From Textbook of Political Economy

POLITICAL ECONOMY, A textbook issued by the Institute of Economics of the Academy of Sciences of the U.S.S.R. This Soviet textbook on POLITICAL ECONOMY was first published in Moscow in 1954. A second revised and enlarged edition appeared in 1955. The present translation was made from the second Russian edition, and edited by C.P. Dutt and Andrew Rothstein.

The Building of Socialism in the Countries of People’s Democracy

Chapter XLII

The Economic System of the Chinese People’s Republic

The Prerequisites of the Chinese People’s Revolution

Until the victory of the people’s revolution China was a backward, agrarian country dependent on the imperialist powers. Chinese economy was of a semi-feudal and semi-colonial character. The semi-feudal character of the economy consisted in the dominance of feudal-landlord landownership and semi-feudal methods of exploiting the peasantry, and this was the main cause of the stagnation, backwardness and lack of rights that prevailed. The land was worked by primitive methods.

The landowners, as a rule, did not carry on large-scale farming but leased out the land in small plots to the peasants. The tenant farm was the most widespread form of peasant holding. Leases were as a rule for an indefinite term or perpetual. Pre-capitalist forms of rent were the most widespread: labour-rent, rent in kind, money-rent.

The semi-colonial character of the economy consisted in the fact that over a long period foreign imperialists had dominated China. The intrusion of foreign imperialism on the one hand hastened the process of disintegration of feudal relations, but, on the other, imperialism, interested in upholding feudal survivals in China, entered into a compact with the feudal forces and held back the development of Chinese capitalism. The clique of landlords and compradore bourgeoisie ruling in China assisted in every way the penetration of the foreign monopolies into the country’s economy. Though capitalism developed to a certain degree, it never became the basic economic system in China.

Right up to the revolution China remained a country where capitalism was developed only to an extremely low level. Modern industry, especially heavy industry, was very weak. The foreign monopolies hindered the development of industry, especially the branches producing means of production, and kept the country in a state of technical and economic backwardness. Modern industrial enterprises existed only in a few coastal districts and in the north-east of the country, while nearly the whole of China’s vast territory was entirely lacking in machine industry. The production of modern industry pre-revolutionary China was equivalent only to 17 per cent the total production of industry and agriculture. The overwhelming mass of manufactured articles were produced by small handicraft enterprises and manufactories. At the same time the growth of commodity relations in town and country rendered extremely acute the unbearable oppression constituted by the semi-feudal forms of exploitation of the peasantry. The spread of wage-labour created numerous bodies of proletarians in town and country.

The landlords, who made up 4-5 per cent of the rural population of China, owned more than half of all the land; the poor and middle peasants, who made up 90 per cent of the rural population, owned only 30 per cent of all the land.

The peasants leased the land on share-cropping terms, paying the landowners from 50 to 70 per cent of the harvested crop for the lease of the land and implements.

The main mass of the peasantry, the poor and middle peasants, were compelled to seek loans in cash and in kind from the land-owners and money-lenders. About 60 per cent of all peasant households constantly had recourse to the “aid” of money-lenders in order to pay their taxes; about half of the peasants regularly ran short of food, and were compelled to borrow it from the rich. Money-lenders and landowners extorted huge sums from’ the peasants as interest on loans.

China’s dependence on imperialist powers, principally on Britain, Japan and the U.S.A., grew continually. Foreign capital in industry amounted to 75 per cent of the total capital invested while the share held by national capital did not exceed 25 per cent. Beginning with the thirties of the twentieth century American imperialism assumed the dominating position in China. In 1936, the U.S.A. share in China’s foreign trade was 23 per cent; in 1946 it was 53 per cent. The American monopolists controlled industry, foreign and internal trade, and finance.

As early as the middle of the last century, when the capitalist powers began to penetrate China on an extensive scale the class of feudal landlords that ruled the country proved quite incapable of defending the State from external enemies. As a result, despite the huge size of the country, China virtually lost its position as an independent State.

The semi-feudal character of China’s economy determined the class structure of the populations.

The landlords were the most reactionary exploiting class in Chinese society. They served as the main prop of the foreign imperialists who enslaved the Chinese people.

The peasantry were the most numerous class in China. With the penetration of commodity relations into the countryside, there was taking place a process of class differentiation among the peasantry. On the eve of the victory of the people’s revolution the labourers (landless peasants) and poor peasants (those with small plots of land) comprised 70 per cent, the middle peasants 20 per cent, and the kulaks 5 to 6 per cent of the village population. The kulaks made use to a large extent of hired labour (farm labourers), combining capitalist exploitation of the peasantry with semi-feudal methods of exploitation.

In the twentieth century, in connection with the development of capitalism, new classes besides the feudal landlords and the peasantry appeared in the arena of social life: the bourgeoisie and the proletariat.

The bourgeoisie in China from the very beginning found itself economically dependent upon foreign imperialists. The big compradore bourgeoisie was closely linked with feudal land-ownership and the foreign imperialists, especially with the American, British and Japanese imperialists. It functioned as middleman between the foreign imperialists and the Chinese market and concentrated considerable wealth in its hands, obtained through merciless exploitation of the worker and peasant masses. During the rule of the Kuomintang clique important positions in the country’s economy were seized by a handful of monopolists who made extensive use of State power to plunder the country (so-called “bureaucratic capital”). Another section of the bourgeoisie consisted of the national (chiefly middle) bourgeoisie. As the foreign imperialists prevented the development of native industry by every possible means, the national bourgeoisie displayed opposition to the foreign imperialists and the compradore bourgeoisie. The rural bourgeoisie – the kulaks – made extensive use of hired labour, combining capitalist exploitation of the peasantry with semi-feudal methods of exploitation.

A very numerous section of the population was the urban petty bourgeoisie (handicraftsmen, small traders) among whom discontent with imperialist robbery and feudal oppression increased.

The industrial proletariat, on the eve of the victorious people’s revolution, numbered about four millions. In addition to workers in factory industry, there were many millions of proletarians and semi-proletarians engaged in other branches: port and town workers engaged in loading, unloading and transporting goods (coolies and rickshaw pullers), workers engaged on navying, and also rural proletarians (labourers), numbering before the revolution some tens of millions. The industrial proletariat, the most organised, conscious and advanced detachment of the working masses, from the twenties of the present century exercised a determining influence on the political life of the country.

After the first world war, under the influence of the great October Socialist Revolution in Russia a broad anti-imperialist and anti-feudal revolutionary movement arose in China, linked with a rapid upsurge in the working-class movement. The Chinese revolution, aimed at overthrowing oppression by imperialism and feudalism, became part of the world revolution.

