Overview: Faultlines


These international crises would soon create an opening for the incorporation of China into global circuits of accumulation. But this would only be made possible after a series of deep faultlines that had cut across both the developmental regime and the socialist bloc more generally finally fissured, throwing China into alliance with the opposing camp in the course of the Cold War. In this section, we detail the nature of these building crises and explain how, exactly, a developmental regime that had stalled the transition to capitalism could ultimately become a vehicle for that very transition. We dig deeply into the evidence detailing these crises and the various makeshift attempts to solve them, and at various points it may be easy to lose sight of the larger theoretical picture. But these bigger questions are actually the heart of the story.

Central to these theoretical concerns is the question of the transition from pre-existing societies into a capitalist mode of production. Below, we emphasize both the nature of the capitalist system (in order to properly frame what a transition into it entails), and the various mechanisms that undergird the process. Our framework draws specifically from Marx’s understanding of capital’s logic and various debates among subsequent scholars informed by Marx concerning the history of capitalism, especially the “Brenner Debate” about the agrarian roots of capital in England. More generally, in order to understand the nature of change in industrial systems (which is both punctuated and gradual) we draw several important tools from the attempt to theorize large-scale systemic change within evolutionary theory, specifically as developed by Stephen Jay Gould. This story is not meant, however, to be an academic account, but instead a readable narrative that emphasizes historical processes rather than theories about them. We therefore do not pose this narrative in the meta-historical language of disembodied academic voices debating one another. Though obviously informed by these discussions, the names and egos of all scholars are largely confined to footnotes, where they can be properly subordinated to the masses of people who actually make history, rather than those who merely speak of it.

The history of the transition is complex, but major trends can be identified in retrospect. Below, we review the details of the developmental regime’s ossification and explain the early moves toward reform as makeshift responses to this deeper social and economic crisis. Central to this story is the problem of stagnant agricultural production and the slow growth of rural industry after the Great Leap. Moves to modernize agriculture, implement new green revolution technologies and funnel surplus rural labor into light industrial activity began to link together in a self-reinforcing dynamic that tended toward increasing marketization and greater dependence on outside inputs, which would open the door to increasing economic ties with the capitalist world. This was all occurring, meanwhile, in the midst of deeper crises within the socialist bloc. As tensions between China and the Soviet Union grew, the developmental regime lost its most important source of imports and technical training just as it was brought to the brink of war on all fronts. This led to a period of isolation that exacerbated the autarchy and ossification of the late developmental regime, ultimately deepening the crisis and forcing the state to look elsewhere for key external inputs. It was in this context that the diplomatic rapprochement between China and the United States took place, pivoting the course of the Cold War and laying the groundwork for a possible (but at that point far from certain) entry of China into the capitalist economy.

Though the main events in this story are fairly straightforward, we take a different approach to its retelling. We emphasize, first and foremost, that policy decisions and the strategies of statesmen largely follow from more fundamental historical conditions, produced by systemic dynamics, including inertia, on the one hand, and the momentum of masses of people, on the other. Great leaders are not the authors of history, but merely annotate and offer minor edits. Just as we argued, then, that the socialist era was not “Mao’s China,” we maintain that the period of transition in no way belonged to Deng Xiaoping. The “Reform and Opening” (改革开放) was never a systematic strategy for marketization. In fact, it was never even a coherent strategy. Its narration as such has taken place only years later, as a congratulatory story meant to uphold the mandate of the state. In reality, it was a haphazard and makeshift process, utterly contingent and often extremely uncontrolled. This also means that the transition could not have been the result of a “betrayal” undertaken by one faction within the party. Even if such a conspiracy were to have existed, the balkanization of production and the ossification of the state machinery would have ensured that it could never be carried out. Instead, all the major reforms tended to be after-the-fact official stamps given to much more local experiments.

Secondly, we maintain that China’s developmental regime was not able to cohere as a true mode of production, nor was it a “state capitalist” or a “bureaucratic capitalist” country. The attempt to adorn capitalism with adjectives is simply a smokescreen obscuring a poor understanding of its fundamental dynamics. And the socialist developmental regime was not capitalist. Those who argue that the end result of the transition somehow proves the pre-existing capitalist essence of the socialist era make a bizarre logical presumption that would hardly be tolerated in any discipline outside theology: conflating the ultimate end of a process with its preceding forms, as if the germ of the human species were present at the dawn of life. Instead, we offer a theory of how a developmental regime that was not a mode of production slowly broke down, overtaken by the self-reinforcing dynamics of marketization that would ultimately cohere into a mode of production ruled by the law of value.

Finally, we neither claim that capitalism was a wholly domestic product, generated by the unleashed entrepreneurial energies of the peasantry, nor a wholly invasive system, forced upon China by an alliance between local bureaucrats and the international bourgeoisie. It’s true that the law of value had begun its gestation in the Chinese countryside, and specifically within rural industry. In the cities, a proto-proletariat had already taken shape, and even the largest state-owned enterprises had begun to market some of their products and, most importantly, to subcontract work to smaller urban and rural industrial firms largely operating within the market. But strong non-market forces also existed, shielding agriculture and protecting the privileges of the state industrial sector well into the new millennium. The development of this domestic law of value could only be completed by the simultaneous incursion of the global economy in the form of imported capital equipment, increasing the state deficit, and the newly opened zones for export. This export economy and the capital networks that drove it are the subject of the subsequent section.


The Geography of Capitalist Accumulation

The global conditions outlined above would soon converge with a domestic crisis in the Chinese developmental regime. Before detailing this domestic crisis, however, it will be helpful to outline the laws of motion that determine the geography of production under capitalism. The compounding accumulation of value is accompanied by spatial expansion. At an abstract level, the basic logic of capitalist production has, from its inception, had a global character: it has oriented itself as if it were a global system, even when its actual productive infrastructure was geographically delimited. But the subsumption of the Asian Pacific Rim, begun in Japan and completed by the transition in China, would for the first time see the majority of the world’s population subject to the direct rule of capital.

Though often formulated in the abstract, with an emphasis on its ability to reshape and domesticate culture, society and the non-human world, the material community of capital is first and foremost defined by its ability to reshape territory to suit its needs. On one end, this entails the systematic destruction of non-market subsistence, and the perpetual maintenance of various, seemingly extra-economic systems that prevent such subsistence from again becoming possible. Of these, property law is the most obvious, but equally important is the “historical and moral element” that enters into the determination of the value of labor-power, signaling the various ways that the material community restructures the fundamental components of human existence, thereby domesticating humanity in accord with the inhuman imperative of accumulation.

On the other end, however, the expansion of the material community also entails the construction of entirely new sorts of territories, such as the logistics complexes that defined the shift of capital across the Pacific Rim. The exact character of these territorial-industrial complexes has changed in each expansionary wave, but their defining feature is one of spatial inequality. Capitalist production is defined by the extreme geographical concentration of industry. Paired with the destruction and continual prevention of alternative forms of subsistence, this results in rapid urbanization, and cities themselves are severed from their historic limits of climate, geography and soil fertility. The archipelago of logistics infrastructure encircling the Pacific Rim was therefore a sort of vanguard of global capitalist production, pushed eastward by declining profitability in the world economy and by the geopolitical calculations of the United States, as the reigning hegemonic power tasked with addressing this crisis. As we detail above, the import of advanced capital goods from the US, Europe and, later, Japan triggered a series of economic booms in the region, facilitated by wartime expenditures in a series of anti-communist conflicts. While many of these wars were either lost (as in Indochina) or reached a stalemate (as in Korea), it was ultimately their economic side-effects that would breach the divide between the capitalist and socialist blocs.


The Countryside in the Socialist Developmental Regime

Returning now to the domestic situation, it will be helpful to start by reviewing the general conditions of the socialist developmental regime as we left it at the close of “Sorghum & Steel.” This regime was not a mode of production because it never developed an internal logic capable of reproducing itself independently from continuous managerial oversight. This meant that it could not sustain itself at the social scale, resulting in a balkanization of society defined by the borders between autarkic production units. It also meant that the regime could not reliably ensure its reproduction over time, leading to rapid ossification. Nonetheless, in the course of this ossification the developmental regime did form its own local class structure, defined first by the extraction of grain from the countryside and, second, by proximity to the central organs of the state. This class structure was inherently contingent on the character of the developmental regime, and was therefore both chaotic and doomed to rapid obsolescence.

The rural-urban divide defined the developmental regime and was regulated by a high accumulation rate, in which consumption was kept low so that investments in heavy industry particular could be kept high. The increase in consumption was consistently kept below the GDP growth rate, so that industry’s share of GDP rose from 25.9 percent of GDP during the First Five Year Plan (FYP), begun in 1953, to 43.2 percent by the end of the Fourth FYP in 1975.[1] Another way to look at this is that, although over 80 percent of the population worked in agriculture, that sector received less than 10 percent of investment over three decades, from 1953 to 1985,[2] while 45 percent went to heavy industry over the same period.[3] Agriculture fed industry. As a percentage of GDP, industry had already surpassed agriculture by the late 1960s. This strategy would begin to shift with the reforms of the early 1980s, however, when the rate of consumption was allowed to rise, slowing the industrialization process.[4] In this sense, industrialization’s relationship to agriculture was quite different in China than it was in the Soviet Union, which had a far higher per capita grain production in the 1920s and 1930s than China had in the 1950s.[5] Thus, while the Chinese state attempted to rapidly develop heavy industry, agricultural production remained a much more severe limit on industrialization. The state had to increase both its relative share of agricultural surplus as well as its overall agricultural output.

The land reform undertaken in the first years of the developmental regime removed the main rural consumer capable of competing with the state for agricultural surplus: the rural elite (including landlords, local officials, merchants and relatively well-off peasants). In late 1953, the state put in place a mechanism to extract this surplus. Called “unified purchasing and marketing” (统购统销), the system entailed complete state control over the grain market, squeezing out all private merchants. This was seen as the best of several imperfect options at the time, necessary if the developmental regime were to remain independent from a postwar global market firmly in the hands of the United States. As Chen Yun, who sat on the drafting committee of the first FYP, explained the logic behind state control over grain at the time: “Are there shortcomings? Yes. It might dampen production enthusiasm, hound people to death […] and cause insurrections in certain areas. But it would be worse if we do not implement it. That would mean going down the old road of old China importing grain.”[6] After the implementation of the state monopoly, political debates between 1955 and 1980 shifted to the question of how to develop agricultural production in order to produce a larger surplus. Of particular importance was how to avoid the risk of reigniting a local transition to capitalism via the development of rural markets.

The Great Leap Forward (GLF) of 1958-1961 was one attempt to answer this question. Self-reliance and the mobilization of rural surplus labor (focusing particularly on slack season labor, but also inefficiently utilized reproductive labor) would make up for the lack of state investment in agricultural production through collective participation in agricultural capital construction. Meanwhile, this would allow for a high accumulation rate, without risking a revival of rural markets. Such a developmental policy relied on large-scale, rapid collectivization, egalitarianism, successful rural industrialization, and political motivation. On many of these accounts, the attempt was a clear failure. Conversely, a policy of agricultural modernization that relied on more substantial investment from the state, creating the conditions for scientific, mechanized, large-scale farming was another option. Yet this would initially slow the industrialization process, as state investment in agriculture would be much higher, constraining the funds available for heavy industry. Ultimately, the pressure to rapidly industrialize within the context of an often hot Cold War pushed the leadership in this former direction, though not without disagreements.


Gender and Rural Industry in the Great Leap

Changes in rural industry over time provide an important lens for observing shifts in China’s economy as a whole. In the late imperial economy, rural handicrafts such as textiles and papermaking generally functioned as an “organic link between growing and processing agricultural product.”[7] Handicraft production coupled peasant households or lineage “patricorporations”[8] with local and regional networks of consumers via an expansive system of “market-towns.” The nineteenth century onslaught of imperialist invasions, bringing the capitalist world market and a century of civil wars in tow, disrupted this system profoundly, but not terminally.

At the dawn of the developmental regime in 1949, the output value of rural “sideline production” (mainly traditional handicrafts) totaled 1.16 billion yuan in 1957 prices.[9] The land reform movement helped such industries recover somewhat and even grow on a household basis, with over ten million peasants working part time in commercial handicrafts as of 1954, yielding an almost-doubled output worth 2.2 billion yuan. The 1953 introduction of the unified purchasing and marketing system severed these sidelines’ “organic link” between farming and the marketing of processed agricultural products, causing rural incomes to fall in areas that had specialized in handicraft production.[10] When the state established monopsony over agricultural products, rural processing businesses were inevitably cut off from their supplies. Grain, cotton, silk, peanuts, and soybeans—the staple supplies of nonagricultural businesses—were taken by the state immediately after the harvest. In fact, during the 1950s the countryside became deindustrialized.[11]

In 1955, the cooperative movement began organizing handicrafts into “sideline production teams” (副业生产队) under the agricultural co-ops. At first, the movement’s emphasis on agriculture further damaged the situation of sideline industries, with virtually all manufacturing taken over by state enterprises, but by the end of 1957 rural industry had recovered to just above 1954’s output value, equaling 4.3 percent of that year’s agricultural output.[12] Then in 1958, the Great Leap Forward incorporated and reorganized both these village-based sideline production teams and over 30,000 town-based handicraft co-ops under “Commune and Brigade Enterprises” (CBEs). Those CBEs that survived into the 1980s would go on to become “Township and Village Enterprises” (TVEs). In a prime example of capitalist exaption of socialist institutions, the CBEs would pass from being a central component of the GLF’s envisioned “transition to communism” to becoming the first private enterprises and a key vehicle of the transition to capitalism. But even prior to that watershed, CBEs would undergo several earlier changes reflecting shifts in national economic policy.

The creation of the CBEs marked the state’s first systematic attempt to promote rural industry as such. If handicrafts had previously intertwined peasant familial economies with local and regional markets through the processing of agricultural goods, the CBEs fundamentally transformed rural industry by making it subservient to the changing dictates of state policy—policy that was responding in turn to changing international conditions. Initially, during the GLF, this centered on diverting “surplus” rural labor from agriculture to contribute directly to the national race to “surpass Britain and catch up with the US” in heavy industries such as steel. This was coupled with the goal of establishing a self-reliant alternative to the import of capital goods for agricultural modernization, now that tensions with the USSR were complicating the latter, more conventional strategy. This second goal would rise to the forefront after the first was abandoned along with the GLF as a whole in 1961.[13]

In practice the diversion of “surplus labor” into non-agricultural production meant transferring primarily young male peasants from the fields into the 7.5 million new factories set up in 1958 and, more commonly, into the hills where they built roads, brought new land under cultivation, laid railroad tracks, and dug mines and irrigation ditches.[14] And by the end of 1958, the newly established CBEs already employed 18 million people, yielding about three times as much output in 1958 as they had in 1954, and almost five times by the following year.[15] As a result, agricultural labor as a percentage of total rural labor dropped from between 90 and 93 percent in the early to mid-1950s to 71 percent in 1958.[16] This sudden transfer of primarily male rural labor into non-agricultural activities was made possible by pulling women out of the home to become the main source of agricultural labor, reversing the traditional gendered division that had prevailed for centuries, memorialized in the phrase “men till while the women weave” (男耕女织). At first, this reversal was facilitated by the socialization of some of the reproductive work that women would otherwise have done at home in addition to farming. The newly established, village-sized “production brigades” set up public dining halls, facilities to care for children and the elderly, and “other collective welfare measures to emancipate women from the drudgery of the kitchen, and presently men and women began to receive wages for their labor, supplemented by free supply of such items as rice, oil, salt, soya sauce, vinegar and vegetables,” along with free clothing, medicine, child-delivery, and even haircuts.[17]

Such experiments did not really challenge the gendered division of labor as such, since this socialized reproductive labor was mainly performed by elderly women, but it did free up younger women to spend more time doing farmwork for the collective. This brief arrangement collapsed when the famine hit and many institutions of the GLF were dismantled, including both these facilities for socialized reproductive work and most of the CBEs. Henceforth, young women were expected to shoulder the double burden of collective farmwork, for which they received fewer workpoints than men, and domestic work in the household, which now became unremunerated and invisible. Ironically, then, this experiment aimed partially (in rhetoric, at least) at decreasing the disparities between gender roles, between the city and the countryside and between industry and agriculture actually ended up imposing modern versions of those distinctions upon rural society for the first time. The original socialist goal of reducing and ultimately eliminating all gendered disparities and even the family itself was definitively abandoned: “Women’s handicraft labor, which had brought in money for the household in earlier times, was now more invisible than ever,” and this invisible, unpaid labor became “foundational to the state accumulation strategy.”[18]

As famine ravaged the country for three years starting in 1959, central leaders identified not only public dining halls and backyard steel furnaces but also the turn toward non-agricultural activities in general as the essential causes of the disaster, rather than the state’s continued seizure of grain and its export to the USSR even after the famine had become apparent. In 1960, the Eighth Central Committee began a series of calls to close most existing CBEs and prohibit the opening of new ones. Their number fell from 117,000 in 1960 to 11,000 in 1963,[19] and the percentage of the national workforce employed outside of agriculture dropped even lower than it had been in 1957.[20] As a percentage of total rural labor, agricultural work rose from 71 percent in 1958 to 97 in 1962, remaining between 96 and 97 percent until 1973.[21] This nearly decade-long reversal of rural industrialization obtained stable policy articulation in the Tenth Plenum’s “Sixty Articles” (“Regulations on the Work of the Rural People’s Communes”) of 1961-1962, which stated, “The commune administrative committees shall generally not run new enterprises for years to come.” Another Central Committee announcement two months later went further by prohibiting communes and brigades from establishing not only new enterprises but also any new sideline teams.[22] Despite this, CBEs would gradually recover throughout the decade, and by 1970 were ready to receive a sudden push—this time with an exclusive focus on agricultural modernization.


