no longer employed, the actual money earnings of a worker are determined almost exclusively by his wage classification. To the extent that assignment to a particular wage grade depends on skill and productivity, a material incentive can certainly be said to exist for workers to upgrade their skills and to work with diligence. The available descriptions of the general criteria for assigning workers, including skill, length of experience, difficulty of job, attitude toward work, productivity and general performance,70 are sufficient only to suggest that such an incentive exists; to know how important it is, we would have to know far more about the relative emphasis given to the various criteria, and the manner in which they are applied. In at least some enterprises, each worker's qualifications are assessed by the masses, whose judgments are then subject to leadership approval. Are the workers anxious to reward exemplary performance readily with promotion in grade? Or, do they emphasize the virtues of a stable and predictable income and thus give most consideration to work experience (seniority), as long as the minimum satisfactory standards of productivity are met? At present, all that can be said is that the existence of wage differences tied at least partly to productivity and skill, and of differences between the wage scales of ordinary workers and technical personnel, preserves a system of material incentives backing up other factors that motivate industrial workers to achieve higher productivity and improve their qualifications. There are, however, general limitations in this system which make it unlikely to play a very sharp material incentive role. First, wage grade assignments are made on a fairly long-term basis and do not. change from day to day in response to fluctuations in worker productivity. Second, it is probably difficult (and therefore unusual) for a worker to be demoted in grade, the way the nonaward of a bonus or a decline in income under piece rates automatically demotes when productivity falls. Third, educational and training costs are mostly borne by the state or the enterprise, so that the strong cultural value of education as well as its independent worth as a "consumption good" should provide a healthy incentive to upgrade one's skills without the need for much additional incentive in material form." Finally, the actual differentials seems to be narrowing, not only because of the phasing out by attrition of the highest salaries and wages, but also because of the nature of recent wage increases. After a period of rapid growth during the 1950's, the real wages of Chinese workers and staff members appear to have declined during the years following the Great Leap, and then to have remained rather stable through the 1960's.72 Beginning in 1971, a series of increases have taken place, affecting as much as 40 percent of the workers in individual enterprises.73 In most if not all cases reported, the raises affected workers in the lower wage grades, invariably by moving them up to a higher grade. Thus, in the Peking Arts Factory, workers in ranks 1 through 4 were promoted sometime before the end of 1972; 74 in the Tientsin Wool Factory, 180

70 Richman, Industrial Society, p. 803; also, Singh and Paine, "Shanghai Diesel Engine Factory;" and "Observations on the Chinese Economy," p. 85.

71 Bettelheim (Cultural Revolution and Industrial Organization, p. 16) states that, while the length of courses offered by factory schools varies with the material taught, it takes only 2 years for an experienced worker to qualify as an engineer.

73 Howe, Wage Patterns, pp. 31-35.

73 Trip notes of Audrey Donnithorne. Professor Donnithorne was told that 40 percent of the workers in the Ta Hsin Craft Factory in Canton received wage increased in 1972.

74 A. Eckstein, "China Trip Notes," and R. Scalapino, "China-Wages and Prices."

workers were advanced from grade 1 to grade 2 in 1971, and 64 moved up from grade 2 to grade 3 in 1973; and similar kinds of increases were reported for Tientsin No. 1 Rug Factory, Tientsin Watch Factory, and Shanghai No. 3 Machine Tool Factory.75 There is evidence of continuing demand for higher wages by some Chinese workers in 1974, and for the granting of such increases.76 By promoting the lower ranks and reducing overall wage differentials, such developments reduce the importance of these differentials as a source of stimulus to worker performance.

In sum, it would seem that the scope for the operation of material incentives within Chinese industrial enterprises is quite limited. Such typical incentive devices as differential bonuses, piece rate mechanisms, and material awards to emulation campaigners, have been ruled out since the Cultural Revolution. Significant wage and salary differences, both between technicians and workers and among workers of different levels of productivity and skill, continue to exist. But they are gradually being narrowed, and their incentive effect on worker performance seems quite constrained even at present.

CONCLUSION

Our general survey of incentives and wages in Chinese industry today has found that 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. Together, these conclusions suggest that the explanation for the morale and motivation of Chinese workers is not, on the whole, to be found principally in material incentives as ordinarly conceived. Other external incentive mechanisms of a nonmaterial sort (emulation campaigns in particular) play a role, but one that must be limited by the current deemphasis of extreme competitiveness ("championship mentality"), by the ideological ambiguity of such campaigns and by the token nature of the awards. Moreover, the value to workers of the stature won in emulation campaigns depends in part on the value to them of the system awarding it. But this is an issue of internal incentives, whose importance in Chinese industry we turn to briefly examine last.

Internal incentives arise from the intrinsically satisfying nature of a job, or from the worker's identification with the objectives and significance of the work. The former kind is frequently associated with the opportunity to exercise craftsmanship and valued skills. Its decline in the industrially advanced countries, due to the extreme subdivision of labor into repetitive and monotonous tasks, has been associated with much worker dissatisfaction. Have the Chinese tried to avoid this problem in their developing modern industries by designing technologies and work methods that incorporate a more challenging role for the worker? Most observers feel they have not, that the issue is one to which they have shown no great sensitivity in responding to queries,

75 "Observations on the Chinese Economy."

