The first is, "How should we evaluate economic policies and performance?" Second, "How can we assess future P.R.C. economic trends and priorities?" And, third, "Is the People's Republic a threat to the United States?"

Now in dealing with these problems, I shall be primarily concerned with the interaction of noneconomic with economic factors so as to place these very excellent analyses in a broader social and political

context.

How should we evaluate P.R.C. economic performance? It seems to me that the desirability of going beyond the purely economic dimension is particularly necessary in attempting evaluations of this sort. Over the past decade my impression is that outside assessments of the Chinese economy have tended to understate its accomplishments, in part, because these evaluations were too narrowly confined to Western economic criteria such as the assessment of per capita income growth. Seen in these terms, of course, the Great Leap Forward and Great Proletarian Cultural Revolution were viewed as irrational or, as one of the authors described the former, a "mad policy" full of “hairbrained" schemes.

But how do the Chinese actually view these policies, since it is, after all, their expectations that have to be fulfilled if the system is to function effectively?

I think we have to recognize that the Chinese under Mao have deliberately rejected the classical Western pattern of industrialization. While seeking to develop a modern socialist state, they are determined to avoid what they call the three great differences that have arisen in Western societies during the process of industrialization—that is, the differences between rural and urban life, between industry and agriculture, and between mental and manual labor.

Mao and his followers are very fearful that economic growth and technological advance and mass production will come to be objects in themselves, that they will dominate the thinking and motivation of their society, leading to increasingly sharp divisions of labor and to a surrender of the decisionmaking power to a new class of technocrats, much as they think has happened in the Soviet Union.

Thus the regime leaders over the past 20 years have resorted to periodic mass campaigns. I think there has been some opposition to this strategy, perhaps in the case of Liu Shao-chi and others or at least some foot-dragging, but essentially these campaigns have been designed to stimulate ideological fervor, insure equality of participation by all elements in society-especially the peasantty-and to foster a political order able to provide for material needs but guided essentially by moral rather than material incentives.

The result of this permanent revolution which I think has been waning since mid-1968 and probably is in long-term decline, obviously has not been to maximize the "production possibility curve" that Mr. Ashbrook has set forth in his paper.

However, P.R.C. economic policies operating within these constraints have permitted an impressive growth in industrial production-11 percent annually if we take the whole period 1949 to 1970and also a gradually rising standard of living for the population as a whole.

More important, from the Maoist viewpoint, these policies have dramatically affected the quality of life in China, broadering political

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participation, promoting economic, social and cultural equity and lessening the differences between urban elites and peasant masses.

This has also been accompanied by a spread of basic technology (including things like public health), continued growth in agricultural output, expansion of small-scale industries, the acquisition of a nuclear capability and a strengthening of China's international finance and trade position.

I think it is even possible that the Chinese have developed an experience that may be applicable in some respects to more advanced industrial societies-for example, in keener sensitivity to the problems of human displacement and environmental pollution and in seeking to relate economic growth to the overall enhancement of the quality of life.

Now, in acknowledging these achievements it is not my purpose to minimize the costs which have been very high in terms of intellectual and cultural freedom, not to mention maximizing per capita gross national product. Rather, I want to suggest that our criteria should measure economic policies and performance against a broader spectrum of political and social as well as economic objectives.

If we are going to further recent trends toward a normalization of relations, I believe our policies must be better informed as to how the Chinese view their own economic performance and as to the extent of their overall achievements whatever the shortfalls in this or that sector.

For too many years American policies were predicated on the false assumption that the Chinese masses were seething in discontent and ready to roll back the Communist regime at the first opportunity. In this prevailing negative mood we often underestimated its accomplishments and sometimes exaggerated its failings. Worse still, we continued to magnify the Communist military threat to the U.S. long after the Sino-Soviet rift and internal preoccupations in the P.R.C. had begun a fundamental alteration of our strategic relationship.

Now, perhaps, the danger is that our perceptions of China will become captive of a pendulum swing in the other direction toward overestimating their achievements, minimizing their failures and ignoring the basic differences in philosophy and purpose which still separate us and which, in combination with external pressures and internal frustrations, could lead again from cooperation to confrontation.

The second main question I am posing today is "How can we assess the future economic trends and priorities in the P.R.C.?" Here, to summarize briefly, I am simply trying to make a case to urge that longer-run forecasting be attempted in the economic field.

Practically all of the papers make excellent and very reasonable short-term trend projections but I think that, even in the short-run, extrapolating from present events a trendline can be extremely hazardous. Moreover, I think in terms of our long-range policy planning, and especially in terms of defense outlays and military expenditures in the future, we need longer-range forecasting.

Perhaps the method that Mr. Aird used in extrapolating a range of alternative future population models or scenarios could be usefully applied to the Chinese economy as a whole, although this would, of course, involve a complex series of noneconomic as well as economic assumptions.

