Why a French Economist has Fallen for Beijing’s Socialist Market Dream

In the West, "Sinicization of Marxism" and "Socialism with Chinese Characteristics" are seen as mere propaganda, with China labeled "state capitalism." However, for French Marxist economist Rémy Herrera, this reflects a profound misunderstanding of China's reality.
May 21, 2024
Researcher at the University of Panthéon-Sorbonne. Former consultant to the OECD and the World Bank.
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A former consultant to the OECD and the World Bank, economist Rémy Herrera is also a former secretary of the World Forum for Alternatives (WFA) and a member of the International Crisis Observatory (OIC).

One of France’s leading Marxist economists and one of the most important critics of neoclassical economics, Rémy Herrera analyses not only the financial and socio-economic causes of the crises of capitalism, but also the countries that have adopted different development models by choosing alternative political-economic approaches to capitalism. In his work, Herrera takes a historical perspective on economic developments in Asia and Latin America, particularly in China and Cuba, and challenges the Eurocentric approach of the neoliberal school in its economic analyses of developments in these countries.

Remy Herrera answered Ferhan Bayır’s questions on the Chinese economy.

Let’s start with your books on China. Based on your research and observations during your visits to China, how do you interpret the much-discussed Chinese miracle?

Many people who comment on the high growth rate of China’s gross domestic product (GDP) that has been observed for decades use the term “miracle” to describe this phenomenon. In my view, it is not a miracle, but rather the result of a development strategy that has been planned and patiently and effectively implemented by the state and senior officials in successive Communist Party-led governments in this country.

Almost everywhere, in academic circles and in the dominant mainstream media, we read and hear that the “rise” of the Chinese economy is due solely to its “opening up” to globalisation. I would like to add that such rapid growth was only possible thanks to the efforts and achievements of the Maoist era. This opening up to globalisation has been strictly and continuously controlled by the Chinese authorities. It is only under this condition (control) that the opening up to globalisation can be considered to have contributed to the country’s undeniable economic success. This opening to globalisation has been able to have such a positive impact on China in the long term because it has been fully consistent with a coherent development strategy and has been subject to the imperatives of meeting domestic objectives and domestic needs.

It must be clearly understood that without the development of such a development strategy, which was clearly the work of the Chinese Communist Party, and – it must not be forgotten – without the energy expended by the Chinese people in the revolutionary process of implementing this development strategy, if the Chinese Communist Party had integrated the country into the world capitalist system, it would inevitably have led to the complete destruction of its national economy, even of its own existence, as has happened in so many other countries of the South and East. We must remember one fundamental point: For more than a century before the victory of the revolution in October 1949, “opening up” for the Chinese people meant first and foremost capitulation, destruction, exploitation, humiliation, decadence and chaos.

How does China’s success differ from Western development models?

The success of the development strategy implemented by the Chinese government and the many positive effects it has brought to the people of this country stand in stark contrast to the failure of the neo-liberal economic policies implemented in Western countries, which have generally been economically, socially, culturally and even morally disastrous for workers in the countries of the North.

Let me give a concrete example. The strength of Chinese state-owned enterprises is that they are not managed like Western international companies. Listed on the stock exchange and operating according to the logic of shareholder value, share appreciation and rapid return on investment, which requires maximising dividends paid to owners, these Western companies operate by squeezing a chain of subcontractors, local or international. But Chinese state-owned groups do not behave in this way. If they did, they would be acting in a way that would harm local small and medium-sized enterprises and, more broadly, the entire national industrial fabric. The compass that guides the majority of China’s large state-owned enterprises to profit or become profitable is not the enrichment of private shareholders, but the prioritisation of productive investment and customer service. Ultimately, it does not matter to Chinese SOEs that their profits are lower than those of their Western competitors, as long as they serve higher, long-term or national strategic interests, including stimulating the rest of the local economy and looking beyond the immediate vision of profit generation.

Can this model be defined in terms of a neoclassical or neo-Marxist model?

