does exist in education, and higher education moves along a distinctly different track from the pre-Cultural Revolution period. Certain of the changes are responsive to at least the short-term needs of the economy:

The problem of illiteracy is being attacked on a broader front than ever before; this is an economy where peasants have to read instructions on fertilizer bags and workers have to read signs on machinery.

The economy must benefit strongly from the "investment in human capital" represented by practical courses in cultivating cotton and raising pigs, in running a lathe and operating an oil derrick, in commune bookkeeping, and in preventive rural medicine.

The economy benefits when the brightest lad or lass in a rural village is selected to fill the annual slot in a national or provincial college; the older system was, as Mao said, a class system.

The emphasis on practical work experience as a college entry requirement, the practical slant of the new curriculum and the new textbooks, and the general dovetailing of educational and productive needs are all pluses for the economy.

Even the shortening of undergraduate and graduate courses and the narrowing of education at the top will benefit the economy if the forgone classroom hours were, as Mao charged, merely a prolongation of isolation from useful work.

Over the long run, the reformed system does not seem capable of supplying adequate replacements for the several hundred top-drawer scientists, now elderly, who received their advanced training in the United States, Germany, the United Kingdom, and other centers of advanced science. The Government will find itself more and more pressed to restore some of the elitist aspects of the old system if it is to meet the more difficult technological challenges of the future. In the meantime, China still retains much of "the advantage of being behind," that is, the opportunity to benefit from high-technology methods and products on which others have paid the cost of pioneering.

XII. PROSPECTS: TECHNOCRATIC FUTURE

One of the most striking paragraphs in Chou's speech to the Fourth National People's Congress dealt with the future prospects for the economy: 12

On Chairman Mao's instructions, it was suggested in the report on the work of the Government to the 3d National People's Congress that we might envisage the development of our national economy in two stages beginning from the third 5-year plan: The first stage is to build an independent and relatively comprehensive industrial and economic system in 15 years, that is before 1980; the second stage is to accomplish the comprehensive modernization of agriculture, industry, national defense and science and technology before the end of the century, so that our national economy will be advancing in the front ranks of the world.

The economic progress of the People's Republic in the first quarter of a century has been a mixture of palpable successes, partial failures, and unfinished tasks. The economy has showed undeniable strength in its ability to feed a huge population, expand industrial capacity

12 FBIS-CHI-75-13, Jan. 20, 1975, D23.

and output, and simultaneously maintain a powerful military defense. At the same time, progress has been highly erratic because of political turbulence.

Near-term economic prospects, i.e., for the period of the new Fifth Five-Year Plan (1976-80), are comparatively easy to assess. We know the agricultural and capital plant now in place, and we know the general thrust of plans for the expansion of productive capacity. Agricultural output will increase as greater inputs come from industry, especially when the new foreign fertilizer plants are commissioned toward the end of the plan period. Weather will lose some of its force as the major factor determining annual output, since massive effort continues to go into water control projects. As agricultural technology improves, the blending of the productive factors will increase in importance, for example, the provision of the proper soil and moisture conditions for new seed varieties.

In industry, expansion of output in steel, petrochemical, and other priority branches will be determined largely by new plants already under construction. Industrial growth rates will be held down by continuing strains on capacity in basic industries. The high catchup rates of the years following the Cultural Revolution will not be repeated in 1976-80.

As for foreign trade, the momentum gained in exploring for oil, developing new oil fields, and expanding pipeline and port facilities will maintain oil's top billing as the fastest growing major export. At the same time, short-term prospects are poor for sales of China's traditional exports because of the weakening of demand in the recession-hit industrial economies. Trade and other financial dealings with Hong Kong will continue to yield net annual earnings of more than a billion dollars in hard currency, assuming no great change in the political status of the Crown Colony. Peking almost certainly will move cautiously in expanding its debt with foreign suppliers. As for relations with the U.S.S.R., China has no compelling economic reason for welcoming a rapprochement with its former Communist partner.

