If viewed from fingerprint of the New Democratic society designed by the Communist Party of China (CPC) in the early days of the People’s Republic of China (PRC), China’s private capitalism was expected to keep existing for one decade or two, although it would eventually disappear along with the transition to a socialist society. However, on June 6, 1952, before the Five Anti Campaign (wufan yundong) was over, Mao Zedong clearly stated in a report (Mao, 1989: p. 459):
After the fall of the landlord class and the bureaucratic bourgeoisie, the main contradiction within China is the contradiction between the working class and the national bourgeoisie, so the national bourgeoisie should no longer be called the middle class.
Mao Zedong’s assertion shows that since the founding of the PRC, CPC’s strategy towards private capitalism has undergone a major transformation. Based on the analysis of the general trend of the development of the New Democratic society, this great turning point reflects an inevitability of history. In fact, Mao Zedong’s strategy towards private capitalism, in which the thoughts on transition to socialism were brewed in 1952, had a series of direct incentives (Walder, 2015). Analyzing the reasons for Mao Zedong’s transformation of private capitalism strategy in 1952 will help us to have a deeper understanding of the historical context of socialist transformation of private capitalist industry and commerce.
2. Changes of Mao Zedong’s Policy towards National Bourgeoisie in 1952
The formation of the CPC’s policy on the national bourgeoisie has a long history. From the ideological point of view, it is obvious that the Chinese Communists regarded the bourgeoisie as the opposite class of the proletariat during the democratic revolution. The democratic nature of the Chinese revolution requires that it must carry out the unified front policy towards the national bourgeoisie. In the period of Democratic Revolution, this contradictory situation inevitably became a difficult problem that confused the Chinese Communists in the period of democratic revolution.
In 1940, Mao Zedong’s On New Democracy (Xin minzhu zhuyi lun) was published, which marked the beginning of the formation of a relatively stable and mature set of theoretical views and policy strategies aimed at the bourgeoisie. During this period, Mao Zedong began to think more about the economic problems of the future country on the basis of the duality of the national bourgeoisie in political struggles, that is, “in a certain period of time and in a certain procedure, they are revolutionary at the position opposite to foreign imperialism and the domestic government controlled by bureaucratic warlords”, as well as “show great weaknesses in economy and politics” and “exhibit a possibility to compromise with the enemy of the revolution” (Mao, 1991). Mao Zedong argued that the future New Democratic Republic “will not confiscate the private property of other capitalisms, and not prohibit the development of capitalist production that ‘cannot manipulate the national economy and people’s livelihood’” (Mao, 1991).
Considering the postwar depressed economy in the early days of PRC, the human, material and financial resources accumulated by the national capitalism were essential for the rapid recovery and development of this newborn country. Therefore, it is somewhat necessary to retain national capitalism and make use of it, reform and develop it. The CPC had also written this decision into the Common Program (gongtong gangling) of the Chinese People’s Political Consultative Conference. Mao also pointed out that “it is certain that we will cooperate with the bourgeoisie, otherwise the Common Program would become a dead letter and [we would] in a politically economically disadvantaged position.” (Bo, 1997). Under the guidance of this thought, the CPC started to adjust the relationships between public and private sectors of the economy, labor and capital, production and marketing. After these adjustments, the national bourgeoisie went through the difficulties, industrial production resumed, and the market became active again. In this situation, the national bourgeoisie recovered from fears and turned to be excited, cheering the so-called “golden age” and “unforgettable 1951” (Li, 1993).
During this period, the cooperation between the CPC and the national bourgeoisie was not very smooth although above supportive policies were proposed and implemented. Unlike Mao, many cadres of the CPC did not have an accurate understanding of the concept of national bourgeoisie, even some of which held a left sentiment to crush capitalism in a rush and eliminate the national bourgeoisie. They believed that the historical role of the national bourgeoisie had ended, and that the future struggle is mainly aimed at the national bourgeoisie. They also thought that the more prosperous the state-run economy develops, the more necessary it is to squeeze the private sector.
To correct this popular sentiment in the party, in June 1950, at the Third Plenary Session of the Seventh Central Committee of the CPC, Mao Zedong made a speech entitled “Don’t attack on all sides”, stating that (Mao, 1977).
