The separation of ownership and management in China: a review of the business contract and share capital systems

As a socialist country, China’s national economy is a planned commodity economy, based on public ownership and regulated mainly by economic plans with assistance from market forces. Chinese society is founded upon, and dominated by, Marxist theory. However it is increasingly recognised that Marxism as a scientific theory is not in any sense a dogma. Rather, it is a guide for action and must be tempered by China’s reality. This means that the basic principles must be upheld but their application should be geared to specific situations. The new concept of the ’initial stage of socialism’ refers to the particular condition of China where some practices are allowed which are different from what Marx described. This is because China is a developing country and has not evolved from a developed capitalist country as Marx had predicted. In its ’initial stage of socialism’, China’s productive capacity needs to be developed. Various economic measures that can be used to tap the country’s production potential are encouraged, so long as they do not endanger the realisation of socialism, the ultimate objective. The theory of the ‘initial stage of socialism‘ paves the way for creative thinking in economic reform. For example, in this stage, the national economy can be decentralised; instead of being restricted to the State, ownership can now be diversified. Numerous new types of enterprises have mushroomed in China in the wake of this new thinking.