The Character of the Chinese Revolution

The people’s revolution in China, which achieved victory in 1949, had deep historical roots. For a long time the alien imperialists and the landlord-compradore State plundered and oppressed the Chinese people. Imperialist oppression and feudal methods of exploitation rendered class contradictions extremely acute and brought .the country to the brink of economic and political disaster. The people’s revolution became the only way out of the situation thus created.

In view of the semi-colonial position of the country and the predominance of semi-feudal relations, the people’s revolution in China assumed in its first stage the character of a national-liberationist, bourgeois-democratic revolution. The principal contradictions, on the basis of which this revolution grew and developed, were, on the one hand, the contradiction between the Chinese people and foreign imperialism, and on the other, the contradiction between the mass of the people and feudalism. The main enemies of the Chinese revolution were the forces of imperialism and feudalism, acting in close alliance. Consequently, the revolution was called upon to carry out two inseparably connected tasks: on the one hand to overthrow the oppression of foreign imperialism, and on the other to overthrow oppression by the feudal landlords inside the country. Thus, the Chinese bourgeois-democratic revolution was, from the very beginning, an anti-imperialist and anti-feudal revolution. “The bourgeois-democratic revolution in China is a combination of the struggle against feudal survivals and the struggle against imperialism.” (Stalin, “The Revolution in China and the Tasks of the Communist International”, Works, vol. IX, p. 292.)

The main driving forces of the Chinese people’s revolution were the working class and the peasantry. The working class, and the peasantry led by it, constituted the chief army of the revolution, guaranteeing to the Chinese, people victory over their foreign and internal enemies. In the course of the revolutionary struggle a united people’s democratic front was formed, in which there took part the working class, the peasantry, the urban petty-bourgeoisie, the national bourgeoisie and all the democratic elements in the country. The revolutionary struggle of the Chinese people was headed by the Communist Party of China, which was guided by the theory of Marxism-Leninism, creatively applying this theory in the conditions of its own country and making use of the experience of the victorious revolution in the Soviet Union.

The historical peculiarity of the Chinese people’s revolution is that it developed under the conditions of the general crisis of capitalism, when the world system of capitalism is in its epoch of decline and is being replaced by the socialist system, when the camp of socialism has come into being, headed by the Soviet Union. In these circumstances the Chinese Revolution was not a revolution which set up a dictatorship of the bourgeoisie and opened a freer road for the development of capitalism, but a bourgeois-democratic revolution of a new type, growing over into a socialist revolution. The Communist Party of China proceeded from the fact that in the present international situation China, as a result of the bourgeois-democratic revolution, leaves the capitalist path of development and takes the non-capitalist, i.e., the socialist road.

Developing Lenin’s teachings on the character of colonial revolutions in the epoch of the general crisis of capitalism and on the growing of the bourgeois-democratic revolution into the socialist revolution, Mao Tse-tung wrote:

“The whole Chinese revolutionary movement led by the Chinese Communist Party is a complete revolutionary movement embracing the two revolutionary stages, democratic and socialist, which are two revolutionary processes differing in character, and the socialist stage can be reached only after the democratic stage is completed. The democratic revolution is the necessary preparation for the socialist revolution, and the socialist revolution is the inevitable trend of the democratic revolution. And the ultimate aim of all Communists is to strive for the final building of socialist society and communist society.” (Mao Tse-tung, “The Chinese Revolution and the Communist Party of China”, Selected Works; vol. III, p. 101.)

During nearly three decades the masses, led by the class with the Communist Party at its head, carried on a stubborn armed struggle against foreign imperialism, against the rule of the feudalists and the compradore bourgeoisie.

In the course of a long anti-imperialist and anti-feudal struggle, the Chinese people established extensive revolutionary bases on which they set up a people’s-democratic united front government, carried out radical social transformations and accumulated rich revolutionary experience and gradually built up a mighty people’s-democratic army, which triumphed in 1949. The Chinese revolution in its bourgeois-democratic phase successfully accomplished the task of the overthrow by the masses, led by the proletariat, of the rule of alien imperialism, the rule of the feudal landlords and the big monopolist compradore bourgeoisie, set up a people’s-democratic republic and carried through revolutionary agrarian transformations.

As the tasks of the bourgeois-democratic revolution were fulfilled, it grew over into a socialist revolution, making the transition to the road of socialist transformations.

The Chinese People’s Republic is a people’s democratic State, led by the working class and based on the alliance of the workers and the peasants. In the socialist phase of the revolution the people’s democratic power has begun successfully to fulfil the functions of the dictatorship of the proletariat. The people’s democratic power is developing the construction of the foundations of socialism while at the same time completing its fulfilment of the tasks of the democratic revolution. China has entered the transition period to socialism.

The greatest significance of the Chinese revolution consists in the fact that it has opened the road of development towards socialism before a huge country with an extremely backward economy in which semi-feudal and semi-colonial forms of economy predominated. This is the principal peculiarity of the economic development of the Chinese Peoples Republic as compared with the European people’s democracies. In the new historical conditions the possibility of successfully building socialism has opened before China. The people’s power, relying on the help of the socialist camp and the support of the vast masses of the people, has carried out in a very short time very profound revolutionary changes in China’s economy and led the country on to the non-capitalist road, the road of building socialism.

Revolutionary Transformation of Agriculture. Socialist Nationalisation

Among the radical social and economic changes in the Chinese People’s Republic, the agrarian reforms have enormous significance. During the revolutionary war, and later in the course of the agrarian changes of 1950-2, the system of feudal landownership was abolished and feudal exploitation ended.

In 1950 the Central People’s Government of China passed “the law on agrarian reforms of the Chinese People’s Republic”, under which the landed property of the landowners was confiscated and that of the temples and monasteries requisitioned without compensation. Draught animals, farm implements and superfluous buildings were also confiscated from the landowners.

The confiscated land and other means of production were distributed per person among the peasants, without regard to age, sex or nationality. The landless peasants and those with little land received the main share of the landowners’ land and farm implements. All peasant debts to landowners for rent of land and to usurers in respect of loans were cancelled.

The agrarian reforms were carried out by the People’s Democratic Government with the active participation of the broad masses of the peasants. By the beginning of 1953 the agrarian reform was completed throughout the whole country (with the exception of a small number of regions inhabited by national minorities) over a territory with an agrarian population of about 450 millions. Peasants without land and those with little land received 116 million acres of cultivable land.