It is determined that the national bourgeoisie will be destroyed in the future. But now we must unite them around us and not push them away. We must fight them on the one hand and unite them on the other.
The recognition that the national bourgeoisie cannot be eliminated immediately but rather should be united, is undoubtedly correct. However, through a careful comparison between the theory of new democracy and the spirit of the Second Plenary Session of the Seventh Central Committee of the CPC, it can be seen that the theoretical basis for uniting the national bourgeoisie put forward by the Third Plenary Session of the Seventh Central Committee of the CPC had undergone subtle changes.
The reasoning in Mao Zedong’s speech to the conference was:
In the land reform, our enemies are big and enormous, and we must not make too many enemies. We must make concessions in one respect to ease our efforts and concentrate our power on attacking the other.
On another occasion, Mao Zedong gave a more specific explanation (Bo, 1997):
At that time, there were bombing and blockade activities from the enemies in Taiwan, and we also had very urgent works of land reform and fighting counter-revolutionary resistance. [In this situation,] we should unite the national bourgeoisie to attack the feudal forces, rather than implement a full-scale attack, which is very unconstructive.
It is worth noting that the economic significance of private capitalism was not mentioned here as before. From these subtle differences, it can be speculated that it was somewhat out of strategy that Mao Zedong criticized the idea of early transition at the Third Plenary Session of the Seventh Central Committee of the CPC.
Liu Shaoqi’s implementation of Mao Zedong’s strategic policy of steady progress and not attacking from all sides at the Third Plenary Session of the Seventh Central Committee was resolute. This was reflected in several important speeches and announcements of his in 1951. For instance, on July 5th, Liu Shaoqi explained to the students of the Academy for Marxist-Leninist Studies how to transition from a new democratic society to a socialist one, which was known as the “Chunouzhai Speech”. “It would take 10 to 15 years before implementing socialist steps. I think it is impossible to take 20 years or more,” he reckoned (Yu, 2005).
However, the original envision that no socialist steps would be taken for at least 10 years encountered rapid changes of social and economic situations along with the progress of the Three Anti Campaign (san fan yundong) and Five Anti Campaign (wufan yundong). In the Five Anti Campaign, especially in Shanghai, it was quite common to detect illegal activities of capitalists. A notable example was that in the military supplies for troops fighting in the frontlines of North Korea, a large amount of shoddy and spoiled food, medicine were found, resulting in severe healthy problems and even the loss of lives of the soldiers in the Chinese Volunteer Army. The alarming crimes of these outlaw capitalists have received great attention from the Central Committee of the CPC. In fact, in deploying the Five Anti Campaign, the Central Committee had already identified the economic so-called “five poisons” of some capitalists, including “bribery, tax evasion, stealing state assets, cheating on government contracts, theft of economic intelligence” (xinghui, toushui loushui, daopian guojia cai chan, tougong jianliao, daoqie guojia jingji qingbao) and regarded them as “an organized, systematic and rampant attack” of the entire bourgeoisie against the working class. Mao Zedong, in his approval drafted for the Central Committee on January 5, 1952, proposed: “[We should] launch this campaign vigorously, in order to give a counter attack to the bourgeoisie’s rampant aggression to our party on this issue during the last three years, which was more dangerous and serious than a war. [We should] give them a major blow”. He also asked party committees at all levels “to treat this campaign as a large-scale class struggle.” (Mao, 1999).
Therefore, it can be seen that during this period, the attitude of the CPC towards the national bourgeoisie had changed. By seizing the “pigtails” of their economic violations, the reputation of some capitalists was lost, and they were also politically isolated. In this sense, this attitude went beyond the scope of the previously established transformation, restriction and exploitation of national capitalism. In accordance with the above requirements, the Five Anti Campaign adopted the approach of “stormy mass movement (kuangfeng baoyu de qunzhong yundong)”. Although at the late times of the Five Anti Campaign, a liberal policy was adopted for national bourgeoisie, after this movement, “the dark and decadent side of capitalism and the ugly viciousness of the capitalist system were exposed intensively in front of the people of the whole country” and “the national bourgeoisie and the capitalist mode of production they represent has indeed been dying.” (Wu, 1982). In June 1952, when the Five Anti Campaign was coming to an end with a decisive victory, Mao Zedong made a very important instruction that the main contradiction in China should be the one between the working class and the national bourgeoisie. “After the fall of the landlord class and the bureaucratic bourgeoisie, the main contradiction within China was the one between the working class and the national bourgeoisie, so the national bourgeoisie should no longer be called the middle class,” he wrote (Mao, 1999). At this point, Mao Zedong’s policy towards the national bourgeoisie had taken a major turning point, and the transformation of the national bourgeoisie was then put on the agenda.