Whatever the validity of this long-range forecasting approach, it does seem to me that Chinese policies will be shaped by broad economic factors which can be fairly clearly foreseen.

As Ashbrook suggests, the food-population balance will almost certainly be the most critical of these, and since fertility reduction policies are not likely to give much relief from population pressures, the regime's ability to raise productivity in agriculture will be absolutely essential to maintaining this balance.

But to go beyond that, although agricultural output will obviously be affected by economic factors like the import of foreign technology and competition of the military for scarce resources, I believe the noneconomic or institutional factors might play a more decisive role. Will the political leadership remain unified and stable and will it maintain a general policy orientation that is pragmatic and functionally rational whatever the rhetoric? Will moral-ideological incentives be sufficient to provide motivation for the producing masses and, at the same time, limit their consumption to an amount that can be sustained by a level of agricultural output which leaves significant savings for investment in industry?

We urgently need more concentrated and systematic research on these complex and long-range issues even if there is no guarantee that conclusive answers can be found.

I would like to skip in this prepared statement now down to the third point, whether China constitutes a present and future threat to the United States.

While the state of the economy can have a pronounced effect-I don't think that economic circumstances determine intentions in a particular situation. I see no correlation in previous Chinese behavior between domestic economic success or failure and external policies of cooperation or hostility.

Similarly, while P.R.C. foreign and military policies are influenced by Chinese reaction to perceptions of external threat-for example, fears of a hostile U.S. encirclement from the Pacific or of a pre-emptive Soviet attack on the north, I believe Peking's international goals and strategies have been developed independently and, except for tactical fluctuations, remain basically unchanged. In other words, I disagree with those who feel that Chinese policies have been merely reactive to fears of the outside.

Peking aspires first, I believe, to defend China's territorial integrity. Chairman PROXMIRE. You have 2 minutes left.

Mr. DORRILL. Fine.

The P.R.C. still aspires to maintain its territorial integrity and unify the nation; it still aspires to a role in Asian and world affairs commensurate with China's size and historical prominence; and it still intends to support world revolution by means of "wars of national liberation," but the speed and intensity with which these goals are pursued will depend on the general orientation of the prevailing leadership at a given time.

Peking's strategy has never been overtly expansionist and has been in practice cautious and prudent in execution.

Thus, briefly, in the short run, I don't think that China is a threat. In the long fun, however, I see certain problems relating to its behavior as a nuclear power and its dedication to support of wars of national liberation which I feel will be with us for some time to come.

It is possible that China will eventually come into competition with us for raw materials available through international trade, increasing the prices we have to pay for supplies and perhaps vying with us for control of access to supplies.

Perhaps the most important challenge for the U.S. in dealing with China over the long-range future will be to develop at least tacit rules of international behavior acceptable to both sides that will allow for the peaceful competition of their diverse political systems in the Third World while defining the limits of support for armed revolutions. Perhaps the greatest threat to either of us in the long run is going to be the failure to establish an international system with sufficient dynamism for internal modernization and reform and, at the same time, with sufficient strength and stability to assure the pacific settlement of international disputes.

Thank you.

(The prepared statement of Mr. Dorrill follows:)

PREPARED STATEMENT OF WILLIAM F. DORRILL

Mr. Chairman, and distinguished members of the Joint Economic Committee' I am honored by your invitation to appear before this committee, which has made such an important contribution in its publications and hearings to our understanding of the economy of China.

At the outset of these remarks, I should like to offer a sincere expression of admiration and appreciation for the excellent compedium of papers recently published by the Committee on the People's Republic of China: An Economic Assessment. These studies provide a wealth of timely data and present an impressive array of sophisticated and objective analyses which will be of great value to all who are engaged in the scholarly study of contemporary China. Not only will they enlighten American opinion, but I daresay they will make informative reading for officials in Peking.

In this statement I shall focus briefly on three questions suggested by a reading of the compendium: 1) How should we evaluate PRC economic policies and performance? 2) How can we assess future PRC economic trends and priorities? 3) Is the PRC a threat to the U.S.? In the course of this discussion I shall attempt also to address questions raised in Chairman Proxmire's letter of invitation concerning China's future economic priorities, her external perceptions and concerns, and the potential threat posed by the PRC for the United States. In dealing with these problems I shall be primarily concerned with the interaction of economic and non-economic factors, so as to place the economic analyses, so ably presented in the compendium, into a broader social and political context. Question 1. How Should We Evaluate PRC Economic Performance? Answer. The desirability of going beyond the purely economic dimension is particularly necessary, I believe in attempting to evaluate the PRC's economic policies and performance. Over the past decade it is my impression that outside assessments of the Chinese economy have tended to understate its accomplishments, in part, because evaluations were too narrowly confined to Western economic criteria, such as the assessment of per capita income growth. Seen in these terms the Great Leap Forward was, of course, a "mad policy" full of “harebrained" schemes (Ashbrook, p. 21)1 and the Great Prolitarian Cultural Revolution, while less permanently damaging, was essentially "irrational". But how do the Chinese view these policies since it is their expectations that must be fulfilled if the system is to function effectively?

