ECONOMIC DEVELOPMENT IN COMMUNIST CHINA UNDER THE FIRST AND SECOND FIVE YEAR PLANS 1953-62

• Document Type: CREST
• Collection: General CIA Records
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• Document Creation Date: December 23, 2016
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• Sequence Number: 1
• Publication Date: August 14, 1958
• Content Type: REPORT

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SECRET
ECONOMIC INTELLIGENCE REPORT
N? 75
ECONOMIC DEVELOPMENT IN COMMUNIST CHINA
UNDER THE FIRST AND SECOND FIVE YEAR PLANS
1953-62
CIA/RR 142
14 August 1958
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
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WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, 'the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
0 "
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ECONOMIC INTELLIGENCE REPORT
ECONOMIC DEVELOPMENT IN COMMUNIST CHINA
UNDER THE FIRST AND SECOND FIVE YEAR PLANS
1953-62
CIA/RR 142
(ORR Project 15.2092)
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
SECRET
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CONTENTS
Summary and Conclusions
I. Performance Under the First Five Year Plan (1953.-57)
.
?
?
Page
1
7
A. Economic Planning and Administration
7
B. Trends in Output
8
C. ,Agricultural Socialization and Production
9
1. Socialization
9
2. Production ... ...... . . . . ......
11
D. Industrial Socialization and Production
13
1. Socialization and Management
13
2. Production
14
3. Transportation ? ? ? . ? ..... ? .. ?
?
?
?
18
E. Foreign Trade and Economic Relations ......
?
?
19
F. Trends in National Finance
21
G. Trends in Capital Construction Investment
22
1. First Five Year Plan Fulfillthent
22
2. Industrial Capital Construction
23
?
II.
Economic Trends Under the Second Five Year Plan
(1958-62)
25
(A. Introduction
25
B. Gross National Product
25
C. Agricultural Production-
26
D. Industrial Production
27
E. Foreign EConomic Relations
28
1. Foreign Trade
28
24 Economic Dependence or Self-Sufficiency , . ?
?
?
?
29
F. National Finance and Investment . . . ......
31
1. Financing the Second Five Year Plan
31
2. Allocation of Investment
31
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III. Problems of Economic Development 33
A. Introduction 33
B. Population and Labor Force. 33
C. Investment Allocation 35
D. Agriculture .. .. . . . ? ? ? ...... . 37
1. Investment
2. Trends in Worker-Peasant Income Differentials .
37
38
3.. Collectivization 39
E. Large Versus Small Industrial Units
F. Prospects
Appendixes
...... ,?? ?
Appendix A. Statistical Tables ......... . .
la
1.3
. ? ? )45
Tables
1. Communist China: Average Annual Rates of Increase
of Production, -.1953-57
. 'Communist China: Gross National Product and Index
of Per Capita Gross National Product, 1952-57
15
3. Communist China: Gross National Product and
Percentage Distribution, 1952-57 . . . . .. ... 14-7
Communist China: Income Originating by Economic
Sector, 1952-57
Communist China: Estimated Production of Selected
Agricultural Commodities and Aquatic Products,
1952-62
6. Communist China: Estimated Production of Selected
Commodities, 1952-62
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50
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7. Communist China: Estimated Volume and Performance
of Transportation, 1952-62 56
8. Communist China: Estimated Balance of Payments,
1953-62
9. Communist China: Gross Investment and Savings,
Five Year Total for 1953-57 58
57
10. Communist China: Estimated Completed Capital Construction
Investment in the First Five Year Plan, 1953-57
11. Communist China: Trends in Gross National Product, by
End Use, 1952, 1957, and 1962 -
12. Communist China: Economic Gross National Intome by
Sector of Origin, 1952, 1957, and 1962
59
60
61
13. Communist China: Selected 1962 Plan Goals ?? OOOOOO 62
14. Communist China: Estimated Gross Investment and
Savings in the Second Five Year Plan, 1958-62
15. Communist China: Proposed Allocation of Gross Investment
and Ratios of Investment to Increases in Output,
1958-62
16. Communist China:
1953-57
Population Based on 1953-54 Census,
17. Communist China:
Figure 1.
63
64
65
Workers and Staff, 1952 and 1956 . 65
Illustrations
Communist China: Production of Selected
Items, 1952-57 and 1957 Five Year Plan
Goals (Chart)
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Following Page
Figure 2. Communist China: Gross National Product, by
Sector of Origin, 1952, 1957, and 1962
? (Chart) ' 10
Figure 3. Communist China: Gross National Product, .1
. Railroad Freight Traffic, and Production of
Selected Commodities, Compared with Those of
Selected Countries, 1952-57 (Chart) 14
Figure 4. Communist China: Foreign Trade, 1952-57 and
1962 (Chart) 20
Figure 5. Communist China: Budget Revenues and .
Expenditures, 1950.-58 (Chart) 22
Figure 6. Communist china: Indexes of Growth of Selected
Industries, 1952=62 (Chart) 28
Figure 7. Communist China Railroads and Selected Roads, Inside
June 1958 (Map) Back Cover
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CIA/RR 142
, (ORR Project 15.2092)
ECONOMIC DEVELOPMENT IN COMMUNIST CHINA
UNDER THE FIRST AND SECOND FIVE YEAR PLANS*
1953-62.
Summary and Conclusions
Communist China made substantial economic progress during the period
of the First Five Year Plan (1953-57). Total output of goods and serv-
ices (gross national product -- GNP) increased at an average annual rate
of about 7 to 8 percent, which may be compared favorably with recent rates
of growth of a little more than 3 percent in India, 8 percent in Japan,
and 7 percent in the USSR. The rate of growth was quite uneven during the
period, however, varying from 4 to 5 percent in 1954 to 12 to 13 percent in
1956 and revealing the extent to which economic activity in Communist China
is geared to the results of the previous year's harvest. Total output on a
per capita basis increased at an average annual rate of 5 to 6 percent, with
nearly half of the additional output channeled into investment or government
purchases of goods and services. .As a result, per 'capita consumption rose
more slowly, averaging 3 to 4 percent a year. As probably more than 60 per-
cent of this increase in consumption went to urban inhabitants, per capita ,
consumption of the peasant population, which constitutes more thar.1 80,percent
of the total population, probably showed little improvement.
During the First Five Year Plan the major accomplishment in the'agri-
cultural sector was the nearly complete collectivization of China's peas-
ants, far ahead of original plans. The number of peasant households which
have not yet joined cooperative farms, 3 percent of the total, is expected
to decrease rapidly as a result of recently imposed restrictions on private
peasants. For all practical purposes the basic unit for control of agri-
cultural production during the Second Five Year Plan (1958-62) will be the
collective farm.
