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Recent Trends in the Chinese Economy

Published online by Cambridge University Press:  30 September 2019

Thomas G. Rawski
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The past 15 years have been eventful ones for the Chinese economy. They have seen an ambitious attempt at economic acceleration decline into agricultural crisis, a major reversal of the direction of economic policy, agricultural recovery and resurgent economic momentum. These years have brought major changes to the Chinese economy: whole new industries have appeared; official policy towards such diverse areas as education, income distribution, regional dispersion of industry and economic specialization has shifted repeatedly; the organization of agricultural production has also changed.

Type
Research Article
Information
The China Quarterly , Volume 53 , March 1973 , pp. 1 - 33
Copyright
Copyright © The China Quarterly 1973

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References

* I am grateful for financial support from the Foreign Area Fellowship Program and the National Science Foundation and for comments on a previous draft by P. Levine, A. J. Nathan, D. H. Perkins, E. S. Rawski and D. A. Seelemann.

1. Tests showing consistency between input and output data appear in Chao, K., The Rate and Pattern of Industrial Growth in Communist China (University of Michigan Press, 1965), pp. 57–75 CrossRefGoogle Scholar, and Agricultural Production in Communist China, 1949-1965 (University of Wisconsin Press, 1970), pp. 249-60. Consistency between overall and disaggregated output data and between national and regional totals is shown in T. G. Rawski, “ Chinese industrial production, 1952-1971,” Review of Economics and Statistics (forthcoming), and “ Regional distribution of industrial production, 1949-1957 “ (unpublished paper, 1971).

2. D. H. Perkins, , Market Control and Planning in Communist China (Cambridge, Mass.: Harvard University Press, 1966), p. 222.Google Scholar

3. 1957, 1970 and 1971 data from Table 1; 1965 data from D. H. Perkins, “Economic growth in China and the Cultural Revolution,” CQ 30 (1967), p. 36.

4. Claims of provincial grain output records have appeared in various issues of Survey of the China Mainland Press (SCMP) and of the British Broadcasting Economic and Technical Supplement (hence BBC) for Anhwei, Chekiang, Fukien, Honan, Hopei, Hupei, Kansu, Kiangsu, Kirin, Kwangsi, Kwangtung, Kweichow, Liaoning, Shansi, Shantung, Shensi and Yunnan Provinces. A typical local report concerns Lunghai county, Fukien, which produced 245,000 tons of grain in 1970, 32 per cent, above 1966 output, with average yield of 10-2 tons/hectare (SCMP 4995, pp. 238-9), and 275,000 tons in 1971, with average yield raised to 10-5 tons/ hectare 03BC W664, 15 March 1972, A10).

5. SCMP 4994, p. 170.

6. The 1971 data for Honan, Inner Mongolia and Shansi shown in Appendix, Table Al raise the possibility that Table 1 understates 1970 grain output in the Yellow River drainage or that the 1970 harvest was abnormally low in this region.

7. For Liaoning grain yields, see Provincial Agricultural Statistics for Communist China (Committee on the Economy of China, 1969), p. 166 and Peking Review (PR) 2 (1971), p. 7. Percentage gains for Heilungkiang, Szechwan, Yunnan and Sinkiang from the following issues of SCMP: 4969, pp. 36 and 33; 4921, p. 15 and 4906, p. 117. For Honan, see PR 40 (1972), p. 27. Claims of record output appear in the following issues of SCMP: 4878, p. 152; 4874, p. 135; 4848, p. 70; 4819, p. 84 and 4826, p. 31.

8. Perkins, “ Economic growth in China,” pp. 36-9.

9. 1970-71 Hopei grain output exceeded the peak prior to the harnessing of the Hai River (1965?) by 30-50 per cent. (SCMP 4994, p. 168). Kiangsi grain yields increased 40 per cent between 1965 and 1970 (SCMP 4922, p. 73). Shantung grain output rose 19 per cent, between 1965 and 1970 (SCMP 4880, p. 24). Inner Mongolia's grain output rose 16-3 per cent, between 1966 and 1970 (SCMP 4909, p. 86). 1970 grain output in Kirin exceeded the 1967 peak by 6 per cent. (SCMP 4874, p. 135).

