The new calculations yield the following average annual rates of growth for the 17-year period, 1958-74 (1957 base):

17

These last calculations are generally consistent with long-term trends implicit in Peking's pattern of priorities and confirmed in qualitative fashion by China watchers. First, agricultural output has been growing approximately in line with population. Long-term improvements in food consumption have been gradual. They have taken the form, not of per capita increases in grain production, but rather of improvements in quality, variety, and availability of many nongrain foods. Many of these small betterments are based on the private plots and private livestock; private activity is not taken account of in the agricultural component of the present index. The agricultural numbers are consistent with Peking's concern to raise agriculture to a new plateau in the 1980's in order to handle bad crop years without recourse to large-scale imports.

Second, the long-term rate of growth of industrial production is closer to the 9 percent of the past 17 years than the higher percentage gains calculated from the small bases of the first decade. A rate of 9 percent is remarkable enough, resulting in a doubling of output every 8 years. This rate will edge downward to judge from problems encountered in 1974, when the leadership began to face up to the need for a large new round of investment in basic industrial branches. Third, the growth in per capita GNP of 3.0 percent reflects the existence of considerable growth potential in the economy, given the effective restraints on the growth of consumption per capita. The absolute per capita GNP figure for 1974 of $240 in this paper is 60 percent above the $150 figure for 1971 in the earlier paper. This results from the shrinkage of the dollar measuring rod, the upward revision of the estimates of agricultural and industrial output used in computing GNP, and the passing of 3 years of moderate economic policy and solid economic growth. The current $240 should be compared to the figure of about $100 in the early 1950's (see table 5). China remains a big poor country— but it is a country that is justifiably proud of its achievements in capital construction and its mastery of modern weapons. China is sui generis, by no means an ordinary LDC, yet not a modern industrial nation either.

Criticisms of the GNP Methodology

Three major reservations on the procedures and results of the methodology are: 18 (1) The sparse coverage of individual commodities; in the agricultural component, only grains and cotton are used, and no distinction is made among individual grains, which may vary widely in economic significance per ton; soybeans, pork, poultry, sugar, and ramie and hemp crops are among the important omissions; in the industrial component, the coverage of the Field index has been raised from 11 major items (JEC-72) to 27 major items, with the coverage of machine building being most strongly affected; with this extension of coverage in industry, the sparse coverage in agriculture remains as the more important issue; the focus on basic agricultural and industrial items at the expense of faster growing nonbasic items may result in an understating of GNP growth. (2) The subsuming of all sectoral economic activity under the two grand categoris of agriculture-related and industry-related activity; as the Chinese economy takes on a larger product mix with a growing proportion of technologically advanced products, the relation of transportation, communication, finance, trade, health, educational, and Government services to the material sectors will change;

17 For another estimate of China's national output, see Shigeru Ishikawa. "Prospects of the Chinese Economy: Trends and Cycles," Pacific Community, vol. 4, No. 2, January 1973, pp. 250-264.

18 This discussion depends heavily on a very helpful critique of the methodology by Dr. K. C. Yeh of the Economics Department of the Rand Corp. The author was unable to follow up on some of Dr. Yeh's valuable suggestions. In many cases. improvements must wait upon the receipt and analysis of more detailed information from the PRC.

because of certain unique qualities of the Chinese economy-such as the absence of a huge rural-to-urban migration--the study of trends in relationships among the various sectors in the PRC may turn up a few surprises; even conceding that the PRC is not moving toward an affluent society, this lumping of sectors may result in an understating of GNP growth.

(3) The use of final output rather than value-added in the agricultural component; because of the sharp upward trend in increases in inputs from the industrial sector into agriculture, the failure to use value-added may result in an overstating of GNP growth; in constructing the industrial index, Field uses wage-bill weights as an approximation for value-added.

A Summing Up

The GNP estimates obtained by use of this simplified methodology have been updated from the JEC-72 paper without any change in the methodology itself. The estimates have been improved by the incorporation of more consistent grain estimates and by the broadening of the industrial component (Field's index). The results, while still rough, seem reasonable. Specifically, the profile of GNP over time, the interrelationships of growth rates (e.g., population versus agricultural production), and the absolute level of per capita GNP appear consistent with the bits and pieces of economic information available from various sources. This simplified methodology will no longer be appropriate when and if the Chinese Government chooses to release the economic data now available within its revivified statistical system.