Agricultural production during the First Five Year Plan generally was.
adequate to meet the basic needs of the populationand the economy, but
few targets for increased production in this sector actually were achieved.
Crop.losses from natural calamities in 1954 and 1956, disruption and con:-
fusion-from rapid socialization; and shortages of equipment, draft animals,
and fertilizers combined to prevent targets from being met. The apparent
fulfillment of the goals for increased production of food grains and cotton'
* The estimates and conclusions contained in this report represent the
best judgment of ORB as of 1 May 1958.
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is believed to have been due in part to statistical understatements in
1952 and 1953 when the National Statistical Bureau was in process of
organization. To the extent that this bias in statistical reporting
influences current agricultural planning, it leads to the setting of
optimistic targets in the Second Five Year Plan.
In contrast with an average annual increase in agricultural pro-
duction of only 3 percent during the First Five Year Plan, industrial
output achieved the high average annual growth rate of more than 16 per-
cent, and production targets on the whole were significantly overfulr,
filled. During the 5-year period, finished steel production more than
tripled and the output of such other basic raw materials as coal, elec-
tric power, and cement doubled. An even more notable achievement was
the rapid development of the machine building industry to a point where
Communist China can now produce large-scale precision machine tools,
simple mining and metallurgical processing equipment, power station equip-
ment for medium-size plants, motor trucks, aircraft, and large locomotives.
In fact, the machine building industry expanded at such a rapid pace that
by 1957 it had outstripped fuel and raw material production, resulting in
production cutbacks and uriderutilization of capacity in many branches of
the industry. Light industry progressed much more slowly than heavy in-
dustry during the First Five Year Plan, in large part because of shortages
of agricultural raw materials.
The impressive record of economic development during the First Five
Year Plan demonstrates the ability of Communist China to restrict con-
sumption and mobilize resources for investment. The high level of in-
vestment, averaging each year about 17 percent of GNP for the 5-year
period, enabled the regime to overfulfill the capital construction plan
by about 14 percent in spite of the concern evinced in early 1957 that
the program was endangered by "strains, stresses, and imbalances."
Approximately 56 percent of investment was allocated to the industrial
sector, within which heavy industry received overwhelming priority,
accounting for nearly 89 percent of total industrial investment. State
investment in agriculture was held to a minimum in spite of the fact
that more than half of total investment funds originate in this sector.
Foreign trade, which in total turnover was equivalent to about-10 per-
cent of GNP, was a significant factor in the economic progress of Communist
China during the First Five Year Plan. Approximately 15 percent of total
investment in capital construction consisted of imports of vital machinery
and equipment, nearly all of which originated in Bloc countries and which
together accounted for 78 percent of total trade. Soviet credits made
only a minor contribution to the economic development of China, because most
of these credits were military in nature. Soviet technical assistance, how-
ever, was of considerable importance to the industrialization program. In,
to assisting in major industrial construction projects, Soviet
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advisers and technicians worked with virtually every ministry in the
government and with individual enterprises. As a result of steadily.
mounting foreign debt charges and payments under Communist China's own
foreign aid program, the regime was confronted with a shortage in foreign
exchange at the close of the First Five Year Plan period.
It is estimated that total output of goods and services will increase
about as rapidly during the Second Five Year Plan as in the First Five
Year Plan. Estimates of.GNP show that, in general, sufficient funds will
be available to finance the investment which, would be required to achieve
projected increases in production during the Second Five Year Plan. This
achievement will entail a relative increase in the share of total output
allocated to investment but at the same time will also permit some im-
provement in per capita consumption. As an indication of continued prog-
ress toward Communist China's major goal of industrialization, it is esti-
mated that the industrial sector will contribute nearly 26 percent of
.gross national income in 1962 compared with 20 percent in 1957 and only
13 percent in 1952. Industrial output will increase at a somewhat slower
rate (91 percent) during.the Second Five Year Plan than during the First
Five Year Plan (109 percent), in large part because of increasing reli-
ance on new capacity to achieve increases in production. On the other
hand, agricultural output during the Second Five Year Plan is expected
to increase at a faster rate (17 percent compared with 13 percent in the
First Five Year Plan) in keeping with the new emphasis on agricultural
development in Communist China's economic planning.
Recent speeches by Chinese Communist leaders indicate their deter-
mination to reach a solution of the agricultural problem. Their
announced plans call fora significantly higher investment in agricul-
ture than during the First Five Year Plan. Assuming no serious diffi-
culties with peasant morale and attitudes, the production of basic food
crops is expected to increase by approximately 16 percent in 1962 above
1957. An increase in population of 13 percent which is expected during.
the same period should allow a slight increase in per capita consumption
by 1962 compared with 1957. Production of -industrial crops should be
sufficient to maintain current consumption levels of consumer goods made
from agricultural raw materials. With increased incentives to farmers,
including measures recently inaugurated, the number of livestock should
increase appreciably.
The Second Five Year Plan, as announced, contains no provision for
new long-term credits from the USSR. Under the plan, Communist China
will have to finance through exports the, imports required for industri-
alization as well as to repay Soviet credits advanced during the First
Five Year Plan (estimated to be 3.1 billion yuan). With their present
capabilities the Chinese Communists probably do not need further Soviet
credits to carry out their planned industrial development. In the event
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of'serious economic difficulties, however, the Chinese might seek and
obtain some assistance on credit from the USSR.
Successful completion of the Second Five Year Plan will depend on
the degree of flexibility and realism with which the regime approaches
certain perennial problems of economic development in China. The basic
problem confronting any government is the unrelenting pressure of popu-
lation on food supply. The impressive gains in industrial and agricul-
tural output to date have been accompanied by an accelerated rate of
growth in population, from about 1 to 1.5 percent per year in the period
from 1950 to 1952 to an estimated 2.4 percent in 1957. The average annual
rate of growth in agricultural output during the First Five Year Plan,
about 3 percent, provided only a small margin above the average growth in
population of about 2 percent. That the Chinese Communists are aware of
the gravity of their Malthusian problem is illustrated by the current
birth control campaign and by the all-out effort to expand agricultural
production.
The Chinese Communists are promoting an extensive campaign to en-
courage birth control and to make large families economically unattrac-
tive. The new policy on population, however, is not expected to do much
more than level off the annual rate of growth at about 2.4 percent, so
that the estimated population will be about 710 million in 1962 and 799
million by 1967. The estimated increase in population of 13 percent
-during the Second Five Year Plan will continue to press heavily on the
supply of food and consumer goods.