10. For Chou's remarks, see Snow, “Ciu En-lai,” p. 22; 1957 output from Chen, Statistics, p. 189.

11. Calculated from the regression equation C = 480 + 3-14S (R2 = 0-73) where C = cotton cloth output (million metres) from ibid. pp. 188-9 and S = sum of domestic cotton output and imports (thousand metric tons) lagged by one-half year (ibid. pp. 339 and 408; 1957 cotton imports assumed identical with the 1956 figure), and the regression is calculated from 1950-7 cloth output and 1949-57 cotton production and imports.

12. 1966 imports reported in R. M. Field, “ Industrial production in Communist China: 1957-68,” CQ 42 (1970), pp. 62-63. Since this was written, PR 41 (1972), p. 12, has reported that cotton output rose five-fold since 1949, implying recent annual output of -4445 x 6 or 2-667 mmt (1949 output from Table 2).

13. In the absence of reports of increased cotton or textile output during 1969-71 (in contrast to many specific figures for other industries and crops), I assume no growth of cotton output during 1969-71 or of textile output during 1970-1.

14. T. R. Tregear, Economic Geography of China (American Elsevier, 1970), p. 221; SCMP 3399, p. 15.

15. Tregear, Economic Geography, p. 222; SCMP 4906, p. 117. However, 1965 output, reported in one source as six times the 1949 level (L. T. C. Kuo, The Technical Transformation of Agriculture in Communist China (Praeger, 1972), pp. 46-7), may have been below the 1957 figure of 8-1-10-5 times the 1949 level derived from Provincial Agricultural Statistics, pp. 202, 200 and 206.

16. SCMP 4814, p. 171; BBC W661, 23 February 1972, All.

17. Chao, Agricultural Production, p. 270; for lower estimates, see Klatt, W., “A review of China's economy in 1970,” CQ 43 (1970), p. 118 Google Scholar; R. M. Field, “ Chinese industrial development: 1949-70,” U.S. Congress, Joint Economic Committee, People's Republic of China: An Economic Assessment (Washington, 1972), p. 83; and A. L. Erisman, “ China: agricultural development 1949-71,” ibid. p. 124.

18. For 1965: new mills from SCMP 3472, p. 9; new spindles from SCMP 3603, p. 17. For 1966: new mills from C. Y. Cheng, The Machine-building Industry in Communist China (Aldine, 1971), p. 261; during the first eight months of 1966, spindle output was 18 per cent, higher than in the corresponding months of 1965 (Lu Yiin, “Survey of Communist China's textile industry,” Fei-ch'ing yen-chiu June 1967, p. 76).

19. Calculated from data appearing in Chen, Statistics, pp. 188-9 and 253-4; also Cheng, Machine-building, pp. 260-1.

20. Official claims for output of spindles (1958-60) and looms (1958-9) from ibid.

21. This neglects possible scrapping of equipment and presumes Great Leap output claims, which may well be exaggerated, to be accurate. On the other hand, it ignores post-1960 output of textile machinery as well as possible improvements in the quality and capacity of such equipment.

22. 1957 stock of cotton spindles calculated from data in Chen, Statistics, p. 253. 1965 estimates for yam and cloth output from Klatt, “A review,” p. 118 and Field, “ Chinese industrial development,” p. 83.

23. For 1965, see Chao, Agricultural Production, p. 270; for 1966-70, see for instance SCMP 4871, pp. 235-8.

24. PR 17 (1971), p. 17, states that 1958 cotton output was 4-5 times the 1949 figure; this implies that 1958 output was 2-0 mmt The official claim made in 1959 was for an output of 2-1 mmt (Chen, Statistics, p. 339).

25. According to Chinese reports cited in Chao, Agricultural Production, p. 270, 1964 output exceeded the 1957 level (1-64 mmt) and 1965 output set a new record. This means that cotton output averaged 1-87 mmt or higher for the two years. Adding imports of 0*1 mmt and applying the regression equation of note 11 leads us to estimate 1965 cotton cloth output at a minimum of 6,666 million linear metres.

