By Dylan Prunster

Editorial Preface

Red Ant has not formally adopted “lines” on many theoretical issues. We are formally unified around two things: anti-imperialism and Marxism-Leninism (understood as the fundamentals of historical materialism plus the Leninist theory of organisation). Beyond this, our approach has been to build real relations of solidarity and strategic unity first, rather than beginning from theoretical agreement on all matters of doctrine. Along with our focus on building a culture of comradely communication, the result of this approach is that Red Ant has achieved real unity between comrades who come from a variety of theoretical histories and tendencies.

Still, theoretical questions cannot (and should not) be suppressed. Matters of doctrine, of “lines”, must be discussed within an organisation. Theoretical views inform practice and strategy—if they didn’t, they would be pure abstractions. Majority views on theoretical questions inevitably emerge. Comrades find positions and arguments more or less convincing. And a certain analysis reveals a certain strategic line of march.

Every conjuncture has its big theoretical questions, questions which socialists feel compelled to answer. The question of how socialists should understand and relate to China is probably a good candidate for today’s big question. And although it is essential, as the Bissau-Guinean revolutionary Amilcar Cabral put it, to start out from the reality of our own situation—to prioritise an analysis of local conditions and local questions—we should never put artificial limits on the political consciousness of the working class. Socialist consciousness is a matter of learning to apply ‘the materialist analysis and the materialist estimate [to] all aspects of the life and activity of all classes, strata, and groups of the population.’¹ That means every political question of the day should be raised for discussion, no matter how remote it may appear—and the question of China is certainly not remote.

Red Ant is currently engaged in a process of serious long-term study of China. Investigating the nature of China’s mode of production is part of that study, which is only just beginning. The article we publish here by comrade Dylan Prunster is a powerful contribution on this topic (see also Andrew Martin’s earlier article on similar issues).

We don’t shy away from the fact that the majority opinion within Red Ant is that China is sincerely working towards socialism. But we are also upfront that there exists a diversity of opinion within our ranks on this. If and when we end up endorsing a position as an organisation, the overwhelming priority is that it results from our basic Marxist commitments, from a materialist estimate of the reality of China’s economy, and from our genuine and substantive engagement with the history of Chinese socialism on its own terms—in short, that it results from serious study. That is the only way to avoid the chauvinism inherent in the approach of many socialists in the imperialist countries.

Introduction

Socialists in the Imperial Core increasingly describe the People’s Republic of China (PRC) as a capitalist economy that has abandoned Marxism in favour of market profitability. These critics sometimes argue that the Communist Party of China (CPC) operates as the bourgeoisie of a state capitalist economy. I argue that the People’s Republic remains a dictatorship of the proletariat and that its use of market mechanisms is compatible with Marxist economic philosophy and Marxist-Leninist theory. Drawing on Marx’s Capital, particularly volumes 2 and 3, Adam Smith’s Wealth of Nations, and current economic data, I argue that the PRC remains a dictatorship of the proletariat. While Smith envisioned market-driven wealth as an end in itself, I will show that China deploys such tools as transitional means within the lower stage of communism, as posited by Giovanni Arrighi in Adam Smith in Beijing. I will argue that China’s use of market mechanisms is a pragmatic response to historical conditions, serves the proletariat’s interests, and subordinates the Chinese bourgeoisie. Doug Lorimer’s influential pamphlet The Class Nature of the People’s Republic of China is the primary foil.

Lorimer claims that China became a capitalist state in the early 1990s when the Fourteenth CPC Congress endorsed a socialist market economy.² He argues that China, previously a “deformed workers’ state” under Mao, implemented capitalist restoration under the “Deng regime”. Lorimer argues that this wasn’t immediate, upon the initial market reforms, but rather that the qualitative change took place in 1992 when market socialism was formally adopted. According to Lorimer, market expansion, foreign capital inflows, widening inequality and a burgeoning private sector confirm that capitalist relations of production now dominate in China. His argument, in short, is that the CPC leadership functions as a bureaucratic bourgeoisie in a state capitalist economy. Lorimer instructs the people of China to form a new vanguard and carry out a revolution.³

Defining Capitalism

Per Marx, bourgeois society is one where the bourgeoisie controls the means of production. This control allows the bourgeoisie to extract surplus value from the proletariat, who are forced to sell their labour as a commodity for subsistence. The state is a tool of oppression for the bourgeoisie.