China, as argued above, has the administrative muscle, the organizational capacity, and the scientific know-how to rapidly curb population growth. However, this program almost certainly will not get the sustained priority over these 5 years necessary to obtain this result. The reasoning here is that a host of other problems (many attendant upon the fading from power of Mao and Chou) will take up the time of the leadership.

In general, the roots of the PRC economic system-as was demonstrated during the Cultural Revolution-are so deep that only a political cataclysm could dislodge the institutions and practices of everyday economic life. 13

Among the critical problems of the transition period is the maintenance of productive incentive and morale. Although most people have been benefiting from gradual improvements in living standards, the absolute level remains austere. As is often the case, the most discontent seems to come from not the poorest groups but comparatively

13 For an authoritative survey of the whole transitional problem-political, economic. military-see A. Doak Barnett, Uncertain Passage: China's Transition to the Post-Mao Era, Washington, Brookings, 1974.

well-off groups who want more rapid improvements. In 1974, for example, spot shortages of consumer goods caused slowdowns and even strikes among industrial workers. Of greater long-run importance is the morale of the urban middle-school graduates, sent to the countryside for a lifetime of service to Chairman Mao. Also of importance to morale is the possibility that hard-liners may come to power and crack down on the private plots and private trade in the countryside. The possibilities fan out rapidly beyond 1980. In some respects China is peculiarly well-situated for the long haul; the People's Republic:

has the natural resources of a superpower with the consumption standards of an LDC;

has instituted tremendous programs of forestation and water control, which ought to ease the Malthusian pressure; and

has encouraged the rank and file to maintain the timehonored Chinese practices of (a) living frugally, (b) recycling human and animal wastes, (c) making good use of discarded equipment and, in general, (d) squeezing the most possible out of limited resources. In other respects, China may run into trouble; the People's Republic:

will find it much harder to run a Soviet-style economy when the product mix becomes more complex and the priorities more difficult to sort out; the Chinese economy today does not require as tight gearing as the Soviet economy and hence has not faced some of the problems fundamental to the system; and

may be unable, without the unifying presence of Mao, to keep the spirit of revolutionary sacrifice alive or, alternatively, may lack the resources to make village life palatable to a new educated generation.

Even if the People's Republic succeeds, and it almost surely will, in further outdistancing most other large LDC's by the year 2000, it can hardly make up the enormous gap between itself and the countries in the front ranks. These countries, like Japan and the leading Western nations, could until the last 18 months have been expected to march rapidly ahead from their own advanced position. Now they are beset with the triple problems of recession, inflation, and huge oil bills, headaches which the Chinese leadership has been spared. Regardless of the difficulties of these other nations, however, Peking will need much more time to achieve industrial parity.

As a final word of caution, the economic progress of the People's Republic has been interrupted in the first 25 years by two prolonged periods of political turmoil. Wide differences in approach to economic development persist within the leadership and may be the cause of intensified conflict during the transitional period. The observer thus should not expect economic progress over the next 25 years to proceed in steady straight-line fashion.

51-174 O-75-4

APPENDIX A

UPDATING OF SIMPLIFIED GNP ACCOUNTS

The dollar estimates of the gross national product (GNP) of the People's Republic of China, 1949-74, presented in this paper were calculated using the same simplified methodology of the author's earlier paper." Briefly, this methodology involves (a) constructing an index of aggregate physical output by combining an index of agricultural production with Field's index of industrial output,15 and (b) converting this index series to a series in U.S. dollars through use of an estimated value of $48.19 billion for Chinese GNP in 1955. The original JEC-72 series was in 1970 U.S. dollars; the present series is in 1973 dollars; the ratio of the GNP price deflator for 1973 to the deflator for 1955 is 1.6983.10

1-2. Grain (million metric tons).
3. Grain index (1957-100)..
4. Food production index (1957=
100)..

5. Cotton (million metric tons).
6. Nonfood production index
(1957-100)..

7. Food index times 0.85.

8. Nonfood index times 0.15.
9. Agricultural production index
(1957-100).

10. Agricultural index times 2. 11-12. Industrial production index (1957 = 100).

13. Line 10 plus line 12.
14. GNP index (1957-100).

15. GNP (billion 1973 U.S. dollars).
16. Population, midyear (million
persons).

17. Per capita GNP (1973 U.S. dollars)..

18. Index of per capita GNP (1957=100).

117.27 108.98 106.06 80.55 90.49 98.23 109.27 122.46 129.33

See footnotes at end of table, p. 43.

