” since the end of 2023, still showed a youth unemployment rate as high as 14.9%. Forced overtime, pay cuts on civil servants, and increases in water, electricity, and infrastructure service fees further reflect the ruling class’s intensified exploitation of the people.
Moreover, facing the continuously declining real estate market and debt on local governments, the central and local governments in China have repeatedly introduced “market rescue” measures, whose effects have always been weaker than expectations. As for the geopolitical conflicts at the borders, for example Taiwan, they always seem to de-escalate just before reaching the edge of war, at least for now. The actions of a new Trump presidency in the US can change this dynamic. The CCP’s bureaucratic bourgeois rule maintains a peculiar contradiction and stability amidst overall depression, still possessing considerable control and capability to take action. This article will attempt to explain the changes in China’s society under internal and external conditions and the reasons for the recent contradictory phenomena.
History of crisis
Among the many issues, the most representative is the real estate and local government debt crises. Since the policy of “monetization of the shanty area redevelopment” in 2014, Chinese capitalism has moved beyond its “pastoral era”. As Chinese economic growth rate began to decline, the CCP controlled state and the bourgeoisie could no longer rely on the “increment” generated by rapid development to secure huge profits. Instead, they turned to seeking for the “stock”, both domestically and internationally. “Externally” refers to the export of capital to acquire markets, which also explains the decline of relations between the Chinese and American ruling classes. “Internally” means extracting more profits from the domestic proletariat and reducing incomes for the petty bourgeoisie—essentially, providing lower wages.
In fact, these processes had already begun around 2012. However, the intensification of internal and external contradictions did not undergo a qualitative change until 2014. On the one hand, in response to China’s efforts to gain a higher position within the international production chain (such as promoting the internationalization of its RMB currency in finance and attempting to break Western technological blockades in industry), the United States began to adopt countermeasures, eventually triggering the trade war between China and U.S under Donald Trump’s first presidential term.
Since then, Sino-American relations have rapidly worsened. Trump’s second presidency, due to begin in January 2025, will likely see a renewed onslaught in the form of increased tariffs on Chinese exports to the US. If Trump’s pre-election rhetoric is implemented – tariffs of 60% to 100% on Chinese exports are likely in an effort to counter the enormous trade deficit that the US has with China.
Domestically, the Chinese government can still be considered “successful” in handling the market, including actively following the mobile internet revolution and “Industry 4.0”, slightly extending the development “increment”. If this measure can still be considered positive, then the “monetization of the shanty area redevelopment” policy starting in 2014 was the direct reason for China’s economic crisis in the 2020s.
Since the beginning of the urbanization, China has consistently pushed forward with redeveloping old, dilapidated residential areas. Previously, the government compensated residents of demolished areas with newly built houses. However, after 2014, this compensation was “monetized”. Residents in the demolition zones received money equivalent to 1.5 to 2 times the price of a house of the same area, allowing them to buy housing on their own. This policy effectively replayed the economic stimulus in 2008. Similar to the period from 2008 to 2014, a large number of new jobs were created, urbanization expanded rapidly, and advanced industries that were originally concentrated in the developed coastal areas spread across inland.
The economic result was rapid growth, accelerated inflation causing housing prices to rocket. On a social level, a new wave of urbanization re-escalated social mobility, disrupting the previously stabilized class structure. Some skilled workers who drove forward early worker organization took the opportunity to become new capitalists. Combined with the influx of a large number of new workers and industrial relocation, this led to the lack of organization of the working class.
From the consumer perspective, stimulus policies and new lifestyles characterized by food delivery and online shopping promoted the prevalence of consumerism. Moreover, the skyrocketing housing prices created a generation of young people with heavy debts. In 2012, China was known for having the highest savings rate per person, in 2019, the debt per person had reached more than 40,000 RMB, while the average annual income in China was only 30,700 RMB. Beneath the consumerism and economic bubbles lay China’s increasingly widening wealth gap and high debt rates.
However, the past three decades of rapid development have created an illusion that this pace of growth is normal for Chinese society. Up until 2019, despite the suppression of left-wing organizations and the declining living standards of young people, the proletariat and the petty bourgeoisie, which is most of the Chinese people, still believed that there were plenty of opportunities for “class ascension” in Chinese society. Some even had the illusion that if they could seize an opportunity to join the bourgeoisie class, the exploitation they had suffered and the debts they had carried would thereby become insignificant.
Additionally, a significant number of Chinese people bought into nationalist rhetoric, believing that once China defeated U.S. imperialism and overcame economic sanctions and technological blockade, the living standards of ordinary Chinese people would improve significantly. Importantly, these statements are not entirely false. China’s social mobility is indeed higher than that of Japan, South Korea, and Western countries, and China’s economic development has indeed been encountered by developed countries.
