Short answer: The Chinese Communist Party combined its ideology with economic pragmatism, whereas the Soviets collapsed before making the system sufficiently efficient.
But the issue cannot be explained simply as “communism succeeded.” In fact, a significant part of China’s success comes from its partial departure from the classical Soviet-style economy.
Why did the Soviets fail?
In the USSR, the economy was largely based on central planning. The state decided what to produce and how much.Initially, rapid industrialization was achieved, but over time the system became inefficient, struggled to produce innovation, and severe shortages of consumer goods emerged. From the 1970s onwards, economic stagnation grew.
Additionally:
- The bureaucracy grew too large.
- Technological development fell behind the West.
- Military expenditures were too high.
- Different nationalities within the union began to demand independence.
- Gorbachev’s reforms (Perestroika and Glasnost) accelerated the dissolution instead of saving the system.
Why did China succeed?
After 1978, under the leadership of Deng Xiaoping, China initiated the “Reform and Opening-up” policies. The Chinese Communist Party did not relinquish political power, but it allowed market mechanisms in the economy.
For example:
- Farmers were given more economic freedom.
- The establishment of private companies was allowed.
- Foreign investment was attracted.
- Special Economic Zones (like Shenzhen) were established.
- Integrated into world trade.
Therefore, some economists describe the Chinese model as “state capitalism” or “market socialism.”
The most important difference
USSR:
- Political control + centrally planned economy
China:
- Political control + market-oriented economy
Thus, many historians attribute China’s success not to its strict application of communism, but to its willingness to compromise on ideology when necessary and implement economic reforms. Deng Xiaoping’s approach summarizes this idea: “It doesn’t matter whether a cat is black or white, as long as it catches mice.”
In summary, the Soviets tried to sustain the system without liberalizing the economy; China, on the other hand,maintained its political single-party rule while largely opening the economy to market rules. This is the most fundamental difference between the two countries.
Let’s explain the Deng reforms in more detail
Deng Xiaoping’s reforms are one of the most important economic transformations in Chinese history. In fact, what Deng did was to partially open the economy to market rules while preserving the communist political system.
1. Exit from the Mao Era
When Deng Xiaoping rose to power in 1976, China was quite poor. Mao’s two major experiments had created serious problems:
- Great Leap Forward (1958-1962)
- Cultural Revolution (1966-1976)
During this period:
- Agricultural yield was low.
- Industry was inefficient.
- Technology was backward.
- Per capita income was very low.
Deng’s fundamental question was this: “Is it more important to be ideologically correct, or to enrich the people?”
His answer was the second option.
2. Agricultural Reform
The first reform started with the peasants.
Formerly:
- Land belonged to collective farms.
- The state determined production targets.
- Working extra did not provide additional income to the peasant.
Deng changed the system.
Household Responsibility System The state continued to own the land. However:
- Families were given long-term usage rights.
- The amount to be delivered to the state was determined.
- The farmer could sell the surplus in the market.
Result:
- Productivity exploded.
- Food shortages decreased.
- Peasant incomes rose.
This reform is the first step in China’s development.
3. Special Economic Zones
This was one of the most critical steps.
In the 1980s:
- Shenzhen
- Zhuhai
- Xiamen
- Shantou
regions like these were established.
In these zones:
- Taxes were lowered.
- Foreign investments were allowed.
- Exports were encouraged.
- Market rules were applied.
The transformation of Shenzhen is particularly striking. In 1979, it was a small fishing town.
Today:
- It has a population of over 17 million
- It has become one of the world’s largest technology hubs.
4. Attracting Foreign Capital to China
The Soviets were very closed to foreign capital. Deng did the exact opposite.
Companies from Japan, the USA, Hong Kong, and Europe were granted the opportunities to:
- Build factories
- Form joint ventures
- Bring technology
China’s goal: To use Western capital and technology. Through this, China began to become the world’s manufacturing hub.
5. Reform of State-Owned Enterprises
Previously, state factories:
- Operated even if they incurred losses.
- Inefficiency was not punished.
During the Deng era:
- Performance pressure was increased.
- A profit criterion was introduced.
- Competition was created in some areas.
Full privatization was not carried out. But state-owned enterprises were forced to operate with market logic.
6. “Let Some Get Rich First”
Classical communism tries to prioritize equality. Deng thought differently.
His famous approach: “Let some regions and some people get rich first.”
Because of this:
- Coastal cities developed rapidly.
- Inland regions were left behind.
Inequality increased. However, overall economic growth accelerated massively.
7. Opening Up to World Trade
This was one of Deng’s most strategic moves.
China:
- Turned to exports.
- Joined global production networks.
- Developed its ports.
Thus: The USA designed, Japan provided the technology, and China manufactured. This model lasted for decades.
8. Difference from the Soviets
The most important difference was this:
| USSR | China |
|---|---|
| Political reform first | Economic reform first |
| Predominantly central planning | Used market mechanisms |
| Private sector very limited | Allowed the private sector |
| More closed to the outside | Open to foreign capital |
| Reforms started late | Reforms started early |
Deng did not pursue political pluralism as Gorbachev did.
His thought: “Open the economy, not the party.”
Therefore, while the Chinese Communist Party maintained power, the economy continued to grow.