Fraught Efforts at Agricultural Recovery

By the early 1960s, the subsistence situation was grave, and the focus was on reviving agricultural production. Without raising state agricultural investment, however, the only way to increase agricultural production was to intensify labor inputs. While the more flexible, post-Leap organizational form of the commune and rising rural population brought increased labor inputs and higher per-acre yields, agricultural labor productivity rose only very slowly until the late 1970s, when state investment in agriculture finally began to increase significantly. In the 1960s and 1970s, in other words, agricultural modernization was again postponed as a future goal, too costly during a time of rising tensions with the Soviet Union, when rapid industrialization—and therefore a focus on industrial investment—was seen as a strategic necessity. Throughout this period, various methods of encouraging greater rural labor investments were attempted via both local experimentation and central state policy. Each form was at best only temporarily successful, as discussed in “Sorghum and Steel.” This process began with the state attempting to rebuild the basic rural institutional structure that had broken down in the Great Leap Forward.

In 1961 and 1962, a new commune structure was adopted. With accounting at the commune level during the Leap, it was difficult for anyone to see how their own work affected their consumption. Communes held tens of thousands of people comprising many villages. The post-Leap structure, by contrast, reduced the importance of the commune in organizing production. The lower levels of the production brigade (the size of a village and containing up to a couple thousand people) and the production team (usually containing between 25 and 40 households) became the center of decision-making about production. Under this new system, communes would act as a “union” of brigades, needing agreements from the lower levels to undertake large projects. Brigades would be responsible for collective profits and losses and would now act as the basic “owner” of rural land. But brigades were also not supposed to enforce egalitarianism among the production teams below them. Brigades had to bargain with their teams for resources and in order to undertake collective projects, and teams could refuse labor to the brigade and above. The team became the basic level of accounting, planning production and small-scale capital construction, deciding remuneration rates, and managing agricultural machinery. Overall, this amounted to an attempt to stop the rapid disintegration of rural institutions following the Leap. At the time, the shift to teams as the basic level of accounting was seen as temporary. The now-postponed, longer-term goal of agricultural modernization implied an increase in the scale of production and organization of labor. Debates about when to raise the level of accounting back to the brigade repeatedly flared up within the party leadership, but they failed to have an effect in most areas due to lack of support.[23]

After two years of sharp declines in agricultural production (1959 and 1960), agriculture began to grow again from 1961, when state agricultural purchasing prices were raised by well over twenty percent, incentivizing labor investments. Yet from the early 1960s through to the late 1970s, one system of labor remuneration after another was tried in order to maintain the intense labor inputs necessary to raise yields. With a policy of local self-reliance remaining strong throughout the 1960s and early 1970s at the expense of agricultural modernization, however, state investment in agriculture and farmland capital construction remained largely stagnant, 1964 being the only year with a significant increase in investment. The mobilization of labor together with new seed varieties did result in relatively high agricultural growth rates between 1962 and 1966,[24] but this growth was not sustained through the late 1960s, with 1968 actually recording a decline. Nor did labor productivity increase significantly throughout this period.

Popularized in the early to mid-1960s, indigenous green revolution technologies, especially new seed varieties and hybrid rice plants, gave a boost to agricultural production, but they also necessitated greater chemical inputs, especially fertilizers, which were still in short supply. By the early 1970s, many of the initial benefits of new seeds began to wear off. It was only with significantly increased state agricultural investments at the end of the 1970s that such technologies really began to pay dividends. Likewise, egalitarian systems of remuneration had begun to show signs of strain as well. Village studies show that monthly meetings to decide remuneration by the use of workpoints began to be taken less seriously, and workpoints that had been decided by group assessment now became almost a set wage as peasants no longer came to meetings. The effects of ideological motivation, so crucial to the socialist developmental regime, were waning. The quality and intensity of work suffered, as did yields.

Falling growth rates from the late 1960s into the early 1970s led to rapid shifts in rural policy, as the state looked for ways to increase agricultural production without raising state investments dramatically. While the production of agricultural chemicals, in particular fertilizers, grew in the 1970s, its sharpest growth did not come until the end of the decade. All of these problems led to a slow and uneven process of agricultural modernization in the 1970s, with absolute agricultural production suffering as a result. National grain production grew unevenly from 240 million tons in 1971 to 284 million in 1975, then it stagnated for the next two years.[25] It wasn’t until after Mao’s death in 1976 that agricultural policy took on a much clearer direction, as discussed below, reacting to the stagnation of the mid-1970s.


Rural Industry after the Leap

Despite the mass closure of CBEs and the restrictions that the Tenth Plenum had imposed after the famine, rural industry began a gradual recovery in 1964, now with a more exclusive focus on industries serving the increasingly necessary but still de-prioritized goal of agricultural modernization—with the idea that rural enterprises could play this role instead of state-run enterprises, which were to remain focused on heavy industry. On the one hand, this reflected an increasing recognition that the mere rearrangement of labor, combined with ideological mobilization, was losing its ability to increase agricultural output (especially now that many peasants had lost faith in the party following the failure of the GLF). On the other, the import of capital goods for agricultural modernization had now become nearly impossible, given the deterioration of China’s relations with the USSR and its allies. The hostile international environment also meant it would be risky to rely on China’s few existing industrial centers for this task, as they either abutted the border with the Soviet Union or sat along the coast, where they were susceptible to US military power. The solution that emerged was a specific form of rural industrialization: the combination of (a) the “Third Front” strategy of establishing new bases for heavy industry scattered throughout China’s underdeveloped southwestern provinces and (b) the revival and expansion of CBEs and county-level state enterprises producing modern agricultural inputs and machinery along with cement, iron and energy. The latter, in particular, would help to create the conditions for marketization in the countryside, prefiguring the rapid rural industrialization of subsequent decades.

This second round of CBE development started gradually, as fears receded about the association between famine and the promotion of rural industry. In 1964 (the same year the Third Front was launched), the Central Committee formulated a policy of promoting the “the five small industries” (五小工业) deemed crucial to agricultural modernization: power (small coal mines and hydroelectric plants), small iron and steel mills, small fertilizer plants, small cement plants and small factories producing agricultural machinery.[26] At first, three of these “five smalls” (steel, fertilizer and cement) were limited to enterprises operated at the county level, that being the lowest level of the state apparatus whose officials were directly appointed by the central government. The other two “small industries” could also be operated at the commune level, but none could be operated at the still lower brigade or team levels. This was the first time since the GLF that rural governments were authorized to set up their own independent sectors of industry.[27]

It would not be until 1970, however, that the Fourth FYP would clearly shift emphasis to both the commune and brigade levels, promoting the development of CBEs in all five of the “five smalls.” This outline was fleshed out at that year’s North China Agricultural Conference and the following year’s National Conference on Rural Mechanization, which declared that “a key purpose in developing rural industry was to further the cause of agricultural mechanization over a ten year period and which made rural industry eligible for bank loans and fiscal support.”[28] It was now also emphasized that the five smalls should operate according to the principle of “the three locals” (三就地): the use of local inputs, on-site production, and the sale of output to local markets. This national policy direction was then given a boost by some underdeveloped provinces such as Hunan, which immediately launched a campaign called “Construct an Industrialized Province within Ten Years” and, in 1972, established a provincial bureau specifically for supporting CBEs.[29] By the end of that year, CBEs had surpassed county-level enterprises to become the major engine of rural industrialization throughout China. CBE output value grew from 9.25 billion yuan in 1970 to 27.2 billion in 1976, averaging 25.7 percent per year.[30] By 1978, nearly half of China’s industrial workforce would be employed by rural enterprises at either the county, commune or brigade level.[31]

Aside from the dire international situation and the persistent problem of stagnant output, another factor contributing to the expansion of CBEs around 1970 was the Cultural Revolution. The mass struggles of 1967-1968 seriously disrupted urban production in many parts of China, creating demand for certain CBE-produced goods. Cadres in some communes near big cities took the initiative of retooling CBE production to serve neighboring urban markets when their own production was strangled by strikes and constant political mobilization.[32] Then, from 1968 onward many urban cadres, workers and technicians began to be “sent down” to the countryside, all contributing to CBE development.[33] Meanwhile, changes in the local investment structure undergirded these changes. All this would have come to nothing, for example, if the new CBEs did not receive generous financing from local banks—at the time all technically branches of the People’s Bank of China or, in some cases, local co-operative savings institutions that didn’t take personal deposits. In Sichuan’s Mianyang Prefecture, for example, “lending to collective industries increased by 58 percent in 1970, and by a further 75 percent in 1971; between 1969 and 1978, the total increase in lending was 5.7 fold.”[34] This in turn was made possible by China’s financial decentralization in the early 1970s, which gradually began to mimic market allocations of investment funds in some rural areas.[35]

Despite these national and sometimes provincial pushes, the lingering association of rural industry in general and CBEs in particular with the famine stalled their development in many locales. This was especially true in Sichuan and Anhui, the two provinces hit hardest by the famine. They did not recover the CBE output level of the Leap years until as late as 1978 and 1980, respectively.[36] By contrast, most provinces regained their 1958 peak by the late 1960s, even before the national push launched in 1970. In fact, commune enterprises grew at a national average of 16 percent between 1962 and 1971—even higher than China’s 11 percent overall rate of industrial growth.[37] This means that local cadres were taking the initiative to support such enterprises despite the central government’s restrictions. Up until 1978, however, the state officially continued to prohibit both communes and brigades from engaging in most industries, and “any commune discovered engaging in industry on more than a commune scale was penalised.”[38] One rural cadre in Sichuan reports being punished for starting a commune-level brick kiln in the late 1960s, and being repeatedly denied loans and authorization for operating the commune’s few enterprises that had survived the Great Leap.[39] Official policy had now clearly begun to diverge from the reality of industrial growth, contributing to the massive shift in rural policy that would begin in 1978.


Class and Crisis in the Late Developmental Regime

Over the course of the 1960s and ‘70s, the developmental gap between China and many neighboring countries had begun to widen. Overall, after the GLF, the socialist developmental regime was able to secure only stalling bursts of growth and marginal improvements in general livelihood. Primary education and access to basic healthcare unarguably improved throughout this period, but these victories were won against a backdrop of pervasive stagnation. Incomes essentially plateaued in both city and countryside—whether measured by wages, estimates of wages plus non-wage subsidies or simply calorie consumption.[40] Meanwhile, urbanization halted entirely. Throughout the last two decades of the developmental regime, the population living in cities was held at under 20 percent of the total, only growing an average of 1.4 percent per year after around 1960, almost entirely due to natural increase.[41] But even this proved too much, as the demographic boom of the 1950s began to flood the saturated urban job market with a new generation looking for work. The result was a wave of layoffs and rustication programs during the Cultural Revolution that funneled even more people into rural and peri-urban areas.

The class structure of the developmental regime, shaped in the 1950s and hardened over the course of the following decade, was defined by the rural-urban divide between the peasant class of grain producers and the urban class of grain consumers. Urbanites were themselves subdivided according to their level of access to the grain surplus—which obviously translated into numerous, often substantial privileges aside from simply eating more—ordered via political status and employment in state-owned industrial enterprises of various sizes and importance. But by the middle of the 1970s, the class structure of the developmental regime had begun to strain. Industrial production continued to grow (despite a brief dip in the most tumultuous years of the Cultural Revolution), but the returns on this growth were funneled into even larger investment drives. In the countryside, an expansion of primary education and noticeable healthcare improvements (all facilitated by the rustification of skilled young urbanites) helped to suppress further unrest, but ruralites remained at the bottom of the developmental regime’s class system, with very little chance at upward mobility. In the cities, a loosening of restrictions on sideline production allowed foodgrain and meat consumption to increase somewhat, but incomes (including subsidies) stagnated. Despite pervasive autarky and geographic unevenness, the general pattern was an increase in the rural-urban divide throughout these decades, with the urban, grain-consuming class commanding incomes somewhere between three and six times that of grain-producing ruralites.[42]

Meanwhile, the black market had begun to grow as the state ossified and production became more militarized: the army had stepped in to directly administer industry after the unrest of 1969, and cadre numbers began to skyrocket as early as 1965. By 1980, the total number of cadre would reach a peak of 18 million, nearly 2 percent of the total population and 4 percent of the total labor force.[43] In the cities, the sub-divisions within the class of grain consumers multiplied alongside corruption, with cadres and even many state workers hoarding ration coupons, embezzling enterprise funds and running illegal private businesses on the side.[44] At the bottom of this urban hierarchy sat a growing proto-proletariat of lower-paid temporaries, returned rusticates, “worker-peasants,” “lane labor” and apprentices, all working precarious jobs at small collective firms subcontracting for the large state-owned enterprises. This proto-proletariat had grown to more than ten million by the 1970s, or about 3 percent of the total labor force. Such workers were disproportionately young and female, and largely concentrated in cities like Shanghai and Guangzhou, where they made up a much larger share.[45]

These later years of the developmental regime saw continuing decentralization and local autarky, combined with the Third Front investment drive initiated after the unrest of 1969. This investment drive was defined by its isolationist military logic: the emphasis was on construction of massive industrial projects in the mountainous regions of China’s interior provinces, the goal being to build an industrial structure secure from US military incursions along the coast and Soviet incursions along the land border to the north.[46] Though similar in size and character to the GLF, this new development burst did not divert unsustainable amounts of resources from the countryside, instead distributing austerity more evenly across the population. Wages stalled, material incentives (bonuses, piece-rates, etc.) were suppressed, and the autarkic nature of production meant that those in larger, better-equipped enterprises or more climatically sound rural collectives tended to fare better than others. Many popular images of quotidian life in the Cultural Revolution (and the socialist era more generally) derive from this period, when material incentives were replaced with ideological rewards (red scarves, pictures of Mao, copies of the Little Red Book) and scarcity was met with essentially spiritual exhortations to sacrifice for the building of socialism.

But scarcity in this era was markedly different than that experienced in the immediate aftermath of the GLF, where recovery was characterized by comparatively low levels of investment. Prior to the Leap, investment as a share of GDP had sat around 25 percent, and immediately afterward it troughed at a mere 15 percent. Following this, investment not only recovered, but would never again experience such a severe trough. Despite a brief dip during the Cultural Revolution, investment as a share of GDP has undergone a secular increase from the post-Leap trough to today.[47] Continual, expanding “big push” investment drives would become a central characteristic of Chinese development, continuing well after the socialist era. The need to sustain these drives in order to avoid the pitfalls of absolute scarcity experienced in the earlier years of the developmental regime would, in fact, provide one important justification for the opening of the economy.


Figure 2



Breaking the Bloc


As the postwar boom in the capitalist world gave way to the long downturn, a series of qualitatively different crises had spread throughout the socialist bloc. China’s developmental regime, though initially successful in preventing the transition to capitalism, was only capable of coordinating production and distribution through an increasingly ossified, militarized and zealous fusion of party, state and society. In other socialist countries, a similar decay had long been evident. The root of this decay has been among the most heated topics debated within Marxist scholarship, with polemics and counter-polemics spilled across nearly the entirety of the last century, often written by political factions stranded in the cold world that came after the insurrectionary era and therefore desperate to clothe themselves in the costumes of long-dead revolutions. There’s no need to repeat these debates, and our inquiry into this question as it relates to China has been made evident already.[48] Nonetheless, it is contextually important to note that this more general crisis of the socialist bloc passed through a certain watershed with the shifts in policy and popular activity that followed the death of Stalin in 1953. But in the same way that Chinese policy changes were often makeshift responses to specific crises and local limits to the developmental project, the conflicts within the socialist bloc that were beginning to peak were not in any direct way “caused” by Stalin’s death, nor were Khrushchev’s policy shifts a simple matter of political whim. Instead, both the popular revolts that followed (in East Germany in 1953, Hungary in 1956 and Czechoslovakia in 1968) and the reforms implemented by Khrushchev were responses to deep-seated crises that had long been building within individual countries and within the hierarchies built into the USSR and the bloc more broadly. In each instance, this process of bureaucratization, revolt, reform and, in some cases, collapse, was shaped by local conditions.

