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The Republic of China in Taiwan, 9; the Republic of Korea, 8; the Philippines, 5.6; India, 3.6; and the Chinese mainland, 3.1. In terms of the rate of growth of per capita gross national product: The Republic of China in Taiwan, 5.6; the Republic of Korea, 5.1; the Philippines, 2.2; India, 1.1; and the Chinese mainland, 1.0. This is during the period 1957 to 1970.
The Chinese mainland, therefore, did not lead the less developed countries as this volume says; it lagged behind them. It also had the most erratic movement in GNP compared to almost all nations. This lends doubt to the existence of a viable economic base.
Just about the only achievement of the mainland is the attainment of the technical capability to detonate 13 nuclear devices, to launch two space satellites and to build up a war machine of an unknown size. These achievements, however, were attained at a terrible cost in terms of the standard of living and economic growth, as I have just reported.
Regarding the achievement in the technical and military areas, I would like to quote from my earlier report, Mr. Chairman, to your committee in 1967:
*** the productive capacity of the economy as a whole does not reveal the strength of the nation in carrying out a specific endeavor to which a large concentration of resources is devoted. Thus, the per capita product of the Chinese mainland is low by any estimate and on any standard, but a nuclear and missile program produced successful results in recent years when the economy as a whole was experiencing difficulties. One must not be misled by the low per capita productivity on the mainland to a feeling of complacency regarding her technical capabilities in certain narrowly defined spheres. At the same time, it is equally erroneous to consider the achievement in a specialized field as an indicator of the degree of development of the economy as a whole.
The situation is the same today.
PREPARED STATEMENT OF TA-CHUNG LIU The Joint Economic Committee has made available for the reference of the members of the Committee, the Congress and the general public an Economic Assessment of Communist China (hereafter referred to as the Assessment) by a group of economists in the Federal Government. The statistics and the estimates presented in this volume are very useful to the serious student of the economy of the Chinese Mainland, whether one agrees with them or not. We in the economics profession are grateful to the Joint Economic Committee, its staff, Mr. John P. Hardt of the Library of Congress, and the authors of the papers for this study.
My comments fall into four categories: (1) The different pictures about the economy of the Chinese Mainland as conveyed by the discussions and conclusions in the text on the one hand and by the estimates and statistics themselves presented in the Assessment on the other. (2) Some limited international comparisons of the rates of growth of industrial production, GNP and per capita GNP. (3) Some comments on the methods used to estimate GNP in the Assessment. (4) Concluding remarks.
(1) THE DIFFERENT PICTURES REPRESENTED BY THE TEXT DISCUSSION AND THE
STATISTICS AND ESTIMATES The impression of the economy of the Chinese Mainland an intelligent but busy reader would get from reading the Assessment would be the following: The economy of the Chinese Mainland is now capable of simultaneously meeting requirements of feeding its population, modernizing its military force, and expanding its civilian economic base. (Assessment, p. XIV.) During the post-war period, the economic growth of the Chinese Mainland "has been strong but erratic.” (Assessment, p. 1.) “The image of China as a desperately poor nation with most of its people living in misery and degradation is an image of the past.” (Assessment, p. 6.) At the start of 1972, the Chinese Mainland "is by no means an ordinary less-developed country. No run of the mill LDC could boast of the following achievements: The feeding and clothing of an estimated 865 million people; the detonation of 13 nuclear devices; the launching of two space satellites (Assessment, p: 6.) "In the early 1970's China almost certainly will be widening its lead over the ordinary less-developed countries and yet at the same time it may be falling further behind the dynamic industrial nations of Europe and, of course, Japan.” (Assessment, p. 10)
Both in the Summary and in the text, temporary setbacks and partial failures of the Chinese economy have been mentioned; but they have not been given sufficient weight to prevent the general reader to gain the kind of impressions from the text discussions and conclusions mentioned above.
The estimates presented in the Assessment clearly indicate that the economy of the Chinese Mainland was not doing well as recently as in 1970; but these indications are either not explicitly brought out in the discussion or are relegated in small print to appendices which only the specialists of the Chinese economy would be likely to read.
The most important conclusions one would get from a careful reading of the estimates and statistics given in the Assessment are that the Chinese people on the Mainland were fed less well in 1970 than in 1957,1 and that it is not certain that they are better clothed in 1970 than in 1957. 1. Per capita food consumption in 1970 was only roughly 94 percent of that in 1957.
