Socialist Transformation of Capitalist Industry and Commerce

Implementing the socialist transformation of capitalist industry and commerce by the state was an important part of the “Party's general line during the transitional period”. According to the realistic situation at the beginning of the founding of New China, the policy of utilizing, restricting and transforming capitalist industry and commerce was implemented, as well as the policy of uniting with, educating and ideological remolding of the capitalist industrialists and merchants was practiced at the same time, and gradually a peaceful transformation was realized through a series of state capitalism forms from low to high level by means of redemption.

Since 1950, private industry and commerce was initially brought into the orbit of state capitalism by the way of placing orders to be processed by private enterprises, unified purchase and exclusive sale, and commissioned distribution and sales. The socialist transformation of capitalist industry and commerce was accelerated with the implementation of the Party's general line in the transitional period and during the first Five-Year Plan.

On September 7, 1953, when Mao Zedong talked with representative figures from the democratic parties and with the leaders of Federation of Industry and Commerce, he affirmed that state capitalism was the only secure way for the transformation of capitalist industry and commerce and for the gradual completion of the transition to socialism: He added: “The state capitalist enterprises should distribute the profit among the four items as: income tax, welfare fund, accumulation fund and dividends and management bonuses to capitalists in pre-determined percentages ("dividing the profits among the four items"). The implementation of state capitalism should proceeded steadily, but not too hastily, it should be voluntary on the part of the capitalists, with no coercion.” This talk effectively pushed the private businesspeople to embark on the path of socialist transformation.

After 1954, after the planned expansion of the number of public-private joint ventures, by June 1955, there were more than 1,900 public-private joint ventures, whose output value was 58% of the total output value of private industry; and in terms of commerce, the state capitalist form of distribution also made a great progress. When the climax of agricultural cooperation came in the second half of 1955, the Party took advantage of the situation to further promote the private industrialists and merchants to accept socialist transformation.

On October 29, Mao Zedong invited the representatives of the industrial and commercial circles to have a discussion with the hope that they could recognize the situation, control their own destiny, accept the socialist transformation, and further clarify the policy of peaceful redemption and acquisition.

In November, the Political Bureau of the CPC Central Committee adopted the “Central Committee's Resolution on the Reform of Capitalist Industry and Commerce (Draft)”, which determined that the socialist transformation of private industry and commerce should have been promoted from the public-private joint venture of individual enterprises to the public-private joint venture of the whole industry. This was a decisive step in the transition from private capitalist ownership to full socialist public ownership.

In January 1956, the transformation of public-private partnership industry was launched starting from Beijing. By the end of January, the transformation public-private partnership enterprises in the whole industry were successively realized in big cities and more than 50 medium-sized cities in China. By the end of the year, 99% of the private industrial business and 82.2% of the private commercial business nationwide implemented public-private joint ventures across the country. So far, China has successfully realized the socialist transformation of capitalist industry and commerce.

In the process of socialist transformation of capitalist industry and commerce, there were some shortcomings and deviations, i.e., some small traders and handicraftsmen was wrongly classified as bourgeois industrialists and businessmen; a part of former merchants and industrialists who were assigned as management personnel were treated improperly; and the number of mergers made between state and private enterprises had been excessive and implemented rapidly, which brought some inconvenience to people's lives; But on the whole, it was healthy and successful, as well as developed and enriched Marxism-Leninism in theory and practice.