Each socialist nation, whether federated within the Soviet Union or sitting outside of it, would therefore experience this period of tumult in its own fashion. Nonetheless, the global scale of the Cold War helped to sculpt certain regional trends within this broader crisis. The two major geographical fronts of the war lay across Europe and along the Asian Pacific coastline, and these were the areas that would experience some of the harshest effects.[49] In Eastern Europe, treated as a military buffer between the Russian core of the USSR and the capitalist world, this came in the form of thorough domestic repression and widespread militarization of society, justified by the threat posed by NATO. These conditions, combined with the troubled histories of many countries’ incorporation into the socialist bloc, ultimately stoked a series of popular revolts that were met with more repression, a cycle that would culminate in the overthrow of most of the region’s national governments in 1989. Along the Pacific, however, the crisis was defined by open warfare on the Korean Peninsula and across Indochina, as well as continual guerilla war in the Philippines and repeated conflicts across the Taiwan Straits. While Russia was somewhat insulated, China had no such luxury.

The continuing active involvement of the United States in ongoing military conflicts bordering China led to a situation in which Chinese national imperatives had begun to contradict those of the USSR which, under Khrushchev, had started to lay the framework for a détente with the US as early as the late 1950s. Many of China’s critiques of the USSR in this period focus on elements of this détente, particularly the attempts to curtail the proliferation of nuclear weaponry via agreements such as the Partial Test Ban Treaty. By the end of the Great Leap, the USSR had ceased all material support for the Chinese nuclear program. This was despite the fact that the US had recently moved long-range nuclear missiles into Taiwan. But even if China could no longer secure military support from the USSR, its leadership could ensure that the interests of the Soviets and the Americans would not be united against it. Soon after, an artillery battle started by the Chinese initiated the Second Taiwan Straits Crisis, undercutting Khrushchev’s overtures for “peaceful cooperation,” and Chinese propaganda began to publicly emphasize the weakness of Khrushchev in the face of US imperialism, even while Chinese diplomats privately sought to secure talks with the US in the hopes of gaining formal acknowledgment (and thereby a seat on the UN, long held by Taiwan).[50]

Also involved in these conflicts, however, was an intentional strategy on the part of the US security apparatus to drive a wedge between the two major players in the socialist bloc. Well aware of the long-standing tensions between the Chinese and the Soviets, the new round of tensions would soon become an opportunity for the Nixon administration to pursue a triangular strategy of Cold War diplomacy that sought to trigger the increasingly volatile fault lines that had long divided the world’s two largest socialist countries. Over the course of the 1960s, these fault lines had already begun to buckle, and an increasingly autarkic China found itself faced with the prospect of simultaneous war against the world’s two great superpowers. By the end of the Cultural Revolution, the faults finally slipped, causing a tectonic shift within the socialist bloc that would ultimately define the shape of the second half of the Cold War.

Though sparked by the death of Stalin and the subsequent policies pursued by Khrushchev in the USSR, all driven by local processes of ossification, the historical roots of what would come to be known as the “Sino-Soviet Split” lay much deeper. Fundamental disagreements on theory, tactics and revolutionary strategy had existed between the CCP and the Soviet Union since the 1920s, when the Comintern-backed strategy of allying with Chiang Kai-shek’s Nationalist Party had resulted in a disastrous period of white terror that very nearly extinguished the revolutionary movement. It was in these years (beginning with the Shanghai massacre of 1927) that the leadership of the CCP had shifted decisively from the party’s orthodox, urban wing, represented by the Soviet-educated “28 Bolsheviks” to its more populist, peasant-oriented wing, represented by Mao. Though maintaining strong relations with the USSR throughout decades of foreign invasion, civil war and reconstruction, these years of white terror had both ensured the CCP’s rural turn and made it wary of overreliance on Soviet guidance.

Nonetheless, Soviet aid had become integral to the early years of the developmental regime, particularly in the Manchurian industrial complex, which saw a massive influx of Russian technicians, managers and engineers in the early 1950s. As tensions increased after 1956, this flow of aid and skill-sharing slowed to a trickle. By the end of the 1960s, it had dried up entirely. Isolated from both the socialist and capitalist blocs, the domestic economy grew increasingly autarkic. This situation was portrayed in domestic propaganda as a proud form of self-reliance, simultaneously anti-imperialist and opposed to the bureaucratic ossification of the Soviet Union. In reality, autarky was paired with a volatile international policy that resulted in support for brutal governments such as the Khmer Rouge and a series of risky military engagements in neighboring countries such as India in 1962.

The most definitive of these was the 1969 Zhenbao Island Incident, a seven-month period of open (though undeclared) military conflict between China and the USSR. This conflict essentially condensed the previous decade of declining economic relations and political controversy into a single symbol of open hostility. Its exact cause (a border dispute over a patch of land in the middle of a river) was not particularly important, nor, in retrospect, was its conclusion (maybe a hundred or so dead soldiers on both sides, no solution to the border question, and an inconclusive ceasefire). What was important was the scale assumed by the crisis, clearly signaling that more was at stake than a few simple tracts of land. Though initiated by a sequence of attacks and counterattacks on Zhenbao Island, located in the Ussuri (Wusili) River, the official border between Russia and China in western Heilongjiang, the conflict would soon see an unprecedented military build-up along the entirety of the two countries’ 4,380 km border. The fighting in Heilongjiang had not only reignited simmering disagreements in the Northeast, but also raised a number of latent border issues and ethnic tensions in Xinjiang, abutting the Soviet Republics of Tajikistan, Kyrgyzstan and Kazakhstan. In reality, the border had never been well-demarcated in the first place, both revolutionary regimes inheriting long-disputed territories defined by century-old treaties signed by the Tsarist and Qing states. China’s far west was particularly amorphous, only fully incorporated into the Qing in 1884 after more than a century of intermittent warfare. It was an ethnically diverse region, the majority of its population drawn from an array of Turkic-speaking nomadic steppe tribes, many of which held strong ties on both sides of the border.

When the Zhenbao Island Incident ignited a simmering border conflict in the Pamir Mountains, in Southern Xinjiang, bordering Tajikistan, the Soviets were able to use these long-standing ethnic tensions in the area to their advantage. Military build-up along the border had been occurring since failed border talks in 1964:

In 1965 the Soviets had 14 combat divisions along the border, only 2 of which were combat-ready; by 1969, Soviet forces had increased to between 27 and 34 divisions in the border areas (about half of which were combat-ready), totaling 270,000-290,000 men.[51]

Alongside this, the Soviets threatened to stoke a separatist insurrection within China, all backed by the possibility of nuclear conflict. As early as 1967, the USSR had deployed a long-range mobile nuclear platform to the border, within striking distance of China’s own nascent nuclear program, which used the Lop Nur desert in Xinjiang for testing. The same year had seen the detonation of China’s first hydrogen bomb at Lop Nur, and by 1969 the Russians would begin contemplating the idea of a joint strike with the US to eliminate China’s nuclear capacity. The Chinese, meanwhile, saw the Soviet Union’s nuclear parity with the United States as a threat to national security, since China was now dependent on being included within the “umbrella” of Soviet deterrence at the very moment when relations between the two states had become increasingly volatile. In 1968, the Soviet invasion of Czechoslovakia set a concerning precedent, with the “Brezhnev Doctrine” arguing that the USSR had the right to intervene in other socialist countries if necessary.[52]

Faced with these threats, the Chinese military turned to a strategy of “active defense,” defined by small-scale ambush attacks along the border, justified as last-resort defensive actions meant to deter future aggression.[53] It was just such an ambush that ignited the Zhenbao Island Incident in early 1969. The USSR perceived the attacks to be simple acts of aggression, rather than an attempt at defensive deterrence—the very logic of “active defense” symbolic of the increasing unpredictability of Chinese military policy. The same year saw the height of the Cultural Revolution, capped by dissension within the ranks of the PLA, and the risk of civil war. By the spring, the conflict over Zhenbao had escalated to involve thousands of troops and by the end of summer a similarly violent battle had taken place in Tielieketi in Xinjiang, along the border with Kazakhstan. Throughout, the Soviets had been threatening nuclear action against China, and the growing tensions began to risk the real possibility of a widespread nuclear conflict for the first time since the conclusion of the Cuban Missile Crisis. Official war preparations in China began in August, including renewed military mobilization and the formulation of plans for the mass evacuation of major cities.[54]

China’s counter to the threat of nuclear conflict was a “people’s war,” to be conducted via an overland invasion of the Soviet Union. Though technologically inferior, with only a handful of deployable nukes, the bulk of the Chinese threat came through the sheer size of its military, capable of flooding into the USSR and fighting a protracted conflict at home and abroad. The relatively low levels of urbanization within China also muted the threat of nuclear conflict itself—with a decentralized population, nuclear strikes on key urban centers would not have the same crippling effect as in Europe or the United States. The Soviets had no good plan to deal with such a threat. If war were to break out, key strategic centers in the Russian East could be lost to the invasion, and the Trans-Siberian railroad easily crippled. At one point, the idea of deploying nuclear mines along the border was considered, though Soviet military strategists understood, in the end, that any substantial nuclear attack would risk a world war.[55] The conflict was resolved inconclusively, ending as haphazardly as it had begun.



Though the threat of open war with the USSR ultimately subsided, the militarization of the developmental regime did not. The risk of the war itself offered a justification for the disbanding of the more radical Cultural Revolution organizations, a process capped by the use of the military to quell the factional battles that flared into local armed conflicts in 1968 to 1969. Meanwhile, in order to ensure uninterrupted production, much of the country’s industrial infrastructure was turned over to military administration.[56] Domestically, this only ensured further stagnation. At the geopolitical level, however, the end result of this military brinksmanship was a rapprochement between China and the United States, spearheaded by the Nixon administration but actively sought by many within the upper rungs of the Chinese state, foremost among them Zhou Enlai.

Over the course of the 1960s, it had become increasingly clear that both autarky and military isolation were fundamentally unsustainable. Economic isolation led to increasing demand for capital goods that could not be produced domestically, and this demand encouraged the opening of diplomatic ties in the hopes of obtaining these capital goods. At the same time, isolation had led to the risk of simultaneous warfare on all possible military fronts—a coastal war with the US, an overland war in Manchuria and Central Asia with the USSR, mountain warfare with India in the Himalayas (following the Sino-Indian war in 1962), and both direct and proxy conflicts with Soviet-aligned governments in the jungles of Indochina. These threats had already led to a major shift in the geography of investment within China itself, with the Third Front development drive focusing on large military-infrastructural projects in China’s least-accessible interior provinces.[57] The political symbolism of the Third Front was stark and militaristic: after the Japanese invasion, the Nationalists had made a similar retreat to the interior, making Chongqing the wartime capital and building much of the basic infrastructure now used in the Third Front industrialization drive.

Following the border conflict in 1969, mending ties with the USSR was unlikely. Instead, China’s only real way out of isolation was to slowly warm to the overtures made by the Nixon administration. This process was spearheaded by Zhou Enlai, an ally of Deng Xiaoping who had long been China’s premiere diplomat. But the opening cannot be attributed to a single faction within the CCP leadership. First, it was more a response to the building domestic crisis than a political whim, driven in particular by demands for capital goods in the petroleum and fertilizer industries, both considered absolutely essential for the success of the industrial programs of the 1970s. Second, there was clear, if tacit, support for this opening among rival factions within the CCP leadership. In fact, diplomatic contact was initiated in the midst of the Cultural Revolution (albeit after the peak of 1969), and if Mao or the Gang of Four had opposed it outright it simply could not have happened. At first, this opening came via informal channels, beginning with the exchange of table tennis players in 1971, endorsed by Mao, in what would later be termed “ping pong diplomacy.” These informal overtures were followed by a series of secret meetings between Zhou and Kissinger later that year.

The US embargo against China was lifted by the end of 1971, and the next year Nixon and Kissinger formally visited China, the first time a sitting US president had ever visited the country. During the visit, Nixon and Kissinger had a single, brief meeting with Mao, during which the main outlines of Chinese policy were established. The remainder of their trip was composed of a series of meetings with Zhou Enlai, interspersed with gift exchanges and scenic photo-ops, and concluded with the issuing of the Shanghai Communiqué, to this day the foundational document of Sino-American bilateral diplomacy. Alongside the lifting of the embargo a year prior, the Communiqué provided the rudiments for future policy in the region. Though ambiguous in its wording, the document proposed the normalization of relations between the two countries, stated that the US was not seeking “hegemony” in the region (and implied that the USSR would not be allowed to seek the same, leaving open the possibility of US support in future border conflicts), and, most importantly, stated US recognition of the mainland government, including formal endorsement of a variant of the “One China” policy, accompanied by the commitment to close a number of US military installations in Taiwan. With the end of the embargo and the possibility for a peaceful resolution to the Taiwan conflict left open, this ambiguous diplomatic statement had opened the door for the growth of a much more substantial economic relationship with the capitalist sphere.

At this point, it cannot be said that there was any real long-term plan to “open” China to large sums of foreign investment. The intention of the Nixon administration was largely geopolitical, attempting to drive a wedge between the two centers of gravity within the socialist bloc. Alongside the end of the Vietnam War, the establishment of this “Triangular Diplomacy” was among the major achievements of Nixon’s long-term Cold War strategy. The strategic aim of the rapprochement was to gain flexibility and leverage in future interaction with the USSR while neutralizing a large potential military threat to the US (which had no interest in becoming bogged down in yet another war in the Pacific) and preventing the formation of any new Sino-Soviet bloc.[58] On the domestic side, even the pro-reform faction within the CCP saw this early diplomacy as part of an extremely limited program of liberalization aimed at solving a series of immediate domestic crises that had proved intractable within the autarkic conditions of the 1960s. But the reforms were intended to preserve and in fact revitalize the developmental regime itself. There was simply never any long-term strategy for market transition.[59] Instead, the transition was the emergent product of confluent crises, as a series of haphazard domestic reforms led to local marketization and rural industrialization at roughly the same time that the diplomatic opening converged with the long downturn in profitability in the capitalist sphere, driving a massive spike in trade (beginning in the 1980s) and foreign investment (beginning in the 1990s).


Nation, State and Family

Though it seems self-evident, it’s important to note here that the sort of international diplomacy engaged in by the Nixon administration presupposes coherent nations, and the capitalist world is necessarily a world of states that administer, cultivate and propagandize such national difference. In the end, the developmental regime’s success in forging the culturally diverse, politically fragmented East Asian mainland into a Chinese nation-state proved to be the necessary scaffolding required for relatively smooth entry into the capitalist world. This precondition is not a mere accident of geopolitics, however. The nation and the modern state, alongside older institutions of local power—most importantly the patriarchal family—have proven again and again to be essential to accumulation. China was no exception, and the completion of the nation-building process, one of the main goals of the developmental regime, would thereby become a key enabling factor in the transition. Meanwhile, the perpetuation of gender inequalities within the developmental regime—despite both propaganda to the contrary and real, substantial advances compared to life before the revolution—would ultimately provide the social space for the growth of a proletarian class, dominated in the first few decades by women.[60]

It is necessary here to take a step back and consider how, exactly, the abstract drive of accumulation is enforced in the flesh. Though the innermost logic of the material community of capital is oriented as if it were a smoothly-linked, fully global system, with no obstruction to the fundamental circuits of accumulation, the reality is that accumulation can happen only through the production of value in the real world, and this is an inherently messy process, constantly obstructed and constantly forced through. The law of value does not descend from heaven. It arrives on the back of gunships, in crashing waves of inflation, or like a spear poised behind the paper of treaties and loan agreements. Its baseline condition is that both resources and human labor capacity, initially exterior to the commodity system, be made and kept available to it as commodities. This means that areas outside the system must be absorbed into it, but it also entails that, despite repeated crises that cast labor out of the production process and leave rings of fallow rust-belt ruins, the commodity form of both land and labor must be maintained by any means necessary. When we discuss the subsumption of China into the material community of capital, then, we are discussing both a specific historical period, and the nature of the local mechanisms that assisted the transition. But, in many cases, these are also the means used by capitalism today to maintain the baseline conditions for the production of value.

A fundamentally economic imperative thereby takes on a myriad of extra-economic forms, often exapted from pre-existing power structures, and almost always carrying their own inertia into the new system. This results in mechanisms of oppression that are inherently in excess of the baseline economic needs of the system as a whole. In China specifically, this includes the general operation of the state (police, prisons, property law), but also specific tools such as the hukou system and the dang’an (档案)—ostensibly a mere administrative “record,” but in reality an individualized system of surveillance overseen by the Public Security Bureau. Both are exaptations that originated in the socialist era. Similarly, the role of national identity and its relationship to the concept of a distinct “Han” culture and ethnicity have been essential to both the general credibility of the state and the violent assertion of territorial dominance in places like Xinjiang and Tibet.[61] Meanwhile, the perpetuation of the family and widespread gender inequalities has been key in the creation and maintenance of a capitalist class system: marketization in the countryside took as its essential unit the productive capacity of individual households—the shift to the “household responsibility system” would not have been possible without the ability to mobilize labor through patriarchal family units. In addition, the early proletariat in China was dominated by women because of pre-existing inequalities in rural work-point allocation and urban employment, and the earliest private capital to flood into places like the Pearl River Delta was mobilized via clan networks.