Conversely, the dictatorship of the proletariat is a state in which the working class, through its vanguard party, exercises control of the means of production, policy direction and exerts coercive control over the subordinated bourgeoisie, predominantly to prevent their attempts at counterrevolution. Commodity production and profit can still exist in a “lower stage” of communism (socialism). Indeed, Marx and Lenin both predicted it would.⁴ The evidence below is assessed against those criteria.

How China Leverages Marx’s Capital for Market Socialism

Capital Volume 2 distinguishes three interlinked circuits of capital: money-capital (M … C … P … C′ … M′), commodity-capital (C′ … M′ … C … P … C′), and productive capital (P … C′ … M′ … C … P). In plain terms, these capture money advanced to purchase inputs, transformation in production, and return with surplus; the realisation of commodities that re-enter production; and the reproduction of the production process itself. Their combined functions determine reproduction and growth. While simple reproduction only reproduces enough money capital to continue the M-C-M process, with surplus value going to the capitalist’s personal consumption, expanded reproduction reinvests surplus value to build the forces of production. Marx also divides the whole annual output into two “departments”: Department I, which produces means of production, and Department II, which produces means of consumption. This framework tracks whether society can physically reproduce itself year after year. China’s five-year plans consciously balance these flows. China, of course, reads Capital not as a blueprint but as a diagnostic and planning tool. Under capitalism, the circuits and departments are subject only to the anarchy of production, that is, via profit signals. Conversely, under socialism, those same circuits are monitored and steered with macro levers to serve the interests of socialist society.⁵

Early plans deliberately overemphasised heavy industry and basic inputs in Department I: steel, machinery, and energy to build forces of production and grow the economic base. Recent cycles, by contrast, have pivoted towards Department II products: consumer products and services to raise living standards. In short, it is an ongoing balancing act based on the needs of society at a given time. This, of course, sounds an awful lot like economic planning. That’s because it is! Rather than direct control of inputs and outputs through economic micro-management as practised in the USSR, China’s planning takes a macro approach, keeping the two departments in equilibrium while aggregate growth continues. Further, profits from state-controlled productive forces are directed towards building infrastructure, R&D, public services, and expanding the forces of production as necessary.⁶

In Volume 3, Marx treats credit as the “main lever of over-production” and as a de facto socialisation of capital.⁷ Policy banks such as the China Development Bank extend low-cost, long-term credit to strategic sectors.⁸ This use of credit as a public lever adheres to the Marx–Engels prescription for the centralisation of credit in a national bank under proletarian rule.⁹ The banks’ tolerance of sub-average profits would be impossible under shareholder-value capitalism, but it fits Marx’s description of credit as “the abolition of capital as private property within the framework of capitalist production itself.”¹⁰ China thus redirects this ‘social capital’ toward proletarian and national-development goals, large-scale infrastructure, technological upgrading, and poverty relief, rather than allowing it to crystallise as wealth concentrated in a narrow rentier class.

Marx considers national land ownership as a means to socialise rent. The PRC constitution vests all urban land in the people and rural land in collectives; local governments lease usage rights to finance infrastructure while preventing a land-lord oligarchy.¹¹

Surplus-value in China remains socially controlled and directed toward proletarian interests even when it circulates through markets.¹² This reality undermines Lorimer’s assertion that a socialist market economy is a “theoretical absurdity”.¹³ He offers an unreferenced sketch of what he considers a genuinely socialist (i.e., fully micro-managed) economy but cites no canonical Marxist authority for the claim that planning and markets are mutually exclusive.