3. The External Reasons for the Change of Strategies
After the successful completion of the task of China’s new democratic revolution, that is, the first stage of the Chinese revolution, the established society is a new democratic one, which is a transitional type of society. The CPC’s original idea was to make a “one-off transition” when all conditions were ripe. However, in 1952, Mao Zedong’s strategy of national bourgeoisie changed, in which he began to consider suspending the new democratic society. This change of strategy was closely related to the external and international environment of China at that time.
First of all, Mao Zedong’s transformation of the national bourgeoisie strategy is because China was facing a peaceful international environment.
After the establishment of the PRC, safeguarding national independence and maintaining world peace became the two main bases of China’s foreign policy. At the Third Plenary Session of the Seventh Central Committee, Mao Zedong put forward the conclusion that a new world war could be precluded according to his analysis of the post-war international situation. Mao Zedong’s assertion had a great influence on the Party at that time, and many people then believed that the peaceful international environment was conducive to the recovery of the national economy and the transformation of Chinese society from new democracy to socialism. But soon after the outbreak of the Korean War, people’s fears and worries severely arose, that is, this local war would possibly develop into a worldwide war because of the intervention of the United States. Particularly in 1952, when the Korean War was deadlocked, the fears and worries became increasingly serious.
Mao Zedong did not change his scientific grasp of the whole post-war international situation because of the outbreak of this local war. At a meeting on August 4, 1952, Mao Zedong said (Mao, 1977):
The saying that World War III is about to be fought is only to scare you. We should strive for ten years to build industry and lay a solid foundation for the country.
In February 1951, Mao Zedong proposed a long-term development strategy of “three years of preparation, ten years of planned economic construction”. In 1952, the newborn PRC had successfully gone through three glorious years. The task of restoring the national economy had been completed ahead of schedule, the Three Anti and Five Anti Campaigns had ended, and the working class had won the first round of victory in the struggle against the bourgeoisie. From 1953 onwards, the nationwide large-scale construction was about to begin, and the entire country was entering a new historical period.
When the Korean War drew to a close, Mao reckoned that the new world war would not happen at least in the next 10 to 15 years, and the coming peaceful international environment would be conducive to China’s development. He suggested to exploit the temporary peaceful international environment to speed up the pace of social reform and economic construction. As a strategist, Mao Zedong at this time began to carefully plan how to deal with the relationship with the national bourgeoisie with holistic, and long-term considerations.
Secondly, Mao Zedong’s transformation of the national bourgeoisie strategy was recognized by Stalin.
In his classic book On New Democracy (Xinminzhu zhuyi lun), Mao Zedong clearly decided that the two stages of Chinese revolution, namely the New Democratic Revolution and Socialist Revolution, must be connected closely, which is a Marxist development theory of revolution suitable for China’s national conditions. On the eve of the founding of PRC, Mao Zedong rejected the notion that the new democratic economy was “new capitalism”. After the establishment of PRC, Mao Zedong believed that the transition period was changing every day and socialist factors could take place every day. He also repeatedly stressed that the idea of “establishing a new democratic order” was not in line with the actual struggle conditions, which indeed hindered the development of the socialist undertakings.
Accordingly, when the Korean War drew to a close and all kinds of social reforms in the country were basically completed, and the stage of economic construction was entered, the issue of the transformation of private capitalism was likely to be put on the agenda by the CPC.