The Chinese Communists also have evidenced awareness of their growing
employment problem. The goal of mechanizing industry as rapidly as pos-
sible has been replaced by plans to use more investment funds on projects
which offer maximum employment. Job opportunities arising from this pro-
gram, however, are limited, and it is probable that nearly half of the
increase in the labor force during the Second Five Year Plan will have to
find employment in agriculture. In addition, various steps have been
taken to stiffen the policy preventing peasant migration into the cities
and even to transfer large numbers of present urban residents back to the
countryside. These developments will tend to depress further the low per
capita income of the rural population but will not materially increase
agricultural output, because rural labor is already abundant.
The Chinese Communists have demonstrated their ability to mount a
program of rapid industrialization. A continuing allocation of 15 to
20 percent of output to investment -- and an allocation of half of this
to investment in heavy industry -- is feasible because of the growing
capacity of the economy for production of producer goods and because of
the ample supply of labor for construction. The productive capability
of China in investment goods, however, contrasts sharply with its capa-
bility in agriculture. As noted above, there is a rather narrow margin
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between the rate of growth in population and the rate of growth in agri-
cultural output. The rapid rate of growth in population poses not only
a problem of food supply but also a problem of maintaining full employ-
ment with equitable income distribution.
It is impossible to forecast whether or not Communist China's agri-
cultural policies will lead to serious difficulties. Some of these
policies, however, should be described as risky, in that the regime, hav-
ing socialized the agricultural population, cannot afford not to achieve
increases in agricultural production. Investment allocation for in-
creasing agricultural output appears to be adequate in the period of the
Second Five Year. Plan. The risk, then, results from the low incomes and
incentives for peasants. The Chinese are following the Soviet example
in collectivization and in financing investment by forced savings which
are extorted primarily from the agricultural population. They are doing
so without the margin of diet and production of surplus food that the
USSR had and in the face of a rapid and possibly accelerating growth in
population.
Should insufficient peasant incentives have an adverse effect on
agricultural production, the Chinese Communists could, of course,
modify their program so as to alleviate the most pressing difficulties.
Peasant incomes could be raised and urban incomes reduced while invest-
ment would be left intact, a situation which in practice probably would
be both administratively and politically difficult. If the supply of
agricultural products becomes critically low, the shortages could be
relieved by foreign trade, in that agricultural exports could be reduced
or agricultural imports increased. This expedient, however, would be At
the expense of imports of investment goods. Alternatively, some reduc-
tion of the planned level of investment could be made, as was the case
in 1957. Another measure which is open to the Chinese Communists is an
increase in the imports of chemical fertilizers. Such imports probably
would pay for themselves through expanded agricultural production, per-
mitting an increase both in agricultural exports and in domestic food
supply.
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I. Performance Under the First Five Year Plan (1953-57).
A. Economic Planning and Administration.
Although the Chinese Communist First Five Year Plan (1953757)
was drawn up to cover the period from 1953 through 1957, the plan was
published only at the midpoint of the period in July 1955. IP ,During
the first half of the period the regime operated under annual plans and
at the same time attempted to complete its institutional organization
for administration of both annual and long-term plans. A number of
serious faults were revealed in the statistical system which still re-
main to handicap present and future planning. The first complete enu-
meratiOn of population was carried out' in 1953-54 and revealed a total
population of about 100 million in excess of previous estimates. _V In
the process of the population census and of the subsequent collectiviza-
tion of agriculture in 1955-56, additions were made to the statistics on
cultivated area and crop production which resulted from improved statis-
tical coverage. The official statistical reports on increases in culti-
vated area and crop production achieved during the course of the First
Five Year Plan thus show a bias (because of statistical understatement
in the base year of 1952) which may influence the future estimates of
possible results to be realized from investment in agriculture. This
bias also may affect the long-range planning of budgetary receipts and
Investment which are based largely on national income to be derived from
production and processingof agricultural products.
*
?
At first, economic planning was modeled closely on Soviet expe-
rience, in spite of the widely different conditions in China of heavy
population pressure on the land and low per capita productivity. Because
of an increased awareness of the special characteristics of China's popu-
lation-resource base, however, the regime altered its approach to a number
of economic problems during the course of the First Five Year Plan, espe-
cially the interrelated problems of population, employment, and investment.
The shift was from one of Soviet and Marxist emphasis on the advantages
of a large population and a capital-intensive investment program to one
of seeking to impose limitations on population growth, additional stress
on labor-intensive investment projects, numerically large shifts of popu-
lation from urban areas to marginal agricultural areas, and deemphasis of
mechanization of agriculture.
In spite of the defects in Communist China's planning for economic
development, the regime has achieved remarkable success in its main ob-
jectives of heavy industrialization, socialization of both agriculture and.
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indudtry, and.fulfillmeht of mosttargets in the First Five Year Plan.*b..
The degree of success which had been achieved in the First Five Year Plan
was the basis for strong expressions of optimism on the part of the Chair-
man of the National Economic Commission in his report to the National
Peoples Congress in early February 1958. 1/ Although credit was given
to the USSR and "other fraternal countries" for the "enormous assistance"
given during the First Five Year Plan, it was assumed that the Chinese
Communist leaders could proceed under the 1958 annual plan and the Second
Five Year Plan to manage the increasing complexity of centrally controlled
planning, production, and allocation of resources with less Soviet aid
than in the First Five Year Plan.
B. Trends in Output.
Communist China made substantial economic progress during the
period of the First Five Year Plan. Total output of goods and services
(GNP) increased at an average annual rate of about 7 to 8 percent, a fig-
ure which compares favorably with recent rates of growth of a little more
than 3 percent in India, 8 percent in Japan, and 7 percent in the USSR.
GNP, valued in constant 1956 market prices, rose from about -78 billion yuan
in 1952 to about 111 billion yuan in 1957.** Growth was quite uneven dur-
ing the period, however, varying from 4 to 5 percent in 1954 to 12 to 13
percent in 1956 and revealing the extent to which economic activity in
Communist China is geared to the results of the ,previous year's harvest.
Total output on a per capita basis increased at an average annual rate of
5 to 6 percent, with nearly half of the additional output channeled into
investment or government purchases of goods and services. As a result,
per capita consumption rose more slowly, averaging 3 to 4 percent a year.
As probably more than 60 percent of this increase in consumption went to
urban inhabitants, per. capita consumption of the peasants, who constitute
more than 80 percent of the population, probably showed little improvement.
The impressive record of economic development during the First
Five Year Plan demonstrates Communist China's ability to restrict consump-
tion and mobilize resources for investment. To achieve this rate of growth,
total investment per year averaged about 17 percent of GNP for the 5-year
period, a proportion roughly comparable to that achieved in recent years
in the US.*** During the plan period the share of GNP contributed by the
* Production of selected items during the plan period and targets
for the First Five Year Plan are shown on the chart, Figure 1, following
p. 8.