Along with this the old feudal system of taxation with its multitude of State and local taxes payable by the rural population and collected from them many years in advance was abolished. The agrarian changes in China liquidated the land-owning class. Instead of ownership of the land by the landlords, small peasant private property in land was established. The productive forces of agriculture were freed from the trammels of outdated feudal relations, and thereby the way was opened to the fulfilment of the great task of industrialising China.

The People’s Democratic Government, carrying out the agrarian reforms which completed the bourgeois-democratic revolution, at the same time passed on to the road of socialist reorganisation.

This means first and foremost the socialist nationalisation of large-scale industry and the banks; all industrial enterprises commercial concerns, banks, transport and other property belonging to the compradore monopolist bourgeoisie were confiscated and taken over by the people’s State.

All the unequal treaties with foreign States, all the old customs, laws and regulations by means of which the foreign imperialists plundered the Chinese people and stifled the national industries, were abolished. The majority of undertakings belonging to foreign capital were requisitioned. State control of foreign trade was established. China was finally freed from imperialist enslavement.

The special feature of the socialist nationalisation carried out by the People’s Democratic Government in China lies in the fact that it left untouched the property of the national bourgeoisie, which in the main consisted of middle bourgeois.

Socialist nationalisation in China led to the creation of the State socialist sector, the most important economic bulwark of the people’s democratic State in economic and cultural construction.

Forms of Economy and Classes in the Chinese People’s Republic in the Transition Period

As a result of the revolutionary agrarian changes and the transformation of the commanding heights of the national economy into public property, radical changes have taken place in China’s economy. Instead of the former semi-feudal and semi-colonial economy there has arisen a transitional economy of several forms, distinguished in China by a number of special features.

The leading place in People’s China’s multiform economy is held by the socialist sector. The socialist sector embraces, first, enterprises based on State ownership, and, second, enterprises based on co-operative ownership.

State property comprises undertakings which were formerly the property of the compradore bourgeoisie and foreign capitalists, nationalised by the People’s Democratic Government, and also undertakings newly established by the State after the victory of the revolution: factories and workshops, pits and electric power-stations, railways and other forms of transport, means of communication, etc.

The mineral wealth, waters, and also State forests, lands adjoining towns, virgin lands and other natural resources are also State property and belong to the whole people. In the sphere of agriculture State property comprises the State-organised machine and tractor stations, machine-hiring depots and agro-technical stations, and State agricultural enterprises -the State farms. In the sphere of distribution, the State owns trading enterprises which playa decisive role in wholesale trade. The whole of foreign trade and nearly all banking business are in the hands of the State.

Further, the socialist sector of the economy embraces co-operative enterprises wholly based on collective ownership by the working masses. To this sector being supply and marketing co-operatives, consumer and credit co-operatives, agricultural producers’ co-operatives of the higher type (collective farms) and those of the handicraft producers’ co-operatives in which all the means of production are the co-operative property of their members. Supply and marketing co-operatives are subject to the guiding influence of State trade and help to strengthen the economic ties between petty commodity peasant economy and State socialist economy and to increase the element of planning in the supply of manufactured goods to the peasants and also in the State procurement of grain, cotton and other materials for industry. Credit co-operation is connected with the State Bank, which directs its work and helps it with funds. The people’s democratic State assists in every way producer co-operation among the individual peasants and artisans, and facilitates the gradual transition of such co-operation from lower forms to higher.

The relative share of the socialist sector in industry and trade is growing rapidly. In 1949 34 per cent of industrial output came from State enterprises, 2 per cent from joint (State-and-private) enterprises and 63 per cent from private enterprises. In 1954 the share of State enterprises had risen to 59 per cent, and that of State-and-private enterprises to 12.3 per cent, while the share of private concerns, had been reduced to 24.9 per cent. In 1954 also, 89 per cent of wholesale trade was conducted by State and co-operative organisations. Under the Five-Year Plan the share of State and co-operative organisations in retail trade is to grow from 34 per cent in 1952 to 55 per cent 1957.

The State controls all foreign trade and concentrates directly in its hands about 90 per cent of all import and export operations, including all trade with the U.S.S.R. and the countries of people democracy. The State People’s Bank has monopoly rights of issue and controls more than 90 per cent of all deposits and loans.

In 1950, for the first time in the history of China, a single State Budget was drawn up, having a real basis. Since 1951 the Budget has shown an excess of revenue over expenditure. In 1955 more than 60 per cent of the Budget resources were allocated to economic construction and also to social, cultural and educational needs. More than 89 per cent of the allocation to industry in the 1955 Budget was directed to heavy industry.

By the end of 1954 marketing and consumer co-operation united 172 million persons. Credit co-operation in the countryside took the form of agricultural credit co-operatives credit groups for mutual aid and credit sections in the supply and marketing co-operatives. There were 150,000 credit co-operatives in China in the spring of 1955, with over 90 million members. All kinds of credit co-operation are developing rapidly.

The socialist sector is the leading force in the whole national economy. It serves as the basis for the introduction of further socialist changes by the people’s democratic State. On the basis of socialist production-relations the basic economic law of socialism has arisen and come into operation. The aim of production in the socialist sector is not the extraction of profit but the satisfaction of the growing demands of the whole of society. Production in this sector is growing steadily. Socialist enterprises are more and more fully equipped with modern technique. But the operation of the basic economic law of socialism is still very much restricted, as private property forms of economy predominate in the country’s economy.

Thanks to the existence of socialised ownership of the means of production, in opposition to the law of competition and anarchy of production, there has arisen and begun to operate the economic law of planned, proportional development of the national economy. The people’s government of China, basing itself on the socialist sector, carries out current and long-term planning of the national economy. State enterprises are developing according to plan; economic accounting is applied in them, and payment of manual and clerical workers is made in accordance with the quality and quantity of the work performed by them. The State fixes the prices of the most important products of industry and agriculture, regulates the monetary circulation and controls foreign trade. By these means the State exercises a regulating influence on the other sectors of the national economy.

In order to meet the country’s demands for food and other goods and overcome chaotic capitalist tendencies, the State has introduced planned purchase and planned supply of grain, fats and textiles and, also planned purchase of cotton.