Admittedly, Lorimer detected widening wealth inequality at the time of publication of his pamphlet. Yet if we extend his own metric forward, the trend reverses. China’s Gini coefficient fell from 43.7 in 2010 to 35.7 in 2021,¹⁴ while the share of privately owned firms in the market capitalisation of the 100 largest listed companies dropped from 55 per cent in mid-2021 to 33 per cent by mid-2024.¹⁵ Extreme poverty was eradicated in 2020.¹⁶ These outcomes contradict the prognosis that capitalist restoration would entrench a new bourgeois elite.

China, then, adapts to a world economy dominated by commodity production in order to safeguard the dictatorship of the proletariat. Its mix of state guidance and market flexibility secures national sovereignty against Western permanent counter-revolutionary pressure. That accomplishment also echoes Adam Smith’s vision of competitive markets without imperial plunder or rampant rent-seeking. The next section shows how China implements selected Smithian principles, often for the first time at a national scale.

Smith and Arrighi: Markets without Capitalism

Adam Smith lauded the division of labour but condemned the “unnatural and retrograde” combination of colonial plunder and finance that characterised early British capitalism.¹⁷ For example, his often-harsh words were aimed unapologetically at the monopoly pricing, political corruption, and colonial misrule of the British India Company. Arrighi posits that China is reviving this Smithian labour-intensive, agriculturally anchored, non-imperialist market theory under socialist state leadership, or to put it another way, with Chinese Characteristics. Despite Smith often being referred to as “the father of capitalism,” Arrighi argues that his vision of a market economy has never truly been put into practice, until now (with caveats).¹⁸

Smith argued for widespread entrepreneurship and a state organ that laid the groundwork, presenting the means for the working class to do so.¹⁹ Smith singled out infrastructure and education as works “in the highest degree advantageous to a great society,” yet correctly identified that they were unattractive and not well suited to capitalists or the capitalist mode of production.²⁰ If one wanted to demonstrate an example of Smith’s texts being used as an instruction manual, their best option would be China’s high-speed rail grid, universal nine-year schooling and vast digital backbone.

While not a proto-Marxist by any stretch of the imagination, Smith’s vision of a society dominated by self-employed artisans has parallels with what Marx would later call the ‘dictatorship of the proletariat’, not in structure, but in the outcome that direct producers, rather than an idle rentier class, guide economic development. The takeaway here is that markets are not intrinsically capitalist; ownership of capital and surplus determines class character.²¹

There are, of course, divergences between the Chinese model and Smith’s vision. While Smith would laud the massive investments into infrastructure by the Chinese state, he would be less excited about the state’s “overreach” into other sectors and ultimate control of the market economy. This divergence, of course, gets at the fundamental difference between communist and liberal theory. Liberals, while advocating for democracy, believe the role of the state, in the ideal society, is to be a neutral upholder of the social contract, without “authoritarian” characteristics. Communists, conversely, see the state as having an inherent class character and existing solely for “authoritarian” purposes, namely, for one class subjugating another.²² Thus, in a dictatorship of the proletariat, of course, the state will play the primary role in building the people’s state, as it is an extension of the people.

The other important diversion is the historical role of the market economy. Smith saw his vision as the end goal for a prosperous society, while China sees it as a historic novelty. China sees itself as being in the primary stage of socialism; the market is decisive for resource allocation, while the state steers the overall course.²³ This keeps Smith’s productivity logic but under the Marxist-Leninist theory of the vanguard party leading society to the eventual withering away of the state and the end goal of the “higher stage of communism.”²⁴ As per dialectical and historical materialism, this process will entail contradictions, negations of the negations, the unity of opposites, the reconciliation of contradictions and new contradictions born out of those reconciliations. Perpetual push and pull, while always on the path of progress. It is immaterial to expect perfection.

Conclusion

If the state remains a workers’ state guided by Marxian principles, as I have shown is the case in China, then socialists and communists should support it with the utmost vigour. Intellectual curiosity and critique are virtues, but they carry responsibilities. Applied to China, this means engaging seriously with Chinese scholars, testing their arguments against material realities, and critiquing those positions on their own terms, rather than recycling Western narratives with a red tint. In doing so, we reject social chauvinism and practice genuine internationalism, standing in principled solidarity with our comrades in China.