One can easily calculate from the estimates given in Table 4, p. 46 of the Assessment that per capita food production in 1970 was only 90 percent of that in 1957.2 However, the export balance in foodstuffs was smaller in 1970 than in 1957.3 After correction is made for the change in the trade balance in foodstuffs, per capita food consumption was about six percent smaller in 1970 than in 1957.4 According to the preliminary estimate given in the Assessment (Table 4, p. 46.), food production remained the same in 1971 as in 1970 while population increased by perhaps another 2.3 percent. Thus, per capita consumption of food worsened again from 1970 to 1971.
The six percent reduction in per capita food consumption in 1970 5 from the 1957 level is a very serious matter indeed. The food production index in the Assessment was estimated on the basis of grain crops which were assumed to account for 85 percent of all food production. The 1957 per capita consumption of grain crops was none too high, according to the Communists' own figures. The daily per capita calorie intakes derived from grain corps, as implied in the Communist data, were only 1833 for 1957.6 The hardship caused by a reduction of six percent in 1970 from this low 1957 level is not difficult to imagine.? After saying that “The quality, variety and availability of food gradually improved” during 1970–71 in the text of his paper, 8 Mr. Ashbrook finally says in fine print in Appendix C that “Whereas the cumulative impact of the claimed improvements would have meant a substantial rise in well-being over the past years, other evidence shows that the per capita vailability of food and the level of rations is roughly the same in early 1972 as it was 15 years earlier in 1957.” 9
1 1957 is used as the initial year of the comparison because, by 1957, Chinese Communist statistics had gained a degree of respectabiity which was soon lost during the Great Leap Years immediately following. Most of the indices given in the Assessment use 1957 as the base year, perhaps for the same reason.
The food production index for 1970 is 117.57 with 1957 =100. The population figures are given at 6419. and 836 respectively for 1957 and 1970. It follows that (117.57/836)/(100/641.9) =0.90.
3 The export balance of foodstuffs in 1970 was about 210 million U.S. dollars (see Current Scene, February 7, 1972), and it was about 1.56 billion 1952 yuan in 1957 (see Liu, T. C. and Yeh, K. C., The Economy of the Chinese Mainland: National Income and Economic Development, 1933–1959, 1965, Princeton, Table 79, p. 246.)
4. Following the method used in the Assessment, grain represented 85 percent of the food production. Valuing the food production at constant 1952 yuan will result in the same index numbers of food production for 1957 and 1970 as those given in Table 4, p. 46, of the Assessment. Subtracting the food export balances from the values of food production of the 2 years and then dividing by their respective population figures, per capita food consumption figures for the 2 years in constant 1952 prices were obtained. The same ratio of 100 to 94 for 1957 to 1970 would be obtained if the computation were done with other constant price weight provided the export balances are converted to the same currency unit properly.
5 Neglecting the worse situation in 1971, since the estimated food supply given in the Assessment for that year is only preliminary.
6 Liu, T. C. and Yeh, K. C., The Economy of the Chinese Mainland: National Income and Economic Development, 1933–1959, p. 52.
7 According to the estimate of Buck, the per capita calorie intake from grain crops in China before the Sino-Japanese War was 2309. See Buck, J. L., Land Utilization in China, Vol. 1, p. 407.
8 Ashbrook, A. G., Jr., "China: Economic Policy and Economic Results, 1949-71”, the Assessment, p. 35. • Ashbrook, ibid., p. 50.
If, by his own estimate, per capita food production has declined by more than ten percent during the same period of time,10 how could the level of rations be roughly the same in 1972 as in 1957? 2. It is not certain that per capita consumption of clothing was better in 1970 than in 1957
From the data given in the Assessment (Table B-1, p. 83 and Table 4, p. 46.), it can be calculated easily that per capita production of cotton cloth, the main textile material used in China for all seasons, 11 increased by only fourteen percent from 1957 to 1970, or about one percent per year.12 Even by 1970, however, per capita production of cotton cloth was only about nine meters (or a little more than nine yeards a year per person). A great deal of cotton cloth was exported, and not much was imported.13 Per capita consumption of cotton cloth, therefore, could not exceed nine yards per person per year for all purposes (clothing, bedding, etc.), a rather small amount.
