General Motors sold more cars in China than in the United States in the first half of 2010, and China now accounts for one-quarter of the company’s global sales. That seems like a lot of capitalism for a country that calls itself communist. How communist is China, really?
Not very. Since the end of the Cultural Revolution in 1976, China has all but abandoned the tenets of classical marxism, including collective ownership of the means of production. Nowadays, just about everything is at least partly privatized. Whereas the Chinese Communist Party under Chairman Mao owned every factory and farm in the nation, the economy is now a patchwork of public and private businesses. Schools can also be state-run or private. Entitlements have also been cut way back since the days of true communism, with minimal state-provided health care and social security programs. We associate socialist countries with confiscatory tax rates, but taxes aren’t especially high in China. (Chinese corporations pay 25 percent and individuals between 5 and 45 percent—numbers roughly comparable to thosein the United States.)
That said, the Chinese government still controls major aspects of the economy and society. For example, just about every Chinese bank is state-owned, so the government decides which businesses and individuals will get the most favorable loans. The domestic media are entirely state-owned as well and offer uniformly favorable political coverage. Perhaps the biggest vestige of classical communism is the fact that every square inch of land in the country still belongs to the government. (People and businesses can own houses and other property.)
Politically, China is as Communist as ever. The country operates under the highly centralized, single-party rule of the Communist Party. Every region, whether it’s a province or a city, has two sets of leadership: local government functionaries and Communist Party officials. While there is overlap between the two groups—after all, government workers must be Communist Party members—the top local government leader must always answer to the top party leader. The governor of a province might make day-to-day decisions about filling potholes and snow removal, but the party official controls macro decisions like which businesses get state money and prime real estate.
The irony is that the Communist leadership structure is geared toward capitalist ends. For example, regional leaders are evaluated every year based on economic growth in their domains. That gives them incentives to drive innovation however possible—sometimes by fostering healthy competition among companies and other times by encouraging a monopoly. The system inevitably produces high levels of corruption, as local officials collect kickbacks from the companies they help.
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Explainer thanks Ted C. Fishman, author of China, Inc.: How the Rise of the Next Superpower Challenges America and the World; Kenneth Lieberthal of the Brookings Institution; and Stapleton Roy of the Woodrow Wilson International Center for Scholars.