However, these partial truths mask the true reason why there is a significant wealth gap in Chinese society. The CCP, using China’s status as a developing country under imperialist blockade to divert attention from to the more shocking internal oppression, was an example of “partial truths can be more dangerous than outright falsehoods”?
The three years’ lockdown policy due to the COVID-19 pandemic, which began in 2019, accelerated the emergence and explosion of existing problems and significantly changed the lifestyle of most Chinese people. Until 2019, ideas such as overconsumption, leveraging, and encouraging loans were widely accepted. However, after the pandemic, people found they are facing unemployment and lack of income. Chinese society’s consumption habits have become conservative again, overall future expectations have also become more cautious. The illusion of continuous growth over the past thirty years was shattered. Most young couples decided not to have children, leading to China’s population declining for the first time in 2022. This change in social ideas caused industries related to child care, such as kindergartens and children’s hospitals, to fall into a decline.
Recent situation
As of the last statistical report in June 2023, China’s youth unemployment rate had reached 21.3%. In July that year the Chinese government stopped publishing youth unemployment statistics. Later the government announced a change in “statistical methods”. By excluding recent graduates who opted to pursue graduate degrees due to poor employment prospects, the government released revised data in December showing a youth unemployment rate of 14.9%.
The Chinese bourgeoisie appears unwilling to address a key factor of this economic crisis, which is the overall lack of domestic consumer demand. While wages have generally decreased across regions, the phenomenon of forced overtime remains unchanged. Even in the high-value-added electric vehicle manufacturing industry, there have been reports of companies like CATL (Contemporary Amperex Technology Co. Limited) forcing employees to undergo even more intensified “896” overtime (working from 8 a.m. to 9 p.m., six days a week).
Due to the sharp decline in the housing market, local governments are finding it difficult to generate income through land sales. And due to the importance of the real estate industry to local economies, the Chinese government, which in 2019 had announced plans to curb housing prices and implement property taxes, had to delay these measures. Instead, it has opted for “targeted investments” to prevent a rapid decline in housing prices. Without such measures, more real estate companies would collapse, severely impacting China’s investment market.
Since 2022, the Chinese government has adopted a strategy of “holding but not boosting” the real estate market through various “market rescue” actions. However, the policies introduced by local governments have not attracted new housebuyers and even not been well-received by house sellers. At the beginning of 2024, many cities saw real estate developers collectively lowering prices to sell properties, but these companies were immediately summoned for discussions and warned by local governments. For real estate companies facing crisis, immediately selling those assets to minimize losses might seem like a reasonable approach. However, for the Chinese government, unrestricted price reductions would inevitably lead to the collapse of the real estate bubble, potentially triggering a large economic depression.
To maintain housing price stability over the following months, local governments employed various measures, including direct administrative orders and certain “reform” initiatives. For example, on May 22th, the Guangzhou government proposed a “old-new exchange” scheme, which means house buyers could sell their old homes to companies and use the proceeds to purchase new ones. This initiative allowed real estate companies to clear their stock of unsold new houses, while the government repurchased the old homes as welfare public rental housing. This arrangement helped companies clear out their houses in stock and allowed the government to generate income from renting out public housing.
However, this approach neither significantly improved people’s ability and willingness to purchase housing nor solved the local debt problem. The rental income from public housing was insufficient to cover the cost and might even increase debt in the short term. Despite these issues, the initiative, which offered some relief, was quickly adopted by many cities. By June 25, 85 cities had responded to the call.
However, ultimately, a series of indirect measures like the “old-new exchange” scheme, those measures such as state-owned enterprises and government buybacks and investments, are just shifting money within the system “left hand to right hand”. What it can’t do is bridge the severe imbalance between housing prices and people’s incomes. Over time, the CCP’s efforts on policies have escalated. On May 17, 2024, they announced a series of policies on the real estate market, including reducing deposit ratios, banned the lower limit on mortgage interest rates, and lowering the interest rates of the national “housing provident fund loan”. Following this, Shanghai introduced measures on May 27, reducing the minimum deposit ratio from 30% to 20%, lifting purchase restrictions, and lowering interest rates. Other cities quickly followed the policies.
Previously, similar strategies of lowering deposits and interest rates had yielded significant results in 2008 and 2014. However, this time, the response was lower than expected.
During the implementation of the “New Policies on 517”, many regions also lifted restrictions on the number of properties individuals could own. Previously, when the real estate market was overheated, local governments had implemented purchase restrictions, limiting residents to owning no more than two commercial houses. After mid-May, many areas, especially developed cities with properties that still retained their value, abandoned these purchase restrictions. Additionally, Hangzhou, a “new first-tier city” (developed cities in China comparable to the “first-tier cities”, which are Beijing, Shanghai, Guangzhou, and Shenzhen), even removed most of its restrictions on household registration. This allowed previously restricted non-residents new opportunities to settle in Hangzhou, which, combined with the new real estate policies, helped stabilize the city’s economic situation.