Even though mechanisms such as these are dependent on and ultimately employed in service of these economic needs (within the circuit of value accumulation, they are not in any way truly “autonomous” or “semi-autonomous”), they cannot be reduced to mere economic causes. This is because their inertial quality gives them both an extra-economic character and a degree of internal consistency which generates the illusion that the state, nation, race, family, etc. are capable of surviving in their current form beyond the potential death of the economy. Such mechanisms are dimensions of what Marx called “original accumulation.” But these are also not leftovers from a certain “stage” of history, as many classical misinterpretations of “primitive” or original accumulation would have us believe,[62] nor are they a method of plundering a not-yet-subsumed “commons” that somehow persists after the transition, as is imagined in theories that recast original accumulation as “accumulation by dispossession.”[63] Original accumulation is not a mere phase in history—and history is, after all, a sort of living, writhing avalanche that tends to shake off any stages saddled onto it—nor is it dependent upon the persistence of a periphery (internal or external) to the capitalist system. Maybe most importantly, these processes are not simply defined by dispossession. The only essential feature of original accumulation is the act of establishing and maintaining the framework necessary for accumulation to continue—not the enclosure of some sort of interstitial commons, but now the perpetual maintenance of the material community of capital, which entails instead the foreclosure of the potential for communism.[64]

What this means for our purposes is that the very creation of the Chinese state—defined by the supposedly continuous and coherent culture of the Han ethnic group—and the persistence of the patriarchal family were necessary preconditions for a relatively smooth entry into the global capitalist system. But the contingency of this process is often disguised in hindsight. Since China did complete the capitalist transition as a nation, and since its government and familial infrastructure was exapted to serve the needs of continual accumulation, we can say that the creation of this infrastructure in the socialist era was, in fact, the birth of mechanisms for original accumulation, even though the developmental regime was not capitalist. This is equivalent to arguing that the pre-existing states and clans of Tokugawa Japan or Prussia under Frederick the Great would become essential to the formation of capitalist states, even while their own economies were by no means capitalist. This doesn’t mean that the very existence of the nation-state guaranteed the transition. Such states can and have collapsed in the midst of changing modes of production or in the face of opposing military powers (as the Chinese state itself experienced earlier in the century), and the transition to capitalism can be carried out in the midst of this balkanization, or on the basis of a new political center—in conditions of statelessness, one of the first acts of subsumption into capitalism was always cartographic, colonial powers drawing arbitrary borders and defining nations where none existed before. The most basic ideological presumption in a capitalist society is the willingness to project capitalism back into the past as if it were both perpetual and inevitable. Portraying the socialist developmental regime as if it were somehow secretly capitalist all along—or a mere stage of primitive accumulation clearing the way for capitalism—simply repeats this procedure, removing the contingency from history and reinforcing the myth of capitalism’s immortality.[65]

In reality, the creation of China as a nation state simply provided an opening into the international capitalist system, at best predisposing the array of probable outcomes in the general direction of transition. But if China had remained in a state of balkanization, it’s equally likely that invasion, colonization and debt-bondage would have had much the same result. Historical counterfactuals can only illuminate so much, however, and there is simply no function to inking out a potential path beyond capitalism that may or may not have existed last century. What we can conclude is that the infrastructure of government created during the developmental regime would, in the end, help to create and continually maintain a system for the commodification of land and labor-power. Similarly, the maintenance of the family unit would undergird marketization, proletarianization and the inward flow of capital. The exact paths by which such features were exapted in the process of transition will be explored below. But it is important to note here that, rather than a hindrance, the existence of an extensive state and pre-capitalist filial traditions were important mechanisms for the introduction of capitalism on the East Asian mainland.


The Limits of Spirit

In addition to geopolitical isolation, Chinese reformers were also responding to a slowly growing wave of domestic discontent. In part, this was an after-effect of the tumultuous peak of the Cultural Revolution, but it was also a novel type of late-socialist disillusionment generated by the ever-lengthening period of austerity alongside high investment. Early on, the new forms of quasi-religious communalism offered by the state, codified in campaigns such as the Socialist Education Movement, had some, albeit unpredictable, success in rationalizing continuing scarcity and rendering sacrifice for the sake of the socialist project into its own spiritual reward. But spirit always meets its limit in the flesh. Numerous ethnographies of the period document the process at the personal level: the model worker becomes caught up in the enthusiasm of the early Cultural Revolution, sacrifices the material incentives introduced following the Great Leap, and is rewarded with quasi-religious symbols of state patronage, which at first seem to have a true social weight to them—the picture of Mao is framed, the red book placed on a shelf, pins and red scarves affixed to outfits. But as the years stretch on these symbols grow hollow. Copies of the Little Red Book pile up next to stacks of Mao photos, too many to frame. The spiritual communalism of the era seems now to accrete nothing but these masses of useless tokens, and the symbolic framework of the state’s ideology begins to break down. Even the most model of workers cannot stave off the growing cynicism. At the mass scale, it manifests first in black markets, illicit businesses, hoarding, work slowdowns—all measures to satisfy the material at the expense of superior virtue. In the end, such cynicism will always begin to take on a more public character, and by the middle of the 1970s open unrest had again begun to grow. [66]

There had already been some retrenchment from the height of the heavily militarized Third Front investment push. Following the Lin Biao incident in 1971, the fear of a military coup encouraged the regime to scale back the army’s involvement in production, and reformers successfully secured cutbacks to bloated construction projects in the West in favor of more immediately productive investment being funneled back to coastal regions. Meanwhile, the early meetings with Nixon and Kissinger resulted in an agreement “to spend US$4.3 billion to import industrial equipment,” with a focus on “11 very-large-scale fertilizer plants from a U.S.-Dutch consortium.”[67] The immediate strategic goal was to preserve the developmental regime, not to implement wide-ranging market reforms, and certainly not to become fully incorporated into the global capitalist economy. But the reforms also had a tactical dimension, aimed at quelling the latent unrest building across the population.

In 1974 a new wave of industrial actions swept through the cities, more subdued than that seen in the late 1960s, but nonetheless widespread enough to signal that many of the same economic issues (stagnant wages, deteriorating welfare services) had persisted despite the rhetoric of the era.[68] Maybe more importantly, explicit critiques of the regime resurfaced in this period, but with much of the ultra-left suppressed in 1969, these critiques were now fused to a more openly liberal program demanding democratization and, increasingly, marketization. In Guangzhou in 1974, a series of big-character posters went up with the first major public statements by the Li Yizhe group, a loose coalition of young dissidents (led by Li Zhengtian, Chen Yiyang and Wang Xizhe) who had been briefly jailed at the height of the Cultural Revolution. Though falling short of the more radical propositions made by the ultra-left factions several years prior, the Li Yizhe group articulated a vaguely humanist-Marxist position, similar in character to that advanced by Eastern European dissidents, and notable for its ability (largely via Wang Xizhe) to justify this vision through an elaborate engagement with Marxist theory. The most impactful of their essays, titled “On Socialist Democracy and the Legal System,” was (indirectly but very clearly) critical of the regime, including the “new nobility” of the bureaucratic class, the Gang of Four and the cult of personality. Alongside an end to the mass arrest and imprisonment of dissidents, it advocated increased democratization, and some of its key authors would go on to become leaders in the Democracy Wall Movement of the late 1970s. The Li Yizhe document was tacitly allowed to spread by Zhao Ziyang (who would later become one of China’s key leaders in the reform era), at the time serving as Guangdong’s Party Secretary. Popular discontent was thereby, at least in part, cultivated and directed by some reformists within the party, who hoped that the political message contained in such critiques could be usefully mobilized against opposing factions.[69]

But the unrest made evident by the Li Yizhe group was in no way a product of such factional conflicts, even if Zhao Ziyang sought to mobilize them for political ends. The Li Yizhe authors had merely begun to formalize their own experience of the Cultural Revolution while also providing a theoretical background for many of the demands that had already started to appear in popular protests. Such protests were concentrated in the major urban centers of the country. In 1974, the “Baiyun Mountain Incident” saw more than a hundred thousand factory workers, demobilized soldiers and youth climb a mountain near Guangzhou, ostensibly as a Mid-Autumn festival commemoration of their ancestors, but in reality the gathering became a protest against bureaucratization and inequality.[70] In the summer of 1975, an undeclared strike wave surged through Hangzhou and “was only brought to an end with large-scale military deployment into factories involving as many as 30,000 troops.”[71] In 1976, the death of Zhou Enlai sparked one of the largest surges of protest since the late 1960s. Using the Premier’s death as a justification for public gatherings, activists in cities across China planned convergences on April 5th, the date on which that year’s Qingming (a traditional day for honoring the dead) would fall. The April 5th movement would see the participation of young workers across the country, voicing the many latent discontents that had been building throughout the Cultural Revolution[72].

But the movement also crystallized these demands in new ways. Absorbing some of the language and logic of the Li Yizhe group, protestors began to code their demands in terms of high-level party politics. Though essentially continuous with the series of worker protests that had begun with the strike wave of 1956 in Shanghai and continued with the unrest of the early Cultural Revolution, the worker-led protests of 1976 departed somewhat from the tradition of “economistic” strikes demanding increased wages, benefits, improved working conditions and increased worker control of production.[73] Instead, protestors targeted the party leadership directly, associating the long stagnation in wages and living standards with the Gang of Four, the faction that had ruled the party since the suppression of the revolts in the late 1960s. Meanwhile, the position of Zhou himself, a reformer affiliated with Deng Xiaoping, helped to translate this unrest into popular support for the reformist faction more broadly. The movement peaked with the 1976 Tiananmen Incident, when wreaths that had been laid in Tiananmen Square in commemoration of Zhou were removed overnight and protestors were forcibly cleared from the square. Though the protestors had for the most part not voiced strong support for any members of the reformist faction (aside, of course, from Zhou), official media outlets blamed the protests on Deng and used the events as an excuse to place him under house arrest in Guangzhou. Ironically, this response had the effect of making the reformists appear to command a more explicitly supportive popular base than truly existed.[74] Once the reformists gained power in 1978, the movement was “presented by the Deng regime as a spontaneous mass act in support of the late Zhou and his protégé Deng, and against the Gang of four (and implicitly against Mao as well); it was portrayed above all as a popular rejection of the Cultural Revolution.”[75] This was despite its clear continuity with the demands made by workers throughout the past decade.

Regardless of the crackdown, strikes continued throughout the summer of 1976 in cities across China. The death of Mao followed in September, and the protest wave was retroactively used as justification to oust the Gang of Four, who by that point had only retained power via Mao’s patronage. The change in leadership was indeed popular, sparking another mass mobilization known as the “three empties,” “meaning that liquor shops, firework shops and even hospital beds were all emptied” in what was “probably the biggest spontaneous party the world has ever seen.”[76] Despite the change in leadership, however, protests did not simply subside. Carrying on the tradition of April Fifth, the Democracy Wall Movement in 1978 addressed many of the same concerns to the new regime, now helmed by Deng. Wages and the urban housing shortage were major issues, as were continuing demands by many activists for increased democratization. For the first time, however, protestors also began to compare China’s state of development to that of capitalist countries, including both the West and its rapidly-developing neighbors. With countries like South Korea, Taiwan, Singapore and even Hong Kong (all of which had found themselves in largely similar conditions to China following World War II) undergoing rapid development, an unaccountable gap between China and its neighbors became apparent. Many began asking why the more advanced socialist system had failed to produce equal or superior returns in standards of living—a question that would only become more prominent in the 1980s.[77] But the Democracy Wall movement fell short of the radical critiques that had been on offer in the late 1960s. Demands for higher wages and more rapid development were paired, at the most extreme, with demands for Yugoslavian-style workers’ self-management and partial marketization.[78]

Though initially supportive, by the first few years of the 1980s the Deng regime feared that industrial unrest was getting out of hand. In particular, the rise of Solidarnosc over the same period in Poland seemed to signal the possibility of similar events in China if too much power was devolved to workers and the newly instituted apparatus for village elections. The state’s response was one of gradual suppression, paired with economic concessions. The freedom to air grievances against the party was slowly reneged, the de jure “Four Big Freedoms” to speak freely, air views fully, hold great debates and write big-character posters were removed from the constitution in 1980, and the right to strike was removed two years later. Meanwhile, a series of catch-up pay raises were phased in from 1977 through 1979, the first in over a decade, and workers were given greater influence over some aspects of local politics and production.[79] This was the context that the reformists’ political program operated within, and these early reforms often responded directly to the crises that had built up over the course of the previous decades. But, in general, this response was incomplete. While living standards were raised, the problem of bureaucratization only seemed to increase and the political elite began a slow merger with technical elites to form a more and more coherent ruling class. This validated many of the critiques made by dissidents throughout the Cultural Revolution, but even these critics had not foreseen the true import of what was happening. As marketization proceeded and the proto-proletariat grew in size, the ruling class that had begun to cohere was no longer simply a collection of bureaucratic elites extracting an undue portion of the grain surplus, but had instead begun to take on the characteristics of a gradually forming bourgeoisie.


Stagnation, Modernization and the Return to the Household

If the material limits facing the socialist developmental regime’s urban sector led to protests by the working class, so too did the bottleneck in agricultural production lead to social instability in both urban and rural areas. Population growth since the GLF led to a stagnation in per capita grain production by the mid-1970s. The state had already been extracting less grain following the GLF, fearing an exacerbation of its already strained relationship with the peasantry. In fact, state procurement of grain was capped and hardly grew between 1965 and 1978.[80] From 1971 through 1976 the state did not even procure enough grain for urban grain consumers.[81] In response, a state hiring freeze was instituted in 1973. Youth were sent to the countryside, effectively pushing them out of the state’s field of responsibility, their food and housing now provided directly by rural production units. Despite this, the grain deficit persisted, and imports became increasingly necessary throughout the 1960s and 1970s.[82] Crucially, the agricultural bottleneck was a strict material limit on the accumulation rate, which determined how much the state could invest in industrial development. These were not only problems of systemic misallocation and stagnant agricultural productivity, but also signaled a deeper crisis in the very heart of the developmental regime. With an intricate patronage structure founded on the rift between city and countryside, the maintenance of steady grain extraction was essential to the maintenance of the developmental regime itself. As this central relationship began to break down, fractures would ripple outward, affecting every aspect of production.

With stagnant agricultural growth dragging down industrial development, the state responded with renewed efforts at agricultural modernization, including a “mini-Great Leap” focused on grain production.[83] While political exhortations and appeals to the Dazhai model continued, it was mainly the state’s “sudden advance” in agricultural investment, especially in 1978 and 1979 (almost nine percent—nearly double the increase in other sectors[84]), that finally brought about real growth in production.[85] At the same time, the accumulation rate grew to an unusually high 34.6 percent in 1979.[86] Millions of rural laborers and huge new state investments led to almost four hundred thousand new agricultural capital construction projects in early 1977, creating new fields, improving old farmland and constructing new irrigation and water conservation infrastructure.[87] New funds were made available for mechanization and scientific farming techniques. Agricultural modernization also implied an increase in the scale of production, which was a precondition for successful mechanization. Meanwhile, peasants in many areas were experimenting with various task-rate and responsibility systems, which contracted production tasks to small groups and in a few areas even to households. For the most part, however, distribution remained at the level of the production team, including where responsibility systems were in use. Throughout the late 1970s, the party still officially ruled out a return to household farming, though there was recognition that in different areas different systems of accounting and remuneration could be used, and only when conditions were particularly favorable should the level of accounting be raised to the brigade, even if that was the long-term goal.

Overall, these investments led to increases in grain production, with national output increasing from around 285 million tons, where it had been stuck for three years through 1977, to 305 million tons in 1978 (an eight percent increase) and 332 million tons in 1979 (a further nine percent increase).[88] This increase occurred even as the total sown area declined, a trend that continued through 1984.[89] State agricultural procurement prices were raised (22 percent in 1979),[90] and taxes on agricultural production cut. The above-quota bonus was increased, and the size of quota was reduced.[91] Together with incomes from rural industries, this led to an almost twenty percent rise in per capita rural household income by the end of 1978.[92] Such reforms thereby seemed to hint at a way out of the agricultural bottleneck, and thus offered a glimpse at a path forward that might lead to the salvation of the decaying developmental regime.

However, these agricultural modernization policies also contributed significantly to higher deficits, leading to the reversal of the mini-Great Leap policies of 1978-1979. It was these deficits more than anything else that resulted in the return to household production in the early 1980s. The deficit became an issue for the party center in 1979, when a small state surplus turned into a 20 percent deficit followed by a 17 percent deficit the following year,[93] with no agreement on how much or how to cut back on state expenses at the time. Deficits were compounded by rising inflation. The deficit problem, blamed mainly on agricultural investments and rising procurement prices, led to a debate on shifting to “household responsibility systems” (HRS) in order to cut agricultural modernization costs to the state. As the new premier, Zhao Ziyang, stated in March 1980, “the burden on the country is too heavy, it is a burden [we] cannot afford.”[94] He advocated that rural areas that relied on the state for food be allowed to shift to contracting production to the household (包产到户). These policies were soon endorsed by Deng Xiaoping, who stated the following month that state investment could be reduced if production were contracted to peasant households.[95] State investment in agriculture dropped over ten percent in 1980 and almost 44 percent in 1981, leading to a drop in grain production from 332 million tons in 1979 to 320 and 325 million tons in 1980 and 1981.[96] The accumulation rate was reduced from its 1979 peak of 34.6 percent.[97]

The primary concern for party leaders in the shift to household contracting was thus the burden of agricultural modernization on state revenues, and in effect the return to household farming was a return to the low investment in agriculture that had characterized agriculture from the 1950s through to the mid-1970s. The high investment in agricultural modernization of the late 1970s was a brief anomaly. By the end of 1980, fourteen percent of production teams had shifted to HRS.[98] But it took another year for HRS to be officially encouraged for all rural areas, no matter how well the collective system was working locally.[99] By that time, over half of production teams had shifted to the HRS, with the central state putting pressure on provinces to transform the organization of agricultural production. Initially, this shift back to household farming was seen as a temporary measure to deal with state deficits. It was a temporary suspension of concern for rural inequality, which would allow for a one-off increase in production as it boosted the incentives for peasant labor intensification without needing the state investment of resources necessary for the long-term policy of agricultural modernization. The turn to the HRS was therefore ultimately a product of an inherent contradiction in the developmental regime’s methods of allocating capital goods—the attempt to modernize via massive state investment in agriculture-generated deficits, which caused dangerous inflationary pressures and strangled funds available for other industrial projects. But such capital allocations could not simply be taken back, since they were embodied in large outlays of plant and equipment. There was, therefore, no way to return to the pre-deficit bottleneck. The turn to the HRS was therefore understood to be the easiest, if not the only, option available to stave off the structural instabilities generated by the deficit.