First of all, I believe that the Chinese do not see their development strategy as a “model”, nor do they seek to impose or export their development strategy. They simply believe that there are certain lessons to be learnt by different peoples of the world, but that different peoples with their own specific historical, social and cultural conditions should determine the ends and means of their own development. This perspective is also very different from the Western vision, which wants its “model” to be followed by all the countries of the world.

Neoclassical models have no place in China. Allow me to add that neoclassical economics, which is the hegemonic current or mainstream in economics today, serves no other purpose than to provide a theoretical and pseudo-scientific justification for the implementation of neoliberal policies, an ideology that opposes the practice of social justice and the development of public services. In reality, neoclassical economics is not a science but a science fiction or, as I have argued in a recent book (Confronting Mainstream Economics for Overcoming Capitalism), an ideology that claims to be scientific.

On the other hand, I believe that Marxism has not yet been overcome scientifically. I do not think that Marxism has any serious competitors today. Marxism remains relevant, not least because we still live in a world where the capitalist system is globally dominant, although there have been significant changes, and where a careful explanation of these changes is needed. Despite the numerous attacks on Marxism since its emergence, and despite the repeated claims that it is obsolete – that it is dead – Marxism is enduring, resilient, I would say “indestructible”, and at the same time Marxism is the main theoretical reference point for those thinking about the ways and conditions for a better world. Despite its frequent dogmatisation and the disappearance of the USSR and the Soviet bloc, sometimes to its detriment, Marxism today retains its essence and remains an irreplaceable reference for those struggling for socialism. It is therefore not surprising that it remains an important theoretical reference for China.

Has China based the implementation of its economic model on theoretical foundations?

I would say that the Chinese development strategy, aimed at maintaining and deepening the socialist transition, is based on a theoretical combination of elements drawn from both the main philosophical currents of traditional Chinese thought (especially Confucianism and Taoism, but also various other currents) and a mixed Marxism reinterpreted and modernised in the Chinese style. But it must be understood that this theory is closely linked to the analysis of practical experience. All this (the aforementioned theoretical structure and the analysis of practical experience) has made it possible to provide answers and appropriate solutions to today’s challenges and, in particular, to the many contradictions arising from them.

The Chinese concept of “socialism of the new era” is patient, persistent, concrete, pragmatic and effective, and at the same time it is not Manichaean (evaluating situations and things in a dualism according to absolute principles of good and evil, without nuances and intermediate states); it knows the long term and is not afraid of confronting contradictions or oppositions (e.g. those related to individual initiative or entrepreneurship), which are seen as complementarities and potentials rather than exclusions and substitutes.

One of the lessons to be learnt from “Chinese Marxism” is the idea of seeking harmony between opposites, within man, between people, between man and nature. Chinese political discourse emphasises ‘social harmony’ and ‘stability’ as fundamental values, and the search for ‘compromise’ and ‘consensus’ as the means to achieve them.

There are many concepts in Chinese Marxism which differ from the concept of “class struggle” in Western Marxism, and which Western Marxism generally views with suspicion as characteristic of conservative regimes. To ignore these concepts is to forget their special meaning in Chinese thought as “reconciliation of opposites” and “positive dialectics”. These concepts mean, for example, that there is a dynamic balance between individual self-interest and social needs, between individual and collective interests, and between needs and moral demands. To simplify, we can say that since Mao, the Chinese have believed in a form of progress based on spiral development that tends to smooth out and mitigate contradictions. In this context, socialism ceases to be a project of perfection (a vision alien to Chinese thought, a vision that rebels against the absolute) and becomes a process of construction in motion.

How would you assess the similarities and differences between China’s economic model and that of the post-World War II Soviet Union and the countries of Eastern Europe or the Balkans?

For some years, the People’s Republic of China maintained a “Soviet-style economic model”, which was introduced immediately after the victory of the October Revolution in 1949. However, the PRC abandoned this model when it broke away from the USSR in the early 1960s. After joining the Council for Mutual Economic Assistance (CMEA or COMECON) in 1950, China left in 1961 and decided to formulate its own development strategy, on its own and for itself. And, frankly, it did so much more effectively than the Soviet Union or the countries of Central and Eastern Europe.

