yields on existing acreage, new acreage is being reclaimed from the hillsides, the desert, and even the sea. At the same time, farmland is being taken for factories, urban housing, and military installations. We have no data to determine the extent to which the forces affecting total cultivated acreage are offsetting. In any case, the net change from year to year is small. As for seeds, China is gradually taking advantage of the opportunities for combining improved seeds with advances in fertilization and water control. The availability of seasoned manpower is another plus factor in agriculture. Numbers are no problem, of course; indeed, average output would rise markedly if China had a more favorable labor/land ratio. The issues have been the level of skill, the distribution among various rural tasks, and motivation: Agriculture is benefiting from the broadening of education and training in rural areas, the increased experience of the work force with fertilizers and machinery, and the assignment to the countryside since 1968 of nearly 10 million middle-school graduates from urban areas. The leadership is taking a moderate approach toward the distribution of rural labor, giving production brigades and teams leeway to adjust to local conditions. According to guidelines sent down from the top, the program for small industrial plants and mines must not be pushed too far; they should not absorb more than 5 percent of the labor force of any county. Motivation presumably is being helped by improvements in rural living standards, including better housing, health care, and educational facilities. Also important has been the pragmatic attitude taken by the Government toward the private plots and petty private trade. Serious disaffection apparently is confined to youth, especially the city youth transferred to the countryside for rural labor. VI. INDUSTRY: FURTHER SUPPORT OF AGRICULTURE The course of industrial development over the past 5 years has been dominated by three themes-the narrowing of the gap between output and available capacity, the even greater emphasis on agriculture-support activity, and a sharp rise, followed by a substantial decline, in output of the defense sector. In 1969, when the Cultural Revolution was winding down, China's industrial capacity was considerably larger than actual industrial output. The gap between capacity and output was the result of (a) the downturn in output caused during the Cultural Revolution by dislocations in industrial planning and management, interruptions in raw material supply, and factionalism within factories, and (b) the considerable additions made to productive capacity during these turbulent years. Even though the Cultural Revolution slowed down output of construction materials and sometimes delayed work at construction sites, the fact remains that these represented only partial setbacks in a huge investment effort. The process of putting the extra capacity to work got underway in 1969, when production rebounded from the 1967-68 trough. The next year, 1970, also saw a sizable rise in output, with growth over the next 4 years dropping back toward the less spectacular-but still quite respectable growth rate of about 8 to 9 percent. Estimated year-byyear increases in industrial output are: The shift in economic strategy of the past 2 years in which the groundwork for a long-term breakthrough in agriculture is being laid-has important implications for the course of industrial development. Much of the tremendous increase in the contracts for Western industrial plants ($1.2 billion in contracts in 1973 and another $850 million in 1974, compared with only $60 million in 1972) is not designed to increase the machine-building or mining capacity of the PRC but rather to expand several fold the capacity to produce chemical fertilizer and artificial fibers. The pressures in 1974 on supplies of coal and electric power are the result of the failure to open large new coal mines in recent years. The attempt to raise population from existing mines by more intensive application of labor has increasingly run into diminishing returns. The skimping on investment in new capacity is tied implicity to the priority of investment in industrial branches that directly support agriculture. Production and procurement of military hardware in 1974 continued at the same general level as in 1972-73, or at approximately 25 percent below the peak level of 1970-71. Although the explanation for curtailed military production is not clear, it probably stems from a combination of: The priority accorded the "agriculture first" policy, the cutting back of production of certain types of naval vessels and obsolescent aircraft while new models are being readied, and the decline of the political strength of the military since Lin Piao's abortive coup in the fall of 1971. A striking feature of the industrial scene at the start of 1975 is the small plants program, which has received new emphasis in the last several years. In Chinese discussions of the program, the term "small plants" refers to enterprises distinguished by (a) simply technology, (b) location in rural areas, (c) production in direct or indirect support of agriculture, (d) dependence on local labor and raw materials, and (e) local (usually subprovincial) administration. The program-as table 3 indicates is broadening the base of important. industrial branches. The cost in resources is small compared with the benefits. The program makes maximum use of local labor, materials, and transport, whose contribution in other uses generally would be much less valuable. Difficulties with the small plants program in the past have come mainly from overzealous implementation during periods of political upheaval. The anti-Confucius campaign has not resulted in any hurried expansion of the program. TABLE 3.