China is a socialist market economy, not capitalist. It's also run by the working classes in democratic fashion. The large firms and key industries in China are overwhelmingly publicly owned and planned, and as the small and medium firms grow they are folded more into the public sphere of influence. The basis of communism is in large scale industry, not in small manufacturing, so it doesn't necessarily make the most sense to socialize small firms.

As time continues and the productive forces develop, these become economically compelled towards socialization, which is expedited by having a socialist economy where public ownership is principle. These are all basic Marxist observations about production and distribution.