SUMMARY

By JOHN P. HARDT

Economic policy and performance are as important in the People's Republic of China as in other major countries in the world. The economic preoccupations of the Chinese leadership were illustrated by the published reports of the proceedings of the Fourth National People's Party Congress and the new Constitution unveiled at that Congress in January 1975. The current Fourth Five-Year Plan (1971-75) appears to be reasonably successful in meeting targets and providing for priority needs. This recent success, in part, reflects a climate more conducive to economic growth and efficiency than the disruptive earlier environments of the Cultural Revolution (1966-69) and the Great Leap Forward (1958-61).

In a measured way China has also opened its economy to commercial and technological relations with the West. Political normalization and increased requirements for imports from industrially advanced nations have together permitted and encouraged this modification of the Chinese policy of economic isolation and self-sufficiency.

This volume follows two earlier compendia on the Chinese economy: "Economic Profile of Mainland China" (1967), and "People's Republic of China: An Economic Assessment" (1972). Hearings related to those earlier volumes were also published. The current volume updates and expands the coverage of the earlier publications. The 28 contributors are more than double the number in the 1972 volume. The participants represent academic institutions in the United States, Canada, and Sweden, various departments of the U.S. Government and research institutions.

The compendium is organized into five sections: Policy Assessments and Performance, Urban and Industrial Development; Rural and Agricultural Development; Defense Economics, and Commercial Relations. Some of the major questions addressed in the studies, with indications of some of the answers, are illustrated below:

1. Has the economy of the People's Republic of China settled down to a stable, continuous process of economic growth?

The performance of the current Fourth Five-Year Plan (1971-75) is second only to the initial Five-Year Plan period (1953-57). Although the recent performance should not be projected mechanically, future prospects under a regularized planning process should seem encouraging to Chinese leaders:

Outside of political upheavals, the main challenges to the Chinese economy over the next 25 years will be to incorporate a more complex mix of products into the system, to maintain a spirit of hard work and sacrifice in a generation with no memory of national or personal humiliation, and to keep the lid on consumption in an era of universal education and advancing technology. (Ashbrook, p. 21.) Moreover, in spite of the disruptive past efforts of the Great Leap Forward and Cultural Revolution policies on Chinese economic

performance, political upheavals may not seriously affect long-term performance:

Finally, as any observer of the Chinese experience over the past 25 years must know by now, the Chinese leaders do not passively accept the unexpected, or expected, but underestimated, economic consequences of their policy decisions. Undesirable or unaccepted results of one policy soon generate new policies to ameliorate those results; the Chinese leadership has shown itself to be remarkably willing and able to experiment within the basic context of their ideological premises and innovate with considerable ingenuity to counter and eliminate the undesirable consequences of their policies. (Dernberger, p. 470.)

2. Do improved access to China through exchanges, increased disclosure of economic data, and improved reliability of information permit a better assessment of Chinese economic performance?

In sum, Chinese statistics in terms of their availability, reliability, and usability are fraught with problems and difficulties. From the vantage point of 1975, the First Five-Year Plan (1953–57), particularly the latter half of it, may be viewed as a golden period for Chinese statistics, although in those years published Chinese data were by no means plentiful and of high quality by the standards of advanced countries. Being kept in a statistical darkness for a decade, economic researchers on China in the 1960's were nearly desperate as they reached the point of no returns. The gradual resumption of some statistical outflows from China since 1970 has opened new research possibilities. To be sure, there are many deficiencies and pitfalls in Chinese statistics, particularly those published in recent years. With patience, care, and ingenuity one could construct certain meaningful estimates on the basis of the statistics that China has so far made public. (NaiRuenn Chen, p. 68.)

Western professional demographic estimates on Chinese population vary widely. The most authoritative United Nations' figures for 1975 indicate that it may be less than 830 million, depending on assumptions, while it is estimated to be over 930 million by the Foreign Demographic Analysis Division of the U.S. Department of Commerce. The fact that the last and only Census during the life of the People's Republic of China is a distant base for estimates is part of the problem.