The most interesting point from a historical perspective
Deng was actually more of a pragmatist than Marx.
Classical communism: Socialist economy first.
Deng model: Get rich first, then think about socialism.
Therefore, many economists today define the current Chinese system, instead of “communism”, as:
- State capitalism
- Market socialism
- Single-party capitalism
Consequently, China’s success stemmed not from applying the Soviet model more strictly, but rather from being able to move away from it when necessary. Deng’s greatest success was not putting ideology ahead of the economy.
In conclusion, China’s success is not the success of communism in its classical form.
Mao-era China was quite close to the Soviet model and experienced serious inefficiencies. The real transformation began with Deng Xiaoping integrating market mechanisms into the system.
We can summarize the process in three stages:
1. Mao (1949-1976)
- Ideology was at the forefront.
- There was full central planning.
- Economic efficiency was low.
2. Deng and beyond (1978-2012)
- The market economy was opened.
- The private sector grew.
- Foreign capital arrived.
- China became the world’s manufacturing hub.
3. Xi Jinping era (2012-present)
- The private sector is protected.
- However, state and Party control is being increased.
- Goal: to sustain economic growth along with political control.
Therefore, when defining China today, many economists use concepts like:
- State capitalism
- Socialist market economy
- Party-controlled capitalism
instead of:
- “Classical communist economy”
- “Soviet-type socialism”
A single-sentence summary: The Soviets tried to adapt the economy to ideology; China adapted ideology to economic growth. In the Xi era, while growth continues, Party control is being strengthened once again.
A proposed solution to China’s problems according to fractal economics
If we look from the perspective of fractal economics, China’s fundamental problem is not a lack of growth, but an imbalance between scales.
That is, the problem is “fractal disconnects” emerging at different scales, such as:
- Rich-poor gap,
- Coastal-inland region gap,
- Large company-small business gap,
- Central government-local government gap,
- Financial capital-real economy gap.
Basic Principle of Fractal Economics
Classical economics: Optimizes total growth.
Fractal economics: Optimizes energy flow between scales.
Although China produces a massive amount of energy (capital, technology, production) today, this energy accumulates excessively at certain nodes.
Therefore, the goal is: Not to increase size, but to balance the flow.
1. Fractal Regional Development Network
Current situation:
- Shenzhen
- Shanghai
- Beijing
have become extreme centers of attraction. In network theory, this situation is the “hub overload” problem.
Solution In every province:
- a technology core,
- a finance core,
- a production core
are created.
Goal: To produce hundreds of medium-sized hubs instead of a single giant hub.
Mathematically:
Centralization coefficient:
Here:
- = regional economic energy
Goal:
Meaning economic energy should not be concentrated in a few cities.
2. Fractal Tax System
This is the missing point of Xi’s “common prosperity” policy.
Today:
- as wealth grows, tax increases.
Fractal approach: Looks at the connection to the local economy, not the size of the wealth.
Example: A company:
- might be worth 100 billion dollars.
But:
- if it develops suppliers,
- if it diffuses technology,
- if it provides regional development
it can be taxed lowly.
In contrast: If it merely hoards money at the center, a high tax is applied.
The criterion here is not size, but network contribution.
3. Fractal SME Ecosystem
China’s risk: Giant nodes like Alibaba, Tencent, and Huawei becoming overly dominant.
In the fractal system: As a node grows, it must produce sub-nodes.
For example: If Huawei is growing, simultaneously it must create:
- 1000 new startups,
- 500 new suppliers,
- 100 new research laboratories.
Thus, energy does not accumulate in a single center.
4. Fractal Debt Management
The real estate crisis is actually an energy concentration.
Currently:
- money real estate
- real estate more debt
a positive feedback loop is forming.
Fractal model: Divides debt into three levels:
- local
- regional
- national
Each level has its own upper limit. Thus, a small crisis does not spread to the large system.
5. Fractal Innovation Model
The USA’s advantage: Bottom-up innovation.
China’s advantage: Top-down planning.
Fractal system: Combines both.
Structure:
- 30% central research
- 70% local research
The center only sets the target. Producing solutions is left to thousands of nodes. This is similar to biological evolution.
6. Fractal Solution to the Population Problem
China’s aging problem is difficult to solve with centralized incentives.
Fractal approach: Birth incentives are made regional.
For example: In regions with declining populations:
- housing
- education
- tax
advantages increase. They decrease in densely populated regions. The system adapts to local needs.
7. Fractal Common Prosperity Index
Xi’s “common prosperity” target is difficult to measure.
A new index for fractal economics:
Here:
- = income balance
- = node diversity
- = network connectivity
- = regional resilience
Goal: Not to increase GDP, but to increase the system’s resilience.
Final Fractal Evaluation
From a fractal perspective, China’s problem is not: “Not being rich enough.”
The real problem is: “The irregular distribution of economic energy in the fractal network.”
Therefore, the ideal model for China would be a Fractal Network Economy built upon:
- Entrepreneurship from the USA,
- Social balance from the EU,
- Xi’s long-term planning capacity.
The success criterion in this model would be: Not Maximum GDP, but Maximum Network Resilience.
This is also the most critical question of the 21st century in terms of fractal economics: An economy should be considered successful not because of how big it is, but because of how balanced and resilient it is across scales in the face of shocks.