The shadow chancellor quoted from Chairman Mao's propaganda text in his response to George Osborne's Autumn Statement.
Mr McDonnell produced a copy of the Chinese Communist leader's Little Red Book after claiming public assets were being sold to the Chinese government.
He also attacked austerity and claimed a Labour victory over police cuts.
Mr Osborne said Labour was a "deadly threat to the economy".
The chancellor shelved planned cuts to tax credits and pledged to protect police budgets in his Autumn Statement and Spending Review, using a windfall from healthier-than-expected public finances.
- Follow live coverage of the Spending Review
- Key points of Spending Review and Autumn Statement
In his biggest Commons speech since becoming shadow chancellor, Mr McDonnell said the government had missed its deficit reduction targets and described the tax credits U-turn as a "fiasco".
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