Alright, I've actually written almost an whole essay that discusses the questions, just to clarify my mind on this questions. But I basically came to conculusion that I agree with the standpoint of the International Viewpoint (and various other trot groups such as the IMT or ICFI) according to which to which the market reforms, which where accompanied and preceded by thoroughgoing process of differentiation which ultimately led to a prfound change in the class structure of the Chinese state (it "bourgeoisified"), have resulted in the successfull restoration of capitalism (or more precisly "bureauratic capitalism"). There are a lot of theretical problems that this imposes on us, but ultimately I think it's most reasonable position.
An alternative view would be to argue that China is a deformed workers' state in which - despite the fact that severe advances towards to restorations have been made - public ownership of the means of production and state planning remain dominant and the Communist party’s power base is rooted in public ownership. For the full restorations of capitalism, a bourgeois counter-revolution that overthrows thebonaparist-bureauctatic caste is still needed. At the present moment, it's still a transitional economy where the capitalist elements dominates but where the law of motions particular to capitalism (especially the law of value) do not fully operate as Michael Roberts demonstrated in his blog posts on China (at least, he made the best case for this position).
Is there any inbetween in saying China has always been (and still is) a Deformed workers state and saying China has always been a State capitalist state?
I don't think so. In my opinion, the theory of state capitalism is an anti-marxist, bankrupt concept. Capitalism can take different forms (such as bureaucratic capitalism or neoliberalism) but State Capitalism (as formulated by Tony Cliff and others) is not one of them.
If so, where would you draw the line in China becoming capitalist?
That's acutally a very difficult question. Let me cite the International Viewpoint on this question:
An undateable counter-revolution?
Any social revolution is a process: there is a before and after to the “conquest” of power. Socio-economic transformations are never instantaneous. We can however date the (temporary) victory of the great revolutions of the 20th century: October 1917 in Russia and October 1949 in China, 1945 in Yugoslavia, 1959 in Cuba, 1954 and 1975 in Vietnam. These dates are not only symbolic – the proclamation of new regimes – they mark a substantial rupture: a state apparatus disintegrates at the national scale, another emerges; one army replaces another; the party (ies) incarnating the old order are defeated to the profit of a party emerging from the revolutionary struggle; an alternative political power takes form.
Everything can be complicated in the detail. According to the forms taken previously by the revolutionary combat (existence or not of significant liberated zones), social transformations can be begun or merely envisaged. The old order can still control a more or less significant part of social relations and bequeath an administration inherited from the past. The new order remains to be consolidated. But the “moment” of the “conquest of power” nonetheless remains a decisive turning point in relation to this.
An undateable counter-revolution?
It is much less obvious in relation to the counter-revolution which defeats what has been socially accomplished by the revolution, as shown in the Chinese case. One can certainly detect points of change in the process of capitalist restoration: it becomes conceivable at the end of the 1970s, starts during the 1980s, is openly affirmed in the 1990s, giving birth to a new power called “emergent”. But the whole seems the product of a gradual evolution in the context of the same state, under the leadership of the same party, framed by the same army. There are some major points of change, as with the new policy of reforms adopted in 1992, but there was no October 1949 of the bourgeois counter-revolution: a conquest of power – in 1992 indeed, power was already conquered.
For some, the fact that one cannot “date” the victory of the bourgeois counter-revolution shows simply that there was no social revolution and that October 1949 was only a myth. For others it proves that the so called counter-revolution has not yet taken place. For the first, the CCP was already bourgeois at the time of its conquest of power; for the second, it remains guarantor of a non-capitalist road, of a market socialism “with Chinese characteristics”. A problem: there was certainly on two occasions a radical transformation of the class structure in China, in 1949 first, then following the “reforms” initiated by Deng Xiaoping.
The difficulty in “dating” the conquest of power by the Chinese bourgeoisie is nonetheless significant. It indicates that the process of counter-revolution is not the reverse image, as in a mirror, of the revolutionary process. It takes different paths, notably in a transitional society, and should be understood in its specificity – it is one of the basic questions that the history of contemporary China poses for us.