*** Peking does not really know the size of China's population or the precise rate at which it is growing. * * *

Perhaps the often-quoted statement by Li Hsien-nien to a Cairo newsman in 1971 and repeated, essentially, in 1972 to the members of a delegation representing Japanese airlines, summarizes the population numbers game best of all. Li reported that the officials at the supply and grain department use a population of 800 million, the officials outside the grain department use 750 million, the Ministry of Commerce "affirms that the number is 830 million," while the planning department "insists that the number is less than 750 million." He concluded that "unfortunately there are no accurate statistics in this connection." (Orleans, pp. 70– 71.)

3. By provincial decentralization in planning has China developed along an uneven pattern of economic development or has it followed a balanced, more egalitarian regional development approach?

*** the Chinese adoption of the relatively centralized Soviet model of economic planning was also partially determined by important distributional and equity goals held by the leadership. The first of these was the desire to begin to realign the geographic distribution of industry. The inherited pattern of industrial development, in which industrial output capacity was concentrated in the Northeast and a few major coastal enclaves, was viewed as the result of over a half-century of foreign domination of the domestic economy. Their determination to reverse this pattern of industrial concentration was motivated not only by strategic military considerations but also by the belief that, in the long run, growth that led to increasing regional disparities in the level of development was not politically acceptable. Secondly, the leadership was committed to insuring a more equitable distribution of government services. In large areas of the country in 1949 there was a virtual absence of health care facilities, education institutions, and other important social services. (Lardy, p. 96.)

The 1950's saw substantial change, but recent data indicate that from 1957 to the 1970's there was little change in the relative shares of the regions in the gross value of industrial output. (Roll and Yeh, p. 81.)

An analysis of central-provincial fiscal relations provides empirical evidence which suggests that the central government continued to exercise broad planning powers and that this has had a profound effect on the character of Chinese economic growth. This evidence suggests that provincial planners have not had a substantially increased role in determining the allocation of the country's economic resources and that, as a result, economic growth since the decentralization has not been characterized by a strong pattern of regional self-sufficiency. In fact, the degree of geographic redistribution of resources carried out by the Chinese central government is rather striking, particularly when compared with other large, less developed countries such as India. (Lardy, p. 95.)

In summary, it is our opinion that several factors have led to equal aggregate output growth despite an investment balance in favor of the interior. These are input constraints in the textile industry, derived demands for coastal output generated by inland industries and agriculture, emphasis on self-sufficiency and new product. *** emphasis on the coastal areas for development purposes suggests a pragmatic approach to the full utilization of resources to attain more than one goal. Moreover, if China's leaders had not adopted the policy favoring inland areas, China almost certainly would have developed as a dual economy. (Roll and Yeh, p. 93.)

4. Is it too early in its development process for the PRC to concern itself with its environment?

There is no such thing as a safe prediction for China, but it does seem that because of this combination of wisdom and "luck” China will not experience the type of environmental degradation that is now present in most of the world's industrial nations.

China has been wise because very early on Mao Tse-tung recognized that the long-term success of economic development required that the people be protected from the hazards of environment and that the environment be protected from uncontrolled abuse. This resolve was based on very practical rather than strictly ecological considerations-long before the limited fad for ecology grew into a major international concern. Mao firmly believed that the basic physical needs of the population-good health, good water, adequate food-were prerequisites to any and all other national goals, hence, the early policies to improve sanitation and health and to make the land more productive. Only after these needs were largely achieved could environmental concern turn to some of the important, but relatively less pressing, problems stemming from industrial pollution.

"Luck" becomes a factor only at the implementation stage of some of the progress. China is “lucky” that more than four-fifths of her population is located in rural areas, where lower densities and essentially agricultural pursuits make environmental problems easier to manage. She is "lucky" that she does not have an economy of abundance which is so damaging to the environment, but rather an economy of frugality in which the "do not waste" ethic is relatively easy to enforce since, of necessity, it is inherent in the society. (Orleans, pp. 143144.)

5. How has Chinese industry grown? Is it likely to slow down in the near future? Has Chinese industrial growth taken on its own pattern of modernization different from both the Soviet and Western industrialization models?