14 For a complete description of the methodology, See Ashbrook, JEC-72, pp. 41-47.

15 For the latest computation of this industrial index, see Robert Michael Field's paper in this volume.

18 Economic Report of the President, February 1975. Washington. Government Printing Office, table C-3, p. 252. The value in table 5 of the present paper of $81.84 billion for GNP in 1955 was found by multiplying $48.19 by 1.6983.

TABLE 5.-CHINA: LINE ITEMS IN CALCULATION OF GNP, 1949-74 1—Continued

7. Food index times 0.85.

8. Nonfood index times 0.15.

9. Agricultural production index (1957: 100).

10. Agricultural index times 2. 11-12. Industrial production index (1957: 100).

13. Line 10 plus line 12.

14. GNP index (1957 = 100).

123.49 115.66 117.96 129.02 133.65 129.96 138.30
246.98 231.32 235.91 258.04 267.30 259.92 276.60

201.90 222.10 264.62 313.33 341.15 370.73 415.80 448.88 453.42 500.53 571.37 608.45 630.65 692.40 149.63 151.14 166.84 190.46 202.82 210.22 230.80 15. GNP (billion 1973 U.S. dollars). 140.51 141.93 156.68 178.86 190.47 197.41 216.75 16. Population, midyear (million persons). 780.5 798.4 817.2 836.7 856.9 877.5 898.6 17. Per capita GNP (1973 U.S. dollars).. 180.03 177.77 191.73 213.77 222.27 224.97 18. Index of per capita GNP (1957-100). 122.86 121.32 130.85 145.89 151.69 153.53

140.60 281.20

432.27

713.47 237.82

223.34

920.1

241.20

242.73

164.61

165.66

1 A brief explanation of the methodology and assumptions used in deriving this table is presented in App. A of the present paper; a complete explanation is presented in the author's previous paper (Ashbrook, JEC-72, pp. 41-47). The index number series and the GNP series of this table are presented with 2 extra digits to facilitate intermediate calculations; the extra digits are not themselves significant digits; similarly, the population figures are presented to 4 digits, even though precise data on population are not available.

2 The food production index deviates from the grain index only in the three disaster years, 1959-61. It was assumed that grain represented 85 percent of the value of food production in all years except for these three, when it represented 90 percent.

Comparison of the Old and New Calculations

Table 5 presents line items that represent successive steps in the calculations as set forth in detail in the earlier paper. In the original calculation, the grain estimate for several years was presented as a range in line 1, and the midpoints were presented in line 2; in the present version, the grain estimates are singlevalued estimates for all years; hence lines 1 and 2 are identical. In similar fashion, the industrial production index for several years was presented originally as a range in line 11, and the midpoints were presented in line 12; in the present version, the industrial index estimates are single-valued estimates for all years; hence lines 11 and 12 are identical.

The results of the new computations, in addition to bringing 3 new years into the mold, are (a) to raise the tilt of the GNP curve after 1957, because of higher estimates for grain output starting in 1962 and for industrial production starting in 1958, (b) to introduce a 14 percent inflation element in the monetary value of GNP because of the change from 1970 dollars to 1973 dollars, but (c) to leave the profile of the curve essentially undisturbed. The average rates of growth of GNP and its two components in the new computations (JEC-75) compared with the old computations (JEC-72) are as follows:

The new rates for 1950-57 (1949 base) are little changed; the new rates for 1958-71 (1957 base) are appreciably higher. The higher rate for the agricultural component is more satisfactory if, as is done in this paper, a high population growth rate of 2.1 to 2.2 percent is used; the combination of a high population growth rate with a low agricultural growth rate in the JEC-72 paper was unsatisfactory. The rise in the industrial production estimate primarily stems from the inclusion of several new series for fast-growing machinery items in the Field index.