** For the?GNP of Communist China, allocated by end use in 1956 constant
prices, for the years 1952-57, see Table 2, Appendix A, p. 46, below.
*** For the distribution of GNP by end use in current market prices and
in percentages for the years 1952-57, see Table 3, Appendix A, p. 47,
below.
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COMMUNIST CHINA
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Figure 1
PRODUCTION OF SELECTED ITEMS, 1952-57 AND 1957 FIVE YEAR PLAN GOALS
INDUSTRIAL
PRODUCTION'
40
PRODUCERS GOODS
70
60
GOAL
30
50
40
6
20
8
30
20
10
10
0
1952 1953 1954 1955 1956 1957
*Modern industry and handicraft workshops.
COAL
150
125
2 100
75
P- 50
4 25
0
a
3
0
4
1952 1953
250
tk.. 200
150
100
50
0
1952 1953 1954 1955 1956 1957
1954 1955 1956 1957
TURBINES
JL
TRUCKS
6
2 4
z
2
0
1952
1953 1954 1955 1956
SALT*
10
'2"
8
6
6 4
2
1952
1953 1954 1955 1956
*Including hondicraft production.
26805 7-58
GOAL
1957
AL
1957
1952 1953 1954 1955 1956 1957
2500
2000
1500
l000
?
500
0
CRUDE OIL
1952 1953 1954 1955 1956 1957 ?
300
250
g 200
2
150
MILUON METRIC TONS
100
50
GENERATORS
1952 1953 1954 1955 1956 1957
7
6
4
1
CEMENT
LGOA
MILLION METRIC TONS
MILLION KILOVOLT AMPERES
CONSUMERS GOODS
4?
30
20
10
GOAL
1952 1953 1954 1955 1956 1957
CRUDE STEEL
6
5
GO4L
4
3
2
1
1952 1953 1954 1955 1956 1957
TRANSFORMERS
4
3
2
GO..t4L
1952 1953 1954 1955 1956 1957
BILLION YUAN
HANDICRAFT
PRODUCTION*
AGRICULTURAL
PRODUCTION*
70
20
60
GOAL
15
50
GOAL
? 40
10
.2, 30
20
5
10
1952 1953 1954 1955 1956 1957
1952
1953 1954 1955 1956 1957
*Handicraft onsps and individual handCroftsmen.
CAUSTIC SODA
200
150
F 100
2
0 50
4
THOUSAND UNITS
THOUSAND METRIC TONS
*Including subsidiary rural produ tion.
NITROGENOUS FERTIUZER
800
600
400
200
1952
1952 1953 1954 1955 1956 1957
1953 1954 1955 1956 1957
MACHINE TOOLS
LOCOMOTIVES
200
30
GO
25
150
20
100
15
GOAL
10
50
1952 1953 1954 1955 1956 1957 1952 1953 1954 1955 1956 1957
1000
2 800
2
F.5. 600
2 400
MACHINE-MADE PAPER
1000
6 800
600
2 400
2 200
COTTON YARN
Z"0
4
G044
GOAL
2 200
EDIBLE VEGETABLE OIL*
2000
1600
1200
800
400
GO14
1952 1953 1954 1955 1956 1957 1952 1953 1954 1955 1956 1957 1952 1953 1954 1955 1956 1957 1952 1953 1954 1955 1956
*Including handicroft production.
200
150
100
.-.-.! 50
0
1952 1953 1954 1955 1956 1957
GRAINS
.....".???????????????????""".."11
GO 4
? 12
SOYBEANS
4
2
GO.
1800
1600
6 1400
1-) 1200
ti 1000
a 800
600
0
400
4
200
COTTON
'O
AL 125
150
ioo
75
50
25
HOGS
ELECTRIC POWER
1952
1000
800
Li
1953 1954 1955 1956 1957
TIRES
600
a
400
0
200
1952
10
8
g 6
0
j 4
0
?
2
1952
yL
1953 1954 1955 1956 1957
FREIGHT CARS
G0.4
1953 1954 1955 1956 1957
1200
L '21000
2
U, 800
600
0
400
0
200
SUGAR'
si
GOA
1957 1952 1953 1954 1955
GOA
?
1952 1953 1954 1955 1956 1957 1952 1953 1954 1955 1956 1957 1952 1953 1954 '1955 1956 1957
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3.0
2.5
2.0
1.5
1956 1957
*Including handicraft production.
AQUATIC PRODUCTS
OAL
1952 1953 1954 1955 1956 1957
50X1?
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a
S-E7C-R-E-T
industrial-sector Tose from 13-percent,in -1952 to--nearly 2O percent-in- -
1957, revealing a rapid rate of progress toward Communist China's major
goal of industrialization. As agricultural output increased at an aver-
age annual rate of less than 3 percent, its relative share of GNP de-
creased from 58 percent in 1952 to 47 percent in the last year of the
-First Five Year Plan.*
C. 'Agricultural Socialization and Production.
1 1. Socialization.
1
The original goals for the socialization of agriculture
called for the incorporation of one-third of all peasant households in
semisocialist agricultural producer cooperatives by 1957 and for a
majority in the principal agricultural areas to be organized in such
cooperatives by 1962. This step would complete preparation for the
transition into fully socialist cooperatives -- collective farms -- dur-
ing the Third Five Year Plan (1963-67): On publicizing these goals in
mid-1955, however, Mao Tse-tung called for a daring program of rapid
socialization which quickly swept millions of peasants into producer'
cooperatives. IV A bumper harvest in 1955 encouraged the regime in its
belief that cooperativization resulted in greater production, andprom-
ises of higher income werepersuasive influences in collectivizing the
peasants. Atter reaching -a high of 1.9 million Cooperatives in late
1955, consolidation and transformation into collective farms took place
at an increasing rate. By July 1957, 97 percent of all peasant house-
holds were members of about 750,000 agricultural cooperatives, including
93 percent in 680,000 collective farms. 2/ A State Council directive of
21 December 1957 placed even the few remaining private peasants under
a comprehensive system of controls to be implemented by neighboring
Collective farms. ?,j Agricultural socialization thus was practically
completed.
On entering collective farms, peasants lost the remaining
benefits from ownership of land, livestock, fruit trees, and implements
which had played a part in determining their share of total income in
the lower forms of agricultural cooperatives. Promised remuneration for
these compulsory contributions is still forthcoming in most instances,
and the delay and uncertainty are sources of dissatisfaction, especially
among those who contributed the most to the collectives -- the upper
middle class peasants.
* For estimates of GNP by sector of origin, for the years 1952-57, see
Table 4, Appendix A, p. 48, below. The same data on income originating
by sector in percentages for the years 1952, 1957, and 1962 are shown on
the chart, Figure 2, following p. 10.