Between 1978 and 1982, China faced a series of economic problems that reflected the difficulties of the post-Mao transition and the implementation of the so-called “opening-up” structural reforms. In particular, the period 1985-1986 saw the introduction of the 1984 tax reform, which was one of the turning points towards a market economy. Then, during the collapse of the USSR and the Soviet bloc, there was a very short-lived experiment that could be described as “neo-liberal”, which was quickly interrupted and abandoned, but the result of this experiment was a sudden and severe economic downturn in 1990-1991, accompanied by an explosion of corruption. It must be acknowledged that the Chinese central government has since fought corruption with great vigour and some success. Fortunately, China has rejected the neo-liberal option that has devastated so many economies around the world. And it has chosen to maintain socialism, which today provides a measure of prosperity for the vast majority of its population.

To what extent do Western Marxists who claim that China has adopted capitalist methods correctly assess China’s financial/wealth growth?

In debates among Western Marxist writers, the vast majority of authors argue that the Chinese economy is capitalist. David Harvey, for example, says that he sees the Chinese economy as “neoliberalism with Chinese characteristics”, where since the 1978 reforms there has been a kind of market economy with more and more neoliberal components, operating within a framework of centralised control that he describes as very authoritarian. I disagree with him. Panitch and Gindin analyse the consequences of China’s integration into the world economic system and see it less as an opportunity for China to redirect global capitalism than as a repetition, this time by China, of the “complementary” role previously played by Japan in providing the United States with the capital flows necessary to maintain its global hegemony, which in turn has led to a tendency in China to liberalise financial markets, eliminate instruments to control capital movements and weaken the foundations of the power of the Chinese Communist Party. I think these writers are wrong.

Other Marxists, Chinese or foreign, certainly fewer in number but no less important, continue to argue that the political-economic system currently in place in China, although comparable or close to “state capitalism”, leaves open a wider range of possible trajectories for the future. For my part, I take this idea so far as to argue that the Chinese system today still contains the essential elements of socialism. Once this has been said, the interpretation of the nature of this system becomes compatible with “market socialism”, which in my view still rests on pillars that clearly distinguish it from capitalism. For my part, I would say that although there are capitalists in China (and there are many billionaires), it is not possible to describe the Chinese system as capitalist. Of course there are elements of “state capitalism”, but I prefer to speak of the Chinese system as “market socialism”, or rather “socialism with the market”. I think we have to take the Chinese seriously when they talk about “socialism with Chinese colours”. This is not just propaganda; it is a reality, it is their reality.

At the monetary and financial level, for example, it is worth noting that the Chinese authorities have been able to cope with the power of the financial markets, but they have also been able to build a “great wall of money” by defending the national currency, the yuan. They have managed to put money at the service of development. Very powerful strategic planning, whose techniques have been made more flexible, modernised and adapted to today’s needs, and thus much more effective, is a distinctive feature of the socialist path. State control of the currency and of all the major banks is a sine qua non, as is close supervision of the activities of financial institutions and of the behaviour of foreign companies operating in the country. Once again, it is the state that controls capitalism in China, not the other way round. At least that has been the case so far.

What is the significance of Deng Xiaoping for China today? Is there a connection or disconnection between Xi Jinping’s political and economic decisions and those of Deng Xiaoping?

Deng Xiaoping’s definitive rise to the pinnacle of power began in August 1977 with the 11th Congress of the Chinese Communist Party and the subsequent push for deep economic reform that began in late 1978. Deng’s idea was not to abandon socialism, but to find ways to lift the vast majority of Chinese out of poverty and enable the country to achieve what the establishment called a “moderately prosperous” society. Since Xi Jinping, the development strategy has been reaffirmed as socialist, and the country’s overall policy orientation has been more in favour of the less affluent sections of the population and the less developed regions of the country.

