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CONTENTS

ECONOMIC DEVELOPMENTS IN MAINLAND CHINA

TUESDAY, JUNE 13, 1972

CONGRESS OF THE UNITED STATES,
JOINT ECONOMIC COMMITTEE,

Washington, D.C. The committee met, pursuant to notice, at 10 a.m., in room S-407, the Capitol Building, Hon. William Proxmire (chairman of the committee) presiding.

Present: Senators Proxmire and Pearson; and Representative Boggs.

Also present: John R. Stark, executive director; Loughlin F. McHugh, senior economist; John R. Karlik and Courtenay M. Slater, economists; Lucy A. Falcone, research economist; George D. Krumbhaar, Jr., and Walter B. Laessig, minority counsels; and Leslie J. Bander, minority economist.

OPENING STATEMENT OF CHAIRMAN PROXMIRE Chairman PROXMIRE. The committee will come to order.

This morning's hearing is a symbol of this committee's long and continuous interest in the economy of Communist China. The committee's 1967 study of China served to illuminate a subject that had been shrouded in mystery.

Relations between the United States and China are in the process of dramatic change. The recent invitations to the President and to the majority and minority leaders of the Senate present striking evidence that these relations are entering a more open and, hopefully, a more constructive phase which can benefit both nations.

By way of background, I should point out that our committee has been urged to update our earlier hearings on the Chinese economy of 4 or 5 years ago. Accordingly, we released a second economic assessment of China just last month. This study was intended primarily to bring to light information and analyses which had not previously been available to the public, to the press, or to scholars. It has been enthusiastically received by these groups, and now we are undertaking these hearings to permit scholars and experts to give the benefit of their views to us and to the public.

We intend to hear from a number of outstanding scholars in the field.

We are fortunate in being able to start our hearings with testimony from our distinguished majority leader, Senator Mansfield, and minority leader Senator Scott, who just completed a historic trip to mainland China as representatives of the U.S. Senate.

Senator Mansfield is an outstanding expert on the Far East. As a professor, he taught Far Eastern history; he traveled in China many

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years ago, and he has consistently maintained a deep interest in our relations with this most important nation.

Senator Mansfield, I can't tell you how delighted we are to welcome you today. We have a number of questions for you, but I understand you have a statement of your own.

Senator Scott, I understand, will be here a little bit later.

We have adopted a committee policy, which I am sure you are familiar with, of limiting initial oral statements to 10 minutes in order to provide as much time for colloquy as possible, and I am sure that, knowing your emphasis on egalitarianism in the Senate, you would want to be treated just exactly like any other witness or any other Senator, so we will run our timer and let you know when the 10 minutes are up.

You go right ahead.

STATEMENT OF HON. MIKE MANSFIELD, A U.S. SENATOR FROM THE

STATE OF MONTANA, ACCOMPANIED BY NORVILL JONES, PROFESSIONAL STAFF, COMMITTEE ON FOREIGN RELATIONS

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Senator MANSFIELD. Mr. Chairman, I hope that the distinguished chairman of this committee will recognize that there are some exceptions to some rules and that, if possible, I would like to go a little more than 10 minutes, which is something I usually don't ask, because I have spent some time on this speech, but I will take my chances.

Chairman ProXMIRE. Without objection, that will certainly be done. When the buzzer goes off, you go right ahead; we will just let you know, and we assume you are answering a question. [Laughter.]

Senator MANSFIELD. Mr. Chairman, I appreciate being invited to participate in these hearings on the Chinese economy. Your committee is to be commended for its work on this timely subject. These hearings can make a significant contribution to public knowledge about developments in China's economy and social system.

I do not profess to be either an economist or an expert on China. What I will say is based on recent personal observations over a period of 16 days in six different Chinese cities and the surrounding countryside, many conversations, and an interest in Asian affairs dating from my service as a Pfc. in the Marines in China in the 1920's.

As a preface to my observations, I want to urge that the committee take with a grain of salt any so-called estimates it may receive about China's gross national product. On the basis of my observations, I would say that our concept of GNP has little, if any, practical application to China. Any general use of GNP as a gage of the state of China's economy could add to the already seriously distorted view we have of that country.

There is no effective way to measure the gross national product and little meaning in the measurement in a country with a socialized economy that is based largely on human labor. While production is stressed in China, the society does not encourage consumption of goods and services as a stimulant to production. There is, for example, no advertising of products of any kind in China. How can one equate, in Western value terms, moreover, the building of dikes, aqueducts, bridges, factories, housing, recreational facilities, and so on, across the spectrum of economic development, all created primarily by human

labor, much of it mobilized on a volunteer basis? Where does the volunteer labor of tens of millions in massive public health programs show in the gross national product?

No visitor of 16 days can expect to fathom the mysteries of that vast and complicated land. No man who has spent his life in that country could expect to achieve that goal.

Any outsider who looks at China sees a distorted picture which, at best, can be tempered by perspective. An observer, for example, can see the bottle, which is China, as half full or as half empty. If China's progress and its system are judged against living standards in this Nation-by the number of cars, television sets, telephones, or plumbing fixtures—the bottle will be half empty, if that.

But the new China is best measured as the Chinese themselves measure it, on the basis of China's past or against the conditions prevailing in other nations of Asia. I have seen the old China, and I have traveled widely throughout Asia. In my view, China's half-filled bottle is filling rapidly.

I would sum up the status of China's social and economic system in three words: It is working. The contrast with the China of the past that I remembered is nothing short of remarkable. Today the people are well fed, well clothed, and, from all outward signs, satisfied. The farms, or communes, appear to be prolific and well managed; much new land is being brought into cultivation and the ravages of nature are controlled; the streets and sidewalks of the cities are clean, the parks meticulously tended, the shops well stocked with food, clothing and other consumer items; policemen are evident only for controlling traffic; military or other armed personnel are conspicuous by their absence. The housing ranges from adequate to marginal, all at low rents; conspicuously absent are the hundreds of thousands of homeless who were to be seen a few decades ago in the streets and on the waterways of China's cities and can still be seen elsewhere in Asia. There is no visible evidence of begging, drug addiction, alcoholism, or delinquency.

The people appear to be well motivated and give the impression of applying themselves vigorously in whatever tasks they are pursuing. Women and men work side by side in the field and the factories. The disparity between the factory worker and the peasant is closing, and the standard of living of both is rising.

China's crops have been good for the last several years, I think, for most of the last decade, due not only to favorable weather but also to intensive efforts, the increased use of fertilizer—both human and synthetic—the spread of scientific methods, more irrigation, and the bringing of new lands into production. China is now a net exporter of foodstuffs.

The wage of the average factory worker in Peking is the equivalent of about $22 a month; that of his wife will be about the same or higher; their children are cared for without charge at a nursery or in public schools; rent takes about 5 percent or less of income; basic food prices are low. For all practical purposes, medical care and recreational facilities are free, and the family probably has a savings account in the factory bank. Nearly everyone rides a bicycle or a bus. Cooking oils, rice, wheat, and cotton cloth—but not synthetics—are still rationed, but the allotments are said to be ample and the system designed more to assure fair distribution than to cope with shortages.

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