26. According to the Liu-Yeh adjusted estimate of gross agricultural output value for 1957 (in 1952 prices), grain and cotton accounted for 63 per cent, of plant and animal output and for 55 per cent, of a total which includes, in addition to these items, forest, fishery and miscellaneous agricultural products. Since we assume that all agricultural output moved in proportion to output of grain and cotton alone, a 10 per cent, error with respect to growth of products other than grain and cotton would imply an error of 3-7 per cent, (or 4-5 per cent.) in our estimate of plant and animal (or the augmented total) output. See Liu and Yeh, Economy of the Chinese Mainland, pp. 397-400. Our result may be compared with an estimate by A. G. Ashbrook, “China: economic policy and economic results, 1949-71,” Economic Assessment, p. 47, which gives average growth rates for agricultural output of 0-1 per cent, for 1957-65, 2-2 per cent for 1965-71 and 1-0 per cent, for 1957-71.

27. Industry is defined to include the extractive sector, electric power and manufacturing; treatment of other utilities is uncertain. The official Chinese concept of “ modern industry “ includes “ modern factories “ and “ handicraft factories “ but excludes “individual handicrafts” (those establishments employing less than four hired workers). For elaboration, see Chen, Statistics, pp. 28-9 and Liu and Yeh, Economy of the Chinese Mainland, pp. 489-92.

28. See T. G. Rawski, “The economics of Chinese machine-building, 1931- 1967” (Ph.D. dissertation, Harvard University, 1972), ch. II and Appendix C.

29. For 1957 ingot steel output and various estimates for 1965, see R. M. Field, “Chinese Communist industrial production,” in U.S. Congress, Joint Economic Committee, An Economic Profile of Mainland China (Washington, 1967), Vol. I, p. 293 and I. Fan, “ Communist China's industries in 1968,” in Communist China 1968 (Union Research Institute, 1969), p. 343.

30. Wu, Y. L., The Steel Industry in Communist China (Praeger, 1965), p. 173.Google Scholar

31. Ibid. p. 179; 60-9 per cent, is the sum of the shares of railroads and other construction.

32. These calculations assume constant requirements of ingot steel per yuan of machinery output and of steel and machinery per yuan of investment outlay, that all machinery imports go to investment, and that increases in the share of steel consumed in machinery production necessitate equal reductions in the share devoted to construction. China's small exports of machinery, which amounted to less than 4 per cent, of domestic output during 1962—4 (Cheng, Machine-building, p. 48 and Table 4 above), do not affect the analysis.

33. Output of bicycles, sewing machines and radios, the products in our tenitem machinery sample which might be classed as consumer goods, grew less rapidly during 1957-65 than the entire sample (Appendix, Table A2).

34. For reports of conversion, see Cheng, Machine-building, p. 305. SCMP 3443, pp. 18-19 includes a report describing replacement of equipment at small paper mills in Shantung.

35. During the first Five-Year Plan period, 38 per cent, of total investment was to be spent on machinery and equipment. For different types of investment, the shares of machinery in total outlay were: industry 40 per cent.; agriculture 17 per cent.; culture and education 10 per cent. (Cheng, Machine-building, p. 43).

36. Available trade statistics suggest that cement exports grew less rapidly than domestic production; elimination of exports from the total would enhance the argument in the text.

37. Chao, Agricultural Production, pp. 315-17.

38. Snow, “ Ciu En-lai,” p. 22 and PR 3 (1972), p. 3. Field, “ Chinese industrial development,” p. 83, estimates 1965 crude oil output at 8 mmt.

39. Capital or producer goods or heavy industry is defined by the Chinese to include mining, metallurgy, power, metal-processing (including machine-building), basic chemicals and building materials (Chen, Statistics, p. 28).

40. Perkins, “Economic growth in China,” p. 41, concludes that output of industrial producer goods rose by 90-100 per cent, between 1957 and 1965. The major difference between my calculation and his arises from my inclusion of machine-building, which by 1965 had become the largest industrial sector. I omit the coal and electric power sectors because there are no Chinese materials which permit us to estimate their output levels; their inclusion in Table 8 with the 1965 output estimates used by Perkins would not change my conclusion: with 1957 = 100, 1965 producer goods output would become 238-87, well above Perkins’ result (using 1957 data from Ishikawa, National Income, p. 60, lines B3 and B4).

