Friday, 30 May 2014

So is China communist or capitalist?

As a recent graduate in International Business & Globalisation, I decided to focus my dissertation on China as it is the second largest economy in the world and a hot topic in the news. This post is directly derived from my dissertation, so I hope you enjoy it!

Many sources state that China is in fact both communist and capitalist and there is evidence of this in Chinese politics and economics. While there are some arguments that the Chinese Communist Party (CCP) remains only communist in name, there's evidence to disprove this, especially as the Chinese government and the CCP remains dominant in controlling large sectors of the economy and society (Beam, 26/7/2010). 

Many Chinese corporations are owned by the state, also known as state-owned enterprises (SOEs), which results in profits of these corporations becoming profits of the Chinese state. 

The CCP and the Chinese government are highly authoritarian regarding the state and this is why there's only one political party allowed in China; with other political parties being prohibited (Service, 2013). 

What has become clear over recent years is that China has created its' own form of capitalism, known as 'state capitalism' (Coase and Wang, 2013). Sandle (2012) believes that communism is being overshadowed by capitalism and is forgotten in comparison to capitalist advantages (Sandle, 2012, pg 124). 

However, Acemoglu and Robinson (2012) believe that state capitalism is more about gaining maximum political control rather than allocation of resources and economic efficiency, especially as Chinese officials are willing to sacrifice economic efficiency for increased political control (Acemoglu and Robinson, 31/12/2012).

It is believed that state capitalism is going to remain for the foreseeable future, however it is expected to fail eventually due to "internal contradictions", estimated by Marxists (Bremmer, 3/6/2010).  

Sandle (2012) believes that China's consumerism is eroding social ethics and obligations, especially because of governmental actions. He further argues that China's capitalism is a necessity in order to unite and repair China (Sandle, 2012, pg 125). However, while state capitalism seems to be effective for China at present, this couls change in the future. 

China's economy will need to become rebalanced and restructure its' inadequate growth model in order to be less of a risk in the global market, if it doesn't do this then the Chinese economy could enter a state of disarray and financial crisis, which would then impact the rest of the world (Schuman, 28/4/2013). 

If China is dedicated to improving its economy, then it will reap the benefits of comparative advantage and its' expanding and low-cost labour force. Furthermore, China will be able to improve its economy if it continues to remain internationally competitive, which could lead to industrial advances and technological innovations (Liu & Zhang, 2009, pg 133). 

In addition, China's adoption of both globalisation and history has shown that Chinese capitalism is different, as it has become desirable for China and the global market it competes in (Coase and Wang, 2013). Chinese officials are very aware of how successful China has become and the economic standing China retains, however, CHina wants to become more prosperous and realises that it needs to remain attentive when considering China's economic future, because it Chinese leaders are dismissive, the future consequences will be catastrophic (Bremmer, 4/11/2011). 

China's economic development is very uncertain for the future and will depend on many factors, such as industrial development, environmental impact and natural resources, however China is neither expected to face disastrous consequences or vast breakthroughs, therefore it could be argued that China's economic future remains relatively stable in comparison to some other countries (Hinton, 1973, pg 225-226). 

While China's economic future doesn't appear volatile or uncertain, the same cannot be said about China's political future. There are many criticisms of the Chinese government and the CCP, such as when China will allow democracy and whether the CCP would continue to rule if democracy was enforced (Coase and Wang, 2013). 

While it is obvious that China has embraced capitalism in a huge way, China is less willing to embrace another Western ideal such as democracy; this may be too westernised for China and the Chinese government doesn't appear to be happy with the prospect of being a wholly Western nation (Constitutional Rights Foundation, 2008). The Chinese government is adamant that the CCP is the only avenue in which to improve China (Rapoza, 31/11/2013), so it appears that China will not be embracing democracy any time soon. 

For now, China is currently maintaining to be both communist and capitalist successfully. However, this will not remain the case for much longer. China is becoming more and more successful and has become a forefront in the global market, which will result in China becoming more and more capitalist and competitive in the global economy. 

In terms of capital, China is not very communist at all, in China's National People's Congress, the politicians have a combined net worth of $89.8 billion - this astounding figure is tenfold the combined net worth of all members of Congress, the Supreme Court and the President of the United States. This figure translates to China having the richest politicians in the world; hardly a communist trait (Frank, 27/2/2012). 

Therefore, what can be established is that China's economy is clearly capitalist, however Chinese politics is dictatorial and communist. While this seems to be remaining relatively successful for now, the Chinese public will eventually want a democracy and therefore the CCP will have to face competition eventually.

As much as the Chinese government will resent this, the Chinese population will soon want to adopt all Western cultures as China has adopted capitalism; even if the Chinese government has so far managed to adopt its' own form of capitalism in order to suppress freedom for the Chinese population. 

China may have to adopt a different economic framework in the future, however the West will encourage China to adopt the same as what it currently has; capitalism without Chinese restrictions. Although China will be hesitant to change, President Xi Jinping could be exactly what China needs for its dramatic transformation; only time will tell. 


Acemoglu, D and Robinson, J (31/12/2012) Is Capitalism Winning? Project Syndicate. Available from: 

Beam, C (26/7/2010) How Communist is China? Slate. Available from:

Bremmer, I (3/6/2010) The State and the Economy: Re-enter the dragon. The Economist. Available from:

Coase, R and Wang, N (2013) How China became Capitalist. Cato Policy Report. Available from:

Constitutional Rights Foundation (2008) BRIA 24 1 a Communism Capitalism and Democracy in China. Bill of Rights in Action, Vol. 24 (1) 

Frank, R (2012) Are China’s Politicians the Richest in the World? The Wealth Report. Weblog [Online] 27th February. Available from: 

Hinton, H (1973) An Introduction to Chinese Politics. Great Britain: Redwood Press Limited 

Liu, X and Zhang, W (2009) Introduction: Success and challenges: an overview of China’s economic growth and reform since 1978. Journal of Chinese Economic and Business Studies, 7 (2), pp. 127-138 

Rapoza, K (13/11/2013) China's Socialist Model Dabbles With Capitalism...Again. Forbes. Available from:

Sandle, M (2012) Communism. Harlow: Pearson Education Ltd

Schuman, M (28/4/2013) The Real Reason to Worry About China. Time. Available from:

Service, R (2013) Interview. In: Can you name the five remaining communist countries in the world? Radio. PRI. 10th December, 1300 hours 

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