What is much worse, is the supply of cotton för padding winter clothing and blankets (the main winter clothing and blankets for most Chinese being cotton padded). As shown in the Assessment, (Table 4, pp. 46–47.) cotton production remained at 1.6 to 1.7 million metric tons in 1970–71, practically the same as in 1957.14 Per capita production of cotton declined by 18 percent from 1957 to 1970; and by 1970 each person had at most only 4.4 pounds of cotton to pad new winter clothing and balnkets or mend his old winter clothing and blankets, whereas in 1957 a person had at most 5.5 pounds per year for such purposes.15
What can one say about the standard of clothing in 1970 as compared with that in 1957? Not much without the data necessary for doing a detailed study of foreign trade in clothing, except that one may probably observe somewhat newer and a greater variety of cotton clothing in the cities, while people have a little less warm clothing in the winter in rural areas and more remote cities. But in the country as a whole, the standard of clothing in 1970 must be very low if the per capita production of cotton cloth and cotton were as low as about nine yards and 4.4 pounds respectively. 3. Partial traveler observations are not representative
Since most food and clothing (including cotton for padding winter clothing and blankets) are the most important consumption items, one is compelled to conclude that, according to the estimates given in the Assessment, the Communist regime on the Chinese Mainland has failed to provide adequate food and clothing for its people over a long period of time. The impressions a traveler may get by visiting a few leading cities and show Communes, where the workers are paid better than the rest of the population, cannot be taken as representing the country as a whole. The living conditions in a few provincial capitals may even be a great deal better than the villages and small cities which no foreign visitors could observe. Partial pictures of the country gained by visitors cannot argue with the statistical estimates made for the country as a whole. The state of food and clothing consumption implied in the estimates given in the Assessment appears to contradict all the statements on living conditions quoted from the text of the Assessment at the beginning of Section (1) of this statement. 4. The growth of the economy is erratic but not strong
It is said that during the postwar period the economic growth of the Chinese Mainland “has been strong but erratic.” (Assessment, p. 6) The growth on the Mainland has certainly been erratic; during the postwar years no other nation has experienced a drop of GNP in three consecutive years, 1958-61, by 24 percent as the Chinese Mainland did, according to the estimate given in the Assessment (Table 4, pp. 46–47). GNP again dropped in two consecutive years from 1966 to 1968. But the growth has not been strong. According to the estimates given in the Assessment (Table 4, pp. 46–47), during the thirteen years 1957–70, the average annual growth rates of GNP and per capita GNP are, respectively, only 3.1 and 1.0 percent. As we shall see, these growth rates are among the lowest in Asia for the same period of time and can in no sense be described as "strong.” Except in detonation of nuclear devices and other war engines, it is difficult to see in what respect the Chinese Mainland“ will widen its lead over the ordinary less-developed countries” (Assessment, p. 6), because we failed to find where the present“lead”'is.
10 Per capita food consumption declined by 6 percent after the production figures are corrected for trade balances.
11 Woolen and silk materials are beyond the means of most Chinese.
13 The output of cotton cloth was estimated at 5,050 and 7,500 million linear meters respectively for 1957 and 1970 in Table B-1, p. 83. Divided by the population figures of 641.9 and 836 million people for the respective years, the per capita output of cotton cloth were 7.87 and 8.97 meters respectively, an increase of 14 percent over the 13 years or about 1 percent per year.
13 Foreign trade data on cotton cloth for 1970 are not yet available to me.
produced cotton was used to make cotton cloth which has been discussed. The only comparison of the Chinese Mainland with other developing nations one can find in the Assessment is again in fine print in an appendix to the first chapter (p. 43). This has to do with per capita gross national product in U.S. dollars in 1970, as follows: The Republic of China in Taiwan.
(11) SOME LIMITED INTERNATIONAL COMPARISONS It is clear from the above that the Chinese people on the Mainland have suffered a reduction in per capita food consumption and may have foregone improvement in clothing for the purpose of a more rapid industrialization. A comparison of the growth of industrial production of several Asian developing nations can throw light on the important question of whether the Chinese Communist system has achieved outstanding success. It is disappointing that no such comparison can be found in the Assessment.
Within the limited time at my disposal, I have found data for six Asian developing countries and regions for the period 1957 to 1969 or 1970, as shown in Table 1. The Chinese Mainland ranked number five, just below India and not substantially higher than the Philippines. 16
One often hears the argument that many of the countries received considerable amounts of foreign aid, whereas the Chinese Mainland was a "do-it-yourself” case. This is not exactly correct. In fact, the Chinese Mainland got a greater head start in terms of systematic and basic technical and financial aid from Soviet Russia than some of the other nations in Table 1 got from other countries. This aid was mainly in the form of whole plants, intended as the basis for rapid industrialization. In the summer of 1960, the roughly 1,200 Russian technicians who were in China returned to Russia; but at this time, about half of the scheduled 300 Soviet-aid projects were completed.17 Table 1.-Index of industrial production in 1969 or 1970
(1957=100] Republic of Korea (1970)
702 Republic of China (in Taiwan) (1970).
600 Pakistan (1969)
307 India (1970)
218 Chinese Mainland (1970)
214 Philippines (1969) -
191 Sources: For the Chinese Mainland, the Assessment (Table 4, pp. 46-47). The figures are taken from line 12, representing the midpoints of a range of estimates. The other data are from the Statistical Yearbook, 1970, the United Nations and the Monthly Bulletin of Statistics, May 1972, the United Nations.
