Socialism with Chinese characteristics, meaning Marxism adapted to Chinese conditions, is the official ideology of the Communist Party of China (CPC), claimed to be based upon scientific socialism. This ideology supports the creation of a socialist market economy dominated by the public sector since China is, as claimed by the CPC, in the primary stage of socialism. The People's Republic of China (PRC) government maintains that it has not abandoned Marxism but has developed many of the terms and concepts of Marxist theory to accommodate its new economic system. The CPC argues that socialism is compatible with these economic policies. In current Chinese Communist thinking, China is in the primary stage of socialism—a view which explains the PRC government's flexible economic policies to develop into an industrialized nation.
The concept of a primary stage of socialism was conceived before China introduced economic reforms. When discussing the necessity of commodity relations at the First Zhengzhou Conference (2–10 November 1958) Mao Zedong—the Chairman of the CPC's Central Committee—said that China was in the "initial stage of socialism"  Mao never elaborated on the idea; his successors were left to do this.
On 5 May 1978, the article "Putting into Effect the Socialist Principle of Distribution According to Work", elaborated on the idea that China was still at the first stage of reaching pure communism and that it had not become a truly socialist society. It is said that the article was written on the orders of Deng Xiaoping, so as to "criticize and repudiate" the beliefs of the communist left. The term reappeared at the 6th plenum of the 11th Central Committee on 27 June 1981 in the document, "Resolution on Certain Questions in the History of our Party since the Founding of the PRC". Hu Yaobang, the CPC's general secretary, used the term in his report to the 12th CPC National Congress on 1 September 1982. It was not until the "Resolution Concerning the Guiding Principle in Building Socialist Spiritual Civilization" at the 6th plenum of the 12th Central Committee that the term was used in the defense of the economic reforms which were being introduced.
At the 13th CPC National Congress, acting CPC General Secretary Zhao Ziyang, on behalf of the 12th Central Committee, delivered the report "Advance Along the Road of Socialism with Chinese characteristics". He wrote that China was a socialist society, but that socialism in China was in its primary stage; a Chinese peculiarity which was due to the undeveloped state of the country's productive forces. During this phase of development, Zhao recommended introducing a planned commodity economy on the basis of public ownership. The main failure of the communist right, according to Zhao, was that they failed to acknowledge that China could reach socialism by bypassing capitalism. The main failure of the communist left was that they held the "utopian position" that China could bypass the primary stage of socialism, in which the productive forces are to be modernized. On 25 October 1987, Zhao further expounded on the concept of the primary stage of socialism, and said that the Party line was to follow "One Center, Two Basic Points"; the central focus of the Chinese state was economic development, but that this should occur simultaneously through centralized political control (i.e., the Four Cardinal Principles) and upholding the policy of reform and opening up.
CPC General Secretary Jiang Zemin further elaborated on the concept ten years later; first during a speech to the Central Party School on 29 May 1997 and again in his report to the 15th CPC National Congress on 12 September 1997. According to Jiang, the 3rd plenum of the 11th Central Committee correctly analyzed and formulated a scientifically correct program for the problems facing China and socialism. In Jiang's words, the primary stage of socialism was an "undeveloped stage". The fundamental task of socialism is to develop the productive forces, therefore the main aim during the primary stage should be the further development of the national productive forces. The primary contradiction in Chinese society during the primary stage of socialism is "the growing material and cultural needs of the people and the backwardness of production". This contradiction will remain until China has completed the process of primary stage of socialism, and because of it, economic development should remain the CPC's main focus during this stage.
Jiang elaborated on three points to develop the primary stage of socialism. The first—to develop a socialist economy with Chinese characteristics—meant developing the economy by emancipating and modernizing the forces of production while developing a market economy. The second—building socialist politics with Chinese characteristics—meant "managing state affairs according to the law", developing socialist democracy under the CPC and making the "people the masters of the country". The third point—building socialist culture with Chinese characteristics—meant turning Marxism into the guide to train the people so as to give them "high ideals, moral integrity, a good education, and a strong sense of discipline, and developing a national scientific, and popular socialist culture geared to the needs of modernization, of the world, and of the future."
When asked how long the primary stage of socialism would last, Zhao replied, "[i]t will be at least 100 years ... [before] socialist modernization will have been in the main accomplished." The state constitution states that "China will be in the primary stage of socialism for a long time to come". As with Zhao, Jiang believed that it would take at least 100 years to reach a more advanced stage.