The difficulty in understanding “Chinese socialism” stems from the refusal of its leaders to interpret it as the banalisation of scarcity or the “sharing of misery”. What the leaders of the Chinese Communist Party sought to do, and succeeded in doing, was to lift the great mass of the Chinese people out of poverty under Mao and up to the level of a “moderately prosperous” society under Deng Xiaoping. Since then, as a logical continuation of the revolution, their desire has been to pursue a socialist transition in which the vast majority of the population now has access to prosperity, especially a wide range of consumer goods, and can enjoy abundance. Wouldn’t that be killing two birds with one stone and proving that socialism can and must overcome capitalism?

Could you elaborate on China’s economic growth?

It is wrong to say, as we often hear, that the high growth rate of gross domestic product (GDP) in the Chinese economy is due to the capitalism adopted since 1978. Quite the opposite. Economic growth has been high because the Chinese state, under the authority of the Communist Party, has managed to prevent capitalism from taking control of the country and, as a positive reflection of this, has redistributed wealth throughout society on a large scale. I should add that, even if we want to believe that the Chinese system is capitalist (which I do not), it would be wrong to claim that China’s high growth has only been observed since 1978. This is because the country’s economic growth was already very, very high under Mao, much higher than in any other country with a planned economy, and even higher than in many industrialised Western countries. Western leaders want to hide this fact because it is unbearable for them to admit that a socialist country can be successful, especially more successful than capitalist countries.

I have to say that the goal of the Chinese Communist Party is not to take over everything economically, but to maintain political control over everything. The two are not synonymous. Chinese leaders have repeatedly said that the coexistence of public and private activities, both encouraged within a mixed, hybrid system, is the chosen means to develop the country’s productive forces as much as possible and raise the level of development. The use of all means, including attracting foreign capital and importing advanced technologies, is not aimed at abandoning socialism, but at improving the living conditions of the population and deepening the process of socialist transition begun in 1949. Paradoxically, China remains a developing country, as evidenced by its still modest GDP per capita. This process will be long, difficult, full of contradictions and risks, and its course remains largely uncertain. However, I think it is worth stressing that this system still has many features that are clearly different from capitalism and which, in my opinion, are related to the realisation of a socialist project and the potential for its reactivation, which leads us to recommend taking the speeches of the country’s political leaders seriously.

Does China’s meeting with President Biden signal a shift from economic dominance to a more pronounced political presence in the international arena, especially in Africa, Latin America and the Middle East, and in its attitude towards Russia? Does China want to become the centre of a multipolar world?

China has no desire to replace the United States as the world’s dominant power. China has neither the will nor the mentality to do so. On the other hand, it is clear that China is trying to contribute to the construction of a multipolar world, as opposed to the unipolar world in which the United States has so far ruled unchallenged (and admittedly in a highly aggressive manner). China’s leaders seek universal peace and balance in international relations. But it is clear that they will defend their country’s sovereignty without submitting to foreign domination.

Regarding the “trade war” between the US and China, we have co-authored a paper with Chinese authors entitled “Turning One’s Loss Into a Win? The US Trade War With China in Perspective’, which we co-authored with Chinese authors, shows that the ratio of labour hours integrated into trade between the two countries since 1978, compared to the same amount of trade exchange, is higher in China than in the US, and that there is an unequal exchange of value between them in favour of the US and to the detriment of China. In other words, the fact that China has run an increasing bilateral trade surplus over the last decade should be seen in the light of the fact that (according to our calculations) it has benefited the United States in particular in terms of the labour hours included in exports.

In such a paradoxical context, the outbreak of the trade war against China in 2018 can be interpreted as an attempt by the US administration, then led by President Trump, to slow down the slow and steady deterioration of the US trade advantage vis-à-vis its main emerging rival, China.

How is China organising international economic relations for a multi-power world to counter US dominance? Given the examples of the Shanghai Cooperation Organisation and the BRICS, can a global payment system be created in the near future to counterbalance the dominance of the US dollar?

China has realised that the two pillars of US domination of the world capitalist system are military and monetary. That is why it has actively participated in the creation of strategic alliance networks such as the Shanghai Cooperation Organisation and economic alliance networks such as the BRICS grouping. He also realised that these two pillars are interdependent and therefore fragile. That is why he launched a number of innovative and bold initiatives.