To the socialist sector belong various kinds of co-operation which are partly based on collective ownership by the working masses and their joint labour. This kind of semi-socialist co-operation is in China the main form of transition to the socialist transformation of agriculture and handicraft industry. To this transitional category belong the agricultural mutual-aid production teams, in which the peasants work collectively to carry out certain tasks. They retain private property not only in land but also in the instruments of production and in the products. Gradually these forms of co-operation are transformed into agricultural producer co-operatives, in which land is transferred to the co-operative in the form of shares and the work of the farm is carried on jointly. In the specific historical circumstances of China a gradual and extensive application of very simple transitional forms of co-operative economy enables the broad masses of the individual peasants to be drawn more successfully into collective production.

Already before the formation of the Chinese People’s Republic, in the years of the revolutionary wars after the agrarian transformations had been carried out, agricultural mutual aid production organisations were formed, and these contained growing-points of socialism. In those days there appeared also in the liberated areas individual agricultural produces co-operatives of a semi-socialist or socialist type. Extensive organisation of agricultural mutual-aid production teams and mass formation of agricultural producer co-operatives on the basis of mutual-aid work-teams began, however, only after the formation of the Chinese People’s Republic.

By the end of 1951 there were more than 300 agricultural producer co-operatives in China, both socialist and semi-socialist. By the end of 1953 their number exceeded 14,000, having increased 47-fold in two years. By June, 1955, there were 650,000 agricultural producer co-operatives in the country, embracing 16,900,000 peasant holdings. Thus, each co-operative contained on average 26 house-holds. The total number of holdings embraced by agricultural mutual-aid production teams and agricultural producer co-operatives amounted in 1954 to 60 per cent of all the peasant holdings.

The petty commodity sector embraces the holdings of peasants and artisan based on petty private ownership of land and other means of production and personal labour. While China is still an agrarian country with a poorly developed industry petty commodity production continues to occupy the predominant place in the economy and serve as the means of existence for the bulk of the population. As a result of the revolutionary agrarian transformations the relative importance of the middle peasantry has greatly increased. A great number of poor peasants and labourers have obtained land and acquired their own holdings, and the middle peasant has become the central figure in the countryside.

The petty commodity sector also includes artisan production, which is especially widespread in the countryside, small trading concerns in the towns, small workshops for day-to-day service of the population, and so on.

In Chinese agriculture fragmented and backward petty commodity production predominates. The land is divided up into tiny plots and worked by the hand labour of the peasants or, with the aid of draught cattle, by primitive agricultural implements. But this backward farming technique is gradually being replaced by modern agricultural machinery and implements, received by the peasants from the growing heavy industry of China. In the Chinese countryside there are about 110 million small and very small peasant holdings. The country includes about 30 million artisans. A large part of the industrial goods consumed by the peasantry are produced by handicraftsmen and artisans.

Small commodity peasant and handicraft production inevitably gives birth to capitalist elements. Class differentiation into poor peasants and kulaks is developing in the village. But in the conditions of the people’s democratic system it is only of a restricted nature.

In the small commodity sector the regulator of production remains the law of value, manifesting its influence in a spontaneous fashion. The law of value has a material influence also on production in the socialist sector. As State and co-operative property is strengthened and the influence of the law of planned development of the national economy is extended, the State is more and more mastering the law of value, money, and trade, and converting these into instruments of socialist construction.

The people’s democratic State gives help to the individual peasant farms and handicraft workers in making use of the productive possibilities which they possess; and at the same time it encourages them to adopt the socialist road of development through co-operation, based on strict observance of the voluntary principle.

Survivals of the patriarchal form of economy still exist in China’s economy. A considerable section of the peasantry in the remote and thinly-populated areas of the country carry on natural or semi-natural (patriarchal) economy in the form of primitive farming and nomadic stockbreeding, directed to satisfying the peasants’ own needs and very weakly connected with exchange and the market. The people’s government encourages the creation in these areas of mutual-aid stock-breeding groups and co-operatives.

The private capitalist sector includes capitalist industrial enterprises in the towns, kulak farms in the countryside and trading capital enterprises. To this sector also belong the numerous handicraft workshops employing hired labour and the manufactories, the number of which is fairly large. The private capitalist sector occupies a considerable place in China’s economy.

In China in 1953 there were more than 200,600 private capitalist enterprises, in which more than 2,750,000 workers, including office workers, were employed. The value of the production of these enterprises constituted 38 per cent of the value of the country’s total production. By 1957, under the Five-Year Plan the share of private capital in industrial production is to be reduced to approximately 12 per cent and the share of private enterprise in retail trade will amount to roughly 21 percent.

In the Chinese countryside, after the abolition of the feudal property of the landlords, there exists the capitalist property of the kulaks and the boundless sea of petty individual peasant property, on the basis of which a spontaneous growth, of capitalist elements is taking place; new kulaks are appearing and part of the well-to-do middle peasantry are trying to become kulaks.

In the private capitalist sector the regulator of production continues to be the law of value, and the law of surplus-value retains its force along with this. However, the sphere of action of the law of surplus-value is increasingly restricted.

The people’s government in China carries out in relation to capitalist industry and trade a policy of utilising, restricting and transforming, with as its ultimate aim the liquidation of the system of capitalist exploitation and of the exploiting classes and the replacement of capitalist property by public ownership of the means of production. In the specific circumstances of China the attainment of this goal demands a relatively long period of time.

In view of the economic backwardness of China and the predominance in the country of fragmented, petty commodity production, the people’s government makes use, under its control, of private industry and trade for the purpose of extending industrial and agricultural production, accumulating resources, training technical cadres and maintaining employment. With the aim of increasing industrial and agricultural production and developing commodity circulation, the people’s government advances credit to private enterprises, gives them orders for the production of particular kinds of goods, supplies them with raw material and buys their finished products from them.

Along with this it carries out a policy of restricting the exploiting tendencies of the capitalists in the towns and the kulaks in the countryside. The people’s power checks the activity of those capitalists who try to raise the prices of goods in evasion of the laws in force, or to subvert workers’ control over private concerns, or to disrupt State plans, thereby doing damage to the people’s interests. A substantial contribution to the restricting of the capitalist elements in town and country is made by taxation policy.

The people’s government encourages the transformation of private capitalist industrial and commercial enterprises into various kinds of State-capitalist enterprises, gradually creating the conditions for the property of the capitalists to be transformed into public property.

The State-capitalist sector embraces those capitalist enterprises which in various ways are connected with and collaborate with the State sector of the economy. Such enterprises include industrial and commercial ones, banks, and credit associations.

