Figure 1. China: Major Industrial Centers

V. INDUSTRIAL ACHIEVEMENTS IN 1971 AND PROSPECTS FOR 1972-75 The Fourth Five-Year Plan got off to a good start, according to the percentage increases that the Chinese reported in the New Year's Day editorial and my preliminary estimates for 1971 (as summarized in table 5). Production of coal in 1971 was up to 325 million tons from 300 million tons in 1970. This increase of about 8 percent was modest in comparison to the more rapid growth in tonnage carried by the railroads and in the production of commodities which consume large quantities of coal, such as steel, chemicals, and electric power. The fuels sector as a whole grew by 14-15 percent because of the rapid growth in the production of electric power and crude oil. The production of electric power rose from 60 billion kilowatt hours in 1970 to 70 billion kilowatt hours in 1971, largely in response to increased industrial demand. And with the exploitation of large new oilfields,

the production of crude oil jumped from 18 million tons in 1970 to 23 million tons in 1971, an increase of 27 percent in a single year.

TABLE 5.-INDICATORS OF CHINESE INDUSTRIAL PRODUCTION, 1971

1 These commodities are included in the index presented in this paper.

21

4.9

55 thousand units.

(5).

7.5 billion lin, M.
1.9 million M.T.

2 Crude steel is the only industrial commodity for which an absolute figure has been reported for 1971.

Product weight is the shipping weight of all types and grades of domestically produced chemical fertilizer. Standard weight is the weight after conversion to units of fixed nutrient content. For nitrogen fertilizer, the standard is 20 percent nitrogen; for phosphorus fertilizer, 18.7 percent phosphoric acid; and for potassium fertilizer, 40 percent potassium oxide.

Not enough data were available to make estimates for the production of these commodities in 1971.

Machine building is 1 of the 3 branches included in the machinery sector. The other 2 are metal products and repair

The industrial materials sector also grew rapidly in 1971. Production of crude steel grew from 18 million tons in 1970 to 21 million tons in 1971, an increase of 18 percent. Although steel capacity has been expanded and the production of rolled steel is reported to have grown by 15 percent, the industry continues to be hampered by a shortage of rolling and finishing capacity for special types of steel products. And in spite of the rapid rate of growth in the production of pig iron, crude steel has overtaken pig iron, and China changed from a net exporter of pig iron to a net importer in 1971. Other industrial materials also rapidly. The production of chemical fertilizer rose from 7.4 million tons in 1970 to 9.6 million tons in 1971, and the production of cement at large-scale plants grew from 13 million tons in 1970 to 14 million tons in 1971. The industrial materials sector as a whole probably grew by at least 15 percent in 1971.

grew

The gross value of the machine-building industry is reported to have grown by 18 percent, but this claim is difficult to accept because officially reported gross value data have tended to overstate the rate of growth in the past. In particular, during the 1950's when a more detailed comparison was possible, the gross value of output for the machine-building industry had the greatest upward bias of all branches

of industry that were measured. Although the officially reported increase overstates the rate of growth, the true rate cannot be estimated accurately because data on the physical output of the major types of machinery necessary for an independent evaluation of the performance of the machine building industry are not available. Machine tools, the sole commodity for which an estimate of physical output for 1971 is available, grew only about 10 percent in 1971, yet the rate of growth for the machinery sector as a whole may have been as high as 15 percent.

The light industrial sector appears to have grown only slowly. The production of cotton textiles in 1971 was probably no higher than the 7.5 billion linear meters produced in 1970 despite a slight increase in the cotton crop. Production in 1970, however, was considerably higher than had been expected because stocks of ginned cotton that had accumulated during the Cultural Revolution were drawn down. Growth in the food processing industry was low because there was little or no increase in agricultural production during 1971. On the positive side, the production of light industrial commodities produced from nonagricultural raw materials increased, and Shanghai, the most important light industrial center in China, reported an increase of 4.9 percent in the production of light industrial commodities. On balance, the production of the light industrial sector probably grew by less than 5 percent in 1971.

With increases in the fuels, industrial materials, and machinery sectors averaging about 15 percent and an increase of less than 5 percent in the light industrial sector, total industrial production probably grew about 12 percent. Although substantially below the 17 percent increase achieved in 1970, this is nevertheless a rapid rate of growth.

With present production at peak levels in all four sectors, the continued growth of industry in 1972-75 will depend on the level of construction activity that has prevailed over the last several years. During the early 1960's, construction was limited primarily to the completion of projects that had been started in the late 1950's. By 1964 or 1965, a broader construction program appears to have been started. For example, new crude steel capacity was added even though rolling and finishing capacity was the bottleneck. During the Cultural Revolution, however, when the production of steel, cement, and timber was down substantially and transportation disrupted, construction activity was undoubtedly affected, but a surprising amount of work appears to have been continued, especially on the major new complexes in Central, South, and Southwest China.

One area for which construction data are available is the electric power industry. Indexes of installed generating capacity and the production of electric power for the years 1957-70 are plotted in figure 2, together with the index of industrial production from table 1. The amount of generating capacity installed has varied considerably from year to year, but significant additions were made every year throughout the period even though there was a substantial amount of excess capacity. Thus, the additions to capacity can only have been building ahead for long-run industrial growth.

Figure 2. China: Indexes of Installed Generating Capacity,
Electric Power Production and Total Industrial Production

I expect that industry will grow rapidly over the next few years and that this rapid growth will be accompanied by a continued shift in structure. Most of the resources available for investment will be allocated to heavy industry, and industrial crops will continue to be sacrificed in favor of food crops. The growth of light industry should keep well ahead of population growth, but by 1975 it will probably account for less than 25 percent of total industrial production.

I also expect that the interior will continue to be developed at the expense of the coastal area. Even though construction in the coastal area has continued, most of the effort has been and will continue to be in the inland area, especially in Southwest China. Thus, by 1975, more than half of total industrial production will probably originate in the inland area.

APPENDIX A

DESCRIPTION OF THE INDEX

The index of Chinese industrial production presented in this paper is an elaboration of the index I prepared for the Joint Economic Committee in 1966.5 The construction of the aggregate index is discussed briefly in part I of this appendix; and the procedures used to distribute production by functional sector and geographic region are discussed in parts II and III, respectively.

I. THE AGGREGATE INDEX

A. For the Years 1949-59

Indexes showing the growth of production for individual branches of industry, for industry and handicrafts, and for total industrial production during the years 1949-59 are presented in table A-1. The construction of these indexes is described below:

5 See Robert Michael Field, "Chinese Communist Industrial Production." An economic Profile of Mainland China, Joint Economic Committee of the U.S. Congress, Washington 1967, pp. 269–295.