I refer to some of them in another book (Money, published by Palgrave Mcmillan). For example, China is planning to challenge the prevailing order in the oil market, of which it is the world’s largest importer. Since 2018, China has decided to promote yuan-denominated oil futures contracts on the Shanghai International Energy Exchange, which is accessible to foreign investors, in order to compete with references such as London Brent and New York West Texas Intermediate (which set the standard for defining crude oil prices and futures contracts for this commodity on Wall Street), which were undisputed in this field until this year.

In this context, China and Russia (already forming an economically dynamic – and militarily deterrent – alliance that could be a reliable counterweight to the United States) have decided to launch a new global alternative currency, called “petro-yuan-gold”, which could displace the dollar. Petro-yuan-gold is a global currency project based on oil, a basic commodity, and linked to gold, a feat no longer within Washington’s reach. Indeed, China’s advantage lies not only in its high GDP growth rate, but also in the fact that it is the world’s largest producer and buyer of gold, with Russia in third place, ahead of the United States. In 2018, Beijing took the initiative to promote a broad oil-yuan-gold trading facility on the global energy exchange. Then came the implementation of metal-yuan-gold. China offered to exchange the yuan it receives for gold for oil supplies and metal purchases. These events will have a significant impact on the global system.

Having persuaded Iran and Saudi Arabia to engage in diplomatic talks, can China achieve similar success in resolving the conflicts between Russia and the West, as well as the ongoing Israeli-Palestinian conflict?

China has, of course, been playing an increasingly important and positive role in defusing existing international conflicts for a number of years. We saw this recently in the war in Ukraine between NATO and Russia, led by the United States, and then in the war between Israel and Palestine, supported by the United States and the European Union. Not long ago, we saw China speak out to prevent the outbreak of a conflict between Iran and Pakistan. We can think of China as the voice of many countries of the South that are seeking the path of development and not the path of war. That is why it is so important to analyse carefully what China wants and says.

China’s international strategy is based on five principles: 1) respect for sovereignty and territorial integrity; 2) mutual non-aggression; 3) non-interference in internal affairs; 4) equality and mutual benefit; 5) peaceful coexistence. One would have to be in bad faith not to recognise that China’s statements on preserving peace and promoting the peaceful resolution of existing conflicts are being respected. And it must be remembered that China has never in its modern history pursued an expansionist colonial policy. Today, it does not want to revive the climate of the “Cold War”, which is contrary to the concept of peace among nations. China opposes all military alliances and has never joined a military coalition, not even against ISIS. It has not established any military bases abroad, except for one in Djibouti, which it presents as a “simple logistical facility” in a sensitive maritime location. The contrast with the Western powers, especially the United States, which has a history of coups and military interventions, is striking. “Cooperation” is the keyword of Chinese policy, along with the priority given to development and the “win-win” principle.

Can China take a more proactive stance in promoting regional and global peace in the midst of the US war economy? How should the Belt and Road project be assessed in this situation?

The military-industrial complex plays a crucial role in the economy of the United States, but it has also reached an extremely worrying dimension, threatening what the West likes to call “democracy” (which it respects less and less at home and almost never beyond its borders). With more than half of the world’s military expenditure and more than 1150 military bases around the world (I calculated this in my article “Notes on US Bases and Military Staff Abroad”), the United States is in an economic crisis, in a difficult situation and is gradually pushing the whole world towards total war. They are more and more openly expressing their desire to shift the axis of new conflicts to the Far East, especially to Taiwan. China must resist this US provocation and push towards war, but at the same time it must defend its interests and territory. Taiwan is one of them. Reunification therefore remains a priority for Beijing. The US administration is fuelling the arms race that once brought the USSR to its knees. But the escalation of this dangerous race is no longer enough to influence a China in good economic health and armed with a sufficient deterrent.