Moreover, apart from Japan, no other nation in Asia had as great an industrial base as Manchuria; and we are comparing the industrial development on the Chinese Mainland with other countries since 1957, when the great Manchurian industrial base had long been restored and greatly expanded with Russian aid.
$350 Chinese Mainland..
100 The per capita GNP of the Chinese Mainland is quite obviously low. However, the data on recent rates of growth of GNP and per capita GNP (in constant prices) over 1957-70 would provide one with some idea of the economic potential of the Chinese Mainland as compared with other countries and regʻons with different kinds of economic systems. Such a comparison is not given in the Assessment. Data for as recent a year as 1970 are difficult to get. Among the five countries and regions for which we have the data to compute the rates, the Chinese Mainland ranks the lowest. (See Table 2.)
16 The index number for the Philippines is for 1969; that for 1970 may be higher. 17 See the Assessment, p. 21.
(III) SOME COMMENTS ON THE METHOD USED TO ESTIMATE GNP IN THE
The estimate of GNP given in the Assessment was derived essentially as follows:
First, an index of GNP in real terms was derived, with 1957 as 100, by extrapolating a detailed estimate of GNP for 1957 (at factor cost with value added by origin) on an index of agricultural production and an index of industrial production. A food index was derived first on the assumption that grain represented 85 percent of the value of food production (except the three disaster years 1959–61 when it represented 90 percent). Cotton production was taken to represent nonfood production. An index of agricultural production was then derived by combining the index of food and nonfood indices with 85 and 15 as the respective weights. The midpoints of the industrial index given in the paper by Robert M. Field on “Chinese Industrial Development 1949-70” (Assessment, Table 1, p. 63.) are taken as the industrial index during this period.
A detailed estimate of the GNP at factor cost by industrial origin yields a 1957 total of 99.3 billion 1957 yuan, with agricultural value added at 47.5 billion yuan, industrial value added at 17.6 billion yuan, and the value added by the rest of the economy at 34.2 billion. On the assumption that the rest of the economy supported the two sectors evenly, i.e., 17.1 billion yuan for each of the two major sectors (thus the support of industrial activity was assumed to be considerably greater per unit of industrial activity than of agricultural activity), the ratio of the industrial “constellation” of economic activity to that generated by agriculture is roughly two to one [(47.5 + 17.1)/(17.6 + 17.1) 64.6/34.7 1.86).
The GNP index is then obtained by combining the indices of industrial and agricultural production with respective weights of two and one.
For India, the time period is from 1960–61 to 1969–70. 2 This is the rate of growth of per capita net national product.
Source: Since the 1970 and 1971 editions of the National Income Accounts Statistics of the United Nations have not yet been published, I had to get the 1970 data from colleagues at Cornell and other places who have access to national resources.
Second, the Chinese GNP for 1955 is estimated at U.S. $48.19 billion. This figure was obtained by the familiar method of calculating the 1955 Chinese and U.S. GNP in both yuan and dollar prices; the Chinese GNP was found to be in the range of 6.67 percent to 21.48 percent of the U.S. GNP (or $26.55 billion to $87.48 billion). On the basis of the U.S. GNP price deflator index numbers for 1955 and 1970 and the index of GNP obtained above, the series of Chinese GNP in 1970 U.S. dollars was then obtained.
Third, the estimate of GNP by end use presented is merely expert judgment, and is not in any sense an estimate. (Assessment, p. 45.)
The author and his collaborators have the admiration and sympathy of one who has gone through equally painful processes to try to derive some indication of the order of magnitudes of the important economic aggregates of the Chinese Mainland. It is much easier to criticize the weaknesses of the estimates than to make suggestions for improving them, or to make better alternative estimates. The subject matter, however, is so vital that it is important to point out the major weaknesses of the estimate.
1. The much more detailed data released by the Communists for the period 1952–57 indicated quite clearly that there had been significant structural changes during 1952–57, that some of the structural changes had trends which were likely to continue, and that there had been increasing interdependency between agriculture, industry and the other sectors of the economy. The greatest weakness of the estimate given in the Assessment is the assumption that the ratio of the industrial and agricultural “constellations” of economic activity remained at the approximate ratio of 1957, i.e., two to one, throughout the long period 1949–70.