- 9 -
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Certain advantages should accrue to the state from agricul-
tural socialization, such as tighter political control over the peasants,
increased efficiency in the mobilization of labor for reclamation and
water conservancy work, and closer control over the production, procure-
ment, and distribution of agricultural commodities. Although some of
these benefits have been realized, peasant disenchantment with socializa-
tion has made itself felt in many ways.
In the winter of 1955-56, exorbitant demands on off-season
peasant labor were made for the construction of irrigation facilities.
As a result, many peasants lost their usual income from sideline activi-
ties, with harmful effects on purchasing power and morale. This practice
has since been modified. In 1956, natural calamities in some areas fur-
ther aggravated the peasants' economic situation, leading to underfulfill-
ment of the state's grain procurement plan. Although sales of domestic
grain were 6.5 million metric tons* greater than in 1955, grain procure-
ment was 1.5 million tons less, and the resulting deficit had to be met
from state grain reserves. V Peasant resistance to grain procurement,
in many cases supported by sympathetic cadres, was achieved by various
methods, among them the following: reports of crop failure were falsi-
fied, standard yields were based on the least productive fields, measures
and scales were altered, and grains were not completely threshed.
In the winter of 1956-57 a substantial number of peasants,
primarily of the upper middle class, withdrew from collective farms. In
Kwangtung Province alone, more than 100,000 households dropped out of
collective farm. 18./ Many subsequently returned, but throughout China -
an increasing influx of peasants into cities, where unemployment is al-
ready a critical problem, has created a serious drain on urban food
supplies. Strong measures have been taken to force these dissatisfied
peasants to return home, but the problem still exists. The reasons for
leaving cooperatives include the unfavorable comparison between the wages
of workers and those of socialized peasants, the low returns to members
of cooperatives compared with those to the few remaining private well-
to-do peasants, the assertion of authority by poorly trained cadres, and
the restrictions on the exercise of former sideline pursuits, especially
trading.
Another result of collectivization has been a serious decline
in the number of hogs and draft animals arising from lack of personal
care, 'inadequate fodder, and low procurement prices. Measures taken to
strengthen incentives to increase the number of livestock have been only
partially successful. These measures include increases in procurement
prices for livestock and livestock products, increases in the size of
private plots (up to 10 percent of total cooperative land) to promote
* Tonnages are given in metric tons throughout this report.
-10 -
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COMMUNIST CHINA
GROSS NATIONAL PRODUCT, BY SECTOR OF ORIGIN
1952, 1957, and 1962
1952
73.7 billion yuan
(1956 Constant factor prices)
oQao6,
7OD.OJOQ0c)
'70400000.009900
0,002.0
).4.c,00,,00,70.700
>Q0O0o00000
0000000000
0000
00100
.00^ -000y00.0 0
)0O.J0J,)00Q00 0C,OQC,
00.00c
.0000,0,0.0-DQ44900
,)00)0,5,i,?04,700L40,
JJ.],a0oGo.D,y0c,,:0
0090-000-0
.>00003000-0-0-00
0 0400
000000-00-0-
>,;JP00,70
0-0-
0-0-0-00
0-0-0 )O,)"
1957
103.2 billion yuan
or-0-000..D0-00-
,
0-00 00-000-
0000-
$0000
r-0C 000 0 0
'93;3' ')P9-`-?05,'
,?
QV0J04.,,,)Q0000,
SQ ?000
Figure 2

1962
148.4 billion yuan
26996 7-58
Agriculture, Forestry, and Fisheries
State Construction
50X1
Industry
Government (including Health and Education)
Modern Transportation and Communications
Miscellaneous Consumer Services and House Rent
VIZ
Trade, Native Transportation, and
Other Business Services
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production of fodder, and assignment of livestock to individuals for
raising and use. The number of draft animals, which provide nearly all
draft power on China's farms, had decreased by 4 percent in late 1957
compared with mid-1956. 2/
2. Production.
a "The expansion of agriculture is a basic condition for en-
suring the development of our industry and fulfillment of Our economic
plan as a whole. ... It is agriculture that provides conditions for the
growth of industry." These statements, appearing in the text of the First
Five Year Plan, 12/ illustrate the extreme importance attributed to the
role of agricultural production in the, development of the Chinese Commu-
nist economy. Although the plan stressed the importance of raising output
of grain and cotton crops, it also called for significant increases in -
all types of. agricultural, production. -
In general, attempts to reach the original targets planned
for 1957 were successful, particularly those for total grains and cotton.
Production of soybeans, sugar cane, and sugar beets, however, fell short
of planned goals.* As production in 1952 probably was higher than that
on which the Chinese based their Five Year Plan goals, successes in meet-
ing specific production goals in 1957 are correspondingly less spectacular
and failures all the more serious.
To achieve the planned goals, major efforts were put forth to
increase the area under irrigation and multiple cropping and to increase
the availability of chemical and organic fertilizers. It is estimated that
production of grain actually increased about 17 million tons during the
First Five Year Plan. Approximately 45 percent of this increase resulted
from expanding the area under irrigation and multiple cropping; about 4o per-
cent, from increased availability of fertilizers; and the remainder from such
measures as the reclamation of waste land; the use of improved seeds, imple-
ments, and pesticides; and the application of improved methods of cultivation.
Official statistics on production of grain for the past 4 years
(1954-57) are generally reasonable in the light of known weather conditions,
expenditures or improvements and fertilizers, and general conditions in the
countryside. There is a possibility tha;b 1956 agricultural production was
overstated. One reason for this conclusion is that only a modest increase
? of 2.5 million tons was claimed for 1957 above 1956 in spite of much better
weather. Statistics for 1952 and 1953, however, are believed to have been
understated considerably because of inadequate reporting and have been re-
vised in the estimates presented in this report. Several types-of evidence
support this revision.
* For the estimated production of selected agricultural commodities for
the years 1952-62, see Table 5, Appendix A, p. 49, below.
S -E -C -R -E -T
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The main source of official statistics in Communist China,
the State Statistical Bureau, was not established until the eve of the
First Five Year Plan, in late 1952. One of its first major tasks was to
take the population census of 1953, which revealed about 100 million
people more than had been accounted for in the official statistics before
that time. As this fact reflects the poor condition of Chinese statistics
before the First Five Year Plan, it is highly unlikely that an accurate
estimate of cultivated and sown area was available at that time. In fact,
In 1952, the authorities admitted that 11 million hectares of registered
taxable land had already been discovered as a result of expanded survey
coverage between 1950 and 1952.
