The People's Republic of China must abolish all the prerogatives of imperialist countries in China. It must confiscate bureaucratic capital and put it into the possession of the people's state. It must systematically transform the feudal and semi feudal land ownership system into a system of peasant land ownership; it must protect the public property of the state and of the cooperatives and must protect the economic interests and private property of workers, peasants, the petty bourgeoisie and the national bourgeoisie. It must develop the people's economy of New Democracy and steadily transform the country from an agricultural into an industrial one.
This article of the Common Program is a short statement about the general policy towards imperialism and feudalism.
The imperative for the People's Republic of China entails the eradication of all privileges held by imperialist nations within its borders. This necessitates the seizure of bureaucratic capital, transferring ownership to the state, and ensuring equitable distribution among the populace. Moreover, there is a need for a systematic overhaul of the feudal and semi-feudal land tenure system, transitioning it towards peasant ownership. The protection of state-owned enterprises and cooperatives, alongside safeguarding the economic interests and property rights of workers, peasants, the petty bourgeoisie, and the national bourgeoisie, is paramount. Additionally, fostering the growth of the New Democratic economy and progressively shifting from an agrarian to an industrialized nation are vital objectives. Most of these elements are in detail described in Chapter 4.
Mao Zedong told Mikoyan in February 1949 (See Part 4), that there are no plans for nationalization.
"Our policy with regard to private industrial enterprises must not repeat former mistakes, so as not to scare away the national bourgeoisie, therefore now we will not carry out the confiscation of private industrial capital and its enterprises."
Mikoyan proposed "I elaborated on our stance regarding foreign property in China. I stated that our position was that Japanese and French property should be nationalized, as well as British property whenever possible. As for American property, a cautious policy should be pursued to create the impression that American interests would be respected by the new government. Once a government led by the Communists firmly established itself in China, this issue could be revisited and decided based on the situation and American behavior." 2 days earlier, Liu Shaoqi stated in his conversation with Mikoyan "With regard to foreign enterprises, they are going to pursue a policy of confiscation and redemption of enterprises. Liu Shaoqi stressed that it would be difficult to implement the policy of confiscating foreign enterprises at once, so they would implement it gradually. Perhaps, he said, we will confiscate foreign military enterprises, for example, in Qingdao, more quickly. On this issue, Liu Shaoqi said, we would like to get your advice."
Foreign companies in China faced a whirlwind of political changes, requiring them to negotiate with three different Chinese governments in rapid succession. From July 1943 to August 1945, during World War II, they dealt with the Nanjing government, which was aligned with the Japanese. As soon as that ended, between September 1945 and April 1949, they transitioned to negotiating with Chiang Kai-shek's Nationalist government. Finally, from May 1949 onwards, they contended with the Communist regime, the People's Government, established in Beijing. By 1950, a military commission had taken tight control of the companies' operations. In June 1950, 685 foreign businesses remained in Shanghai, belonging to proprietors of 34 different nationalities. Of these, 185 (27per cent) were British and they employed almost 30,000 Chinese workers. A key feature of the CCP’s approach to eliminating Western presence was its deliberate avoidance of compensation claims under international law. Instead of outright seizing or nationalizing foreign property, the CCP leveraged lawful means to persuade foreigners to abandon their property or transfer it to Chinese entities voluntarily. CCP foreign policy experts, many of whom had studied in the West, understood that such tactics would shield China from international compensation demands. As a result, foreign individuals and businesses faced mounting obstacles that ultimately compelled them to leave. They weren't allowed to shut down their businesses and were often compelled to keep all their employees on the payroll, even if there wasn't enough work. This led to them drawing large sums of money, estimated at £500,000 per month at times, from their head offices in places like Hong Kong and other European cities, effectively pumping foreign capital into China.
The new revolutionary regime enforced strict rules, and foreign managers who didn't comply faced serious consequences, including detention and even imprisonment. Furthermore, these managers were typically not allowed to leave China without a special exit permit. Obtaining this "clearance" from the authorities was rare, making it nearly impossible for them to depart.
The CCP has always made a difference between national enterprises and foreign businesses. The latter should be eliminated as soon as possible. Prior to May 1952, there was no comprehensive strategy for nationalization, except for American assets.