In the long run, this constituted the beginning of decollectivization, and by late 1983, 98 percent of production teams had made the shift.[100] Meanwhile, the decollectivization of production was matched by a decollectivization of rural administration. The institutional functions of the commune were replaced by the township (乡) government, and the brigade level was replaced with village (村) leadership. The main production model adopted was dabaogan (大包干) or “big management contracting,” in which land remained owned by the village collective, but households could produce what they wanted on the contracted land as long as they produced crops to fulfill the team’s quota to the state.[101] The production teams no longer managed agricultural production under the system. One immediate consequence of all this was that inequality within villages and between regions increased. Under this new system, how well one’s household did in comparison to others in the same village had much to do with the size and make-up of the family. A bigger factor in economic success, however, concerned the location of one’s village and a household’s connections to local leaders. In areas nearer the coast and more prosperous cities, the new freedom to sell diversified, above-quota produce on the market allowed for increases in some peasant incomes, but also led to greater local inequality. This inequality within the village was mirrored by inequality between villages, as peasants in less accessible interior regions farther from cities had far fewer opportunities to benefit from the same system.

Many contracts between households and the collective were originally for just one to three years, but the contract length was quickly raised to fifteen years in order to incentivize reinvestment into the land. Initially, agricultural production increased between 1980 and 1984, especially with a greater use of fertilizers and increased incentives to add labor inputs. For the state, the short-term gains of the new system paid off by decreasing the financial burden (agricultural investments remained low) although agricultural modernization slowed as well. But urban food prices were still subsidized, remaining below rural procurement prices through the 1980s, and therefore still generating a deficit. In fact, the resulting increased agricultural production impelled further market reforms, now targeting the purchasing and marketing and quota systems.

Without a strong collective system to enforce quotas, many households began to ignore them altogether, producing market crops instead.[102] Meanwhile, the unified purchasing and marketing system that had been designed to manage the shortage of agricultural surplus was now faced with the new problem of excess production, with the state having guaranteed the purchase of grain at any magnitude.[103] This encouraged further market reforms in grain purchases, since guaranteed procurement became extremely costly as production increased. State subsidies on farm products rose to 18 percent of total state expenditures in 1981, and decreased only slightly to 14 percent in 1984. In response, above-quota bonuses were removed for key agricultural products between 1983 and 1985, instituting a single price system. Guaranteed prices were then replaced with negotiated prices, so the state could respond to the changing market. Finally, in January 1985, the state attempted to end the quota system for most agricultural products entirely, instead influencing production through contract and market purchasing, stabilized by a price floor.[104] With the end of the quota system, the state guarantee to purchase certain agricultural products also disappeared.[105]

These reforms aimed at replacing state-planned procurement with market purchasing. But equally strong structural forces were still pushing in the opposite direction, since any reduction in urban food-price subsidies would have led to urban unrest, eroding the fragile credibility of the reformists. The end of guaranteed prices was thus not fully implemented, and a drop in grain production in 1985 forced the state to pay higher market prices, again increasing food subsidy costs.[106] Attempts to fully marketize agricultural prices looped through a pattern that repeated itself throughout the reform period: the high cost of food subsidies to the state budget forced it to undergo purchasing and in some cases market price reforms, and this reduced grain production, with the state retreating somewhat from the reforms in response, usually raising the cost of subsidies again. But beyond grain production, higher costs for animal feed and other agricultural inputs (namely fertilizers and pesticides) helped to push more rural labor into rural industry and grew the markets for sideline agricultural products, such as vegetables.[107] Marketization thus pushed forward overall, despite cycles of reform and retrenchment. Meanwhile, a key contradiction throughout the process was the question of how to reduce the financial burden on the state caused by food subsidies without raising urban food prices so much that inflation would lead to urban protest. As would become evident in the 1989 Tiananmen protests, the state failed in this respect. It was only with the repression of the movement that the state was finally able to traverse this contradiction, finally marketizing agricultural products.


The Golden Age of Rural Industry

As agricultural production was staggering toward the market, rural industry was undergoing its renaissance. The Third Plenum of 1978 acted as an official sanction for local developments that had already been long underway, marking a fifth turning point for rural industry (after the cooperative movement, the Great Leap Forward, the post-Leap clampdown and the late-1960s revival focused on agricultural modernization). In addition to providing CBEs with tax breaks and exemptions, the plenum not only called upon rural collective enterprises to do all processing of agricultural products “suitable for rural processing,” but also recommended that urban factories shift part of their component processing to CBEs and “help equip the latter with necessary equipment and technology.”[108] The early 1960s restrictions imposed after the famine were finally lifted, allowing both communes and brigades to run enterprises in any industry except four reserved for the state: cotton textiles, tobacco, armaments, and certain types of iron and steel.[109] But even these restrictions were applied with the usual local exceptions, as different types of iron and steel industry were allowed at different scales, and there are clear examples of non-state cotton textile factories in Wenzhou in the same period.

Overall, these reforms facilitated the gradual formation of regional networks intertwining rural collective enterprises (soon to be renamed “Township-and-Village Enterprises,” or “TVEs”) as suppliers of components for urban state-owned enterprises—a model known as the “SOE-TVE nexus,” which would end up playing an important role in the transition to capitalism for places like Shanghai. But first, the CBEs were still expected to focus on the task of facilitating agricultural modernization, now coupled with an official revival and expansion of rural industry’s main traditional role, which had never entirely disappeared in reality: processing agricultural products. This function became particularly important as the unified purchasing and marketing system gradually gave way to private markets. As rural collective enterprises gradually began to take on a life of their own in response to the combination of partial marketization, agricultural decollectivization, rising productivity and financial decentralization, the Third Plenum was followed by a number of new policies promoting CBEs. The result was a rise in their output value at an annual growth rate between thirteen and nineteen percent between 1980 and 1983.[110] While still showing robust growth, this was slower than the average growth rate of 25.7 percent from 1970 to 1976. This slower growth, despite the increased incentives, was probably due to the even higher incentives for agriculture during these years. CBE growth would truly take off in 1984 due to the combination of further policy incentives introduced that year and declining incentives for agriculture, including decreased procurement prices.

For rural industry, then, the decade can be divided into two stages. The early years, from 1978 to 1983, saw CBEs begin to experiment with a variety of ownership structures, financial arrangements and employment relations. Despite the official name “Commune and Brigade Enterprises,” many were actually owned by production teams (the smallest administrative unit, below the brigade level) or even individual households, or some combination of individual and collective owners. In 1981 a team of foreign researchers observed CBEs “established jointly by households or groups of individuals or by households in combination with teams, brigades or communes; enterprises established jointly by teams or brigades of the same or different communes; enterprises established jointly by the commune in combination with state enterprises.”[111] This demonstrates both the trend toward private enterprise, which would eventually become predominant, and the apparent diversity of economic possibilities, in contrast with what may now seem to have been an inevitable march toward capitalism. Such open-ended diversity would soon give rise to a vast political debate in China and abroad about the possibilities of “market socialism,” in which the experimental nature of CBEs/TVEs would play a central role.

Already in the early 1980s, however, signs of where such experiments would actually end up had already become visible. Although the legality of these ownership structures was still in a grey area, once a CBE had obtained registration it became eligible for considerable state assistance, including loans (from the government, banks or state enterprises for which CBEs produced components) and the assignment of technicians. These technicians were not members of the “collective” enterprise, and were therefore essentially wage-laborers—even though central policy was still years away from allowing private enterprises to hire wage-laborers, outside of the four SEZs that had opened just the year before. [112] On the financial side, relations were also changing, with de facto joint-stock owners becoming common as the recipients of these loans, and the previous requirement that CBEs hand over nearly all their profit to the commune or brigade for the financing of public goods and services being scaled back. For example, one Sichuanese commune-level “joint corporation” established in 1980 was responsible for managing twenty-eight enterprises, most of which were formerly independent CBEs. The corporation initially “issued shares free of cost to the villages (formerly brigades) and co-operatives (formerly teams) out of which it emerged,” and then it sold new shares to finance investment. These were marketable to anyone including villages and individuals. Although in 1981 private shareholders accounted for only one percent of this corporation’s capital, “the fact that an individual can in principle acquire shares in a collective enterprise in China represents a startling change of policy.”[113] This also signaled the growth of substantial new inequalities: one brigade-level corporation in another part of Sichuan managed four enterprises. After a few years of development and reorganization, twenty-five of the 201 households comprising those five teams owned no shares, sixty-some had over ten shares each, and one owned twenty shares. Observers concluded that “the new forms of enterprise organisation, and the methods used to finance them, could lead rather quickly to the emergence in the countryside of a class of ‘penny capitalists.”[114]

As usual, the state now rushed to catch up with mushrooming local initiatives, hoping to give them direction. This initiated the second phase of the decade’s rural industrial renaissance, marked by much more rapid growth. On the first day of 1984, the Central Committee issued a “Circular on Agricultural Work” calling on governments at all levels to “encourage peasants to invest in or buy shares of all types of enterprises,” and to “encourage collectives and peasants to pool their funds and jointly set up various kinds of enterprises.”[115] A few months later, another party circular changed the official term from CBE to “Township and Village Enterprises” (乡镇企业 – hereafter TVEs) because by then nearly all communes had been reorganized into townships and brigades into villages and many team-level, household and joint-household enterprises had emerged in rural areas, so a more inclusive category was needed.[116] The circular also announced that TVEs should receive the same treatment as SOEs, including state aid. The number of officially recognized TVEs increased tenfold between 1983 and 1985, their employment more than doubling and their output value increasing 270 percent.[117] This may be partly attributed to the inclusion of existing enterprises within the new category of “TVE,” but the sector continued to grow more rapidly than before, the number of enterprises increasing fifty percent in 1986-1988, and employment increasing by 27 percent during the same period, giving them a 1989 output value eight times higher than that of 1983.[118] Among these TVEs, private enterprises grew faster than collective ones, services grew faster than industry, and those in “economically backward” regions grew faster than those in “advanced” ones.[119]

Such enterprises had begun to form without the encouragement or oversight of the state, but official recognition and access to state aid accelerated the process. Why did the state suddenly liberalize and promote such a variety of rural enterprises at this time? And why did collective and individual rural entrepreneurs respond so actively, especially after 1984? As discussed above, peasants’ incentives for investing in agriculture began to fall after 1984 with falling procurement prices, rising costs of inputs, declining soil fertility and increasing opportunities for other types of work, including both migration and rural industry. The increasingly common decision to “leave the soil without leaving the village” (离土不离乡), as taking jobs in rural industry was called at the time, would eventually become a problem for the state, but at first it was not seen as a threat to food security or a cause of inflation. CBE/TVE employees were expected to continue farming their decollectivized land in their spare time, and the continued agricultural modernization supported by some of these enterprises would decrease the amount of labor necessary to simultaneously increase farm yields, generating a surplus of rural labor for which the state would otherwise need to create jobs. The promotion of consumer-oriented rural industry was consistent with the state’s shift toward a strategy of more consumption-driven growth and an increased role for light vs. heavy industry, as was the promotion of rural enterprises manufacturing components and processing materials for state enterprises, to the extent that the latter were themselves producing consumer goods. China’s scarcity of consumer goods after decades of “shortage economy” meant there were plenty of market opportunities for both types of rural enterprise to grow rapidly in the 1980s-1990s, when urban consumption grew faster than ever before.[120]

While the immediate limits faced by the agricultural sector encouraged the development of TVEs, these enterprises in turn created new dynamics and problems for the economy. By producing consumer goods, by providing inputs for SOEs and by generating disposable income for ruralites, they helped stimulate consumption, but this in turn contributed to the inflation that led to urban unrest by the late 1980s and forced the state to make adjustments to its economic strategy. Meanwhile, at the local level, accompanying policy changes incentivized rural cadres to help establish and support such enterprises. Fiscal decentralization forced cadres to devise new ways to generate revenue, and allowed them to pocket a larger cut of it, legally or not—corruption in this regard becoming one of the reasons the central state would later move to privatize collective TVEs in the mid-1990s. The assessment of cadres for career promotion shifted from ideological measures to more purely economic ones such as sales and employment, to which TVEs contributed more than agriculture alone. Perhaps most importantly, it was from the explosion of a new variety of CBEs in 1978 that China’s first batch of private enterprises were born and began cautiously experimenting with new structures of ownership and employment, the second batch after 1984 doing so more boldly. And by extension, some of these would also become China’s first private enterprises outside the SEZs to receive foreign investment and produce for export.


The Market in the Shell of the State

Industrial reforms were also underway in the cities. The mainland’s incorporation into the global market was not initially a process of stripping-down nationalized industries in the name of reform. Such a direct dismantling of the socialist era class structure was neither desirable nor possible, given the intricate networks of dependence and patronage that were fused to it. Instead, the output of the planned sector was for the most part maintained at pre-reform levels, and in many instances actually increased slightly. Early on, even the most radical reformers within the party still conceived the massive state-owned sector to be the core of the economy, with marketization applied largely to decrease the external costs suffered by large industrial enterprises and enhance agricultural productivity. But state-fixed investment was slowly and partially reoriented from heavier to lighter industries and from producer goods to consumer goods, housing and services, alongside renovation of existing plant and equipment. Total state fixed investment dropped in the early reform years, in part because of rising state deficits, reaching a trough in 1981 then recovering slightly in the mid-1980s. Its composition also changed: Investment in new production dropped from over half of the total in 1978 to an average of around a third from 1980 through 1988. Of this new production, investment in textiles and food processing jumped from seven percent of capital construction in 1978 to 13.5 percent in 1981 and 1982, and by the late 1980s, larger shares were being spent on renovation funds, which were often controlled by local governments and smaller enterprises.[121]

Another significant shift, however, was the funneling of resources away from production entirely to deal with the urban crisis that had accompanied the maturation of the baby boom generation, worsened by the return of many rusticates. Housing doubled its share of state fixed investment between 1978 and 1982, though it remained a small fraction of the total. Meanwhile, “a large share of enterprise-retained profits went into housing construction during these years: Perhaps 60% of total urban housing was financed by enterprise funds.”[122] This was itself a symbol of the increased decentralization of investment, with more money poured into existing enterprises and local governments, which were then given more power in allocating those funds. SOEs were allowed to retain a larger share of their total profits and given control of output in excess of their mandatory production targets, much of which was liquidated via “decentralized, semi-market transactions” that had long sat somewhere between the plan and the late-socialist black market. Such transactions, including both barter and market purchases, were now actively encouraged by the regime.[123] Since this added flexibility and local knowledge to the planned economy, this shift was supported by reformers. Since it supported the existing hierarchy of SOEs and allotted more funds to be used on technical upgrades, it was also supported by conservatives. Since there were no major layoffs in this period, the investment shift was also largely supported by workers in the enterprises themselves. Their position within the socialist developmental regime’s class hierarchy was not yet challenged in any substantial way—while incomes increased rapidly for ruralites, urban workers’ share did not decrease, and in fact grew slightly in the years following 1978.[124]

But while the state sector was maintained, the shift in overall investment and the growth of rural production had begun to cause significant changes to the composition of total industrial output. Overall, SOEs would decline in importance in subsequent decades, with larger shares of total output produced by TVEs over the course of the 1980s, joined by domestically-owned private firms, household firms, foreign-owned firms and hybrid firms in the 1990s (see Figure 3, the latter categories are split between “Private” and “Other”). By 1992, SOEs were producing less than half of total output, while rural TVEs were just under a third. By 1996, domestically-owned private and household firms had grown to nineteen percent, while foreign-invested firms composed some twelve percent.[125]


Figure 3


The fifty percent retained by urban SOEs is, however, a deceptive figure, since these enterprises had themselves had undergone more than a decade of slow transformation, growing to resemble their more fully marketized rural and SEZ competitors. Beyond the fixed amounts of plan-allocated goods, grey markets for industrial materials were allowed to operate in the open, ultimately creating a dual-track pricing system linked to the already-vibrant rural market, with the TVEs at its core. Wholesale trade and trucking industries were deregulated and firms were given far more leeway to hire the temporary and contract workers who composed the growing proto-proletariat. [126] At the same time, the wages of workers formally employed by SOEs became more dependent on piece-rates and bonuses, even while non-wage welfare funds increased.[127] The problem of urban unemployment was dealt with in part by the elimination of the state commercial monopoly, allowing a massive expansion and diversification of trading and retail. So-called “labor service companies,” mostly operating in retail sales and catering, began to absorb “between one and two million labor market entrants annually” beginning in 1979. Alongside these collectives, “slightly over a million private peddlers had gone into business in urban areas” by the end of 1982.[128] Such trends were particularly strong in coastal cities like Shanghai and Guangzhou, which began to regain their historic dominance in such small-scale commerce and light industrial production.