In mid-1955, when the goals for the First Five Year Plan were
first published, the 1957 goal for sown acreage was 151.6 million hectares.
When the final figures for 1955 were published in 1956, sown acreage had
already reached 151.1 million hectares, 11/ indicating that the statistics
for the base year of 1952, on which the 1957 goal was based, had been
understated. The 1957 goal was later revised to 160 million hectares, a
reasonable figure in light of both the existing sown acreage and the.con-
tinued efforts to expand crop cultivation.
The considerable increases of about 6 million hectares of sown
area and 21 million tons of grain claimed for the 3 years from 1952 to
1955 are not believed to have been possible. Increases in production
which could have resulted from increased irrigation facilities and other
improvements as well as increased supplies of agricultural chemicals, espe-
cially fertilizer, fall far short of Chinese Communist claims of increases
for that period. Weather is not a factor, for both 1952 and 1955 were
'excellent crop years, well above average. These considerations support
the conclusion that statistical understatement, because of/inadequate
coverage in the base year, was responsible for a substantial proportion
of the claimed increases in production.* The year 1955, considered to be
an "average calamity year" and well covered statistically, is therefore
selected as the base year from which to project estimates for the Second
Five Year Plan and to adjust the data for 1952 and 1953. Trends using
these revised data are considered to be feasible and acceptable.
Food requirements of China's rapidly expanding population have
necessitated a continuous expansion of area sown to food crops, especially
grains. During the First Five Year Plan, however, the area under indus-
trial crops increased even more rapidly. From 1953 to 1956 the percentage
of the total sown area in industrial crops rose from 8.1 percent to 9.2
percent, but that of grain crops dropped from 79.3 percent to 78.1 percent
* Confirmation of this conclusion is provided by a recent Chinese Commu-
nist admission that nearly half of the claimed increase in cultivated area
during the First Five Year Plan resulted from improved statistical cover.,
age. 1?/
-12 -
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and that of soybeans from 8.6 percent to 7.6 percent. In 1957 the per-
centage of the total sown area in grain crops further decreased to 77.1
percent. 1.3./
Although official concern has been great, planned increases
in livestock have not been realized, including the target for the First
Five Year Plari, The number of hogs, for example -- despite a consider-
able increase from a low of 84 million in 1956 to 114 million in mid-
1957 -- still fell short of the 1957 target of 138 million.-112/
D. Industrial Socialization and Production.
? 1. Socialization and Management.
By the end of 1956 the socialization of industry had virtually
eliminated all private industrial enterprises in Communist China. The con-
version of most of the private industrial sector in 1956 into joint state-
private enterprises, a transition stage preliminary to exclusive state
ownership, was a device which enabled the regime to exercise effective con-
trols over the activities of these enterprises and at the same time retain
the services of the former private managers and technicians. Payment of
liquidation dividends at a flat rate of 5 percent to the former capitalist
owners was originally planned to continue at least until 1962, but there
has been recent Party agitation to abolish this form of "exploitation"
within a period of 2 to 3 years: 22/
The general growth and expansion of the industrial base dur-
ing the First Five Year Plan have been accompanied by Chinese Communist
measures directed at increasing Party control over all industrial enter-
prises. Party control over management in industrial enterprises has been
expanded by strengthening the "collective leadership" of the Party committee
over the individual plant managers, and control over the workers has been
similarly expanded by the establishment of workers' congresses in place
of the unpopular trade union conferences. These workers' congresses, which
also function under the leadership of the Party committee, are supposed to
have certain supervisory powers over the plant manager, thus further limit-
ing the authority of managerial personnel in industrial enterprises.
If the isolated'complaints made in the past year by non-Party
managerial personnel and former capitalist groups are indicative of the
general situation in Chinese industrial enterprises, the economic waste
generated by unskilled or ignorant Party representatives at the individual
enterprise level must be substantial. It is hardly probable that the re-
cent increase of Party influence in enterprises will alleviate the dis-
satisfaction and unrest manifested by the workers and noted in Mao's
"contradictions" speech in 1957. 1//
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2. Production.
During the First Five Year Plan, Communist China made con-
siderable progress in laying the foundations for industrialization. The
gross value of modern industrial output (excluding handicrafts) increased
about 133 percent during the plan, with heavy industry increasing more
than 200 percent and light industry about 85 percent. 1?./ Although the
average annual rate of growth of industrial output during the period was
high (about 16 percent), it was uneven, having been reduced to about7 per-
cent in 1957, which was a year of consolidation and restoration of balance
after the relatively overambitious construction of 1956. The share of GNP
originating in industry rose rapidly, and the proportion of gross industrial
output originating in the state, joint state-private, and cooperative sec-
tors of the economy increased from about 49 percent in 1952 to about 71 per-
cent in. 1955 and to more than. 99 percent in 1957. In spite of notable ad-
vances in industrialization, China still. lags behind Japan and far behind
other advanced industrial nations in per capita and total production of
most industrial goods..* Riding the wave of success developed in the course
of the First Five Year Plan, Communist China has recently announced its
intention of surpassing Great Britain's output of most producer goods by
1972, including iron and steel, electric power, coal, cement, and chemical
fertilizer.
Production targets in the First Five Year Plan were, on the
whole, significantly overfulfilled: production of producer goods in 1957
was about 34 percent above the plan goal, production of consumer goods
4 percent above the plan goal, and handicraft production 6 percent above
the plan goal. Crude oil, edible vegetable oil, sugar, cigarettes, and
cotton cloth (excluding homespun) constitute the major commodities which
underfulfilled plan targets.** The degree of overfulfillment of produc-
tion targets varied greatly, however, so that critical imbalances between
industrial sectors and between related industries were developed in 1956
and 1957. Heavy industrial development was given special emphasis during
the plan period, and high average annual rates of increase in production
were achieved, as shown in Table 1,*** which compares the average annual
rates of increase in output of selected heavy and light industrial products
during 1953-57.
By far the most notable achievement of the 5-year period was
the establishment of the basis for further industrialization in the machine
-*. A comparison of Communist China's GNP and production of selected com-
modities with those of various industrial nations is shown on the chart,
Figure 3, following p. 14.
** For goals of the First Five Year Plan and estimated output of selected
industrial products for the years 1952-62, see Table 6, Appendix Al p. 50,
below.
*** Table 1 follows on p. 15.
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COMMUNIST CHINA Figure 3
GROSS NATIONAL PRODUCT, RAILROAD FREIGHT TRAFFIC, AND PRODUCTION
OF SELECTED COMMODITIES, COMPARED WITH THOSE OF SELECTED COUNTRIES, 1952-57
a
Communist China
- USSR
? ? --- Japan
India
--- USA
----- UK
The dollor values for the Gross Notion?, Product of he
USSR and Communist China were computed on the heel of
ruble-dollor and yuon-dollor rotios deiived by homporing In-
dividual prices in these countries with those in the US. T e
dollar values for Jopon, Indie, end the UK were derived o
the basis of official exchange rotes.