Notes

1. Lenin, What is to be Done?, in Collected Works vol. 5, 412. ↩︎
2. Doug Lorimer, The Class Nature of the People’s Republic of China (Sydney: Resistance Books, 2004). https://socialist-alliance.org/sites/default/files/class_nature_of_the_peoples_republic_of_china.pdf ↩︎
3. It should be noted that Doug Lorimer died in 2013 and his pamphlet on China on which this polemic is a reply was published in 2004. However this is still an influential text for Socialist Alliance and is reflective of the perspectives of other left groups in Australia on China. ↩︎
4. Marx, Critique of the Gotha Program, in Marx and Engels Collected Works vol. 24 (London: Lawrence and Wishart, 2010), 86. Lenin, “The New Economic Policy and the Tasks of the Political Education Departments,” in Collected Works vol. 33 (Moscow: Progress Publishers, 1965). ↩︎
5. Xian Zhang, “Exploring the sinicization of Marx’s social capital reproduction theory: Review and reflection,” China Political Economy (2021), 4 (2). ↩︎
6. Zhang, “Exploring the sinicization.” ↩︎
7. Marx, Capital vol. 3 (Moscow: Progress Publishers, 1959), 441. ↩︎
8. “China Development Bank lends over 3 trln yuan in 2023,” CDB News January 27, 2024, https://www.cdb.com.cn/English/xwzx_715/khdt/202401/t20240129_11267.html ↩︎
9. Roland Boer, Socialism with Chinese Characteristics: A Guide for Foreigners (Singapore: Springer, 2021), 235. ↩︎
10. Marx, Capital vol. 3, 436. ↩︎
11. “Constitution of China,” https://english.www.gov.cn/archive/lawsregulations/201911/20/content_WS5ed8856ec6d0b3f0e9499913.html ↩︎
12. “Report on China’s central and local budgets,” https://english.www.gov.cn/news/202403/13/content_WS65f1970bc6d0868f4e8e50df.html ↩︎
13. Lorimer, The Class Nature of the People’s Republic of China, 37. ↩︎
14. Gini index – China, https://data.worldbank.org/indicator/SI.POV.GINI?locations=CN&view=chart&utm ↩︎
15. Tianlei Huang and Nicolas Veron, “Share of China’s top companies in the private sector continued to steadily decline in 2023,” Peterson Insitute for International Economics, 2024, https://www.piie.com/research/piie-charts/2024/share-chinas-top-companies-private-sector-continued-steadily-decline-2023 ↩︎
16. The World Bank and the Development Research Center of the State Council, the People’s Republic of China, “Four Decades of Poverty Reduction in China: Drivers, Insight for the World, and the Way Ahead,” 2022 https://thedocs.worldbank.org/en/doc/bdadc16a4f5c1c88a839c0f905cde802-0070012022/original/Poverty-Synthesis-Report-final.pdf ↩︎
17. Adam Smith, The Wealth of Nations vol. 1 (Chicago: University of Chicago Press, 1976), Book III, Chapter I, 406. ↩︎
18. Giovanni Arrighi, Adam Smith in Beijing: Lineages of the Twenty-First Century (London: Verso, 2007), 40-45. ↩︎
19. Arrighi, Adam Smith in Beijing, 42-44, 50-51. ↩︎
20. Adam Smith, The Wealth of Nations vol. 2 (Chicago: University of Chicago Press, 1976), Book V, Chapter I, Part III, 244. ↩︎
21. Arrighi, Adam Smith in Beijing, 32-39. ↩︎
22. Lenin, The State and Revolution (Paris: Foreign Languages Press, 2020). https://foreignlanguages.press/wp-content/uploads/2025/08/C05-The-State-and-Revolution-8th-Printing.pdf ↩︎
23. “Resolution of the Central Committee of the Communist Party of China on Further Deepening Reform Comprehensively to Advance Chinese Modernization,” https://www.mfa.gov.cn/eng/xw/zyxw/202407/t20240721_11457437.html ↩︎
24. Lenin, The State and Revolution, 95-102. ↩︎