However, the measures taken by first-tier and new first-tier cities like Hangzhou brings negative effects to second and third-tier cities. Over the past thirty years, many rising second and third-tier cities, such as Jinan and Xiamen, have heavily relied on land finance, but their economic development levels were still not comparable to those first-tier cities. The policies taken by the first-tier cities directly resulted in attracting a large influx of people, make the economic conditions of second and third-tier cities worse. The outflow of population led to more severe consequences for the real estate markets and local debts in these cities. Facing the economic crisis, some cities overly dependence on real estate were actually abandoned.
To address the financial crisis, local governments have adopted measures to increase income and reduce spending, directly impacting the quality of life for ordinary people. Starting from June 26th, people noticed on their mobile “personal income tax” application, that there are 5 new categories of personal income taxes: income from operations; interest, dividends, and bonuses; income from property leasing; income from property transfers; and incidental income.
Apart from expanding tax categories, many state-owned infrastructure and services have also increased their price. For example, Shanghai has raised its water prices for the first time since 2014, the highest tier in its laddered pricing system increasing by over 50%. Similarly, Guangzhou released a water price reform plan, with an increase by nearly 34%, and other cities like Xianyang, Wuhu, Nanchong, Ganzhou, and Qujing increased their water prices from 10% to 50%.
Not only water prices, electricity and gas prices have also risen across various regions. Additionally, transportation costs have increased in all areas. For example, the second-class seat price from Wuhan Station to Guangzhou South Station rose from 463.5 RMB to 553 RMB, while from Shanghai Hongqiao Station to Hangzhou East Station, the second-class seat price rose from 73 RMB to 87 RMB. In the same time, salaries of civil servants in various regions have declined, mostly by 15% to 30%. Furthermore, rumors have circulated about further “reforms” within the civil service system, typically involving reductions in salaries or even layoffs for employees such as teachers and civil servants.
While the measures of the CCP leadership have become more and more unrestricted, one “tool” still remained cautiously used: large-scale reduction of the RMB’s interest rates. In a situation that disregarding the effective protection of the income and quality of life of the proletariat, a significant interest rate reduction was expected to be a method capable of partially alleviating China’s economic downturn, with a large scale inflation. However, during this crisis, Chinese government’s reductions in interest rates have been relatively small. The cause of this phenomenon is another economic power facing a huge crisis, the United States.
International conflict
In previous economic crises, the ruling class of the United States has been able to take advantage of the dominant position of the US dollar worldwide, using adjustments in interest rates to control the investments and transfers taken by capitalists, drive them (or direct them) to acquire large amounts of overseas assets and profit during economic crises. This has been described as the “Dollar Tide”. Since 2016, facing China’s growing strength and increasing resistance to US dollar hegemony, a trade war symbolizing the struggle in trade, technology, and finance has begun between US imperialism and the Chinese CCP regime.
For the US government and US dollar, China’s restriction on foreign exchange and large state-owned enterprises are very unfavorable for US capital intervention. For the Chinese government, the forced large-scale interest rate cuts following the US dollar cycle in 2008 were also one of the major causes of overheating in the Chinese housing market and inflation. Therefore, as tensions between the US and China have escalated, the financial confrontations have created a phenomenon of “counter-cycle” strategy between the two sides.
While the real estate bubble in China continues to intensify, the US debt crisis has also threatened the ruling class of the United States.
While the United States is constrained by US debt, inflation, geopolitical challenges, and internal turmoil, China is also facing a slow but unstoppable decline in housing prices, continued deterioration of local governments’ finances, a depression in domestic consumption, and the decline of its population.
Under the pressure of their respective internal problems, China and United States, for a period, seemed to have no intention of provoking or escalating conflicts. The ruling classes of both sides, costing the declining quality of lives of the proletariat in their own countries and around the world, continued this confrontation of “waiting for the other to fall first”. Thus, we can see that China and the United States have had multiple confrontations from the Yellow Sea to Guam, but the results have been “much said but little done”.
However, the election of Trump can alter this situation, and in a decisive form. It is likely that an escalating conflict between the US and China will be a central feature of the new geopolitical era. The Chinese ruling class has exhausted all measures except improving the situation of the workers, yet they still cannot end the crisis—nor can the ruling class of the United States.
Working Class
Behind China’s rapid economic growth, large-scale infrastructure and urbanization lies the severe exploitation of the vast Chinese working class, and also migrant workers, who own their own rural lands but work as workers in the cities and straddle the line between petty bourgeoisie and proletariat.