There exist in China on a wide scale the following basic forms of State capitalism, constituting successive levels of its development. The lowest form of State capitalism is the system of periodical purchases of the products of private enterprise by State organs; the medium form is the working up by private enterprises of raw material and semi-products belonging to the State, State orders for finished products, centralised purchases, guaranteed markets; the highest form is the creation of mixed, so-called State-and-private concerns. These are enterprises in which the State invests its own funds and in which it has its representatives to manage the enterprises jointly with the capitalists. The leading role in these enterprises is played by the State. Exploitation of labour by capital is restricted; the capitalists receive only part of the profits. With the passage of time this highest form of State capitalism will assume ever greater importance.

The development of all these forms of State capitalism is accompanied by class struggle. China’s experience fully confirms Lenin’s statement that State capitalism in the transition period is a “continuation of the class struggle in another form, and under no circumstances... the substitution of class peace for class war”. (Lenin, “The Tax In Kind”, Selected Works, 1950, Vol. II, Part 2, p. 546.)

The development of State capitalism prepares the necessary conditions for future nationalisation of the enterprises.

Thus there exist in the transitional economy of China the same three basic forms of social economy – socialism, petty commodity production and capitalism – as existed in the transition period from capitalism to socialism in the Soviet Union and which exist at the present time in the European people’s democracies. As a result, however, of China’s economic and technical backwardness inherited from the past, the relative, share of the socialist forms within its economy is considerably less than in the European people’s democracies, and the relative share of capitalism, and, even more, that of petty commodity production are correspondingly greater. In China, unlike the European people’s democracies, State capitalism is extensively utilised in the interests of socialist construction.

The class structure of society has changed in accordance with the changes that have taken place in China’s economy. The basic classes are the working class and the peasantry. Alongside the working masses of workers and peasants are also the numerous artisans and other toilers of town and country. In addition there is the national bourgeoisie in the towns and the kulaks in the countryside, and also the numerous stratum of urban petty bourgeoisie.

The Communist Party of China, taking into account the various forms of economy and classes in the economy of the transition period, mastering and making use of the economic laws of the development of society, has determined the direction of economic construction for the whole transition period. In 1953 Mao Tse-tung declared:

“The general line and the central tasks of the Party in this transition period are, in the course of a somewhat lengthy space of time, gradually to effect the socialist industrialisation of the country, gradually to effect the socialist transformation, of agriculture, handicraft industry and private trade and industry. This general line is a beacon illuminating all our work. To carry out any work, whatever its nature that diverts us from it, is to commit an error either of the right deviation or of the left deviation.” (Pravda, June 22, 1954.)

The regime of people’s democracy in China guarantees the possibility of liquidating exploitation and poverty and building socialist society. In China, a huge, economically backward country with complex and variegated conditions, the building of socialist society is a gigantic task. The Communist Party is working on the principle that socialist society will be built, basically, in the course of about three Five-Year Plans.

Of decisive importance for the success of socialist construction is the strengthening of the alliance of workers and peasants under the leadership of the working class. Therein lies the basic condition for drawing the peasant masses into the building of socialism. The policy of the People’s Government is aimed at the development in every way of the economic links between State industry and peasant economy, and at extending the co-operative organisation of the peasant farms. The Communist Party of China takes as a basic principle that to strengthen the alliance of the workers and peasants it is necessary, simultaneously with the gradual putting into effect of socialist industrialisation, gradually to carry out a socialist transformation of agriculture as a whole. This means bringing about co-operation between the peasant holdings; that is, transition from individual farming to co-operative forms of farming, with gradual liquidations of the system of kulak farms, as a result of which the whole rural population will become well-to-do.

In China in the transition period an important role is played by the united people’s democratic front led by the working class. It is a broad association based on the alliance of the workers and peasants and including all patriotic elements, i.e., also those elements of the national bourgeoisie who are ready to co-operate with the people’s democratic State. Owing to the special historical conditions of China, which was in the past oppressed by foreign imperialists and can only become an independent and powerful State by following the path of socialism, there is not only struggle between the working class and the national bourgeoisie but also a relationship of practical co-operation. The people’s government draws the national bourgeoisie into participation in State affairs, into the solution of urgent problems of economic construction, while at the same time suppressing all forms of anti-popular activity.

The fundamental contradiction in the transition period is the contradiction between socialist and capitalist elements in town and country, between the working class and the working masses of the peasantry, on the one hand, and the bourgeoisie in the towns and the kulaks in the country, on the other. For the building of socialism it is necessary that the contradiction between the socialist and capitalist economies be resolved. This contradiction is being resolved through the gradual carrying through of radical economic changes which will alter the face of China: socialist industrialisation, socialist transformation of agriculture and handicraft production, radical transformation of private industry and trade, leading to the complete elimination of capitalist relations in these branches of economy and their replacement by socialist relations. Socialist industrialisation is the main link in socialist construction in China, while the transformation of agriculture and handicraft production and that of private industry and trade are important component parts of it, inseparable from socialist industrialisation. The socialist transformation in China’s economy is accompanied by acute class struggle between socialist and capitalist elements, which develops in accordance with the formula: “Who will beat whom?”

The Paths of Socialist Industrialisation of China

In the course of a brief period, 1949 to 1952, the Chinese People’s Republic restored the national economy which had been ruined during the prolonged war. Already by 1952 the volume of production in the basic branches of industry and in agriculture exceeded the highest figures ever attained in the past. The relative share of the socialist forms of economy had grown and their leading role in the whole national economy had been consolidated.

In the course of the same period the entire mainland of China was united, the agrarian changes were brought to completion, and a number of measures were taken for the democratic transformation of the social system and the suppression of counter-revolutionary elements. The strengthening of the financial system and the currency reform laid the basis for the stabilisation of prices. All this prepared the conditions for unfolding planned economic construction, having as its aim the gradual socialist reconstruction of society.

Beginning in 1953, the Chinese People’s Republic began to carry out the first Five-Year Plan for the development of the national economy (1953-7). This plan was approved in its final form by the second session of the All-China Assembly of People’s Representatives in July 1955, but its basic tasks had been in process of being put into effect since 1953.

The aim of the first Five-Year Plan for the development of China’s national economy is, first and foremost, to create the primary foundation for socialist industrialisation of the country. In accordance with the economic law of priority growth of the production of means of production, the first Five-Year Plan provides for the principal forces of the country to be concentrated on the creation of heavy industry – metallurgy, fuel, power, engineering, chemicals – as the fundamental basis for the development of the entire national economy. The people’s democratic government of China starts from the principle that only on the basis of heavy industry can the advance be assured of all branches of industry and agriculture, together with satisfaction of the requirements of defence and a steady rise in the material and cultural standard of life of the people. Alongside of the main task – development of heavy industry in every way – the Five-Year Plan envisages an advance in transport, light industry and agriculture and an extension of trade, with a steady growth in the relative share of the socialist forms of economy.