800
600
400
ELECTRIC POWER
? ?
; 200
..... T
1 ?
O ....--? '''''''
Z......--- ?"'"
? 100 ..
---
-1-
; 80 ......-...,
9 60 L....- - -
6 40
a3 20
io 40
8
6 30
1952 1953 1954 1955 1956 1957 1952
b Production by units producing primarly for public
use; about 80 percent of total production.
509
400
50X1
TOTAL PER CAPITA
GROSS NATIONAL PRODUCT a
200
.............
8 - - - - -
ct
oo
80
60
0 40
C73
20
???
10
1952 1953 1954 1955 1956 1957
COAL
500L """ ...1--
_ .."'" =4
....... .- ----
.....-
400 "...ft....0, ?.1.?
.......
.....
....---
300
In
200
,(2
Ut
2 100
0
.-.-.', so
60
50
COTTON CLOTH
?
11
1952 1953 1954
C Includes mixed fabrics, predominately of cotton.
.
Data plotted on semi-logarithmic grid.
MILLION METRIC TONS
ow*
2000
1000
RAILROAD FREIGHT TRAFFIC
_.1
800
600
? 400'
1.0
cl ? 200
to
O 100
? 80
to
MILLION METRIC TONS
60
40 6.- "'"
30
1952 1953 1954 1955 1956 19- 57
400
200
100
60
40
20
6
4
6
CRUDE OIL
4.?
1 1-
1953 1954 1955 1956 1957 1952 1953 1954 1955 1956 1957
CRUDE STEEL FOOD GRAiNS d
180
140
120
100
80
'g-
60
40
20'
-
10
8 --------
6
1955 1956 1957 1952 1953 1954 1955 1956 1957
10
8
6
1952 1953
1954 1955 1956 1957
d Includes wheat, rye, barley, oats, corn, and
rice where produced. Does not include
potatoes or soybeans.
4000
Communist China
--- USSR
--- Japan
India
? ? USA
ELECTRIC POWER
?
2000 ? --------
4.????? ?????7
or 1?6?0?0
800
0
0
LINEAR METER
400:
200
100
80
60
-1
40
20
io
1952 1953 1954 1955 1956 1957
60 L.
50
COTTON CLOTH
?.L ?
40
40.
?????
30 ???? -1`
100
80
GROSS NATIONAL PRODUCT
US DOLLARS
100
80
60'
50
1952 1953
COAL
1957
1000
e't 800
600
Ut
-----------
400
200
100
1952 1953 1954 1955 1956 1957
CRUDE STEEL
640000 --r-
---
200
20
10
8
1952 1953
1954
1955
1956 1957
60
Li 40
20
10
8
6
RAILROAD FREIGHT TRAFFIC
6000
4000
2000
14.1
to 1000
9 800
3.4 600
400
200
100
1952
2000
1000
600
',too
200
100
60
40
20
10
10
6
1953 1954 1955 1956 1957
CRUDE OIL
2
1.0
.6
. 1952
1953 1954 1955 1956 1957
9.,
FOOD GRAINS
1Z00L
800
700
600
"."". S.****??
500
400
300
200S.
J.
2 100
1952 1953 1954 1955 1956 1957 1952 1953 1954 1955 1956 1957
26807 7-58
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Table 1
Communist China: Average Annual Rates of Increase of Production,
1953-57
Percent
Product
Rate
Product
Rate
Pig iron
25
Cotton cloth
5
Crude steel
32
Paper
20
Electric power
21
Grain
2
Coal
14
Cotton
5
Machine building industry
35
Textiles
7
Cement
20
Sugar
Petroleum products
22
(including handicrafts)
14
Nonferrous mining
21
Vegetable oils
Chemicals
31
(including handicrafts)
8
Cotton yarn
6
Flour
11
building industries. Whereas China was formerly heavily dependent on
foreign prpducers for almost all Machinery as well as for many of the raw
materials required by the machine industry, it is now claimed -- and
reasonably so -- that the machine building industry can satisfy between
70 and 80 percent of machinery requirements under the Second Five Year
Plan. 121/ Although still dependent on imports for certain components,
China now is able to produce large-scale precision machine tools, simple
mining and metallurgical processing equipment, power-station equipment
for medium-size plants, motor trucks, aircraft, and large locomotives.
The naval and civil Shipbuilding industries, the electronics industry, and
related ferrous and nonferrous metallurgical industries also have achieved
considerable development. Much of the recent advance has involved imita-
tion of Russian designs, but China has begun to design some types of new
equipment independently. The extra-rapid development of machine industries
in relation to other industries and services created imbalances in product
demand and raw material availability which led in 1957 to production cut-
backs and underutilization of capacity in such machine building indus-
tries as those producing trucks, locomotives, freight cars, agricultural
machinery, and textile machinery. This capacity will be utilized exten-
sively in meeting the targets of the Second Five Year Plan (1958-62).
The iron and steel industry has so developed that in 1957, it
was Claimed, 88 percent of rolled steel requirements would be met by
domestic production, compared with 61 percent in 1952. 22/ The signifi-
cant increases in production still have not eliminated many of the basic
problems in the iron and steel industry, including concentration of a
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large share of production at An-shan, inadequate development of ore
mining and dressing facilities, and the inability to supply the increas-
ing variety of steels revired by the advancing technological level of
Chinese industry. These continuing problems are being met to a degree
by construction now under way, or planned, of integrated plants at
Pao-t'ou and Wuhan and of about 25 small and medium-size plants advan-
tageously located throughout the country near the ore deposits and local
consumption centers. China has become self-sufficient in most nonferrous
metals (with the notable exceptions of copper, chromium, and nickel).
Two significant aspects of production of nonferrous minerals have been
the increase in exports of nonferrous metals and the rapid development
of the aluminum industry, which presently meets domestic metal demands.
Further development of metals and minerals for export .is planned, but ex-
pansion of production of copper, presently inadevate, probably will re-
main the most important item in the plan for the development of nonferrous
metals.
Although production in the chemical industry increased about
three times during the First Five Year Plan, the industry still is far
from meeting the needs of agriculture and other industries in either
volume or variety of products. Development of the chemical industry dur-
ing the Second Five Year Plan appears, however, to have the highest
priority. As an integral part of the drive to solve China's pressing
agricultural production problem, the chemical fertilizer industry is to '
be developed as fast as possible, and, to aid the tense situation in the
supply of cotton cloth, the synthetic fiber industry is also to be en-
couraged.