We must recognize that the Chinese under Mao have deliberately rejected the classical Western pattern of industrialization. While seeking to develop a modern socialist state, they are determined to avoid the "three great differences" that have arisen in Western societies in the process of industrialization, i.e. the differences between rural and urban life, between industry and agriculture, and between mental and manual labor. Mao and his followers fear that economic growth, technological advance, and mass production will become dominant objectives, leading to increasingly sharp divisions of labor in society and a surrender of

Underlined references in parentheses refer to authors and pagination of papers in People's Republic of China: An Economic Assessment.

decision-making power to a new class of technocrats who will shape China's development primarily according to technological requirements. Thus, regime leaders-with varying degrees of enthusiasm (and, perhaps, outright opposition in the case of Liu Shao-ch'i)—have resorted to periodic mass campaigns to stimulate ideological fervor, insure equality of participation by all elements in society (especially the peasantry), and to foster a political order able to provide for material needs but guided essentially by moral rather than material incentives. The result of this "permanent revolution," which has been waning since mid1968 and probably is in a secular decline, obviously has not been to maximize the "production-possibility curve" (Ashbrook, p. 48). However, PRC economic policies operating within these political constrainst have permitted an impressive growth in industrial production—11% annually, 1949–70 (Field. p. 62)—and a gradually rising standard of living for the population as a whole. More important, from the Maoist viewpoint, regime policies have dramatically affected the quality of life in China, broadening political participation, promoting economic, social and cultural equity, and lessening the differences between urban elites and peasant masses. Moreover, this has been accompanied by a spread of basic technology (including public health), continued growth in agricultural output, widespread expansion of local small-scale industries, the acquisition of a nuclear military capability, and a strengthening of China's international finance and trade position. It is even possible that the PRC experience in developing what is frankly described as a "relatively backward economy" may suggest directions for improvement in more advanced industrialized societies: e.g. in keener sensitivity to problems of human displacement and environmental pollution, and in seeking to relate economic growth to the overall enhancement of the quality of life.

In acknowledging these achievements and potential contributions it is not my purpose to minimize the costs, which have been extremely high-in reduced intellectual and cultural freedom as well as per capita GNP, but rather to suggest that our criteria should measure economic policies and performance against a broad spectrum of political and social, as well as economic, objectives. If we are going to further recent trends toward a normalization of relations with the PRC our policies must be better informed as to how the Chinese view their own performance and as to the extent of their overall achievements whatever the losses in one or another particular area. For too many years U.S. policies were predicated on the false assumption that the Chinese masses were seething in discontent and ready to "roll back" the Communist regime at the first opportunity. In this prevailing negative mood we often underestimated its accomplishments and sometimes exaggerated its failings. Worse still, we continued to magnify the Chinese military "threat" to the U.S. long after the Sino-Soviet rift and internal preoccupations in the PRC had begun a fundamental alteration of our strategic relationship. Now, perhaps the danger is that our perceptions of China will become captive of a pendulum swing in the other direction, toward overestimating their net achievements, minimizing their failures, and ignoring the basic differences in philosophy and purpose which separate us and which, in combination with external pressures and internal frustrations, could lead again from cooperation to confrontation. Question 2. How Can We Assess Future Economic Trends and Priorities in the PRC?

Answer. Attempts to forecast future economic or other policies by means of linear projections of current trends are hazardous, even in the short-run. Nevertheless, planning requires estimates of the future situation and it seems to me that several of the papers in the compendium have done an excellent job in forecasting near-term economic trends within the limits of this methodology. Indeed, the study of demagrpahic prospects has been able to go much further, on the basis of a more sophisticated methodology, to project a range of population growth models for the next twenty years (Aird, pp. 327–331). I believe that this method of extrapolating a range of alternative future models (or scenarios, as some would prefer to call them) could be usefully applied to the Chinese economy as a whole, although this would involve complex series of non-economic (e.g. political) as well as economic assumptions.

Whatever the validity of this more ambitious approach to long-range forecasting, it seems to me that future PRC policies will be shaped by economic factors which can be fairly clearly foreseen. As Ashbrook suggests (p. 39), the foodpopulation balance will almost certainly be the most critical of these. Since fertility reduction policies are not likely to give much relief from population pressures (Aird, pp. 330, 331), the regime's ability to raise productivity in agriculture (e.g. through increased application of fertilizers and herbicides, improved seed-strains,