41. The Chinese include paper, textiles, food processing, drugs, leather, printing and daily necessities in light or consumer industry (Chen, Statistics, p. 28).

42. Textiles and food processing accounted for 75 per cent, of Shantung's 1952 and for 58 per cent, of Kwangtung's 1957 industrial production ibid. pp. 229-30).

43. Perkins, “Economic growth in China,” p. 41, assumes that combined output of handicrafts and consumer industry stagnated or declined slightly between 1957 and 1965.

44. Gross value of producer and consumer goods (both excluding individual handicrafts) for 1956 were virtually identical (Ishikawa, National Income, p. 60). Although the share of producer goods probably rose above 50 per cent, in 1957 (no data are available), we allot a 50 per cent, weight to each sector. Field, “ Chinese industrial development,” p. 63, estimates industrial output (including handicrafts) to have grown at an average annual pace of 5-0-6-1 per cent, during 1957-65 and 5-4-6-6 per cent, during 1957-70.

45. For Kwangtung, see Y. C. Chao, “ Industrial development,” in Communist China 1963, Vol. I, p. 84. For Shensi, see News From Chinese Provincial Radio Stations 39 (3 January 1964), p. 3.

46. 62 per cent, is an average of percentage increases reported in various issues of SCMP for Anhwei, Honan, Inner Mongolia, Kirin, Kwangsi, Peking, Shansi, Shensi, Szechwan and Yunnan, weighted by 1957 provincial gross output value for industry from Rawski, “ Regional distribution of industrial production.“

47. PR 34 (1972), p. 7.

48. Part of the difference between Field's previously cited estimate and mine arises because Field's index includes slow-growing individual handicrafts, while mine does not. Even if handicrafts did not grow at all after 1957, however, my data for factory industry (excluding individual handicrafts) indicate an average growth rate for 1957-70 more than 40 per cent, greater, than that implied by Field's results. Since I base my estimate on the official 1957 industrial output figure, which Field regards as an overestimate, the gap between the level of output as estimated by Field and as shown in Table 10 is greater than differing estimates of post-1957 growth rates alone would imply. A defence of the official 1957 figure is offered in Rawski, “Chinese industrial production, 1952-1971.“

49. Military procurement, estimated for 1953-61 by Cheng, Machine-building, p. 208, never exceeded three billion yuan prior to 1958. Even a large increase would leave civilian supplies growing ahead of national product, suggesting a rising rate of capital formation.

50. Rawski, “ Machine-building,” p. 409, concludes that even in the absence of positive net investment after 1960, the 1965 stock of industrial fixed capital would have been over 3-5 times the 1957 level. Rising output of capital goods implies that this figure is a substantial underestimate of the actual increase.

51. Liu, “Quantitative trends,” pp. 155-67.

52. Domestic product is an aggregate output measure which, in China's case, is virtually identical with national product (Liu and Yeh, Economic Development of the Chinese Mainland, pp. 18-19). The reader should note that the use of 1952 prices results in a higher estimate of industrial growth, the share of industry (as opposed to agriculture) in aggregate product, and therefore of the growth of the economy than would be obtained from estimates based on prices of other years, such as 1933, 1957 or 1971. Limited data prevent me from offering alternative estimates at the present time.

53. 1952 and 1957 figures are mid-year totals derived from data in Chinese publications CLiu and Yeh, Economy of the Chinese Mainland, p. 102). 850 million is a high estimate of 1971 population. A lower figure would raise the estimated level and growth of per capita income. However, the 1970 figure of 697 million recently published in a Chinese atlas (New York Times, 6 August 1972), appears unrealistically low.

54. Simon Kuznets, “ Problems in comparing recent growth rates for developed and less developed countries,” Economic Development and Cultural Change, January 1972, pp. 185-209.