Other tasks of the Five-Year Plan are the creation of the primary basis for socialist transformation of agriculture and handicraft industry, the creation of the conditions for socialist transformation of private industry and trade, and the gradual raising of the material and cultural standard of life of the people on the basis of the growth of production.

China possesses all the conditions needed for solving the historic task of industrialising the country, and has extensive possibilities of doing this.

China possesses immense human reserves. The Chinese working class, headed by the Communist Party, is leading economic and cultural construction. As the foremost class of society, by its exemplary self-sacrificing labour, by its organisation and discipline, it is rallying the broadest strata or the working masses in the fight for socialism. The friendly alliance of the workers and peasants has been consolidated and grown strong, and the cause of the industrialisation of the country is meeting with active support from hundreds of millions of peasants. As a result of the agrarian changes the peasants have been freed from the huge payments they used to make to the landlords, which enables them, as, well as improving their living conditions, to contribute part of the fruits of their labour to the cause of industrialisation.

China possesses very rich natural resources for developing all branches of industry, and in the first place heavy industry. At the same time there are inevitably a number of difficulties to be overcome on the way to fulfilling this task, difficulties connected with technical backwardness, insufficiency of skilled industrial personnel, an irrational distribution of industry and disproportion between its several branches, inherited from the past, lack of knowledge of the country’s natural resources, etc.

The industrialisation of China is being carried out through the building of enterprises equipped with the most up-to-date technique, and radical reconstruction of a number of large-scale factories, and also more rational and complete utilisation of old enterprises.

The Chinese People’s Republic receives first-class equipment from the Soviet Union and the European people’s democracies, and is drawing on their very rich technical experience, and experience in the organisation of labour and production at large-scale socialist enterprises.

It is intended to construct and reconstruct during the first Five-Year Plan 3,000 enterprises, etc., including 694 large industrial enterprises, the chief among these are 156 which are being equipped by the fraternal aid of the Soviet Union. The building of these enterprises is a big step forward in the development of the basic branches of industry and the raising of its technical level. By the end of the Five-Year Plan China will have its own heavy industry, ensuring the basis for industrialisation of the country. The volume of industrial production expressed in terms of value will have doubled.

As a result of the fulfilment of the Five- Year Plan the production of means of production is to increase by 126.5 per cent, the production of consumer goods by 79.7 per cent, and the relative share of the means of production in the total amount of industrial production will grow from 39.7 per cent in 1952 to 45.4 per cent in 1957.

Socialist industrialisation is leading to an especially rapid growth of State industry. In the course of the first Five-Year Plan the total value of the output of the whole of China’s industry will approximately be doubled, in comparison with 1952, that is the annual average increase is to amount to nearly 15 per cent; while the total value of the output of State industry is intended to increase by 1957 2.3-fold, an annual increase of about 18 per cent. By the end of the Five-Year Plan, State, co-operative and mixed State-and-private enterprise will be responsible for 88 per cent of total industrial production, the share of private enterprises being restricted to 12 per cent, with the majority of them working on government orders.

The rapid development of industry requires considerable accumulation. The resources for this purpose come, in the first place from accumulation made in the State sector of the economy, and from revenues from domestic and foreign trade, and secondly from taxes levied on capitalist enterprises and also taxes collected from the population.

One of the main conditions for the successful development of China’s national economy is a rise in the productivity of labour of the workers and peasants. Labour emulation is developing among the workers in State enterprise for increasing production, improving the quality of output, economising material and better utilisation of plant. The advanced workers in production receive material encouragement. There are thousands of heroes of labour who have been given awards.

The Gradual Socialist Transformation of Agriculture

The revolutionary agrarian reforms in the Chinese countryside are having a substantial influence on the development of the productive forces of agriculture and on the conditions of the peasant masses. For the first time in the history of the country measures on a national scale are being taken to secure a considerable development of agricultural production. Government aid in seed and credit is given to needy peasants. Struggle against agricultural pests is organised. Propaganda is being carried on for modern agricultural technical knowledge. With the participation of broad masses of the peasantry, the Chinese People’s Government is carrying out irrigation works of great importance for the most important agricultural regions of the country, and has relieved tens of millions of people of the danger of floods.

An example of the great hydro-technical projects is the hydro-technical scheme in the Huai basin, on which for three years 2 million men were at work. The courses of 77 rivers were cleared and new channels made over a total length of 2,000 miles; 104 locks were constructed. One dam alone, in the lower reaches of the river Huai, saves 20 million peasants from inundations. According to incomplete data, from 1950 to 1953 the peasants themselves built more than 6 million small irrigation canals, ponds, and reservoirs, dug over 800,000 wells, restored or built over 250 large irrigation works. As a result the area of irrigated land was increased by over 8 million acres.

In 1954 the construction was completed of the Kuanting water reservoir on the upper course of the river Yungting (North China) which prevents flooding in the Peking and Tientsin region.

In the first Five-Year Plan work will be undertaken to utilise the waters of the river Hwangho (the Yellow River) and establish complete control over It. Dozens of huge dams will be built on this river and its tributaries, to make possible the creation of a number of large reservoirs and hydro-electric stations.

In 1952 agricultural output reached the highest level in the history of China, considerably surpassing the peak pre-war figures of production. In 1952 the gross harvest of grain was 145 per cent of the 1949 figure, and of cotton about 300 per cent. During the first Five-Year Plan the total output of agriculture and rural auxiliary activities will increase, in terms of value, by 23.3 per cent. By the end of the Plan the production of food will be 17.6 per cent greater than in 1952, of cotton 25.4 per cent, of jute and kenaf 19.7 per cent, of tobacco 76.6 per cent, of sugar-cane 85.1 per cent, of sugar-beet 346.1 per cent; the area under oil-bearing crops will be 37.8 per cent greater. It is estimated that in the course of two Five-Year Plans, or a little more, the yield from grain crops will be brought up to 275-300 million tons, surpassing the 1952 level by 70 per cent, and representing an annual average output of 10 cwt. of grain per head.

The Chinese People’s Republic has achieved definite successes in agriculture. However, the situation in the country is that the population is enormous, the cultivated area insufficient natural calamities occur from time to time, and farming methods are backward. Small peasant economy is not in a position to meet the growing food requirements of the population, or the raw material requirements of industry. There is an acute contradiction between the low level of production of marketable grain and agricultural raw material, on the one hand, and the rapid growth of the State’s demands for foodstuffs and raw material, on the other. On the basis of small production it is impossible to prevent differentiation taking place among the basic masses of the peasantry and to radically improve their condition and assure them a well-to-do existence.