More generally, it is important to understand that capitalism, trapped in a systemic crisis, can no longer find solutions to its problems through the logic of maximising immediate profits and is becoming more dangerous. Between company bankruptcies and mass unemployment, stock market crashes and banking instability, the likelihood of a worsening of the systemic crisis of capital is extremely high today. All the conditions are in place for the contradictions in the system to become even more pronounced, especially since very few reforms have been carried out since the 2008 crisis. The most urgent issue at the moment is to put an end to the “organisation” of the world system through war under the domination of the United States of America. The defence of peace is a priority. Consequently, we must pull the plug on the war machine operated by the financial oligopolies by subjecting it to public and democratic control.

This is where the great project of the Silk Road comes in, already partially implemented: land routes – the “Belt” – and sea routes – the “Road”. This cooperation is of particular interest to Asian countries, because China has neighbours, both near and far, such as in the Middle East, that do not have sufficient investment for their development, and also because China sees advantages that could stimulate the development of its own western provinces, which are lagging behind in terms of development compared to those on China’s eastern coast. African countries are also interested because they are the ones most affected by “underdevelopment” (as the West calls it). We cannot say that this cooperation is perfect, as it focuses more on the supply of raw materials, but it is very important for African countries that China provides infrastructure, builds hospitals and roads in exchange for the supply of raw materials.

The Silk Roads go all the way to Europe, which creates resentment because it comes from a strategic competitor. If the European economies are in principle capable of developing themselves and have sufficient investment, why do some of them welcome Chinese investment so much? The reason is obvious: the governments of European countries with economies in recession or even in decline, victims of neo-liberal austerity, debt reduction, spending cuts and privatisation imposed by the European Union, are ready to sell their assets to the highest bidder and see Chinese investment as a means to develop themselves. China has made many investments outside the European Union, particularly in the Balkans. It is therefore not surprising that 17 Eastern and Southern European countries, 11 of which are members of the European Union, have joined the Silk Road initiative.

The Silk Road does not stop at the Euro-Asian continent and Africa. Cooperation with the countries of Latin America and the Caribbean is already well advanced, especially with the poorest countries in the region. Development assistance is provided mainly through the Silk Road Fund (a sovereign wealth fund) and loans from public banks at favourable interest rates. However, China does not want to be the sole financier of this project and wants to involve all countries that are able to participate in these loans, and which, unlike the World Bank or the International Monetary Fund, do not impose politico-economic conditions on the countries they finance, in loans for infrastructure that will form the basis for rapid development.

This is what led to the creation of the Asian Infrastructure and Investment Bank, which today has almost a hundred members (France, Germany and the United Kingdom are members of the Asian Infrastructure and Investment Bank, but the United States of America, which, unlike the IMF and the World Bank, cannot control it, is obviously not a member; China, the bank’s largest shareholder, explicitly excludes its veto).

All in all, the Silk Road has grown enormously in just a few years: 124 countries, representing two-thirds of the world’s population, and 24 international organisations have signed agreements.

He should insist that it be made clear that this project is intended to exclude all political considerations. It is an initiative “open to all countries” with no other objective than common development. But there are also partnerships that focus on economic cooperation and the construction of multilateral trade zones, as in the case of the Regional Comprehensive Economic Partnership, which will create the largest such zone in the world, with three billion inhabitants and 30% of world GDP. And in such partnerships, US hegemony will be challenged, especially as trade and investment will no longer be conducted in dollars but in national currencies.

Finally, we are realising that it is capitalism itself that has become unsustainable. It is obvious that this system, which is essentially dedicated to infinite and unlimited accumulation, is incompatible with a finite and finite planet. Capitalism destroys any kind of social harmony with the logic of creating ever greater inequalities. China claimed to achieve development by controlling these dynamics of capitalism. But now it is these dynamics that have to be limited. “Chinese” market socialism will have to gradually move away from capitalism if it is to realise a truly alternative path for humanity. This is the real goal; according to the Chinese authorities, and more explicitly today, certain features borrowed from capitalism are borrowed to be used “until the bridge is crossed”, they are not a long “detour” in the socialist transition on the road to communism.


Researcher at the University of Panthéon-Sorbonne. Former consultant to the OECD and the World Bank.
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