China: Socialist or Capitalist
So many people think it's both, or neither
I’ve been trying to get this video out for about a month, maybe more but many things got in the way - I had a couple of trips I wasn’t planning but loved them and learnt from them as I always do and will write about what I’ve learnt later. However I did promise I would do my best to explain whether China is Socialist or Capitalist, so here we go
Wherever you are, welcome to another of my takes on China and so many people ask me this - is China Socialist or Capitalist - the answer is Yes!
I’d like a dollar for the number of times people have told me that China has only grown because the US allowed them to, or China didn’t grow because of socialism, it grew because it’s actually Capitalist - my answer to that is why don’t you adopt the same methods in your own country and accept constant growth and public benefits - the answer is usually I wouldn’t do that, it’s Communist - proving that most people who argue with me that China is Capitalist, have no idea what they’re talking about but, I have to admit, it is a little confusing so I’ll start with a scenario and work through from there.
Imagine, and for people in China, this is hard but people in the West know exactly what this feels like: you’re paid less this year for doing the job you’ve done several years, when you get your income, the salary buys less than it did, your landlord charges more this year than they did last year. If you’re lucky enough to own a home, you probably also have a mortgage, but, for many of us we suffer mortgage fluctuations, it goes up and it goes down but we accept that because, over time, the property increases in value.
However, as the property increases in value, the local government charges a higher amount of that value in tax. This is a tax for the land we own, and the building that’s on it. As I’m no mathematician so I went to QWen AI for some help with this and found that, using a dynamic scenario, buying a home for $50,000 in the USA in 1975, which is the year I left school and started work. By 1995, that home would be worth $180,000 and this seems great. But it’s not, the owner will have paid $52,000 in local taxes to live there. But this is where the scenario gets even more scary:
If it was purchased with a 30 year mortgage, which is normal, over the first 20 years the AI calculator tells me the repayments over would have been $96,554 and there is still over $31,000 left to be paid. Imagine that, you bought it for $50K, paid almost 100k and then still owe $31K on which you will pay more interest and, when the mortgage is finally paid, you will have paid at least 5 times the value of the home you bought - and even though the mortgage is now paid, you still pay taxes for the rest of your life to live there.
The upside is that you have an asset worth over $200,000, the downside is, it’s cost $250,000 and that doesn’t include the electricity and water you’ve consumed, it doesn’t include the insurances you need.
China’s system doesn’t have this problem. Homes are affordable, most people pay cash, or borrow from family, monthly incomes continue to rise and constantly stay ahead of inflation, people are getting wealthier as their income increases, so do their savings and here’s the big thing - China has no property tax, once you own your home, it’s free to live there. China controls all the utilities and delivers them at affordable prices - it costs me only 30 RMB a month for all my water in a three bedroom, one bathroom home, it costs less than 400RMB a month for electricity in the summer months and only 200 RMB a month in winter. $400 is about $57 and 200 RMB is under $30.
If I was living in many of the larger northern cities, in winter, my heating would be free as hot water is pumped through from the power stations to my radiators. I have gas water heating and cooking, my gas bill is less than 100 RMB a month. In total, because I have no mortgage, I pay on average less than 500 RMB a month - that’s about $82 USD or about 50 British pounds to live in my apartment - that’s what State Control gives us. You might not ever get rich owning homes in China but you’ll always have an affordable roof over your head and, once you’ve bought it, you get 70 years of land use, before needing to renew that - but if its still in your family, it’s free, if you’re selling it, it’s a one off fee - mine was 20,000 RMB and I own the apartment and the land it sits on for the next 67 years.
Job security Western countries over the last 50 years has decreased considerably. When I left school and got a job, it was a real job, 40 hours a week and overtime if I did more, it included deductions for healthcare which was free, pensions which I now receive and if I was unemployed for a period of time, I got unemployment benefits. Nowadays, kids leaving school go on casual, zero hour contracts or gig work and are paid. In the UK and Australia they may get medical coverage but they have to wait a month to see a doctor, or years to see a specialist, if the injury or illness is not life threatening, then it might take a decade to get sorted
In China, I walk down to the hospital, register, join a queue and see a doctor within an hour or so. I can usually see a specialist the same day or next day and I have an operation when I need it - I don’t have insurance but for example, an appendectomy, which one of my friends recently went through cost a total of 27,000 RMB including hospital visit, hospital stay, the operation and all treatment and medication.
Schools are free for 10 years, universities are affordable and they’re now ranked with the best in the world - I don’t say this - I actually went looking for and found a US website that ranks them and, what’s more, the cost of them is affordable, even for foreign students - rarely more than $5000 USD a year - living expenses of another $2-300 USD a month will be needed but how does that compare to a degree in a Western country?