APPENDIX B

SOURCES OF INFORMATION ON THE CHINESE ECONOMY

In his 1972 article, the author suggested that the flow of economic information from the People's Republic of China would "increase substantially over the next few years after the statistical drought of the 1960's." 19 Three years later, in early 1975, the Chinese Government has only slightly relaxed its tight hold on national production figures. A large statistical apparatus is in place, restored to good bureaucratic health after the disruptions of the Cultural Revolution. Premier Chou En-lai, however, has pushed aside inquiries about the release of more economic data by saying the system needs more seasoning before detailed figures can be made public.

The following notes bring up to date the information in the author's previous account, arranged in the same five categories of information:

(1) Foreign trade data released in varying detail by most of China's trading partners: The level of information from this source remains the same as in 1972. The observer of the Chinese scene continues to draw valuable inferences from analysis of fluctuations in Chinese imports of grain and fertilizer, purchases of machinery and equipment, and exports of manufacturers and raw materials. The growing production and exports of oil are an example of an important trend that has been readily observable through this source.

(2) Economic releases by the Chinese Government: The indispensable reference source for the 1950's, the handbook compiled by the State Statistical Bureau, "Ten Great Years," 20 has faded back in time 3 more years since the previous article. Nothing has replaced it. In retrospect, the handful of national production figures given at the end of 1970 by Chou to the late American author Edgar Snow did not foreshadow the lifting of the statistical blackout. Only fragmentary information has appeared in the Chinese press in 3 years since JEC-72: (a) Sporadic annual production figures for grain, steel, and oil; (b) scattered claims of percentage increases in the national production of coal, electric power, cement, tractors, and other machinery items, often given on the distant bases of 1949, the year of Communist takeover, or 1965, the year preceding the Cultural Revolution; and (c) claims of annual percentage increases in gross industrial production over the preceding year for most of the 29 provincial-level units. These last figures have been successfully reconciled with percentage figures on gross industrial production for all of China by tying the percentages back to the absolute figures published for the 1950's."1

19 See Ashbrook, JEC-72, pp. 49-51.

20 Peking. Foreign Language Press, 1960.

21 Robert Michael Field. Nicholas R. Lardy, John Philip Emerson "A Reconstruction of Gross Value of Industrial Output by Province in the People's Republic of China" (draft of forthcoming article).

At the Fourth National People's Congress in mid-January 1975, Chou included in his "state of the union" address one paragraph on the economic results in 1974. With the exception of some earlier sketchy reports on agriculture output, this paragraph contains practically all the national statistical data released on the year 1974:

22

"We have overfulfilled the third 5-year plan and will successfully fulfill the fourth 5-year plan in 1975. Our country has won good harvests for 13 years running. The total value of agricultural output for 1974 is estimated to be 51 percent higher than that for 1964. This fully demonstrates the superiority of the people's commune. While China's population has increased 60 percent since the liberation of the country, grain output has increased 140 percent and cotton 470 percent. In a country like ours with a population of nearly 800 million, we have succeeded in ensuring the people their basic needs in food and clothing. Gross industrial output for 1974 is estimated to be 190 percent more than 1964, and the output of major products has greatly increased. Steel has increased 120 percent, coal 91 percent, petroleum 650 percent, electric power 200 percent, chemical ferti izer 330 percent, tractors 520 percent, cotton yarn 85 percent and chemical fibres 330 percent. Through our own efforts in these 10 years we have completed 1,100 big and medium-sized projects, successfully carried out hydrogen bomb tests and launched manmade earth satellites. In contrast to the economic turmoil and inflation in the capitalist world, we have maintained a balance between our national revenue and expenditure and contracted no external or internal debts. Prices have remained stable, the people's livelihood has steadily improved and socialist construction has flourished. Reactionaries at home and abroad asserted that the Great Proletarian Cultural Revolution would certainly disrupt the development of our national economy, but facts have now given them a strong rebuttal." (3) Eyewitness reports of refugees and emigrants and of journalists, businessmen, technical people, and other visitors to China: This category has produced the main increase in information on China in the past 3 years. As a result of the opening of relations between the United States and the People's Republic, more than 2,000 Americans have visited China. Among these visitors have been several well-known economists, including Alexander Eckstein (Michigan), John Kenneth Galbraith (Harvard), Wassily Leontief (Harvard), and James Tobin (Yale). These Professors of the Dismal Science have received a wide audience for their reports. Their collective observations have helped to solidify foreign appraisals of the Chinese economy and to fill in details of interest to the economic fraternity. Their findings did not, at least so far as the author can judge, modify any of the generally held views about the physical achievements or the overall condition of the economy. This was not surprising. Several years ago, an academic visitor put it something like this, "If you are greatly taken by surprise by what you see in China, you have not done your homework." Presumably, he was referring to the availability of enough first-rate books, films, and journalistic reports by earlier visitors to form a reasonable impression of what things are like in China. In weighing the reports of visitors, it must be kept in mind that (a) visitors usually are selected by the Chinese Government from people at least mildly sympathetic with the government and (b) they normally see only the showplace cities, factories, and communes and have close contact only with carefully screened people.