Fig. 3.1 British companies in China
By April 1952, major British firms in China had announced their intention to close down operations, a stark departure from their traditional practice of striving to expand commercial activities in the country. This decision was driven by the ongoing decline in the value of foreign investments in China, attributed to heavy taxation, enforced subscription to government loans, restrictive labor legislation, and pervasive government control. As a result, enterprises became increasingly unprofitable and unattractive. Rentals were frozen, taxation raised, demands for considerable repairs at short notice were made, and massive fines imposed. But, again, no outright confiscation as such or a legal nationalization was carried out. In April 1952, the UK and the PRC finalized a commercial agreement, yet British possessions in Shanghai, Tianjin, and Wuhan were still confiscated. Conversely, by 1957, ten British-owned companies continued to operate in Shanghai. In reality, distinguishing the "foreign" from the "Chinese" proved challenging. British commercial enterprises were deeply intertwined with the Chinese economy in numerous ways. Addressing their removal posed complex challenges that couldn't be neatly resolved along ideological lines.
Fig. 3.2 American companies in China
Between 1946 and 1954, American companies in China faced increasing difficulties due to the ongoing Chinese Civil War and the eventual victory of the CCP in 1949. Here’s a breakdown of their fate during this period:
The period 1946–1949 can be characterized by the Civil War and Economic Instability. Directly ater World War II, US businesses initially hoped for economic expansion in China, especially with Nationalist leader Chiang Kai-shek's government still in power. However, the ongoing Chinese Civil War between the GMD and the CCP created instability, affecting trade and business operations. Hyperinflation and corruption within the GMD government further disrupted business activities, reducing profitability for American firms.
After the Communist Victory, the new government imposed strict economic controls and nationalized many industries. Foreign businesses, including American companies, faced increasing restrictions, asset seizures, and pressure to leave. The US government, under President Truman, imposed an embargo on China following the PRC’s support for North Korea in the Korean War (1950–1953) in this way cutting off American firms from the market. Remaining American businesses, such as oil companies (e.g., Standard Oil) and banks, were forced to close or sell off their assets. And by 1954, nearly all American businesses had exited China , and diplomatic relations between the two nations had completely collapsed.
At the end of December 1950, the People's Republic of China decided to confiscate all American possessions and to freeze all private and national assets. This was in line with the decisions of the 6th CCP congress in 1928 which stated the nationalization of all foreign firms.
In 1951, the Chinese government decided to take over all American funded schools and institutes and to destroy all American influences. Before the Second World War, there were 13 American-supported colleges and universities in China, many of which had been created by religious congregations. See Article 41. Moreover, an important percentage (of the order of 50%) of the Chinese professors had studied in the United States for some time. In short, there was a strong cultural connection between China and the United States.
Fig. 3.3 French companies in China
France had a strong commercial and colonial presence in China before the founding of the People’s Republic of China (PRC) in 1949. French businesses were active in banking, trade, railways, public utilities, and luxury goods, particularly in Shanghai, Tianjin, Guangzhou, and Indochina (Vietnam, Laos, Cambodia). Banque de l'Indochine (印度支那银行, Banque de l'Indochine, BIC) and Crédit Lyonnais (里昂信贷银行, Crédit Lyonnais) controlled French financial interests in China and Indochina. Both were nationalized. Compagnie Française de l'Orient et de la Chine (法国东方汇理公司, CFOC) was specialized in French-Chinese trade, including silk, tea, porcelain, and opium (before 1900). Pékin Syndicate (北京公司, Pekin Syndicate Ltd.) was a Franco-British company with mining interests in China, including coal and iron. Both companies were also nationalized. The Yunnan-Indochina Railway (滇越铁路, Compagnie Française des Chemins de Fer de l’Indochine et du Yunnan, CFIY) was built by the French between 1904-1910, connecting Kunming (China) to Haiphong (Vietnam). The Tianjin Tramway and Light Company (天津电车电灯公司, Société Française des Tramways et d'Éclairage de Tientsin). Both were taken over by Chinese authorities after 1949.
The Compagnie française de tramways et d’éclairage électrique de Shanghai (CFT), The company dealt not only with transportation and electricity but also with water supply. Out of the 4077 persons employed by the French companies active in Shanghai, CFT employed 3199, that is 78.4 percent. It could no longer transfer funds to its Paris headquarters, forcing the head office to use its reserves outside China to cover the company's expenses within the country. This meant money was now flowing from Paris into China.