The victory of the people’s democratic revolution opened up a path of gradual socialist transformation of China’s agriculture. The Communist Party and the People’s Government of China have laid down, and are carrying out, a plan of gradual voluntary transition of the peasants from small peasant private property to large-scale collective socialist economy, on the principle that socialist industrialisation of the country cannot take place in isolation, divorced from the organisation of cooperation in agriculture.

The resolution of the Central Committee of the Chinese Communist Party “On the development of agricultural producers’ co-operatives” (December 16, 1953) states:

“With the aim of further developing the productive forces in agriculture, the Party laid down the following central tasks for its work in the countryside: using forms and methods understandable by and acceptable to the peasants, to educate the peasant masses and promote their gradual association and organisation; gradually to introduce socialist re-organisation in agriculture with the aim of converting it from backward, small commodity individual economy into advanced and highly productive co-operative economy; gradually to end the disproportion in the development of industry and agriculture, and to give the peasants the possibility of gradually ridding themselves of poverty and winning a prosperous and happy life.” (People’s China, No. 8, 1954.)

The road of gradually bringing together the peasants for production laid down by the Chinese Communist Party, passes through agricultural mutual-aid production teams to small agricultural producer co-operatives of a semi-socialist type, and so to large agricultural producer co-operatives of the higher type, completely based on social ownership of the means of production and possessing a completely socialist character.

Agricultural mutual-aid production teams unite a number of peasant households to carry out joint work on certain agricultural tasks while retaining private ownership of land and other means of production.

Many permanent teams combine the labour of the peasants not only in agriculture but also in auxiliary trades. A certain division and specialisation of labour exists within them. Some of these teams set up collectively-owned funds. Thanks to the joint collective labour of the peasants, such forms of co-operation have definite advantages over individual peasant farming. The lower forms of co-operation prepare the individual peasants to pass over to agricultural producer co-operatives.

Agricultural producer co-operatives of the semi-socialist type presuppose the pooling of the land on a share basis, unified management on the basis of collective labour, and the building up of certain common funds. In these co-operatives, income is distributed according to the size of the land share and the amount of work performed on the common farm. The land and other means of production remain the private property of the members of the co-operative; the peasants are remunerated not only for their land but also for the animals and agricultural implements which they have handed over for joint use. Gradually, as such co-operatives grow stronger, the share of income distributed according to work done becomes greater and greater, remuneration for shares increasingly loses its significance and socialised property grows steadily. The highest form of agricultural co-operation is the producer co-operative of the type of the agricultural artel in the U.S.S.R., based on common ownership of the means of production, including the land and collective labour. In such agricultural producer co-operatives of the higher type income is distributed exclusively on the basis of work-days earned.

The transition from lower to higher forms of co-operative association takes place gradually, allowing for different conditions in the economic, political and cultural development of each area, with the strictest observance of the principle of voluntariness and mutual aid. The Communist Party and the Government of the Chinese People’s Republic wage a resolute struggle against both drift and violation of the principle in the development of co-operation between peasant farms.

Cooperation is coming to the Chinese countryside in conditions in which the industrialisation of the country has only just begun, and consequently the necessary basis has not yet been created for equipping agriculture with advanced modern technique. The overwhelming majority of agricultural producer co-operatives are still without the material basis of machine production. In only a few of them is the land worked by machinery, supplied by the first machine and tractor stations. The rest of the co-operatives cultivate the land either by hand or with the aid of oxen, using antiquated agricultural implements or implements of an improved type. Even in these primitive co-operatives, however, as a result of the mere pooling of the peasants’ means of production and of collective labour the yield of agricultural crops is, as a rule, higher than on individual peasant holdings. This testifies to the high labour activity of the members of the co-operatives, to the advantages of the co-operatives over the mutual aid teams and still more over the individual farms. The Communist Party of China takes as its starting-point that during the first two Five-Year Plans the main content of the transformations in the countryside will continue to be social, with technical changes only of auxiliary importance. During the third Five-Year Plan, however, the transformation of the countryside will consist of the simultaneous carrying-through of social and technical changes. Fundamental technical, re-equipment of agriculture on a country-wide scale will take about four or five Five-Year Plans, i.e., twenty to twenty-five years, to complete.

At the present time a mass movement for bringing about rural co-operation has already begun in a number of agricultural areas, and this is rapidly spreading throughout the country. The majority of the Chinese peasants are filled with determination to take the socialist road. The socialist industrialisation of the country and its successes strengthen this determination day by day, for the peasants realise that only the road of uniting in co-operatives, the road of socialism, will deliver them from need and lead to a radical improvement in their lives. This mighty movement of the rural population of China, numbering more than 500 millions, towards socialism has enormous international significance.

The reconstruction of approximately 110 million individual peasant farms on collective principles and the carrying through of technical changes in agriculture involves considerable difficulties. The Communist Party of China, at the head of the broad, movement of peasants towards socialism, mobilises the masses to overcome these difficulties without allowing the tempo in the growth of co-operation in agriculture to decline.

Taking into account the great historical experience of the Soviet Union in building socialism, the Chinese Communist Party is leading the peasantry in its movement along the road to socialism. According to present plans, by the spring of 1958 the agricultural co-operatives of a semi-socialist type will embrace 250 million persons, or 55 million peasant households, i.e., half the population of the countryside. By the same time, changes of a semi-socialist character will fundamentally have been completed in the rural economy of many counties and a number of provinces, while in certain areas a small section of the co-operatives will have been transformed from being semi-socialist to being fully socialist. During the first half of the second Five-Year Plan, i.e., by 1960, semi-socialist changes will fundamentally have been completed in the remaining half of agriculture. By that time the number of agricultural co-operatives fully socialist in character will have increased still further.

Alongside producer co-operation, co-operation between peasants in the sphere of circulation is becoming increasingly widespread in the form of supply-and-marketing and credit co-operatives. These forms of co-operation help the peasants gradually to free themselves from exploitation by merchants and usurers. They assist the peasants to sell foodstuffs and raw material to the State and to obtain means of production and consumer goods, they supply credit at low rates of interest and help to develop savings. They make easier the organisation of producer, co-operatives among the peasants.