All of this allowed greater and greater shares of total production to be allocated by the market, even while almost all large enterprises were still formally nationalized and still contributed their plan-mandated production targets to the state. Meanwhile, SOEs came to depend more and more on the market portion of their transactions, and therefore found themselves in competition with other SOEs in the same industry as well as newly-founded TVEs and foreign firms.[129] This competition was further stimulated by the redundancy of the autarkic socialist-era industrial structure, which had sought to create complete supply chains within each province. Even state investment (now averaging around 20% of GNP) was increasingly reliant on firms’ own retained funds, rather than centrally-budgeted allocations—and firms, in collaboration with local government, made decisions about where to invest these funds in traditionally competitive terms, since profitable investments would return more retained funds, meaning higher wages, greater bonuses and more kickbacks to management and cadres. This would ultimately be formalized through a policy of “responsibility for one’s own profits and losses” (自负盈亏), essentially recognizing that inter-firm competition was now essential to the industrial system.[130]


TVEs as Vehicle of Internationalization

TVEs played a crucial role not only in the emergence of capitalist relations domestically but also in China’s re-integration into the global economy, quickly becoming the key sector linking rural areas to foreign trade. By 1985, TVEs were earning 2.38 billion US dollars in foreign exchange, comprising 4.5 percent of China’s export earnings. This quickly rose to 12.5 billion USD in 1990, 20.8 percent of total export earnings, compared with only about four percent for county-level state enterprises that year.[131] In part, this was because the primary products and light-industrial commodities being produced by rural enterprises matched global demand. At the same time, they fit into a regional niche: China could not yet compete with the capital-intensive products coming out of Japan and the “Four Tigers,” but it could readily compete with other ascendant manufacturers (mostly in Southeast Asia) on the more labor-intensive markets. At the same time, this moment coincided with two important changes to national policy, both of which sought to catch up with developments already underway locally: the decentralization of control over foreign trade and the Coastal Development Strategy, which put pressure on local officials in coastal areas to promote exports within their jurisdictions. Export-oriented TVEs in coastal areas had already been developing more rapidly than elsewhere, due to simple geographic proximity to global shipping lanes. Once central policy also pushed in this direction, a distinctive coastal model of TVE development arose that would become most pronounced in Guangdong’s Pearl River Delta.

It was in Guangdong that the first step toward internationalizing the rural economy had been taken, as early as 1978. Aside from hosting three of the four original SEZs (established in 1980), local officials across the province began reorienting first agriculture and then rural industry toward Hong Kong markets more generally.[132] Farmers were encouraged to switch from grain aimed at restoring China’s food security to the production of fruit, fish, poultry and pork for wealthy consumers in the colony. Soon thereafter, local governments began signing agreements with Hong Kong capitalists for the supply of equipment to CBEs in return for their industrial products. By 1981, rural Guangdong was already so dependent on exports to Hong Kong that when the colony was affected by a US recession at the time, Guangdong’s economy was shaken as well. Then, in 1984, Premier Zhao Ziyang put the official stamp on the process by calling for the promotion of the Guangdong model throughout China, starting with several “rural export bases” on the coasts. Zhao emphasized that production should be thoroughly transformed in accordance with the prerogatives of foreign trade: “It’s not a case of you planting what you want, processing what you want and then making available for export what you can spare; quite the opposite, based on the international market you both plant and process.”[133] Three years later, Zhao began pushing for TVEs to play a more pronounced role in China’s foreign trade because, in contrast with state enterprises, TVEs were “flexibly managed and able to adapt themselves to market changes,” making them “the new impact force for the development of labour-intensive industries” and “the establishment of an export-oriented economy.”[134] In the end, Zhao was not necessarily laying out a state-direction plan for nationwide marketization, but merely stating what had already become an evident fact on the ground.

The development of TVEs in general and of their foreign trade in particular were thus not simply the spontaneous initiatives of entrepreneurial peasants finally allowed to act as they pleased, but were also pushed forward by a series of central policy changes, local government projects and “old mobilization techniques” such as “quotas, test points which receive favorable treatment, and models in the press that were to be emulated, all of which politicized economic decisions”—all seeking to give direction to local dynamics that had emerged chaotically in response to earlier, apparently minor reforms. [135] These “test points” were in theory meant to serve as pilot sites for experimental practices that, if successful, could then be adopted elsewhere. But in reality they helped give shape to China’s new geography of uneven development. Those test sites receiving the most favorable treatment, such as Shenzhen, tended to become the new centers of export-oriented TVEs fueled by labor from other rural areas—whose own industrialization, already less favored by geography and the state, would be dealt further blows by subsequent economic and political developments. For example, Shenzhen was allowed to retain all of the foreign currency it obtained from exports, and Guangdong Province as a whole could keep thirty to one hundred percent (depending on the product), whereas Sichuan’s already low retention rate of twenty-five percent was reduced to twenty-one in 1988. Such favoritism suggests a spiral where, in a context of growing dependence on international trade, the simple fact of port access also increased the political weight of leaders from coastal areas, who could then further shape state policy in their favor. Guangdong’s export-oriented TVEs thus prospered at the expense of several inland regions that were “outbid for exportable commodities produced in their own provinces.”[136]


Regional Diversification of Rural Industry

In the late 1980s, academics and the state began promoting three (among about a dozen identified) regional experiences of rural industrialization as models to be emulated nationwide: the Sunan (Southern Jiangsu) Model, the Wenzhou Model, and the Pearl River Delta (PRD) Model. These were distinguished mainly by their ownership structures: the Sunan Model centered on collective ownership at the three levels of village, xiang and zhen (the latter both translatable as “township” and derived from the earlier communes), the Wenzhou Model centered on household ownership, and the PRD Model on a combination of five types known as “driving forward on five wheels” (五个轮子一起转), adding county-level enterprises to the other four (household, village, xiang and zhen). As was common in the era’s policy-making, these were not purely intellectual or political “models,” but instead were observational: policy generally sought to catch up to the local dynamics that tended to rapidly outpace it. The three models, then, were named after the locations where they had arisen, and the debate was not simply about the abstract benefits offered by each, but instead about the empirical results that could be observed in these three “experimental” sites. It is worth examining these briefly in order to demonstrate how diverse and open to new possibilities China’s economy appeared during this optimistic period of transition, and how this regional variation ended up shaping the nation’s uneven economic geography after their subsumption under a more unified law of value in the late 1990s.

In addition to the different ownership structures emphasized in the contemporary policy discourse, then, each of these models was inseparable from its own regional production regime: the Sunan enterprises’ use of local labor and capital to manufacture consumer goods and industrial components for nearby state enterprises that produced appliances (bicycles, refrigerators, etc.) for the domestic market, the Wenzhou enterprises’ use of familial labor and capital to manufacture light-industrial consumer goods (garments, footwear, etc.) for the domestic market, and the PRD enterprises’ use of initially local but increasingly migrant labor and foreign capital (mainly from overseas Chinese at first) to manufacture a variety of products for export. TVEs in other parts of China meeting similar conditions resembled each of these models to one extent or another. Those in coastal Fujian, especially its SEZ in Xiamen and the neighboring county of Jinjiang, resembled those in the PRD, differing in that most of the initial capital came from Taiwan instead of Hong Kong, and that joint-household enterprises predominated over collectives. Likewise, many TVEs in the old industrial hubs of Shanghai and Tianjin resembled those in Sunan, and it is likely that there were household enterprises oriented toward the domestic market throughout China (like those in Wenzhou), but the lingering official suspicion of private enterprise in some locales forced many of these to disguise themselves as collectives until the reversal of national policy in the mid-1990s.[137]

Some observers have highlighted a fourth “Pingding Model” in reference to Pingding County in the north-central province of Shanxi. Apparently this was never promoted by the government as something to be emulated elsewhere, but similar patterns can be found throughout mountainous parts of northern and western China.[138] Like the Sunan Model, this involved collective enterprises using local labor and capital to produce goods for the domestic market, including inputs for industrial use by urban enterprises, but here the production centered on the resource extraction (mining, quarrying, logging) and processing (metallurgy, construction materials, sawmilling) favored by these TVEs’ mountainous locations. This model displayed the most continuity with “the five small industries” of the early 1970s, only now the primary goal was not to use these materials locally for agricultural modernization but to make money by selling them to urban enterprises for industrial use.

The various industries in Pingding County itself (including iron smelting, limestone quarrying and construction materials production) centered on coal mining,[139] and about eighty percent of TVEs in the coal-rich provinces of northwest, southwest, central and northern China were coal mines, although at the national level such mines only constituted three in one thousand TVEs.[140] Rural collectives had already begun mining coal as early as the Great Leap Forward, and this sector was promoted as one of the “five smalls” in 1964, but by 1978 only fifteen percent of China’s coal was produced by CBEs, the rest being the prerogative of SOEs. With the series of policy changes introduced above, rural coal mining grew exponentially in the 1980s, supplying 49 percent of China’s coal by 1995 from 73,000 TVE mines. The sector was able to grow particularly fast in response to China’s endemic coal shortage and the state’s inability to fund SOEs sufficiently to keep up with the constantly growing demand for energy. By the mid-1990s, the TVE mines had ended China’s history of coal shortage, accounting for 73.5 percent of the total increased output over the previous seventeen years.[141]

This and related industries also profoundly transformed the rural areas where they developed, enriching them but also causing severe pollution and countless injuries and fatalities, and rendering the local economy dependent on a sector that would be largely shuttered in the late 1990s. Shenmu County, Shaanxi, for example, went from being a “key poor county” (重点贫困县) without enough electricity for its own minimal uses in the mid-1980s to a prosperous electricity exporter by the late 1990s. Eighty-five percent of the county’s government revenue derived from over two hundred TVE coal mines, which employed about 20,000 of its 350,000 rural residents, paying them over twice as much as they would receive from farming, but still far less than SOEs paid their workers.[142] It was these lower wages and far more precarious employment relations that helped TVE coal mines to prosper, along with their lack of expenditures on safety measures, land recovery, environmental protection and social obligations, in contrast with the requirements of SOEs.[143] Although the mines were nominally collective, many were actually run as private enterprises by their managers, who were often local officials or even cadres from SOE coal mines.[144]


The Rise and Fall of the SOE-TVE Nexus

The success of increasingly privatized rural industrialization in Wenzhou and the PRD ended in urbanization or “townization” (城镇化), as their environments became polluted and agriculture was abandoned—dashing the hopes of 1990s leftists who envisioned TVEs as forging an alternative collectivist path that would overcome the urban-rural divide.[145] The Sunan Model is worth exploring here in some depth, however, because it actually does display an alternative path of development that prospered briefly from the late 1980s through the mid-1990s, until the combination of market forces and state policies led to its collapse. While it seems unlikely that a mere adjustment of policy could have altered this path or turned the model into a national alternative to the foreign-invested, export-oriented one that defined the 2000s, looking more closely at this experience helps to highlight the others by way of contrast, while also showing part of the material basis for the widespread optimism about a pluralistic “market socialism” that characterized the early 1990s. Finally, the rise and fall of this regional production regime was one way the conditions were laid for the subsequent boom of private industry in the early 2000s, as a vast stock of fixed capital, trained personnel, relationships and infrastructure were built up in this public sector and then dumped into the market.

The introduction of the dual-track economy allowed for a sudden explosion of consumer demand that would persist for a decade. This meant that SOEs could sell consumer goods at high prices, but the shortage also applied to many of the materials for producing such goods: although materials-producing SOEs were likewise incentivized to expand their production for above-quota sales, it took several years for this expansion to catch up with demand, so material prices were high as well. SOE managers responded by turning to their personal relationships (or creating new ones) with local officials in the surrounding countryside to create new TVEs specially tailored to produce the materials they needed at lower prices than those being sold by other SOEs. Eventually this nexus expanded to outsource components and even final products previously made directly within the SOEs—not only to cut costs, but also to expand production in ways still limited by bureaucratic red tape, state control over urban land use, etc. It was much easier for an SOE manager to have a friend in the countryside open a new factory there than to obtain the land and permits necessary to do so directly in the city. Overall, then, the SOE-TVE nexus was a set of relationships whereby SOEs in a given city outsourced the manufacture of industrial components to collective enterprises in the surrounding countryside, which the SOEs supported by granting loans, donating equipment and sending technicians to train the TVE personnel. This benefited the SOEs by facilitating the expansion of production at minimal cost (often otherwise impossible due to regulations held over from the planned economy), the townships and villages by providing new sources of revenue (in principle shared with all residents as dividends in the collective enterprises), and the TVE employees by providing industrial jobs to rural residents ineligible for positions at urban enterprises.

The nexus predominated in Sunan, much of the broader Jiangnan region of which Sunan is a part (also including Shanghai and northern Zhejiang), and the peripheries of Tianjin and a few other strongholds of state enterprises that managed to adapt to the market economy and even prosper, if only for a few years from the late 1980s through the mid-1990s.[146] As noted above, however, the term “Sunan Model” usually refers mainly to its collective ownership structure, which spans the period before and after the heyday of the SOE-TVE nexus, and which also includes TVEs manufacturing consumer goods as opposed to industrial components for nearby state enterprises. In the greater Shanghai area, this sort of nexus was so successful for TVEs that it briefly raised the income of ruralites as high or perhaps higher than that of urbanites in the late 1980s and early 1990s.[147] This scenario was made possible by the convergence of the aforementioned policy changes promoting TVE formation (and the previous two decades of modernization that rendered many ruralites “surplus” to agricultural work), the only partial marketization of these regions at the time (in contrast with the more complete marketization of the SEZs), the presence of relatively robust and dynamic SOEs there, and the shift in national economic strategy to the promotion of light industry for domestic consumption. That shift created an incentive for consumer-oriented SOEs to expand at an unprecedented rate, and of course this market-oriented expansion was only possible because of the simultaneous decentralization of management and loosening of state monopolies on the production of many goods.

In Shanghai, where this sort of nexus is best documented, key consumer goods produced by SOEs were bicycles, refrigerators, sewing machines, motorcycles and automobiles. By the late 1980s, collective enterprises in the surrounding countryside were producing components for all these industries. Shanghai’s SOEs had started subcontracting to CBEs even before 1978, but this did not become a common practice until the 1980s, when the nexus system quickly took shape.[148] In part, this was because Shanghai’s economy was still being sheltered from the experiments with foreign investment and more thorough marketization going on in the PRD and elsewhere because the municipality was the state’s most important source of revenue, providing one-sixth of the central government’s total—among which seventy percent derived from Shanghai’s SOE profits.[149] By 1988, then, 31.2 percent of Shanghai’s suburban industrial output was produced by 1,446 joint ventures (联营企业) between SOEs and TVEs, championed by the local state as “urban-rural unification.”[150] For example, one household refrigerator SOE, a significant source of revenue for the Shanghai government, increased its annual output from 10,000 units in 1985 to 850,000 in 1996, its workforce growing from 557 to 2,740. By 1997 it had developed a supplier base of 76 subcontractors, 41 of which were TVEs. It had also helped its supplier of compressors (the most important component for manufacturing refrigerators) develop its own subcontractor base. At first the refrigerator SOE had imported most of its compressors from Japan, but over this decade it localized 70 percent of its supply, cutting costs by 45 percent. During the same decade, the local compressor factory had increased its annual output from 100,000 to 900,000 units. It had done this largely by helping to set up sixty subcontractors, over half of which were TVEs.[151]

These networks expanded so rapidly and then contracted so suddenly in part because of the decades-long “shortage economy,” which perpetuated the illusion that the SOEs could expand continuously without ever saturating consumer demand. By the time it became evident that conditions had now shifted to a “surplus economy,” it was already too late. In this case, the transition from planned to market economy is better understood as two shifts over a period of about ten years: (a) from planned to mixed or “dual-track” (双轨制) economy starting in 1984, and (b) from dual-track to market starting in the mid-1990s. In the dual-track economy of the late 1980s to early 1990s, the heyday of the nexus, “SOEs did not feel market competition until several years later, when production capacity caught up with and surpassed demand.”[152] From 1984, a set of state policies permanently constricted the scope of the planned economy. Anything that SOEs produced beyond that scope could henceforth be sold outside bureaucratic channels, with the sellers keeping the profit. Somewhat like the socialist regime (intended as a transition to communism) briefly generated the illusion that it was a stable system capable of reproducing itself with no end in sight, so too did the dual-track economy create a widespread sense that it was a fully formed economic system in its own right, with its own set of institutions. The belief that socialism was stable enough to withstand these vast reforms had blinded many participants to the full extent of a transition that ultimately took on a life of its own. In the same way, the apparent health of the dual-track economy blinded many managers of SOEs and TVEs to their gradual subsumption under the law of value.