-China: Contribution of small plants to industrial output Agricultural machinery----- Chemical fertilizers______ Cement--- Hydroelectric power_--- Coal____ Iron and steel__ Almost all the simple farm tools and a substan- 30 percent of national output; used mostly for 20 percent and 15 percent, respectively, of national output; used in rural industry and construction. Because the industrial sector has been pressing against supplies of fuels and raw materials, expansion of the small plants program is now proceeding at a conservative pace. Furthermore, the subsiding of pressure from radical political elements in the last half of 1974 has increased the chances for continued moderation in the program. Another striking feature of the industrial scene is the great percentage increase in oil output from its small beginnings in the 1950's and early 1960's. Production of crude oil has advanced as follows: In the steel industry, production of finished products has lagged behind the growth of domestic requirements. Furthermore, production of crude steel in 1974 is estimated to have fallen back to 24 million tons from 26 million in 1973 because of shortages of raw materials and, perhaps, labor unrest. Imports of finished steel rose to 4 million tons in 1974; and imports of iron ore, pig iron, and steel scrap continued to rise. After several years of tough negotiations, China signed contracts with Japanese and West German consortiums, for a $430 million sheet steel rolling and finishing mill to be built at Wu-han. The new facility, when commissioned in 1977, will boost annual production of finished steel by more than 3 million tons, still short of Chinese needs. VII. FOREIGN TRADE: OFF THE CHART Until 1971, the value of China's foreign trade never rose above the 1959 peak. Then, because of a renewed Chinese interest in foreign goods, but also because of revaluations of world currencies and worldwide inflation, the dollar figures began to zoom upward-reaching $12.6 billion in 1974. In 1973, somewhat more than half of the 67 percent rise was attributable to monetary factors, somewhat less than half to the rise in physical volume. In 1974, almost all of the 28percent rise was attributable to the monetary factors. The sharp upward trend is shown by the tabulation: Specific features in China's foreign trade in 1974 are: Imports of grain, sugar, cotton, vegetable oils, and other agricultural products increased roughly one-fourth, from a record $1.3 billion in 1973 to $1.6 billion in 1974, 40 percent coming from the United States. Orders for whole industrial plants from non-Communist suppliers continued strong in 1974, at an $850 million level. Orders for other machinery and equipment fell off substantially from the record 1973 level, to about $300 million. The relaxation of Peking's conservative attitude toward debt was reflected in trade figures for 1974, with the trade deficit with non-Communist nations reaching $1.3 billion compared with $370 million in 1973. Japan remained the leading trading partner, with two-way trade in excess of $3 billion ($2 billion in 1973). Whereas exports to Japan had covered all but $165 million of imports from Japan in 1973, a deficit of almost $700 million was incurred in 1974. Trade with the United States totaled about $1.1 billion ($875 million in 1973); ↑ China's trade deficit with the United States was more than $850 million; this deficit will be sharply reduced in 1975, to perhaps one-third of the 1974 figure. Net hard currency earnings from economic dealings with Hong Kong of $1.6 billion provided the major offset to China's deficit with the developed West in 1974. Oil exports, boosted by increased physical volume and the quadrupling of international oil prices since mid-1973, have taken up the slack in China's traditional exports, which have been hurt by worldwide recession; earnings from oil were $35 million in 1973, jumped to $140 million in 1974, and are expected to reach $800 million in 1975. Trade with the other Communist countries consisted largely of (a) the exchange of Chinese foodstuffs, textiles, and other consumer goods for Soviet and East European industrial equipment and (b) Chinese aid deliveries to North Vietnam, Albania, and North Korea. Foreign economic and military aid take less than 1 percent of China's GNP. The major economic aid venture, outside of food shipments to North Vietnam, continues to be the Tan-zam Railroad project on which These figures show Chinese imports c.i.f. and thus will be higher than U.S. Department of Commerce figures. about 13,000 Chinese are working. Military aid is dominated by shipments of small arms to North Vietnam and shipment of tanks, aircraft, and other arms to Pakistan. VIII. TRANSPORTATION: SQUEEZING IN MORE TRAFFIC At the start of 1975, the key transportation system for the modern part of the economy remains the rail network, supplemented by waterways for the movement of bulk commodities. The rise in oil production is turning the spotlight on the construction of pipelines and port facilities as well as branch rail lines and roads in the new oil-producing areas. In January 1975, Peking announced the completion of a 1,152kilometer-long pipeline extending from China's largest oilfield at Ta-ching to the port of Ch'in-huang-tao on the Pohai Gulf. Rural areas continue to make do with age-old water and road transport; some areas, however, are being transformed by the extension of rail routes into hitherto isolated regions. In the past 4 years, the Chinese rail network has grown by 10 percent to more than 44,000 kilometers, twice the size of the pre-Communist network. Recent progress has included (a) the double-tracking of important segments of line in the populous East; (b) the completion of several trunklines; (c) the gradual extension of new lines into the hinterland; (d) additional electrification of trackage, mainly in the mountainous area of Szechwan and Shensi; and (e) construction of industrial spurs, the expansion of rail yards and transfer facilities, and the building of new repair depots. In 1973-74, growth in freight traffic has exceeded the growth in rail transport capacity. Railroad authorities are now contending with widespread-but not crippling-shortages of freight cars, especially tank cars. Road construction in 1974 included (a) the construction of nine trunk highways, mainly in the sparsely populated outer areas which depend on roads for movement of long-haul freight; (b) the building of 10,000 km of short-distance roads linking rural counties and communes; and (c) the paving of more than 13,000 km of road with asphalt and residual oil. In 1974 and so far in 1975, Chinese ports have been generally able to handle increasing shipments from Free World countries. Occasionally, numerous ships have had to wait for berths at Chinese harbors, some for long periods of time. Meanwhile, the Chinese have continued to improve their ports and harbors by dredging, construction of new facilities, purchases of additional materials-handling equipment, and adoption of improved procedures for loading and unloading cargo. IX. CONSUMER: MAKING IT GRADUALLY The rank-and-file consumer has been benefiting in the last 5 years from a series of small improvements in his austere living standards. The quality, variety, and availability of foods continue their slow longrun rise. Grain is still rationed, normally in adequate amount, according to age and type of work. Pork, poultry, and fish appear more frequently on the table, as do fresh fruits and vegetables. |