Policies of Utilization, Restriction, Transformation Towards National Capitalist Economy

The basic policy of socialist transformation of capitalist industry and commerce. In March 1949, the Second Plenary Session of the Seventh Central Committee of the Party put forward the policy of utilizing and restricting capitalism. Later, in June 1953, the Political Bureau of the CPC Central Committee decided on the basic policy of utilizing, restricting and transforming capitalist industry and commerce.

China's private capitalist industry and commerce was a force that could not be ignored in the national economy. As China's economy was in a backward state, for a long time after the victory of the revolution, it was necessary to make full use of the enthusiasm of urban and rural private capitalism to promote the development of the national economy. But the negative effects of capitalist industry and commerce was also restricted. The existence and development of China's bourgeoisie was not as unrestricted as that of capitalist countries. They would be limited in several aspects: as to the scope of activities, by tax policy, access to markets, as to the labor conditions in the enterprises.

The state adopted appropriate and flexible restrictive policies against capitalism which would be suitable to the specific conditions of different branches and professions and in all periods. At the same time, the policy for socialist transformation of capitalist industry and commerce, adopted peaceful redemption and gradually transformed private capitalist ownership into ownership by the whole people through the form of state capitalism.

In the early days of the founding of the People's Republic of China, the initial forms of state capitalism were practiced: such as joint state-private management; orders placed by the state with private enterprises to process materials or manufacture goods, with the state providing all the raw materials and taking all the finished products; and similarly placing orders, but the state buying not all but most of the finished products, these ways were gradually enriched and developed. The more advanced form of state capitalism was the public-private partnership, which was the joint venture between individual and private enterprises, followed by the public private partnership of all enterprises. By the end of 1956, 99% of the private industrial households and 82.2% of the private commercial households embarked on the path of public-private joint-venture partnership in the whole industry, thus China basically completed the socialist transformation of capitalist industry and commerce.

As Deng Xiaoping said: "The successful completion of the socialist transformation of China's capitalist industry and commerce is one of the most glorious victories in the socialist history of China and the world.” “This victory was achieved because the CPC led all the working class to implement the Marxist policy formulated by Comrade Mao Zedong according to the situation in our country, and at the same time, the progressives and the majority of the capitalists also played a positive role in the process of accepting transformation.”