By mid-1950, CFT's financial situation had worsened to the point where it had borrowed around $500,000 USD from the People's Bank. Consequently, all of CFT's income had to be deposited with this bank, and the company was only permitted to use these funds for "well-justified purposes," requiring consent from the authorities. The company's financial distress was further highlighted by its $200,000 USD debt to the Shanghai Power Company.
Given these challenging circumstances, by June 1950, CFT made the decision to approach the Chinese authorities. They sought permission to repatriate all their European staff and requested that the authorities take over their commercial responsibilities. CFT aimed to retain only its property rights, hoping for a potential change in the future.
Fig. 3.4 German companies in China
Germany had a long commercial presence in China, especially from the late 19th century to 1949. German businesses were active in banking, trade, chemicals, pharmaceuticals, shipping, and heavy industry. However, their operations were affected by World War II, the Chinese Civil War, and the Communist takeover in 1949. For example, The Deutsch-Asiatische Bank (德华银行, Deutsch-Asiatische Bank, DAB) founded in 1889, but after World War I, its influence declined due to the loss of Germany’s colonies. It was closed in 1949. Krupp (克虏伯, Friedrich Krupp AG) supplied arms, railway equipment, and industrial machinery to China before WWII. The company lost its Chinese assets after Japan’s occupation and later the Communist takeover.
While West German firms lost their China presence, East Germany maintained some trade ties.
Fig. 3.5 Other Foreign Companies in China
1950–1951 Shell lost direct control over its operations.
1951–1952: Shell’s remaining assets were gradually taken over by the state, and by 1952, the company had effectively ceased operations in mainland China.
In 1953-1954 Fiat had effectively exited the mainland Chinese market, as state-owned enterprises took control of the automotive and industrial sectors.
In 1955 Nestlé had fully exited mainland China.
The government permitted five foreign banks to continue operation in Shanghai for a short time: The Chartered Bank of India, Australia, and China, the British
Mercantile Bank, the Banque de l'Indochine, the Banque Belge pour l'Etranger, and the Moscow National Bank. These remaining foreign banks had to follow Chinese laws and foreign exchange regulations. The Hongkong and Shanghai Banking Corporation and the Standard Chartered Bank were among a few foreign banks that maintained business relations with China even after 1952.
Fig. 3.6 Russian companies in China
A complex relationship between the CCP and the Soviet Union began well before the establishment of the PRC in 1949. Even before the PRC's founding, the Soviets exerted considerable influence over industrial assets in Manchuria, particularly after the defeat of Japan in World War II. This influence extended to various sectors, including key industrial enterprises. Adding complexity to the CCP's path to control, the Soviet government held partial ownership of many of these companies and deployed cadres to assume management roles. Simultaneously, CCP authorities assigned their own cadres to apprentice with these Soviet managers at each company, preparing for eventual takeover. This period of shared control and mentorship laid the groundwork for future economic relations. The formal takeover process began with the acquisition of relatively small-scale supply bases in remote counties. This gradual approach culminated in 1952 with the complete transfer of ownership from Soviet to Chinese hands.
These formerly joint ventures were then absorbed into state-run entities, becoming crucial components of the PRC's planned economy. Key examples of these entities include:
China Resources Company (华润公司): A major state trading enterprise;
Northeast General Merchandise Company (东北百货公司): Managed retail operations in the northeast;
Dalian Commodity Trade Bureau (大连商品贸易局): Oversaw trade and distribution in the Dalian area.
Following the PRC's founding in October 1949, this existing framework of Sino-Soviet economic interaction was formalized and expanded through a series of agreements. Joint enterprises were established in crucial sectors such as oil, mining, railways, and general industry. (See Article 55) However, the legacy of Soviet influence, established in the pre-1949 period, continued to shape these ventures.
Several significant joint ventures illustrate the scope of this cooperation:
The Sino-Soviet Petroleum Company (中苏石油公司): Managed oil extraction in Xinjiang;
The Sino-Soviet Aviation Company (中苏航空公司): Operated China's air transport;
The Chinese Changchun Railway (中长铁路, CCR) (formerly the South Manchuria Railway): This crucial railway, previously under Japanese control, was co-managed by the Soviet Union and China after World War II, with the Soviets eventually transferring full control to the PRC in 1952;
Furthermore, industrial and military cooperation was evident in facilities like the Dalian Shipyard (大连造船厂). Initially under Soviet military administration, the shipyard was later transferred to full PRC control.