The State socialist agricultural undertakings are called upon to play a great part in the socialist transformation of the peasant farms. By the beginning of 1955 there were over a hundred large mechanised State farms and over two thousand county and district State farms, about a hundred machine and tractor stations and many machine-hiring and agricultural stations. The State agricultural undertakings give real help to the peasants, showing them in practice the advantage of large-scale mechanisation of farms.

The gradual bringing about of the socialist transformation of agriculture is taking place in conditions of acute class struggle. The kulaks are trying in every way to disrupt the process of developing co-operation, to wreck the co-operatives or to use them for their own ends. The bulk of the peasantry, overcoming the resistance of the kulaks, are confidently advancing along the path of co-operation, which corresponds to their vital interests.

An indispensable part of the socialist changes carried out in China in the transition period is the development of co-operation in small individual handicraft production. Directing the development of small handicraft production on to the socialist path, the Chinese People’s Government is organising the artisans into a distinct type of artel, the handicraft co-operatives (production groups in handicraft manufacture, supply and sales artels of handicraft co-operatives, handicraft producer co-operatives).

The Rise of the Material and Cultural Standard of Living of the Chinese People.

Socialist construction in the Chinese People’s Republic is accompanied by the improvement of living conditions for the workers, the peasants and the intelligentsia. As a result of the carrying through of the agrarian changes the life of the Chinese peasantry has considerably improved as compared with what it was like before. Nevertheless, the peasant masses can deliver themselves completely from need only by taking the socialist road the road of uniting in agricultural co-operatives.

The position of the working class has considerably improved. In State and private undertakings the working day is restricted to eight to ten hours (instead of the former fourteen to sixteen hours’ days) and collective agreements between the undertakings and the workers have been introduced. Workers and employees’ wages in State and private undertakings are fixed on a single level for corresponding categories. Throughout the whole country effectively functioning trade unions have been established in which the majority of manual and clerical workers are organised. In 1951 social insurance for workers and employees was introduced.

The Chinese people have already achieved considerable successes in cultural construction. Before the revolution workers and peasants had no access not only to the middle and higher educational institutions but even to the elementary schools. About 90 per cent of the population were illiterate. In the Chinese People’s Republic education has become accessible to the working masses.

The improved material position of the Chinese working people is to be seen from the considerable increase in the purchasing power of the population, which in one year alone, 1953, increased by approximately 20 per cent.

The volume of retail trade was in 1953 180 per cent of what it had been in 1950 (in comparable prices). In 1954 retail turnover was 12 per cent higher than in 1953. In 1952 the wages of workers in all State enterprises were 60 to 120 per cent greater than in 1949. In 1953 they were on the average 5 per cent higher than in 1952 and in 1954 another 5.2 per cent higher. In 1955 over 55 million children were being taught in elementary schools, i.e., nearly 2.4 times the maximum number of pupils in elementary schools before China’s liberation; 4.6 million pupils were attending secondary schools, while 290,000 students were in higher educational institutions, In 1954 over a tenth of all the adults and children in the country were studying in various evening institutes.

The conversion of China from a backward agrarian country into a mighty socialist power with a highly developed modern industry requires that serious economic and financial difficulties should be overcome. The growth of productive forces is of decisive significance for raising the welfare of the people, The Chinese people take as their starting point that only by steadily expanding production, by raising the productivity of labour, by carrying through a regime of strict economy, will they gradually be able to get rid of the age-old poverty, consolidate the historical con quests of the people’s revolution and ensure a happy future.

The revolution brought a radical change in the position of the women of China. Women enjoy full political rights on the same basis as men, and actively participate in the economic, social, and political life of the country. They receive equal pay with mentor equal work. On the introduction of the agrarian reforms women peasants received the same allotment of land as men. Great attention is being paid to motherhood and child protection.

The victory of the people’s democratic revolution liberated the Chinese people from national enslavement, and created the conditions for the economic and cultural advance of all nationalities of liberated China on the basis of complete equality of rights.

The victory of the revolution and the building of socialism in China is of world-historical importance. Its importance is particularly great for the countries of the colonial and semi-colonial world, whose political and economic situation is similar to that which existed in China before the victory of the people’s revolution. The example of the great Chinese people inspires the peoples of these countries to resolute struggle against imperialism and feudalism, for national and social liberation.

Brief Conclusions

(1) In the course of its development the Chinese people’s revolution developed from a bourgeois-democratic into a socialist revolution, as a result of which China entered on the transition period to socialism. The Chinese People’s Republic, which came into being as a result of the victory of the revolution, is a State of people’s democracy, led by the working class and based on the alliance of workers and peasants. This State is successfully carrying out the functions of the dictatorship of the proletariat.

(2) The people’s democratic State has carried out radical social and economic changes. As a result of the revolutionary agrarian reforms, the land and other means of production were confiscated from the landowners without compensation and distributed among the peasants, according to the number of persons, as their own private property. At the same time the people’s democratic State was carrying out a number of socialist changes. The overwhelming majority of undertakings in modern large-scale industry, the banks, the most important and means of transport, the greater part of wholesale trade, an almost all foreign trade, as a result of the expropriation of the compradore bourgeoisie and foreign capital, passed into the hands of the people’s State. Thus the socialist sector of the national economy came into being, embracing State enterprises and also co-operative enterprises based completely on collective property of the working people.

(3) The economy of the Chinese People’s Republic is multi-form. The socialist sector holds the leading place in it. Bordering on the socialist sector are those forms of co-operation which are partly based on joint labour and have a transitional semi-socialist character. In addition, there are petty commodity, private capitalist and State capitalist sectors. The petty commodity sector, which embraces the enterprises of the peasants and artisans, continues to occupy the predominant place in the country’s economy. A considerable role is played in China’s industry and trade by private capital, which is controlled by the State and utilised by the people’s democratic government to increase production of manufactured goods. Various forms of State capitalism are also widespread. The three basic forms of social economy in the transitional economy of the Chinese People’s Republic are socialism, petty commodity production and capitalism.

(4) The main classes of contemporary China are the working class and the peasantry. The class struggle is waged between the working class, acting in alliance with the main masses of the peasantry, on the one hand, and the urban bourgeoisie and the rural kulaks on the other – between the socialist and the capitalist elements of the national economy.

(5) The general line and central task of the Communist Party of China in the transition period consists of gradually bringing about socialist industrialisation of the country, gradually effecting the socialist transformation of agriculture, handicraft industry and private trade and industry. The people’s democratic State, in carrying through these changes, is creating the conditions for overcoming the age-old technical and economic backwardness of the country, abolishing the exploitation of man by man, eliminating poverty and need, and building socialist society.

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