76 See, e.g., the article by Paul Strauss in the Journal of Commerce, Sept. 6, 1974.

or in the technologies of plants actually observed." One writer states that the Chinese have failed to popularize the work in which Marx most extensively discussed "alienation" (the "Economic and Philosophic Manuscripts" of 1844) and that as a result "Chinese writers do not draw on Marx's insights about the state of mind of the worker participating in a fragmented job." 78

Two qualifications must be made to the above conclusion. The first concerns the encouragement of technical innovations by workers, particularly in the organizational context of the "three-in-one combination teams" that emerged from the Cultural Revolution. Together with the links established between education and production work and the encouragement of worker education, this development paves the way for increasing numbers of workers to achieve greater mastery of the technology to which they are tied, and clearly constitutes a form of "job enlargement." 79

The other qualification leads us to consider the second aspect of internal incentives mentioned above (the worker's identification with the objectives and significance of the job), because it concerns the degree to which workers share authority over the decisions that affect them, such as those concerned with production planning, specification of tasks, cost control, investment planning, establishment of work and safety rules, allocation of the welfare fund, et cetera. Clearly, an authentic participation in such decisions can be thought of as countering job fragmentation, but the issue is larger than this.

The construction of new forms for industrial management in which "bourgeois authority" would be reduced, status differentials eroded, and workers armed with substantial influence over enterprise decisions, has been a major aspect of Chinese Communist industrial policy since the Great Leap Forward of the late 1950's, although progress has been halting and sometimes reversed. A variety of such forms, including workers' management teams, workshop and team assemblies and worker representation on enterprise revolutionary committees, emerged with still unknown degrees of longevity from the Cultural Revolution. The social relationships these forms must come to grips with, together with the systems of ownership and distribution, comprise the "relations of production," and Chinese Marxists consider them to be interconnected:

we must consolidate and develop socialist ownership by the whole people * prevent the restoration of the bourgeois right already liquidated with regard to the system of ownership *** and at the same time restrict bourgeois right with regard to the two other aspects of the relations of production, namely, the relations between men and the relations of distribution. * * * **

The interdependence of these different components of the relations of production is easily seen. An erosion of status differentials separating workers and managers, for example, would weaken the legitimacy

For example. Suzanne Paine and Ajit Singh on the Shanghai Diesel Engine Factory: "We discovered that there was no radical approach to improving the actual content of manual work away from monotonous and repetitious production line operations. Younger workers were moved around to some extent but older workers remained on the same job all the time." 78 Donald J. Munro, "The Chinese View of 'Alienation,'" The China Quarterly, No. 59 July-September 1974, pp. 581-82.

See Bettelheim, Cultural Revolution and Industrial Organization, ch. 3, for an interesting discussion of this issue in relation to diminishing the dichotomy between mental and manual labor.

So Yao Wen-yuan, "On the Social Basis of the Lin Piao Anti-Party Clique," Hsinhua News Agency, Mar. 2, 1975, p. 19.

of wide income disparities based on status; thus, the tendency discussed earlier for the extremes of the wage gap to narrow is consistent with attacks on enterprise hierarchy during the Cultural Revolution. And if income distribution is tied to broader issues concerning the relations of production, so must incentives be. Indeed, a close study of Chinese factory management in the early 1960's reveals just such a link; as the bolder experiments with "participation, equality, and collective advancement" of the Great Leap gave way to tighter control, less participation, and an increasing amount of enterprise hierarchy, so concurrently did individual material incentives come to the fore, especially piece rates and awards of various kinds.81 It is likely that the subsequent evolution of the individual management system would turn up similar correlations.

Thus, 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.

81 Stephen Andors. "Factory Management and Political Ambiguity, 1961-1963," The China Quarterly, No. 59, July-September 1974, esp. pp. 456-461.

THE CHINESE PETROLEUM INDUSTRY: GROWTH AND

PROSPECTS

By BOBBY A. WILLIAMS

CONCLUSIONS

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 in this study are as follows:

China produced 65 million tons of crude in 1974 and was the world's 13th 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 could easily be 7.6 billion metric tons. Offshore reserves will add appreciably to these estimates.

Current exploration is concentrated in existing fields and in the Pohai Gulf. At least three jack-up rigs and perhaps a semisubmersible are working in the Pohai.

Exports of crude rose to more than 4 million tons in 1974 and should exceed 8 million tons in 1975, earning the Chinese more than $700 million.

In 1974, oil accounted for 17 percent of the primary energy produced in China, up from 2 percent in 1957 and 11 percent in 1970. Industry and transportation are the largest consumers of petroleum. Agriculture is consuming a rapidly growing share, up from 9 percent in 1957 to 15-20 percent today.

China is the world's fifth largest producer of natural gas. Output in 1974 was approximately 60 billion cubic meters, 52 billion cubic meters of which was produced in Szechwan Province.

Refining capacity at mid-year 1974 is estimated at up to 47 million metric tons. The industry, whose technology is comparable to Western refining industries in the late 1950's, satisfies China's product needs.

Since 1970, the People's Republic has added almost 2,000 kilometers of new pipeline, largely to facilitate oil exports, and has invested heavily in port and handling facilities and tankers.

By 1980, China should be producing more than 200 million tons of crude oil annually of which approximately 50 million tons may be exported.