Fig. 3.7 Japanese companies in China
An important player on the industrialization of China is Japan.
In 1931, Japan transformed Manchuria into the puppet state of Manchukuo. Leveraging its vast colonial territories, population, and resources in northeast Asia, Manchukuo became a significant industrial project for the Japanese. The empire's influence extended further into North and Central China following the outbreak of the Sino-Japanese War in 1937. Alongside the advancing army, Japanese special agents were dispatched to confiscate Chinese factories and mines. In the northern provinces of Shanxi and Hebei, military agents collaborated with the Xingzhong Company, a Mantetsu operation based in Tianjin, to seize control of local industries and businesses.
In Shanxi, numerous factories, including Baojin and most of Yan Xishan’s, (a warlord) were taken over by the Japanese and restructured into military-managed factories under Japanese authority. Their original Chinese names were replaced with serial numbers, and over 40 factories in Shanxi alone were converted to military management. To oversee these confiscated factories and integrate them into Japan’s expanding wartime economy, two new national policy corporations were established: the North China Development Corporation and the Central China Development Corporation. Modeled after the South Manchuria Railway Company, these corporations were tasked with managing industrial production in occupied China during World War II. All schools, churches, and other social or cultural organizations which received money from foreign countries were obliged to cut off their relations with their financiers.
The most important tool to destroy feudal remnants was the Land reform law. On June 30, 1950, the government promulgated this law. This law stipulated a division of land, livestock, and farm implements of the rich farmers (10% of the total number of farmers) to the poor farmers (70%) and to the small and medium farmers (20%). To guide this law properly, the government announced four days later the decision that regulated class status in the country. In his explanation of the land reform law, Liu Shaoqi emphasized that the policy to preserve the rich peasant economy is intended as a long-term approach, not a temporary measure. This approach will remain in place throughout the New Democratic stage, as the rich peasant economy will only become obsolete once large-scale mechanization, the formation of collective farms, and socialist transformation are fully implemented in rural areas—objectives achievable only in the more distant future. This is why, at present, preserving the rich peasant economy is advocated.Article 27 of the Common Program relates to this law.
Howlett (2013). Page 1951 At the end of 1949, there were 376 British firms in Shanghai. By August 1956, only 66 foreign companies remained in China, 16 of which were located in Shanghai [↩][Cite]
Shai (2003). Page 105 [Cite] Thompson (1979). "Wages were the main cause of rising overheads. Some Chinese workers who in the past had been treated as seasonal employees, when work was determined by the company based on the number of boats in port, had now been transformed into permanent employees under the new mandatory People's Government regulations. This meant more than a thousand ''permanent" Chinese workers were now on the payroll. Attempts by the firms to reduce either numbers of workers or wages were unsuccessful. One shipping company was draining reserves at the rate of about £20,000 a month, with only £85,000 left by April of 1950 out of local reserves estimated at the beginning of 1949 at over £200.000." Page 26 [↩][Cite]
By 1950, Coca-Cola was mostly forced out, but its bottling plant in Shanghai remained functional for a few more years before shutting down completely in the mid-1950s. [↩]
Shai (2003). "The actual seizure of the Company took place in November 1953. Interestingly enough, the local People’s government claimed that the takeover orders were aimed at safeguarding « public operations » and guaranteeing the protection of the Company’s properties on behalf of the Company. Thus, the action was not defined as “confiscation” or “expropriation”, but rather as a “takeover” for the purpose of administrating the properties. The Chinese authorities were very subtle in their steps. They seized only the active assets of the company, leaving the responsibility for the passive assets (liabilities and indemnities to personnel) to the French." Page 109 [↩][Cite]
Harbin, a major city in the Northeast, had a large Russian émigré population, many of whom ran businesses, department stores, and trading companies. Some of them left China for the Soviet Union (via repatriation programs) or moved to Hong Kong, Australia, or the US [↩]
Zeng (2023). Page 100 "Driven by the dual force of territorial colonization and economic imperialism,
Japanese capital entered a wide range of industries in China, heavy and light, from coal mining and iron and steel to railroads and textile mills. One of the largest
Japanese industrial establishments was Mantetsu." Page 101 [↩][Cite]
03-02-1949 Memorandum of Conversation between Anastas Mikoyan and Ren Bishi and Liu Shaoqi on Economic Issues 
Article 3 