One result of this was that managers of such firms were still making decisions that only made sense in the context of a shortage economy left over from decades of planning oriented toward heavy industry, basic infrastructure and military production. Under conditions where the rules and signals of the emerging market economy were changing rapidly, the managers of these SOEs and TVEs developed an entire portfolio of business practices that temporarily made sense in the dual-track economy but eventually contributed to its demise: reliance on personal relationships with bureaucrats whose offices were being reorganized or phased out, the design of TVEs around the production of specific components for sale to particular SOE, and the more basic problem of continuing to expand production vastly beyond what the market could absorb. When prices began to fall in the mid-1990s, the SOEs (still not allowed to lay off workers) began scrambling to cut costs by reducing the number of orders from local suppliers and switching to cheaper parts from new TVEs that were popping up in more distant townships. Market rationality replaced the ethics of personal loyalty that local TVE managers had taken for granted. By 1999, between sixty and seventy percent of the local TVE subcontractors for six key industries had closed down in the rural counties of Shanghai.[153] This devastated the economies of these counties, with just one study finding hundreds of thousands of workers laid off in each of the several townships it surveyed.[154]

This devastation dumped a vast stock of experienced workers and machinery into the private economy. Many of these factories were taken over by their managers, often in partnership with capital from elsewhere in China or overseas, and restructured according to more purely market principles. Local workers were thrown into competition with new migrants from poorer areas. In other cases, the equipment in these now-defunct factories was purchased by private enterprises elsewhere and shipped away. As will be discussed in more detail below, nationally, most collective TVEs were closed or privatized from the mid to the late 1990s, but this occurred last in Shanghai and Sunan. This shows that TVEs were more successful there than elsewhere in purely economic terms, and that they were more important to the state (because they were helping SOEs to generate a crucial source of revenue), so they were not forced to privatize—at first. Here it was not until the SOEs dug their own graves by expanding beyond the nation’s capacity to consume their products that the TVEs dependent on them went bankrupt and were either directly privatized or had their equipment sold off to existing private enterprises. This is thus not a typical story about the rise and fall of collective rural enterprises, but the eventual outcome was the same. Thus, it illustrates both the diversity of economic experiences characterizing different parts of China in the apparently fluid 1980s-1990s, and their ultimate collapse under the pressure of the law of value.


The Gestation of Value

Beginning as early as the mid-1980s, domestic production had begun to respond to pressures that increasingly resembled the dictates of value accumulation. These pressures were by no means fully developed, as many TVEs did not become entirely marketized until the mid-1990s, but the form of value had clearly begun its gestation in both the countryside and the SEZs. This was a definitive point in the transition to capitalism, despite the fact that ownership remained nominally public (beyond the borders of a few SEZs). This can be loosely understood as the emergence of two, initially separate, mutually underdeveloped systems of value, which would merge by the turn of the century. The first was domestic, undergirded by the growth of rural industry and driven largely by local dynamics, such as the new incentive structures conditioned by the household responsibility system. The second was international, marking not just the gestation of a value-form but instead the intrusion into the mainland of the prevailing global system of accumulation. By the 1990s, the two would begin to link, each complementing the other to condition a wave of successive marketization programs that eased the linkage between the developing domestic value-form and the reigning dictates of the global economy.

At the risk of distracting from our main narrative, it’s important here to clarify what we mean by “capitalist transition” in some theoretical detail. Value itself is a sort of spectral category that nonetheless takes material form at the social scale: it is a “real abstraction,” in the sense that the act of exchanging commodities poses their equivalence, and thereby both retroactively implies the amorphous character of a general, abstract labor that can be actualized in a diversity of commodities and requires the emergence of a general, abstract money commodity to realize this equivalence.[155] The Marxist idea of value, then, does not rely on any subjective act of valuation—this is, perhaps, the greatest difference between Marx’s critique of political economy and all forms of economics. Value is absolutely not defined by individual consumers “valuing” one good over another, even if this is an important proximate cause within the sphere of circulation.[156] It is better understood as an emergent process, guided by a machine-like logic that makes use of humans and all kinds of non-human systems as raw material and conveyance mechanisms for its expansion. This process itself, as opposed to individual “values,” generates a “value-form.”[157] The value-form is an emergent property of capitalist production, which it then drives forward according to its basic internal logic: Capitalist production is undertaken not to serve human needs but instead to increase the mass of value, embodied in commodities. In order for value to be produced in the capitalist sense, however, labor must also be a tradable commodity, defined by its ability to produce a value in excess of the wage, which is realized only when the value produced (in the form of commodities) is successfully sold on the market. This realized value then takes the form of money capital, the bulk of which is funneled back into production as investment. The function of investment is ultimately to produce even greater quantities of value, and at the level of the firm this function is signaled (though often not in any simple linear fashion) by profit. The investment market is therefore defined by differentials in the rate of profit between firms and industries.

Competition via the market, then, plays a vital role at three stages of this process. First, there is the necessity of a general labor market, ensuring that surplus value can be produced as an excess over the wage. Not all workers need to be fully dependent on the wage, but a market wage must be dominant enough to exert an inertial force ensuring that more and more workers will tend to become dependent on the wage, directly or indirectly. Similarly, the market wage must be dominant enough to generate a gravitational pull on those outside of it—i.e., peasants subsisting largely off their own land who trade excess on the market are trading at market prices defined in the end by the cost of labor and its proportion to capital.[158] Second, there is the necessity of a general commodity market for produced goods. Again, not all goods need to be commodified, but there is a general tendency for such a market to constantly increase its scope, pulling more products into market exchange and thereby transforming them into commodities. This transformation also entails the incorporation of these goods into the capitalist technosphere, where the production process tends to become more disaggregated and automated over time. Finally, there is the necessity of a market for capital: both money capital and fixed capital must be tradable and subject to market competition, making investment receptive to the rate of profit.

Taken together, these market forces will generate a form of value that tends to increase the productive forces generally. This occurs both due to the inertial force expanding production in absolute terms—i.e. more factories opening, more workers entering the labor force—and in relative terms, via increasing productivity per worker. Competition drives this expansion in both forms. In order to remain in business, individual firms must out-compete others by either finding new markets (in new commodities or simply in new regions) and expanding production to serve them, or by revolutionizing their existing facilities in order to produce greater quantities of goods for less labor. The two are of course not exclusive, and in both regards early entrants take on increased risk and gain increased reward if successful. When others follow, the market stabilizes at its new, increased size and scope. For the economy in general, the total value has expanded. Such expansion is dependent on the ready availability of a workforce whose labor can be purchased at a wage that leaves sufficient room for profit and on the ability of firms to trade finished goods over commodity markets, thus realizing the value created in the production process.

From the late 1970s onward, each of these markets within the Chinese economy was at least partially incomplete. In the early years of reform, the only production that can be said to have generated value in the capitalist sense was taking place within the insulated sphere of the SEZs, to be traded on the global market. But over the course of the 1980s, the rise of the domestic market would see the partial formation of a distinct, albeit infantile, value form operating within the shell of the planned economy. Outside of the SEZs, production for value was most dominant in rural areas with large quantities of TVEs, and particularly (though not exclusively) in those SEZ-adjacent industries that had become at least somewhat linked to export processing. But socialist-era welfare policies limited the size of the population that was dependent on the wage, particularly among those with urban hukou. In the countryside, workers freed from agricultural work by enhanced productivity provided a ready labor market for TVE production. In the urban sphere, this process remained incomplete, with the share of proto-proletarian workers growing, particularly in the coastal cities, but often remaining small compared to workers still more fully incorporated into the “iron rice bowl” of socialist-era, enterprise-based welfare. Nonetheless, growing marketization increased inflation and began to change the character of subsistence, turning more goods into social necessities. This further incentivized entry into the labor market, particularly among the peasantry.

Meanwhile, capital itself was only indirectly subject to market forces, evinced by the relatively low number of factory closures in the period. Firms were allowed to experience the upsides of market competition, but were still insulated from the downsides (i.e. bankruptcy and absorption into more capable competitors). This partial exposure to market forces nonetheless drove SOEs to focus on productivity growth, instead of simply expanding their state allotments or resource consumption, as had been the case in the socialist era. A growing portion of retained revenue thus funneled back into enterprises in the form of new machinery, equipment and training. Overall, by the 1990s, “enterprise funds [had] replaced state appropriations as the major source of finance for research and development.”[159] While TVEs and smaller private firms tended toward labor-intensive production, SOEs were capital-intensive, with markedly higher labor productivity. The entire process of technological transformation tended to enhance competitive pressure, and this ensured that the velocity of marketization itself increased.

Early on, the most radical wing of the remaining socialist-era dissidents, such as Li Zhengtian and Wang Xizhe of the Li Yizhe group, had imagined that economic reforms could be combined with increasing the scope of worker control in order to create a co-operative system of firms coordinated by democratically-regulated, non-capitalist markets.[160] Similarly, the party itself returned to debates from the 1950s on the “socialist law of value.” A new, “socialist market” interpretation emerged, in which the market could co-exist with state ownership in a way that precluded transition to capitalism. Since the market was seen as merely a mechanism for administering the circulation of goods, it was imagined that production  could remain socialist so long as it was nominally owned and administered by the state—whether embodied in the village committee, the municipal government or a central planning authority. This meant that, alongside increased enterprise autonomy and economic efficiency, economists began to discuss the idea of “socialist profit” and the intentional revival of the law of value, but did not envision these as necessarily leading to the rehabilitation of capitalism.[161]

Both the dissidents and the reformers in power, however, tended to conflate formal ownership with the realities of everyday operation. A capitalist system is indeed founded on private ownership, but equally important is the tendency for the very basis of private ownership to be undercut by the expanding social scope of production. On top of this, ownership as a social practice is historically specific: the distinction between previous and modern forms of private ownership lies in capitalist ownership’s location within a market defined by the law of value. It is this context that also ensures that the scale of production tends to increase, so the private ownership of production is gradually eroded by more complex forms of administration that tend to span a greater breadth of society.

On one side, this entails private ownership of the means of production on the part of capitalists, who claim the right to administer the excess value generated by the process of production. But the key here is not nominal ownership so much as the specific ownership of tradable commodities. Under capitalism, in contrast with other modes of production, ownership is fundamentally fungible, with the commodity form writing contingency into its basic structure. Ownership thereby becomes the administration of commodities, and nothing deeper. This also means that many distinct styles of ownership and administration can exist within a capitalist system, so long as none threaten the commodity form and the drive toward value accumulation that defines it. Moreover, there is a secular tendency for the scale and extent of production to increase, and this requires that administration itself grow more complex. Ownership follows, becoming both more social (via publicly-traded companies, the transformation of retirement funds into stock market investments, state subsidies paid to industry, etc.) and in many cases more monopolistic. Meanwhile, state-owned firms are relatively common, as are worker cooperatives and small businesses. Capitalism thereby accommodates a vast diversity of methods for the administration of production. Absolutely none of these forms of ownership, including state ownership, can be considered somehow “less” capitalist than the others. In fact, the entire framework of definition here is at fault, the attempt to sum up to capitalism starting from micro-economic units equivalent to an attempt to distinguish water from ice by counting its molecules.

It is the function of the firm within the overall movement of social production, rather than its nominal ownership or method of administration, that defines its inclusion within a capitalist economy. But if we define the function of individual firms relative to the environment of production, how do we understand their function when this environment is in transition? In such a situation, the character and function of individual firms takes on an added dimension: contributing to, hindering, or otherwise influencing the direction of change. All economies transitioning into capitalism tend to include an array of older forms of ownership, administration and labor which are slowly converted into the greater system of value accumulation and increasingly subject to this system’s requirements. The colonies of capitalist countries, for instance, were unambiguously a part of the global capitalist market, even while they utilized the labor of slaves, coolies and indentured servants. In such situations, individual productive units sit on a sort of ecotone—the space where distinct ecosystems of production meet. Some methods of production go extinct, but others adapt. And just as many of these archaic forms are therefore exapted into the capitalist system—sometimes as simple accidents of history, but often because they prove to be equally or more efficient at securing the accumulation of value in a given era than already existing forms of organization. The key question in a period of transition, then, is not one of how exactly sites of production are owned and managed, but instead how they operate relative to the larger pressures of compounding growth and intensive technological transformation that define a capitalist economy.

As these various forms of the market relation began to take hold in China, they gained their own inertia independent from the intentions of reformers. The commodity market, the labor market and the capital market developed at different rates, but growth in one tended to initiate, cultivate and reinforce growth in the others. In the early 1980s, the commodity market was developing rapidly, the labor market was still limited and the capital market was almost nonexistent. The law of value was largely limited to the SEZs. By the end of the decade, however, the commodity market was pervasive, and it had begun to stimulate the growth of the labor market and facilitate the transformation of TVE ownership into something resembling a locality-based shareholder corporation. At the same time, the growth of the commodity market and the availability of contract labor slowly transformed the methods of production within even the large SOEs. The ability to outsource lower-order operations to smaller firms, combined with technical changes that enhanced productivity would soon create an abundance of obsolete plant and equipment, as well as unnecessary labor. A domestic law of value had begun to take shape, but it was still geographically delimited and internally incomplete. It was also a tumultuous political process, with economic volatility generating popular revolt that threatened the stability of the transition itself.


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[1] Erik Brodsgaard & Rutten, K. From Accelerated Accumulation to Socialist Market Economy in China, Brill, 2017, p. 4.

[2] Sun Laixiang, Aggregate Behaviour of Investment in China, 1953-96: An Analysis of Investment Hunger and Fluctuation, Palgrave, 2001, pp. 209-210.

[3] Ibid.

[4] Nonetheless, investment-driven growth has been the norm both before and during the reform period, with investment in manufacturing as a share of GDP remaining extremely high compared to other countries.

[5] Anthony Tang, “Agriculture in the Industrialization of Communist China and the Soviet Union,” Journal of Farm Economics 49(5), 1967: pp. 1118-1134.

[6] Brown, p. 35.

[7] Barry Naughton, The Chinese Economy: Transitions and Growth, MIT Press, 2007, p. 272 and chapter 2. Also see Richard von Glahn, The Economic History of China: From Antiquity to the Nineteenth Century, Cambridge University Press, 2016, chapters 7 and 8.

[8] Hill Gates, China’s Motor: A Thousand Years of Petty Capitalism, Cornell University Press, 1996, p. 29.

[9] William A. Byrd and Qingsong Lin, China’s Rural Industry: Structure, Development, and Reform, Oxford University Press, 1990, p. 9.

[10] “Sorghum & Steel,” p. 79.

[11] Naughton 2007, p. 272.

[12] Byrd and Lin 1990, p. 9.

[13] A third initial goal, also later abandoned along with the first, was to help make the new agrarian “people’s communes” more self-sufficient as part of the “transition to communism” by increasing their ability to produce not only steel and grain for China’s soldiers and urban workers, but also consumer goods for use in the countryside. Not surprisingly, this latter goal was mobilized more in rhetoric than in reality as something to be emphasized more after the first two goals of national development had been achieved, but this has not prevented later pro-market ideologues from citing its failure as a lesson against the foolhardiness of utopian politics.

[14] Carl Riskin, China’s Political Economy: The Quest for Development Since 1949, Oxford University Press, 1987, pp. 125-126. For a detailed account of how this played out in one Sichuanese commune, see Stephen Endicott, Red Earth: Revolution in a Chinese Village, I. B. Tauris, 1988, chapter 6.

[15] Byrd & Lin 1990, p. 10.

[16] Dong, Qi and Murakami, Tomoaki and Nakashima, Yasuhiro, “The Recalculation of the Agricultural Labor Forces in China” (July 14, 2015). Available at SSRN: https://ssrn.com/abstract=2630513 or http://dx.doi.org/10.2139/ssrn.2630513, p. 11-12.

[17] Endicott 1988, pp. 52 & 57.

[18]  “Sorghum & Steel,” p. 80, and Gail Hershatter, The Gender of Memory: Rural Women and China’s Collective Past, University of California Press, 2011, pp. 138 and 265.

[19] Chenggang Xu and Xiaobo Zhang, The Evolution of Chinese Entrepreneurial Firms: Township-Village Enterprises Revisited, International Food Policy Research Institute, 2009, p. 2.

[20] Chris Bramall, Chinese Economic Development, Routledge, 2009, p. 269.

[21] Dong, Murakami, and Nakashima 2015, pp. 11-12.

[22] Chris Bramall, The Industrialization of Rural China, Oxford University Press, 2007, p. 9.

[23] Anita Chan, Richard Madsen and Jonathan Unger, Chen Village: Revolution to Globalization, University of California Press, 2009; David Zweig, Agrarian Radicalism in China, 1968-1981, Harvard University Press, 1989, pp. 56-57.

[24] Dali L. Yang, Calamity and Reform in China, Stanford University Press, 1996, p. 105; Kenneth R. Walker, Food Grain Procurement and Consumption in China, Cambridge University Press, 1984.