According to the National Bureau of Statistics, by the end of 2023, the total number of employed workers nationwide was 740.41 million, with urban workers (those engaged in industrial and service industries) in the scale of 470.32 million, accounting for 63.5% of the total workforce. In rural areas, 297.53 million migrant workers retained land as a means of production and worked as part-time farmers and laborers, including 176.58 million who worked outside their hometowns and 120.95 million local migrant workers.
Compared to data of 2012, the total number of migrant workers in China has not increased significantly over the past 11 years (262.61 million in 2012), but the number of urban workers has grown from 371.02 million to 470.32 million. This indicates the expansion of the proletarian workforce in the past decade, but the slow increase in the number of migrant workers also shows social issues such as the urban-rural divide, the influx of labor into cities, and overall low-wage competition that still exist.
This situation, coupled with the general ineffectiveness of the Labor Law, means that Chinese workers continue to face issues such as low wages, poor working conditions, and difficulties in defending their rights. However, this does not imply that the working class will remain silent regarding their interests.
According to the China Labour Bulletin, there were 1,794 recorded worker protests in 2023, a 216% increase from the 831 incidents in 2022. Among these, the number of manufacturing workers’ strikes saw the highest increase, rising from 37 in 2022 to 438 in 2023. This not only highlights the severity of the economic crisis faced by Chinese capitalism, but also reflects the dramatic economic structural changes occurring in China. It is important to note, though, that even China Labour Bulletin lacks sufficiently reliable sources, with many statistics based on rumors or social media screenshots. But, in the absence of more authoritative data, these figures still hold considerable reference value.
One notable protest was the 2022 strike by Foxconn workers in Zhengzhou. Faced with lockdown policies under pandemic management, reduced work benefits, and infection risks from the company refuse to establish quarantine of new and old employees, the workers ultimately opted for collective action.
The protest evolved from passive strikes, to gatherings, rallies, and eventually demolishing lockdown facilities, leading to direct confrontations with police forces. The presence of many retired veterans among the Foxconn workers, significantly enhanced their organizational discipline. Despite initial fallbacks in clashes with the police, they were able to reorganize and launch new offensives.
The Foxconn workers’ struggle eventually secured them the right to return home and receive “compensation” from the company. After the workers who chose to go home have left, those who remained found they had not received full compensation, prompting them to launch another struggle to secure equal and full compensation.
However, it must be acknowledged that the current Chinese labor movement is still very nascent and weak in both scale and quality. Independent workers’ organizations have yet to form, and even the most basic union structures are severely lacking. The working class has not yet accumulated a consistent tradition of struggle, resulting in a significant “vacuum.”
Most worker protests are confined to individual workplaces or cities. In current unorganized state, protests are inevitably spontaneous and driven mainly by anger, with workers’ organizational awareness and expectations remaining very low and basic. Workers’ protests do not challenge the capitalists’ right to close factories and lay off employees but focus on more “practical” minimum goals, such as recovering unpaid wages and compensation. At this stage, the goals of Chinese labor struggles still concentrate on implementing Labor Laws, securing the right to assembly, and eventually, rights to form independent worker organizations.
Conclusion
In the current crisis, which ultimately is still a form of the overproduction crisis of capitalism, the only thorough solution is to effectively raise the rights and living standards of the working class. However, in the vast majority of cases, without the struggle of the workers, the ruling class cannot be expected to make concessions on their own.
For the working classes of both China and the United States, whether it is “breaking the blockade of imperialism” or “regaining the jobs taken by the Chinese”, it will not bring a better life as promised by politicians and their scribes. The working classes of China, the United States, and the world as a whole, only a united, organized socialist revolution, can decisively eliminate crisis, oppression, and inequality.
A workers’ and socialist programme for China is needed:
- For the immediate implementation of the “Labour Law” across the whole economy, which would mean a maximum 40 hour week in employment as a step to 35 hours with no loss of pay. No to forced overtime
- For a living minimum wage in all provinces that covers the cost of living. For the establishment of workers’ committees to democratically decide on the minimum wage level
- Affordable public housing for all
- Healthcare and social services that are free and at the point of need
- Youth need a future – end mass unemployment – for the right to a job and a living wage – for a mass public job creation programme
- For the right of candidates and parties to stand in elections
- For the right of assembly, protest and to publish and distribute political ideas
- End the oppression of women and LGBT people. Oppose racism and division
- For the building of independent trade unions in China to genuinely represent workers and for those organisations to forge the building of a genuine workers’ party in China
- Nationalise the major privatised sectors of the Chinese economy under democratic workers’ control and management
- Kick out the bureaucrats. The state-owned sector must be put under the control and management of workers’ committees as part of a socialist planned economy
- End privileges of the elite. No elected official to receive more than the average wage of a worker.
- For the right to elect and deselect all officials
- For a workers’ and socialist China as a step to a world socialist federation of states