Changing the predefined notion of transition from new democracy to socialism, that is, transition at that time directly to socialism without waiting ten or fifteen years to establish a new democratic order, was a critical turning point in the history of Chinese Revolution. Because of this, Mao Zedong took a very cautious attitude. Although the rest of the Party’s leaders did not demonstrate any objections, he felt it was still necessary to pursue the advice of Stalin.
In October 1952, when Liu Shaoqi led a delegation of the CPC Central Committee to attend the 19th National Congress of the Communist Party of the Soviet Union, Mao Zedong commissioned Liu Shaoqi to seek Stalin’s views on China’s transition to socialism. In his letter to Stalin on October 20th, Liu Shaoqi elaborated on the general approach to China’s vision of transitioning to socialism, based on Mao Zedong’s advice. Stalin read Liu Shaoqi’s letter and made a positive assessment of the party’s vision when he met with the delegation on October 24. “I think you’re right,” he said, “when we are in power, the transition to socialism should be done step by step. Your attitude toward China’s bourgeoisie is correct.” (Bo, 1997). At that time, China was planning its first five-year plan, hoping to receive assistance from the Soviet Union. Stalin’s statement is undoubtedly a theoretical support for the Chinese Communists.
4. The Internal Reasons for the Change of Strategies
If viewing domestically, in 1952, some changes had taken place beyond expectations in China’s social, political and economic situations, providing good internal conditions for the Party and the government to implement socialist transformation of private capitalism.
Firstly, during the period of national economic recovery, the power contrast between the production values of state-owned and private industries had changed critically.
In the early days of the founding of PRC, private capitalism occupied a considerable proportion of the national economy, and its status and role were irreplaceable by the state-owned economy to a very important degree for a relatively long time. During this period, the CPC was confronted with the heavy task of restoring and developing the national economy, so it was very necessary to rely on private capitalism. Nevertheless, the development of private capitalism to a certain extent was not contradictory to the non-capitalist future. In fact, during these years, the development of state-owned and cooperative economies was even faster than that of private economy, which was more evident after the Five Anti Campaign.
After three years of economic recovery, the proportion between the production value of state-owned and private industries changed radically. In 1949, the share of public sector in China’s industrial gross domestic product (GDP) was 43.8% and that of the private economy was 56.2%. By September 1952 the share of state-owned economy had risen to 67.3%, while the share of private sector had fallen to 32.7%, which means the state-owned economy had surpassed the private economy at this time. After the Five Anti Campaign, private industrial and commercial firms began to be included in the track of accepting the leadership of the state-owned economy, and a series of forms of national capitalism, from low-level to high-level, such as processing orders (jiagong dinghuo), distribution and dealership (jingxiao daixiao), state monopoly of the purchase and marketing (tonggou baoxiao), joint private-state enterprises (gongsi heying), etc. had emerged. In the field of industrial and commercial circulation, a profound social transformation had actually begun. In this sense, the economic policy of the CPC was proposed on the basis of China’s realistic economic statistics, which was also an important factor for Mao Zedong’s transformation of strategies towards private capitalism.
Take Shanghai as an example. After the Three Anti and Five Anti movements, the proportion of the private economy decreased significantly. Statistics described the situation in 1952 (Liu & Wang, 1993):
The share of private factories in the total turnover of Shanghai’s industrial firms decreased from 78.4% in the second half of last year to 61.9% in the first half of this year, and the detailed data from January to June was 69%, 64%, 56%, 62%, 62% and 63% respectively. Notably, cigarettes fell to 32 per cent in terms of production from 73 per cent in the second half of last year, steel from 49 per cent to 35 per cent and gold pen from 92 per cent to 74 per cent. This situation is more significant for commercial firms. Private sector accounted for about two-thirds in the fourth quarter of last year and just over half in the first half of this year. The share of turnover of Guangzhou’s private sector fell from 75.8 per cent in the second half of last year to 58.3 percent in the first half of this year. In Tianjin, the share of private firms’ turnover also fell from 53.2 per cent in June last year to 38.8 percent in June this year. In the markets of eight major cities, the share of private dealers in the first half of this year was lower than in the second half of last year, with grain sales falling from about 60% to about 20% and flour sales falling from about 40% to about 20%. For smaller cities like Hangzhou, private dealers accounted for 66% of commercial turnovers last year, compared with 44% in April. In May 1952 in Nanchang, compared with the same month last year, the turnover of state-owned companies increased by 83 per cent, and that of cooperatives by 162 per cent, while that of private business decreased by 46 percent.
