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At last month’s Chinese Communist Party Central Committee plenum, 78-year-old former president Jiang Zemin resigned as chairman of the Central Military Commission and was replaced by his heir, President Hu Jintao. The move is the culmination of a protracted power struggle within the Chinese regime between factions grouped around Hu and Jiang.

While the plenum’s theme was “strengthening the party’s ruling capability”, its focus was the transfer of military leadership. Jiang ostensibly resigned for health reasons. His request was approved by the Central Committee. Now all the powers of the Stalinist bureaucracy—the party, state and army—are officially in Hu’s hands. Jiang has gone into retirement in Shanghai, living in a luxury mansion, probably with his son, the most powerful entrepreneur in China.

The official state propaganda has hailed the handover, praising Jiang for his “outstanding contribution to the party, the country and the people”. The unstated message at the central committee was that Jiang has lost power but he will not be harmed politically.

Personal ambition and interests have played a role in these events, but it is the underlying social tensions and the complex relations between the Stalinist regime and the aspiring capitalist elite that determined the outcome of the factional struggle.

Jiang’s reluctance to give up control over the military following Hu’s elevation to president stemmed from concerns within the ruling stratum that the new leadership might go too far in using democratic concessions to create a stable social base of support for the Stalinist regime. In particular, the old leadership had fears that Hu’s regime would renounce the official interpretation of the 1989 Tiananmen Square massacre and seek to gain support by denouncing, or even purging, the political leaders responsible for the atrocity. Jiang, former premier Li Peng and a number of other leaders who directed the massacre on June 4 are still alive.

The differences between the factions around Hu and Jiang, however, are limited and tactical. The main purpose of Jiang’s theory of “three represents” was to allow capitalists and entrepreneurs to join the Communist Party in an effort to win their support. The new leadership under Hu has simply taken this further, seeking to guarantee the regime’s survival by liberalising, in a limited fashion, the tight controls over society. Portraying themselves as “people first” and more “democratic”, both Hu and his colleague, Premier Wen Jiabao, are permitting some discussion over “political reform” in academic circles.

In the last two years, Jiang had used his control of the Central Military Commission to put through a series of measures to protect the former leadership, including placing his protégés in the powerful Politburo Standing Committee and his own elevation to the status of “state icon” in the constitution—along with Mao Zedong and Deng Xiaoping. Having secured the old guard’s interests, Jiang agreed to hand over control of the military.

The composition of the new Central Military Commission reflects Hu Jintao’s strengthened position. According to the list published by Xinhua news agency, four more generals were added to the original seven-member body. Out of the eleven members, six of them are considered to be pro-Hu. Unlike when Hu was vice president, Jiang’s closest protégé, the current vice president Zheng Qinghong, is not on the list.

Hu was able to win support from the military with promises in recent months to increase military spending and expand the Central Military Commission to include representatives of the navy, air forces and nuclear forces. Defense Minister Cao Gangchuan’s public statement on July 31 that the Peoples Liberation Army “must unite around the central leadership of the General Secretary Comrade Hu Jintao” also played a role.

The selection of Hu Jintao to take charge of Chinese leadership is the logical outcome of the reintroduction of the capitalist market in China. Hu Jintao is the CEO of emerging Chinese capitalism—a figure mandated to consolidate support for the regime among the businessmen and middle class layers who have profited from the free market frenzy in China over the past 25 years.

Unlike Jiang Zemin and other former leaders who have connections to the peasant-based “Red Army” and the Chinese Revolution of 1949, Hu has none. He was appointed by Deng Xiaoping in the early 1990s as the successor of Jiang under conditions where, in the aftermath of Tiananmen, the regime was waging a campaign against “bourgeoisie liberalisation”. The economic reforms Deng had initiated a decade earlier were stagnating. The appointment of Hu as the future head of the ruling party was a warning to Jiang and the leadership as a whole to accelerate free market reforms.

In advancing this agenda, the new leadership requires a firm grip over the military. Jiang Zemin has not only handed over the state to Hu Jintao but also a social time bomb. The regime faces the prospect of an eruption of discontent under conditions where it is despised as corrupt and dictatorial by the majority of the population.

Chinese Stalinism has nothing to do with socialism and is organically hostile to the working class. The struggle to liberate China from Japanese imperialism and against the capitalist Kuomintang government, however, did win Mao Zedong’s movement considerable support among the peasantry. The land reforms introduced after the Stalinists took power in 1949 consolidated the rural masses as the social base of the Maoist regime.

In the years following the revolution, Mao was regarded by millions of peasants as the “red sun” leading them out of centuries of oppression. The peasantry formed the backbone of the Peoples Liberation Army and was crucial to Beijing. The army’s loyalty to Mao was the key factor in keeping the industrial centres under control during the chaos of the Cultural Revolution.

Deng Xiaoping equally rested on the peasant-based army. When he returned to power in 1978, he promoted officers from his pre-revolutionary Second Field Army to the key military posts. During the Tiananmen Square crisis in 1989, when the regime faced mass unrest, 10 of the 17 senior generals in China were from Deng’s own unit. It was these generals who ordered their troops into Beijing and other cities to suppress the working class and the student movement.

The free market measures implemented since 1979 have shattered support for the Maoist regime amongst the peasantry. Collective farming has been broken up. Tens of thousands of state-owned enterprises in rural areas have been closed down. Unemployment, poverty and heavy taxation has forced tens of millions of peasants to migrate into the cities and join the ranks of the working class as super-exploited cheap labour.

Whatever the differences between the factions around Hu and Jiang, their common platform is to protect the privileges and property of the party apparatus and the profits of the transnational investors that have poured capital into China over the past two decades. Hu Jintao may be prepared to offer concessions to the capitalist elite and the middle classes, but his leadership, like that of Mao, Deng and Jiang, is dependent on police-state measures to maintain the party’s grip on power.

Political repression under the new leadership has already seen a number of crackdowns. Ye Guozhu has been arrested over his application for a demonstration of tens of thousands of petitioners visiting Beijing. Two well-known Internet writers, Kong Youping and Xian Xianhua, were sentenced to 15 and 12 years jail on the charge of “subversion of state power” in the north eastern Liaoning province. Many other dissidents are reportedly under strict police surveillance. A number of web sites have been shut down over their criticism of the government. A well-established official think tank magazine, Strategy and Management, has also been suspended because of its criticism of the Stalinist regime in North Korea.