Industrial production in China *** grew at an average annual rate of 13 percent during the years 1949-1974. The experience in the 1950's was quite different from that of the 1960's and 1970's. The average annual rate of growth during the period 1949-1950 was 22 percent, whereas the rate for the period 1960-1974 was only 6 percent. * * *

Despite accumulating structural problems and the poor performance in 1974, industrial production in the remainder of the decade should get back to the recent growth trend of 8 to 10 percent. ***

Chou singled out the Fifth Five-Year Plan period (1976-1980) as crucial for the attainment of "front rank" status for China by the end of the century. The basic economic problem for the People's Republic of China is to boost the growth rate of grain production well above the rate of population growth. The degree of success the Chinese have in promoting birth control and in raising agricul

tural production will be important determinants of the rate of industrial growth, influencing, for example, the amount of investment resources that can be spared for the expansion and modernization of heavy industry. (Field, pp. 149, 159.)

6. How does the Chinese system of industrial management differ from that of other industrial nations? With a continued deferment of increases in consumer goods availability, how are workers' incentives and increased labor productivity attained?

China's system of planned socialist industrialization aims at rapid transformation of the economy by mobilizing resources to raise output for investment and defense as well as for consumption. Consumer preferences, including individual desires for leisure both on and off the job, occupy a distinctly subordinate position in the constellation of official goals.

In light of these objectives, our evaluation of performance in China's post1949 industrial system must be broadly favorable. The preceding survey has shown that reliance on administrative rather than market control over resource allocation has contributed to China's achievements in raising the level, changing the structure and compressing the real cost of industrial output. This finding draws support from favorable comparisons of industrial growth in China and in other large industrial latecomers, and also from the revealed preference of the industrial democracies for nonmarket distribution of essential resources in wartime, when resource mobilization and rapid structural change replace consumer welfare as primary national goals.

It is entirely possible that with their relatively static product mix, modest growth rates and markets which show signs of becoming less homogeneous as personal incomes rise, China's consumer industries could benefit from a substantial shift toward market-linked methods of allocation. But in the dominant producer sector, the continuing prominence of ambitious targets, technical uncertainty and unpredictable demand suggests that as in the past 25 years, fundamental institutional change holds little prospect for improving the performance of China's industrial system. (Rawski, pp. 196-197.)

*** urban-rural differences still provide a reason for Chinese to become industrial workers; that horizontal allocation of labor within industry is done without much reference to material incentives; and that wage differentials tied to occupation and skill stimulate work performance and skill acquisition only in a limited manner.

*** having been led to anticipate an important role for internal incentives in industry by the relative weakness of external ones, we are finally drawn to the conclusion that their function can hardly be distinguished from that of other institutional features of the "continuing revolution" in China. It seems that the clue to the motivation of the Chinese worker, as to that of any other, is ultimately to be found in the threads that bind him to society. (Riskin, pp. 222, 224.)

7. Is China self-sufficient in oil and gas? Will the PRC become a major petroleum and petroleum products producer and exporter? The rapid emergence of the PRC as a major oil and gas supplier has not only economic but geopolitical significance.

The emergence of the People's Republic of China as a major oil producer and oil exporter is a recent phenomenon. Prior to 1949, Chinese petroleum output was insignificant. As part of its general program of building up industrial strength and reducing dependence on foreign sources of supply, the new government undertook an intensive exploration and development effort in the oil industry. The payoff was the discovery in 1959 and the subsequent rapid development of the huge Ta-ch'ing oilfield in Manchuria's Sung-Liao Basin. Additional large discoveries in the North China Basin in particular-have eliminated the PRC's dependence on foreign oil, insured an abundant supply of oil for the modernization of the Chinese economy, and enabled Peking to export sizable amounts of oil, beginning in 1973.

The salient points *

are as follows:

China produced 65 million tons of crude in 1974 and was the world's largest producer, just behind Indonesia.

Proved reserves are conservatively estimated at 1.1 billion metric tons. Proved plus probable reserves are estimated at 5.9 billion metric tons and