These changes show that during the period of national economic recovery, the total output value contrast between state-owned and private economies changed in critically. In particular, this trend is particularly evident after the Five Anti Campaign.
Second, private capitalism’s attempts to get rid of the normal track of the new democratic economy have aroused the dissatisfaction of the CPC. In June 1950, at the Third Plenary Session of Seventh Central Committee of CPC, Mao Zedong made the rational adjustment of industry and commerce an important task of the Party. According to his suggestions, the Party proposed detailed policies to adjust the relationships between public and private sectors of the economy, labor and capital, production and marketing. On the basis of adjustments, it further provided strong supports to private industrial and commercial firms in terms of business scope, distribution of raw materials, sales marketing, labor conditions, tax and credit policies. In particular, by expanding state orders and state purchasing-to-marketing, it helped private capitalist firms to overcome difficulties and resume and develop production. As a result, private capitalism revived quickly and further developed. However, with the progress several important movements at that time, including the Korean War, the land reform movement and the fighting against the counter-revolutionary resistance, the situations change fast, in which some new problems private capitalism emerged, leading to the dissatisfaction of the CPC.
A typical problem in private capitalism was that some capitalists demonstrated an attitude of non-cooperation in the process of national capitalism like processing orders and state monopoly of the purchase and marketing. More and more capitalists were not satisfactory with legitimate profits, and began to oppose processing orders in different ways like directly refusing or resisting euphemistically. At this time, the relationship between the government and the bourgeoisie once became very tense. Moreover, some capitalists were extremely keen to profits with many opportunistic aims in mind, which had harmed the interests of the country. Especially some contractors of the military goods in the Korean War sold inferior goods to the Volunteer Army, such as broken-bottomed rubber shoes, easily rolled shovels, aid kits made of rotten cotton, cans of spoiled beef and so on, which severely endangering the life and safety of the Volunteer Army. In addition, some capitalists attempted to bribe government officials in order to get illegal economic rewards.
As early as in July 1951, Liu Shaoqi in his report to the students of the Central Party School on the impact of bourgeois attitude on the CPC’s policies, said (Liu, 1993):
The implementation of industrial nationalization is a serious step, the nature of which is to begin to undermine the private ownership of capitalism; the time and method to implement this policy depends on the situation and the attitude of the bourgeoisie. The bad attitude of the bourgeoisie may force us to take this step earlier in a more drastic way.
Therefore, the understanding of bourgeois performance is an important incentive for the Party to change their policies. On November 1, 1951, when the Northeast Bureau of the CPC reported to the CPC Central Committee on the Three Anti Campaign, it was mentioned that the common feature of all major corruption cases was the collusion between private businessmen and corrupted officials to steal the state property. On January 5, 1952, a report from the Beijing Municipal Committee of the CPC sent to the Central Committee on the Three Anti Campaign also referred to similar problems of the private business sector, which was then forwarded by Mao Zedong on behalf of the Central Committee. He also wrote in his comments (Mao, 1989: p. 238):
… to give a counter attack to the bourgeoisie’s rampant aggression to our party on this issue during the last three years, which was more dangerous and serious than a war. [We should] give them a major blow.
This is the first order to punish the criminal acts of illegal capitalists on a large scale in the newborn country. Mao Zedong further drafted and spread the Instructions for the central government on cadres to make clear the relationship with the bourgeoisie (Dui Zhongyang guanyu ganbu jiaodai zichanjieji guanxi de zhishigao), aiming to put an end to the bourgeoisie infiltration into the Party, administrative offices of the government and military departments.
Third, through the Five Anti Campaign, the animosity between working class and the bourgeoisie had become more and more severe. In the new democratic society, which allows the existence and development of private capitalism, labor-capital relations, as one of the basic relations of society, directly affect the harmony and stability of the whole society. In the early days of PRC, the CPC was focused on regulating capital-labor relations, in which a new democratic labor-capital dispute settlement mechanism was formed. On the whole, the labor-capital relations in private industrial and commercial firms were fairly harmonious during the recovery period of the national economy. During the Five Anti Campaign, due to the “five poisons” behavior of the bourgeoisie was widely exposed, negative impressions with the bourgeoisie emerged in the whole society, which the led to the worsening of labor-capital relations in the private enterprises.