(4) Soviet analogies: The economy of the People's Republic has the skeletal structure of the Soviet economy because of the adoption of the Soviet system by the new PRC Government in the 1950's. The structural similarity of the two systems has aided the outside observer in piecing together the Chinese economic picture. The use of Soviet analogies, however, had gone about as far as it was going to go by 1972. In the subsequent years, the Chinese-or is it the Soviets?-have been willing to move away from the Soviet model in a number of pragmatic details. At any rate, this now ranks as a wornout source of information on the Chinese economy.

(5) Scholarly appraisals: The last 3 years have witnessed an increased flow of scholarly books and journal articles on China, stimulated by the greater openness of China to the outside world and the accumulating economic and political strength of the PRC. This interest is heightened by fascination with the fate of the revolution in the period that will follow after Mao and Chou leave the scene.

22 FBIS-CHI-75-13, Jan. 20, 1975, D21.

Summary: For the student of the Chinese economy, particularly the U.S. student, one of the most important gains in information in the past 3 years, has been the on-the-spot observations of Western visitors, including leading American economists. Although the hoped-for lifting of the statistical blackout is yet to come, the generally moderate tone of the Fourth National People's Congress in January 1975 is cause for renewed optimism. Meanwhile, the piecing together of information on the Chinese economy gives varying feelings of confidence about the state of our knowledge of particular economic sectors. We have a good picture of foreign trade flows, a reasonably precise picture of Chinese economic priorities and the general industrial and agricultural situation, and only a hazy picture of the military sector and of details of the annual and 5-year plans. Our appraisal of economic motivation is especially conjectural.

APPENDIX C

THE CHINESE VARIANT OF THE SOVIET ECONOMIC MODEL

The Chinese economy is a variant of the Soviet-style "command economy" that incorporates important features of both traditional Chinese society and the Communist revolution.

Soviet-Style Command Economy

In the 1950's, Sino-Soviet cooperation was at its height and the Chinese were rapidly learning from Soviet engineers and scientists. China adopted the Soviet economic system wholesale, including the following major features:

(a) State ownership of industrial, transportation, and financial facilities of any importance;

(b) Collectivization of agriculture;

(c) Tight centralized control over the division of resources among investment, defense, and consumption and over the allocation of key commodities; (d) Adoption of a development strategy of forced-draft industrialization, under which priority is given to investment and, within investment, to the development of heavy industry;

(e) Setting of growth targets in annual and 5-year economic plans; (f) Establishment of a massive bureaucracy to spell out the details of the plans and to administer the day-by-day operation of the economy;

(g) Organization of Party units at every level to monitor the performance of the economic bureaucracy and individual enterprises;

(h) Formation of mass organizations—trade unions, peasant associations, youth leagues, women's associations, professional bodies-to provide further layers of Party control over the economy; and

(i) The use of foreign trade to procure machinery and technology not available at home, with the ultimate objective of economic self-sufficiency. The Soviet imprint on the Chinese economy was deepened by the dispatch of 12,000 Soviet engineers and technicians to China in the 1950's, the training of several thousand advanced Chinese technical students in the U.S.S.R., the widespread adoption of Soviet technical manuals and administrative handbooks, and the wholesale introduction of Russian language training into the schools.

Furthermore, China became wedded to Soviet technical standards and Sovietmanufactured equipment. The core of the successful basic industrial advance of the 1950's was approximately 150 modern Soviet-equipped projects-steel mills, machinery plants, electric powerplants, et cetera.23

Economic contact with the U.S.S.R. is now largely confined to a small flow of spare parts from the U.S.S.R. and border trade in locally produced goods. English has regained its place as the major foreign language in the educational system. Even so, the skeletal structure of the Chinese economy continues to bear an unmistakable family resemblance to the structure of the Soviet economy. In basic industry and in the defense sector, much of the heavy equipment still bears Cyrillic legends. Figure 2 is a schematic diagram of the economic decisionmaking structure of the PRC.

23 The Chinese and Soviets had agreed on a program of 300 plants to be constructed over a period of 15 years (1953–67). When the Soviet technicians went home in 1960, about half this number had been completed.