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This paper is a response to the doctrine that capital is incompatible with public ownership. The fundamental characteristics of modern productivity determine the co-existence of the market economy and capital relations.

Socialism can neither bypass the market economy nor “go beyond capital”; capital appears in two historical forms, including the private capital and the public capital. Public capital is the inevitable outcome of the inherent contradictions of public ownership in a socialist market economy.

It represents an economic relationship that compels individual labourers to provide surplus labour for the society. The combination of the strong accumulation function of public capital and the improvement of people's welfare is the main cause of China's development miracle.

The innovation impetus of the public capital and its “immunity” to the capitalist crisis highlight the tremendous power of socialism with Chinese characteristics in breaking free of the shackles of capitalism and continuously developing productive forces. Public capital demonstrates and will continue to demonstrate the historical legitimacy of socialism.