Questions on State Capitalism

Excerpts from Part I of the survey report on “The Question of Public-Private Relations in Capitalist Industry” directed by Li Weihan. It is included in the Selected Works of Li Weihan published by People's Publishing House in 1987.

Between March and April in 1953, in order to summarize the basic situation and systematic experience of state capitalism since the founding of New China, Li Weihan, the minister of the United Front Work Department of the Central Committee, led an investigation group with the participation of the State Planning Commission and the Administration of Industry and Commerce to conduct research in Wuhan, Shanghai, Nanjing, Wuxi, Changzhou, Jinan, and other places and submitted a report on "The Question of Public-Private Relations in Capitalist Industry" to the Central Committee in May. In mid-June of the same year, the Politburo of the Central Committee held two enlarged meetings to discuss and affirm this report and set the policy of reforming capitalism through state capitalism.

The report outlines the development of state capitalism and then puts forward various forms of state capitalism from lower to higher levels. The report points out that: “In the past three years, there has been considerable development of joint ventures, processing has been greatly developed, and although leasing forms have not been developed many new kinds of developed forms have emerged, such as industrial ordering, contract sales, unified purchase, unified sales, monopoly, distribution, etc., which constitute a series of forms from the lower to the higher level.”

The report stresses that: “In state-capitalist industry, the value of new production has been divided not only into variable capital and surplus-value but first into three parts: workers' wages, profits of enterprises and profits of state enterprises, with the working class having two of the three parts. Then the profits of enterprises are divided into state taxes, capitalists' dividends and bonuses, workers' bonuses and benefits, and enterprises' provident funds, with the working class getting most of the four shares. Workers in state capitalist enterprises are no longer producing simply for the capitalists, but at the same time for the state."

The report summarizes the role of state capitalism as follows: Firstly, state capitalism is the main form of capitalism that we use and limit. Secondly, state capitalism is the primary form that gradually brings the private industry into the orbit of state planning. Thirdly, state capitalism is the main form of the gradual transition from capitalist industry to socialism.

The report proposes the following countermeasures based on the public-private partnership enterprises and the problems in implementing the relevant policy guidelines: Firstly, the policy of gradually implementing public-private partnership should be affirmed for large factories that are beneficial to the people's livelihood and have the potential for future development. However, we must take care of the needs, cadres, funds, capitalists' willingness, and political influence in the steps, carry them out in a planned way and control them. That is to say, we must have certain approval procedures. Secondly, the management of public-private joint ventures should allow the capitalists and their agents to participate and should discuss and resolve all issues that need to be discussed and resolved with them. Except for major issues, after consultation, the representatives of the public shares have the right to decide, but the representatives of the private shares are allowed to appeal to the higher authorities. Thirdly, concerning the treatment of profits, in addition to the withdrawal of a small number of provident funds, private shares should be guaranteed a minimum share of profits (can be in the form of dividends), but should also provide a maximum limit, the number of slightly better than the interest on bank deposits regardless of how much more than this amount should be fully returned to the state. Fourthly, the investment in the joint venture shall be allocated by the State Treasury in accordance with the national plan, and the private shares shall be treated in the same manner as the original shares if they are willing to invest. The original personnel of an enterprise should be contracted down and used according to their capacity without discrimination. They should be gradually transformed into state cadres whose salaries can be appropriately adjusted. In this way, public-private joint ventures should be treated the same as state-owned enterprises except for income tax payable, and their production and investment should be included in the state plan as well. The wages and benefits of workers should also be the same as those of state-run enterprises in principle. Fifthly, important joint ventures should be led by a central and local dual leadership, its original has formed its own system in the country, should restore the leadership relationship between the branch and the head office, and its production should be managed by the central departments concerned. Sixthly, on public-private joint ventures, there is still a need for a charter or regulations, to be implemented on a trial basis, after the further experience, and then into law.