55. Calculated from Tables 12 and A3.

56. This question is more fully treated in Rawski, “ Machine-building,” ch. V.

57. Ta-kung pao (Peking), 27 September 1959; Chen, Statistics, p. 187.

58. Various estimates of peak Great Leap industrial output exceed 1957 output by 198 per cent. (C. Y. Cheng, The Economy of Communist China 1949-1969 (Michigan Papers in Chinese Studies, 1971), p. 15); 66 per cent. (Field, “ Indus-, trial production,” p. 47); 90 per cent. (Chao, Rate and Pattern, p. 88); and 57 per cent, (for factories, mining and utilities - Liu and Yeh, Economy of the Chinese Mainland, p. 66).

59. Cheng, Economy of Communist China, p. 15, estimates that industrial output fell by 50 per cent, in 1960-1 and by a further 10 per cent, the following year. Field, “Industrial production,” p. 47, indicates that output reached its low point in 1961, falling about 36 per cent, below the 1960 level.

60. Perkins, Market Control, pp. 90-5, succinctly describes the process of agricultural recovery.

61. Data on grain imports and aggregate trade flows appear in A. H. Usack and R. E. Batsavage, “ The international trade of the People's Republic of China,” Economic Assessment, pp. 348 and 343.

62. 7967 Fei-ch'ing nien-pao (1967 Yearbook of Chinese Communism) (Feich'ing yen-chiu tsa-chih she, 1967), p. 852 and Chugoku kogyo kojo soran (Handbook of China's Industrial Plants) (2nd ed. Ajia kenkyu-jo, 1970), Vol. II, p. 372.

63. Data on imports of petroleum plants appear in Price, “ International trade,” Economic Profile, Vol. II, p. 603.

64. K. P. Wang, “ The mineral resource base of Communist China,” ibid. Vol. I, pp. 171 and 187.

65. Data on imports of fertilizer plants appear in Price, “ International trade,” ibid. Vol. II, p. 603.

66. B. M. Richman, A Firsthand Study of Industrial Management in Communist China (UCLA Graduate School of Business Administration, 1967), pp. 57-8, lists the Wuhan Diesel Engine Plant as among the worst equipped and managed enterprises he encountered in 1966. This seems to be the same plant, which, according to SCMP 3626, p. 26 (January 1966), had recently converted its facilities to produce diesel engines.

67. On conversion costs in the Soviet Union, see D. Granick, Soviet Metalfabricating and Economic Development (University of Wisconsin Press, 1967), ch. 2. Rawski, “ Machine-building,” ch. IV, discusses capital-output ratios and factor productivity.

68. N. Rosenberg, “ Neglected dimensions in the analysis of economic change,” Bulletin of the Oxford University Institute of Economics and Statistics, February 1964, p. 71.

69. SCMP 3269, p. 17, describes the growth of the Ocheng works. B. M. Richman, Industrial Society in Communist China (Random House, 1969), p. 470, mentions unfinished facilities at Wuhan.

70. Current Background (CB), 818, pp. 3, 6.

71. Ibid. pp. 6, 7 and 25; CB 852, p. 29.

72. Ibid. pp. 91, 92 and 102. 1967 production targets and state plans are mentioned in CB 818, pp. 6 and 35 and CB 852, p. 107.

73. Appendix, Table A2.

74. BBC W664, 15 March 1972, A4 and Cheng, Machine-building, p. 204.

75. Kiangsu data from BBC W654, 5 January 1972, A7. An estimate of 1965 output is given in Rawski, “ Machine-building,” pp. 368-72.

76. Ibid. p. 357; Cheng, Machine-building, pp. 258-9.

78. Indications of current farm policies appear in “ Pre-Cultural Revolution Policies to the Fore,” Current Scene, Vol. X, No. 8 (1972), pp. 21-3; PR 1 (1972), p. 17; 39 (1972), p. 19; 40 (1972), p. 21; SCMP 5012, p. 180, and 5040, p. 134; and T. Durdin, “China links pay to productivity,” New York Times, 7 May 1972.

79. Elements of this debate can be seen in CQ 48 (1971), pp. 797-9 and in SCMP 4866, pp. 194-5, and 4895, pp. 78-9.