[25] Joshua Eisenman, Red China’s Green Revolution: Technological Innovation, Institutional Change, and Economic Development Under the Commune, Columbia University Press, 2018, p. 262.

[26] J. L. Enos, “Commune- and Brigade-Run Industries in Rural China,” in Institutional Reform and Economic Development in the Chinese Countryside, edited by Keith Griffin, M.E. Sharpe, 1984, pp. 240-241.

[27] Bramall 2007, p. 19.

[28] Ibid., p. 21.

[29] Ibid.

[30] Byrd & Lin 1990, p. 10.

[31] Bramall 2009, p. 270.

[32] Ibid.

[33] Bramall 2007, p. 21.

[34] Ibid.

[35] Bramall 2009, p. 269.

[36] Bramall 2007, p. 22.

[37] Ibid., p. 23; Bramall 2009, p. 270.

[38] Enos 1984, p. 241.

[39] Endicott 1988, p. 88.

[40] Mark Selden, The Political Economy of Chinese Development, M.E. Sharpe 1993, pp.174-175

[41] Kam Wing Chan, “Fundamentals of China’s Urbanization and Policy,” The China Review, Volume 10, Number 1, Spring 2010, pp.63-94

[42]The range of this figure is largely due to the question of whether or not to include subsidies in the measurement. If only nominal wages are compared, the rural-urban income gap sits between 2 and 4:1, but if subsidies are included (and we argue that they should be) the true gap in “income” as a measurement of total consumption ability sits closer to 5 or 6:1. For a review of various measurements, see Selden 1991, p.170

[43] Wu 2014, p.25, Figure 1

[44] Michael Frazier, The Making of the Chinese Industrial Workplace: State, Revolution and Labor Management, Cambridge University Press, 2002. p.255

[45] Selden 1993, p.175

[46] Naughton 2007, pp.74-76

[47] See Figure 2 above, as well as Naughton 2007, p.57, Figure 3.1. Naughton’s data ends in 2004, but can be compared to the World Bank’s measure of Gross Capital Formation as a share of GDP, available at: <http://data.worldbank.org/indicator/NE.GDI.TOTL.ZS?locations=CN>

[48] It is equally important to again emphasize that we write about China specifically, and our conclusions about the nature of the developmental regime cannot simply be transferred wholesale to other countries in the socialist bloc. This, nonetheless, has been exactly what many scholars do, only in reverse, using their conclusions about the USSR to pre-determine their understanding of China or other socialist nations. It should go without saying, however, that the historical experience of countries as diverse as Yugoslavia, Vietnam, Cuba and Tanzania, though all “socialist,” will have created distinct local crises rooted in local conditions, and each therefore had a unique position in relation to the crises of the larger socialist bloc. For our conclusions on China, see “Sorghum & Steel.”

[49] The proxy wars across Asia, Africa and the Middle East were also, of course, effects of the Cold War, but they were a dimension of its global character, only loosely cohering into geographic fronts—and failure in these territories did not threaten the fundamental security of China and the USSR, by far the two largest socialist powers.

[50] Lorenz Luthi, “Chapter 3: Mao’s Challenges, 1985,” The Sino-Soviet Split: Cold War in the Communist World, Princeton University Press, 2008.

[51] Michael S. Gerson, “The Sino-Soviet Border Conflict: Deterrence, Escalation, and the Threat of Nuclear War in 1969,” Center for Naval Analyses, November 2010. p.16

[52] Ibid, pp.16-20

[53] Andrew Scobell, China’s Use of Military Force: Beyond the Great Wall and the Long March, Cambridge University Press, 2003. p. 15

[54] Bovingdon 2010, pp.39-45

[55] Ibid, pp.44-45

[56] See: Yiching Wu, The Cultural Revolution at the Margins: Chinese Socialism in Crisis, Harvard University Press, 2014.

[57] See Naughton 2007.

[58] Doug Bandow, “A Nixon Strategy to Break the Russia-China Axis,”  The National Interest, 4 January 2017. <http://nationalinterest.org/blog/the-skeptics/nixon-strategy-break-the-russia-china-axis-18946?page=show>

[59] See: Barry Naughton, Growing out of the Plan: Chinese Economic Reform (1978-1993), Cambridge University Press, 1996.

[60] The evolution of the gender question under the developmental regime (and to this day) is a topic worthy of much more focused inquiry, which we hope to explore in the future. Suffice it to say here that the initial vision of abolishing marriage entirely had long been abandoned by the 1970s, and the party in fact helped to reinforce and police the family, such that people refusing to marry were even sometimes punished. For more on this, see: Margery Wolf and Roxane Witke (Eds.), Women in Chinese Society, Stanford University Press, 1975; Tani E. Barlow, The Question of Women in Chinese Feminism, Duke University Press, 2004; Hershatter 2011.

[61] We have not yet discussed events in Tibet in any detail, but for Xinjiang, see our piece in this issue: Adam Hunerven, “Spirit Breaking.”

[62] This view of historical “stages” within, before and after capitalism became a central feature of many schools of Marxism after Marx’s death. In his own writings, the concept is often secondary and not particularly well-developed. But determining the national “stage” of development was a major focus of debates on revolutionary strategy in places like Russia, China and Japan in the early decades of the twentieth century, leading also to distortions such as Preobrazhensky’s theory of “socialist primitive accumulation,” justifying violent collectivization in the countryside.

[63] This position was initially popularized by David Harvey, and is today the core theoretical presumption of many political programs based on the defense, revival or expansion of a supposed “commons.”

[64] For more on the theory of original accumulation as a continual process, see the work of Werner Bonefield, particularly chapter 4 of his Critical Theory and the Critique of Political Economy, Bloomsbury, 2014.

[65] “Sorghum & Steel” and its concept of China’s “socialist developmental regime” were implicit critiques of the various theories that all such regimes were merely variations of capitalism (whether “state capitalism,” “bureaucratic capitalism,” Bordiga’s description of the USSR as simply “Russian capitalism,” or Aufheben’s concept of “the deformation of value”). Rather than summarizing such debates, we simply aimed to present our own account of the specifically Chinese experience, and the article indeed resulted from over ten years of engagement with these theories. Several readers have assumed this presentation reflected a lack of familiarity with such theories, but our account does not claim to address the many other regimes that called themselves “socialist.” A small handful of works have attempted to deal with China directly (namely the accounts of Loren Goldner and Elliot Liu), and we did address these. But very few were formulated with China in mind and, in the end, we maintain that one cannot understand Chinese history by studying Russia.

[66] On these tendencies in the 1970s, see section four of “Sorghum & Steel” and chapter 7 of Yiching Wu’s Cultural Revolution at the Margins.

[67] Naughton 2007, p.77

[68] Jackie Sheehan, Chinese Workers: A New History, Routledge, 1998. pp.144-145

[69] Anita Chan, Stanley Rosen and Jonathan Unger, Eds., On Socialist Democracy and the Chinese Legal System, Routledge 1985. pp.1-20

[70] Chan et. al. 1985, p.9 and Sheehan 1998, p.146

[71] Sheehan 1998, p.146

[72] ibid, pp.146-149

[73] For more detail on the history of “economism” as both an aspect of worker protest in the socialist era and a term used to discredit unrest, see: Sheehan 1998 and Wu 2014.

[74] Sheehan, pp.148-151

[75] Ibid, p.150

[76] Ibid, p.154

[77] ibid, pp.160-163

[78] This was particularly prominent in the work of theorists like Wang Xizhe. See: Chan et. al. 1998.

[79] Sheehan, p.155, p.167 and pp.192-193

[80] Dali Yang, Calamity, 108.

[81] Ibid., p. 123.

[82] Ibid., p. 108.

[83] Zweig 1989, p. 71.

[84] Frederick C. Teiwes and Warren Sun, Paradoxes of Post-Mao Rural Reform: Initial Steps Toward a New Chinese Countryside, 1976-1981, Routledge, 2015, pp. 203-204.

[85] See also Sun Laixiang 2001.

[86] Griffin and Griffin in Griffin ed. 1984, p. 211.

[87] Zweig 1989, p. 71; also Rural Capital Construction numbers—China Data tables.

[88] CIA, “China Provincial Grain Production,” 1982, <https://www.cia.gov/library/readingroom/docs/CIA-RDP83B00227R000100070005-7.pdf>; Teiwes and Sun 2015, p. 203; Zweig 1989, p. 71.

[89] Li, Yuxuan, Weifeng Zhang, Lin Ma, Liang Wu, Jianbo Shen, William J. Davies, Oene Oenema, Fusuo Zhang, and Zhengxia Dou. “An Analysis of China’s Grain Production: Looking Back and Looking Forward.” Food and Energy Security 3, no. 1 (March 1, 2014): 19–32. <https://doi.org/10.1002/fes3.41>.

[90] Teiwes and Sun 2015, p. 203.

[91] Sicular, Terry. “Grain Pricing: A Key Link in Chinese Economic Policy.” Modern China 14(4), 1988:, p. 486.

[92] Teiwes and Sun 2015,, p. 119.

[93] Sicular, “Grain Pricing,” 1988, p. 478.

[94] Teiwes and Sun 2015, pp. 150-151.

[95] Ibid., p. 152.

[96] Ibid., p. 203.

[97] Adjit Ghose in Griffin ed. 1984, p. 211; Teiwes and Sun 2015, p. 151.

[98] Teiwes and Sun 2015,  p. 163.

[99] Thus while it is no surprise that the household responsibility system spread in a less developed province such as Guizhou, it also spread in areas where the collective economy worked much better, such as Guangzhou. The speed at which it was adopted provincially, however, was quite varied. See Teiwes and Sun 2015, pp. 159-164.

[100] Jonathan Unger, The Transformation of Rural China, M.E. Sharpe, 2002, p. 102.

[101] Ibid., p. 100.

[102] Sicular, “Grain Pricing,” 1988, p. 469.

[103] Ibid., p. 470.

[104] Sicular, Terry. “Agricultural Planning and Pricing in the Post-Mao Period.” The China Quarterly, no. 116, 1988: p. 694.

[105] Sicular, “Grain Pricing,” 1988, pp. 470-473.

[106] Sicular, “Agricultural Planning,” 1988, pp. 695-696.

[107] Ibid., p. 696-697.

[108] Bird & Lin 1990, p. 10. According to Enos (1984, p. 225), it was already common for CBEs to do both of these things (process agricultural products and produce industrial components for state enterprises) as early as 1975. Since this was not officially encouraged, and was in many cases prohibited or restricted until 1978, this observation may be taken as further evidence of local initiative with which official policy was forced to catch up—like the reorientation of some CBEs toward urban consumer markets disrupted in 1967-1968, mentioned above.

[109] Enos 1984, p. 241.

[110] Byrd & Lin 1990, p. 11.

[111] Griffin and Griffin, in Griffin ed. 1984, p. 216.

[112] Ibid., p. 217.

[113] Ibid.

[114] Ibid. p.218.

[115] Byrd & Lin 1990, p. 11.

[116] Accordingly, Byrd & Lin translate xiangzhen qiye as “rural nonstate enterprises,” but we have stuck with the more common “Township and Village Enterprises” lest it appear we are referring to something else. Note that this category also includes enterprises owned by production teams and any other combination of rural collective or individual owners below the level of county government – as the CBEs had unofficially come to encompass in the early 1980s. It would not be until the mid-1990s that rural private enterprises were officially contrasted with collective ones – now as the preferred form of ownership, with collectives deemed as more likely to become inefficient, nepotistic, etc.

[117] David Zweig, “Internationalizing China’s countryside: the political economy of exports from rural industry,” The China Quarterly 128, 1991, p. 719.

[118] Ibid.

[119] Byrd & Lin 1990, p. 11.

[120] Daniel Buck, Constructing China’s Capitalism: Shanghai and the Nexus of Urban-Rural Industries, Palgrave Macmillan, 2012. This is discussed in more detail below, in the section on the SOE-TVE nexus.

[121] Naughton 1996, pp.80-82, Figure 2.2

[122] Ibid, p.82

[123] Gary H. Jefferson and Thomas G. Rawski, “Enterprise Reform in Chinese Industry,” in Ross Garnatu and Yiping Huang, eds., Growth Without Miracles: Readings on the Chinese Economy in the Era of Reform, Oxford University Press 2001. p.246.

[124] Naughton 1996, p.83

[125] Naughton 2007, p.300, table 13.1

[126] Jefferson and Rawski 2001, p.247

[127] Naughton 1996, pp.101-103

[128] Ibid, pp.117-119

[129] Jefferson and Rawski, 2001, p.249

[130] Naughton 1996, p.106, Figure 3.2

[131] Zweig 1991, p. 717-718.

[132] Ibid., p. 721.

[133] Quoted in ibid., p. 721-722.

[134] Quoted in ibid., p. 722.

[135] Ibid., p. 727.

[136] Ibid., p. 734.

[137] Bramall 2007, pp. 60-70; Buck 2012, pp. 13-15; Lin 1997, p. 127.

[138] Bramall 2007, pp. 64-65.

[139] Ibid.

[140] Rui 2004, pp. 2-3.

[141] Ibid., p. 4.

[142] Ibid., p. 6.

[143] Ibid., p. 7.

[144] To the above four, several other identified patterns of rural industry could be condensed into a fifth describing those parts of central and western China whose TVEs remained predominantly collective, using local labor and capital to process agricultural products and manufacture agricultural inputs and consumer goods for the domestic market. Like the Pingding pattern, this was never officially promoted as a national model, and it largely fell apart in the national push to privatize collective enterprises in the late 1990s, although a few collectives held on and managed to survive by carving out niche markets. A prominent example is Nanjie Village in Henan, which has been championed by many leftists as the last bastion of Chinese socialism and a model alternative to capitalist enterprise. However, its success has been made possible only by generous support from the Agricultural Bank of China and the exploitation of non-local workers, who comprise two-thirds of the workforce and do most of the manual labor for the village’s twenty-some enterprises without enjoying any of the collective benefits enjoyed by villagers. See Issue 1 of China Left Review, 2008.

[145] For an overview of these 1990s political discussions about TVEs, see chapter 3 of Alexander Day, The Peasant in Postsocialist China, Cambridge University Press, 2013.

[146] Much of this section is gleaned from Buck 2012, the source of the term “SOE-TVE nexus.”

[147] Buck 2012, p. 187.

[148] Ibid. p. 26.

[149] Ibid., p. 14.

[150] Ibid., p. 27.

[151] Ibid.

[152] Ibid., p. 81

[153] These industries were sewing machines, bicycles, motorcycles, automobiles, refrigerators and measuring instruments. Ibid. p. 5 and 132.

[154] Ibid., p. 191.

[155] The concept of “real abstraction” is central to Marx’s method, and the clearest recognition of this is usually credited to Alfred Sohn-Rethel’s 1977 work, Intellectual and Manual Labor. Its very popularity in the academic Marxist cliques of the late 20th century, however, led to extreme misuse, guided by the seasonal fashions of high philosophy. Recent years have brought several attempts to refocus the concept in classically Marxist terms. One good contemporary summary of Marx’s use of real abstractions and their connection to the exchange process can be found in: Ray Brassier, ‘Concrete-in-Thought, Concrete-in-Act: Marx, Materialism and the Exchange Abstraction’ in Crisis and Critique, Vol. 5, No.1, 2018.

[156] This has, however, been a point of contention within some schools of Marxism. See, for example: Elena Louisa Lange, “Failed Abstraction: The Problem of Uno Kōzō’s Reading of Marx’s Theory of the Value Form”, Historical Materialism 22.1, Brill, Leiden, pp. 1–31.

[157] For more detail on this, the school of “value-form theory” has become coherent enough in Anglophone scholarship to be a distinct point of reference. This is a broad category, however, including the early work of Isaak Rubin, the Neue MarxLektüre in Germany, as well as the work of certain Francophone and Anglophone ultra-leftist theoretical currents. One good source among many is Michael Heinrich’s An Introduction to the Three Volumes of Marx’s Capital, Monthly Review Press, 2012.

[158] Other types of market exchange have existed historically, of course, the most relevant here being the expansive, largely rural markets that dominated the East Asian mainland from the medieval era well into the Qing. Production for these markets was dominated by artisanal forms of labor, largely undertaken by subsistence farmers selling excess agricultural goods or homemade products. For the vast majority of the population, subsistence was a matter of local agricultural production, rather than the wage. There were arguably one or two periods, during the Southern Song and the early Ming, when local market relations began to extend to agriculture, freeing a substantial portion of labor into wage production in urban centers and thereby opening up a potential for a transition to capitalism. For our purposes, we can simply note that this transition never occurred. There was no domestic “capitalist” tradition prior to the late Qing. For an overview of this debate and an explanation of how markets functioned in pre-capitalist mainland East Asia, see Richard Von Glahn, The Economic History of China: From Antiquity to the Nineteenth Century, Cambridge University Press, 2016.

[159] Jefferson and Rawski, 2001, p.252

[160] This vision was modeled on the experience of Yugoslavia, and at the theoretical level bears substantial resemblance to the anarchism of Pierre Joseph Proudhon. See: Sheehan, 1998, pp.144-145.

[161] Naughton 1996, p.98