|“||"What is socialism and what is Marxism? We were not quite clear about this in the past. Marxism attaches utmost importance to developing the productive forces. We have said that socialism is the primary stage of communism and that at the advanced stage the principle of from each according to his ability and to each according to his needs will be applied. This calls for highly developed productive forces and an overwhelming abundance of material wealth. Therefore, the fundamental task for the socialist stage is to develop the productive forces. The superiority of the socialist system is demonstrated, in the final analysis, by faster and greater development of those forces than under the capitalist system. As they develop, the people's material and cultural life will constantly improve. One of our shortcomings after the founding of the People's Republic was that we didn't pay enough attention to developing the productive forces. Socialism means eliminating poverty. Pauperism is not socialism, still less communism."||”|
|— Deng Xiaoping, on 30 June 1984 at a Central Committee plenum, in a speech discussing Marxist theory|
Deng Xiaoping, the architect of the Chinese economic reforms, did not believe that the market economy was synonymous with capitalism or that planning was synonymous with socialism. During his southern tour, he said, "planning and market forces are not the essential difference between socialism and capitalism. A planned economy is not the definition of socialism, because there is planning under capitalism; the market economy happens under socialism, too. Planning and market forces are both ways of controlling economic activity".
In the 1980s it became evident to Chinese economists that the Marxist theory of the law of value—understood as the expression of the labor theory of value—could not serve as the basis of China's pricing system. They concluded that Marx never intended his theory of law of value to work "as an expression of 'concretized labor time' ". Marx's notion of "prices of production" was meaningless to the Soviet-styled planned economies since price formations were according to Marx established by markets. Soviet planners had used the law of value as a basis to rationalize prices in the planned economy. According to Soviet sources, prices were "planned with an eye to the ... basic requirements of the law of value." However, the primary fault with the Soviet interpretation was that they tried to calibrate prices without a competitive market since, according to Marx, competitive markets allowed for an equilibrium of profit rates which led to an increase in the prices of production. The rejection of the Soviet interpretation of the law of value led to the acceptance of the idea that China was still in the "primary stage of socialism". The basic argument was that conditions envisaged by Marx for reaching the socialist stage of development did not yet exist in China.
Mao said that the imposition of "progressive relations of production" would revolutionize production. His successor's rejection of this view has, according to A. James Gregor, thwarted the ideological continuity of Maoism—officially "Mao Zedong Thought". Classical Marxism had argued that a socialist revolution would only take place in advanced capitalist societies, and its success would signal the transition from a capitalist commodity-based economy to a "product economy" in which goods would be distributed for people's need and not for profit. If because of a lack of a coherent explanation in the chance of failure this revolution did not occur, the revolutionaries would be forced to take over the responsibilities of the bourgeoisie. Thus Chinese communists are looking for a new Marxist theory of development. Party theorist Luo Rongqu recognized that the founders of Marxism had never "formulated any systematic theory on the development of the non-Western world", and said that the Communist Party should "establish their own synthesized theoretical framework to study the problem of modern development." According to A. James Gregor, the implication of this stance "is that Chinese Marxism is currently in a state of profound theoretical discontinuity."
The concept of private ownership is rooted in classical Marxism. Because China adopted socialism when it was a semi-feudal and semi-colonial country, it is in the primary stage of socialism. Because of this, certain policies and system characteristics—such as commodity production for the market, the existence of a private sector and the reliance of the profit motive in enterprise management—were changed. These changes were allowed as long as they improve productivity and modernize the means of production, and thus further develop socialism. According to this perspective, Mao's leftist belief that China could advance to full socialism immediately by bypassing capitalism is considered false.
The CPC still considers private ownership to be non-socialist. However, according to party theorists, the existence and growth of private ownership does not necessarily undermine socialism and promote capitalism in China. It is argued that Karl Marx and Friedrich Engels—the founders of communism—never proposed the immediate abolishment of private ownership. According to Engel's book Principles of Communism, the proletariat can only abolish private ownership when the necessary conditions have been met. In the phase before the abolishment of private ownership, Engels proposed progressive taxation, high inheritance taxes and compulsory bond purchases to restrict private property while using the competitive powers of state-owned enterprises to expand the public sector. Marx and Engels proposed similar measures in the Communist Manifesto in regards to advanced countries, but since China was economically undeveloped, party theorists called for flexibility regarding the CPC's handling of private property. According to party theorist Liu Shuiyuan, the New Economic Policy program initiated by Soviet authorities in the aftermath of the war communism program is a good example of flexibility by socialist authorities.
Party theorist Li Xuai said that private ownership inevitably involves capitalist exploitation. However, Li regards private property and exploitation as necessary in the primary stage of socialism, claiming that capitalism in its primary stage uses remnants of the old society to build itself. Sun Liancheng and Lin Huiyong said that Marx and Engels, in their interpretation of the Communist Manifesto, criticized private ownership when it was owned solely by the bourgeoisie but not individual ownership in which everyone owns the means of production and hence cannot be exploited by others. Individual ownership is consistent with socialism since Marx wrote that post-capitalist society would entail the rebuilding of "associated social individual ownership".
According to writer and researcher Huang Yasheng and many others, the economic theory in China is not socialism with Chinese characteristics but the opposite—capitalism with Chinese characteristics.