Capitalism won’t do that, socialism does and, now that I’ve set the scene, I want to come back to the original question about Socialism or Capitalism
According to CGTN and I’m using a lot of their research here, the term “socialism” is often understood differently. In the United States, for instance, progressive Democrats are often branded by Republicans as “socialists.” But what they advocate is different from both Marxist socialism and the ideology upheld and the system taken by China. To these Democrats, private ownership and market economy are still considered the main body of U.S. institutions, even though they push for more government control over the economy.
It’s quite plain and simple - no matter how far progressives go, they never depart from those two principles of private ownership and a free market. This, however, leaves ground for people to sow doubt about the way China works. But anyone who has been to China and approaches it without bias would draw the conclusion that China is nowhere near a system that Westerners are so familiar with.
And, whilst China generally refers to itself as State Capitalist the situation is more nuanced. In the 1950s, when the Communist Party of China (CPC) eliminated elements of exploitative classes and institutions, China began to enter the phase of building a socialist society as it needed to address the principal contradiction facing the society at the time - and that is one between the ever-growing material and cultural needs of the people and the backwardness of social production.
The system was built entirely on the public ownership of production means and planned economy in accordance with Marxist theory.
But the extremes of such a system are clearly something the CPC has steadfastly tried to avoid. The need to prevent China from heading down a path that goes against the tide of the times has thus necessitated the incorporation of “Chinese characteristics.”
First coined by Deng Xiaoping in 1982, the concept of socialism with Chinese characteristics aims to redefine the relations between three things - planning and socialism, which is fundamental, market economy which will allow growth and capitalism which would allow some people to grow faster than others. However the need to grow, as Deng pointed out: allowed these “trailblazers” to attain financial success in a controlled and motivated manner, the path is paved for others who aspire to seize similar opportunities. Thus changing the idea of pure Marxism into a system which allowed growth through controlled capitalism.
This genius strategy has preserved institutions of socialism and public ownership while importing sophisticated management experience and advanced market mechanism from developed countries.
Deng further explained that: “Planning and market forces are not the essential difference between socialism and capitalism. A planned economy is not the definition of socialism, because there is planning under capitalism; the market economy happens under socialism, too. Planning and market forces are both ways of controlling economic activity,”
The existence and growth of private ownership, does not necessarily undermine socialism or promote capitalism in China. So, reform and opening-up initiated by Deng in late 1978 adopted elements of a market economy, which became the first major step in the creation of socialism with Chinese characteristics.
More recently, Xi Jinping has said “The Chinese socialist system and state governance system did not drop out of the sky but emerged from Chinese soil through a long process of revolution, economic development, and reform”.
Over the past four decades, the path of socialism with Chinese characteristics has led China to remarkable achievements. China’s gross domestic product (GDP) grew from just $150 billion in 1978 to $18.7 trillion in 2024 and continues to rise at about 5% per annum, while its GDP per capita rose from $156 to $13,300. And, by the time the CPC celebrated its centenary in 2021, China had finished building a moderately prosperous society in all respects.
The World Bank now registers China as the richest country in the world in terms of Price Purchase Parity and here’s an amazing statistic, over 90% of Chinese adults own their own home, not only that, over 75% of them have no mortgage and remember that there are no property taxes or rates here that means, once the home is paid for, it’s literally rent free living for life. Only a few countries have this kind of levels of ownership and they all regard themselves as socialist.
So, where does this take China in the future? On recognising the achievements, Xi Jinping has said: “What we face now is the contradiction between unbalanced and inadequate development and the people’s ever-growing needs for a better life,”. So the gap between the rich and poor, as well as the gap between the rural and urban regions are being closed - infrastructure that Westerner decry as unsustainable is built, not because the country looks for a return on investment but because the construction and operation of them narrows the gap, again only Socialist countries will do this - in Capitalist countries there needs to be a Return On Investment measured in dollars over years.
In China, the Cost Benefit Analysis for a trainline, a new freeway or any other major infrastructure development is not measured in terms of how soon can we recover the costs but in how much it will improve the people who live along it. Return on investment is not about financial return but lifestyle improvements.
To further crystalize what is considered the country’s guiding principle, new elements are constantly injected into the concept of socialism with Chinese characteristics. A concept that was originally invented to address national growth and basic human needs has now evolved into something that’s relevant to many aspects of Chinese society.
From bringing food to the table to having the options to choose from, the transformation process is expected to last long and Chinese leaders, through regular meetings continue to commit to see it through.
All the advances made over the years have been part of an attempt to deal with the issues that arise as China forges its own path. Perfecting China’s socialist institutions also means adhering to Marxist teachings, advancing with time, adapting to changing circumstances such as climate change and biodiversity, the introduction of automation and robotics as mundane, dangerous and repetitive work is taken from humans and handled by robots as well as one more important thing that China strives to do which is: seeking truth from facts.
The fact is, China is a Socialist country, the vast majority of people benefit from Socialist policies but there are Capitalist additions which Marx might not have approved of but for sure he’d agree, they work in China, for the Chinese.