Before the Five Anti Campaign, private entrepreneurs, as owners of the capital, have absolute management rights, including employment, production, sales, etc. However, due to the imperfection of the state’s internal control mechanism, it provided an internal environment for the breeding of “five poisons” behavior. During the Five Anti Campaign, the bourgeoisie’s “five poisons” behavior was punished to varying degrees, and within the private enterprise, the working class’s awareness for the production management and supervision of enterprises was further strengthened. Moreover, after the Five Anti Campaign, the workers had gained a new understanding of their own value, and had drawn a clear line with the capitalists. They also established a coalition with high-level managers, which further consolidated the dominant status of the working class. In this sense, the working class not only completely obtained the political advantage within private firms, but also obtained a strengthened supervision right over the firms. As a result, the capitalists can no longer gain illegal windfall profits, and basically lost the monopoly and control of their firms.
In fact, after the Five Anti Campaign, national bourgeoisie were already unable to fully operate their businesses as they had done in the early days of the PRC. Most private industrial and commercial entrepreneurs were greatly deterred by this massive mass movement. A mental state of “panic” had generally arisen between them. They worried that the policies of the Party had already changed and believed that this campaign would eventually eliminate the bourgeoisie and that the CPC would no longer unite with them. A popular saying at that time is that “the future of the country is brilliant, and the future of our individuals is bleak.” This panic mental state inevitably affected them in actual production and operation activities. The “fear of exploitation” of the national bourgeoisie suggests that at that time, some private owners themselves had to seriously consider the rationality and possibility of suspecting the existence of exploitative capitalist modes of production, which to some extent helped to push the weak private capitalism on the road to extinction in China.
During this period, workers in private industrial and commercial firms also found it difficult to accept the reality of continuing to serve capitalists and being exploited by capitalists. Compared with the growing number of workers in state-owned and joint private-state enterprises, workers in private enterprises tended to feel politically inferior. As put by Mao Zedong, workers “are not at ease in the private sector, and they are relieved to be in state-owned enterprises” (Mao, 2003). Especially in the situation that private capitalist enterprise production and operation were strongly depressed and could not secure their wages, masses of workers constantly sent applications to the government through trade unions, hoping to achieve joint private-state enterprises or even change their firms to state-owned ones. When the socialist high tilde occurred in the countryside and the agricultural cooperation was achieved, they were more eager to cross the threshold of socialism as soon as possible.
There is no doubt that the development of private capitalism in China came to an end in 1952. It was at this turning point in history that Mao Zedong’s strategy for private capitalism changed dramatically. According to the existing literature, after the founding of the PRC, Mao Zedong first raised the issue of transition to socialism at the secretariat meeting of the CPC Central Committee on September 24, 1952, saying, “[We will] basically complete socialism in ten to fifteen years, not to start to transition to it after ten years.” (Pang & Jin, 2003). Mao Zedong’s speech showed that his ideas for the transition from new democracy to socialism had changed.
In conclusion, Mao Zedong and the Central Committee of the CPC adopted a cautious attitude and prudent steps in the preparation, formulation, and announcement of the general line for the transition period. The present paper, based on historical documents and data, studies Mao Zedong’s incentives for changes in private capitalist strategies, which not only provides a clear understanding of the historical context of socialist transformation of private capitalist industry and commerce, but also explains, to some extent, the historical reasons behind Mao Zedong’s changes in private capitalist strategies and why it took place in 1952.
The author gratefully acknowledges the support of Young Faculty Startup Fund of Shanghai University of Political Science and Law (Q-06-19-007-13).
 Liu, G. G., & Wang, M. Z. (Eds) (1993). 中华人民共和国经济档案资料选编: 工商体制卷 (1949-1952) [Selected Economic Archives of the People’s Republic of China: Industry and Commerce Section (1949-1952)]. China Social Sciences Press.