Starting from a very low base, production of crude oil
achieved the impressive growth rate of 230 percent during the plan period. 21/
Development of existing and new producing fields and construction of new
processing and transport facilities during the plan period have laid the
groundwork for future large increases in production. Demand for petroleum
products is increasing rapidly, however, and China still will be dependent
on imports to a marked degree during the next 5 years. Shortage of petro-
leum products probably has retarded the growth of some sectors of-the
economy.
Production of coal, which almost doubled during the First
Five Year Plan, generally has kept pace with industrial and power re-
quirements, but unanticipated urban and rural household demand brought
on a coal shortage in 1956 and 1957. Increased emphasis on small and
medium-size workings should help to meet the growing demand for household
use. Recent steps to help solve another problem, the poor quality of
coal produced, include an accelerated program for construction of coal
washing and processing units.
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As shown in Table 1,* light industry progressed much more
slowly than heavy industry during the First Five Year Plan. Growth of
China's light industrial sector is, of course, limited by the inadequate
supply of agricultural raw materials. Most of the increases in produc-
tion by light industry during the Five Year Plan have come from a greater
utilization of existing facilities. Although the cotton textile industry
has developed additional capacity, shortages of raw materials have led,
to considerable underutilization of capacity during the last 3 years.
The relatively small rate of growth of consumer goods indus-
tries probably should be further depressed because of an upward statis-
tical bias created espeFially in this sector by socialization and the
concomitant increased ability of the regime to account for production at
the local level. The meat-slaughtering industry is mentioned as a case
in point. In 1952, only 10 percent of this industry was controlled by
the government and was reported as light industrial output in the modern
sector, but the corresponding figure in 1955 was nearly 70 percent. Al-
though the index of total meat slaughtered, with 1952 as 100, increased
to only 129 by 1957, the index of industrially-slaughtered meat (that
done by the state) rose to 1,146. This falsely inflated the growth of
the light industrial sector. With slaughtering deleted from the produc-
tion tabulation, the 1957 index for modern light industry would be re-
duced from 185 to 172 (1952 = 100).
In spite of the heavy priority assigned to the development of
modern, mechanized industry during the First Five Year Plan, handicraft
in 1957 still eemprtsed about 16 percent of total industrial output com-
pared with about 21 percent in 1952. 2/ The handicraft industry accounted
for the following significant proportions of the production of major con-
sumer goods in 1956: salt, 22 percent; sugar, 36 percent; edible oils,
27 percent; and cotton cloth (including homespun), 22 percent. Handicraft
production of producer goods, largely simple farm tools and other ironware,
also increased at a rapid rate (about 126 percent) over the plan period.
Regional dispersion of industry, motivated by both strategic
and economic considerations, is a long-range goal of the Chinese Communists.
There was, however, an even greater concentration of industrial production
in the old industrial areas during the First Five Year Plan. This concen-
tration resulted not only from the reconstruction of the existing industrial
plant but also from the location of new industry in these areas which pro-
vided known sources of raw materials and fuel and developed transportation
facilities and a reservoir of skilled labor. More than 80 percent of total
investment in China's iron and steel industry was allocated to Northeast
China during the plan period, and half of the 156 key industrial projects
receiving Soviet aid are located in this one region. 2,1/
* P. 15, above.
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3. Transportation.
The transport sector of Communist China has supported the rapid
advance in economic development and, except for local dislocations, has
kept pace with the general industrial growth of the economy. The transpor-
tation system has been utilized at close to capacity, and all branches of
the sector have experienced high annual growth rates.* The railroads, with
their high percentage of the traffic load, have been primarily responsible
for the support of the industrial sector,** but the other types of carriers
are increasing their proportionate share of the load as shown in the follow-
ing tabulation of percentages of total freight ton-kilometers borne by each
type of carrier for 1950, 1956, and planned for 1962:
1950
1956
1962
Railroads
93.2
82.8
81.3
Highways
0.9
2.4
3.6
Inland waterways
4.o
8.9
8.8
Coastal shipping
1.9
5.9
6.3
Total
100.0
100.0
100.0
The supporting role of native transport in China is tradition-
ally very important. A recent article by the Soviet Minister of the River
Fleet, ,221/ reporting on his inspection of Chinese inland waterways, pre-
sents the following percentage breakdown of freight carried by all of the
various types of transport in
1956:
Tons Carried
(Percent)
Ton-Kilometers
(Percent)
Railroads
33.0
78.7
Inland waterways
Modern ships
4.7
8.5
Native ships
9.9
3.6
Coastal shipping
1.5
5.7
Motor vehicles
10.7
2.3
Carts and pack animals
40.2
1.2
Total
100.0
100.0
* Communist China's railroad system and major highways are shown on
the map, Figure 7, inside back cover.
** For the estimated volume and performance ,of the various types of
transportation carriers for the years 1952-62, see Table 7, Appendix A,
p. 56, below.
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The absolute amounts derived from the percentages given for the modern
means of transport and cart transport check closely with official Chinese
Communist announcements of transport achievement. The estimate for in-
land transport by junks is the first provided for 50X1
this sector. This series points up the important part native transport,
in the form of native ships and carts and pack animals, plays in short-
haul local movement of goods. Native transport in 1956 carried more than
50 percent of the total tabulated freight tonnage, although it accounted
for less than 5 percent of the total tabulated ton-kilometers.
E. Foreign Trade and Economic Relations.
-Foreign trade turnover of Communist China was equivalent to
approximately 10 percent of GNP over the First Five Year Plan, rising
from more then 8.1 billion yuan in 1953 to a high of more than 11 billion
yuan in 1955, followed by a drop to slightly more than 10 billion yuan
in 1957.* The decline in 1956 was on the import side and reflected a
sharp reduction of receipts under.Soviet loans. In 1957, there was a
cut in both imports and exports, with total trade about 5 percent less
than in 1956. In spite of the 1956-57 decline the foreign trade goals
of the First Five Year Plan, it is claimed, were overfulfilled and total
trade by the end of 1957 was expected to exceed the First Five Year Plan
target by 6.4 percent, with the import and export plans overfulfilled by
8 percent and 4.8 percent, respectively. 22/**
The contribution of foreign trade to economic and military develop-
ment during the First Five Year Plan is indicated in the composition of
Communist China's imports. Imports during this period totaled more than
25.3 billion yuan, of which approximately 8 percent were financed by Soviet
loans, presumed to be largely of a military nature, and about 4 percent
by Soviet economic credits. Articles in the Chinese Communist press have
stated :that the composition of imports was approximately as follows:
machinery and equipment, 60 percent (15.2 billion yuan); essential raw
materials, 30 percent (7.6 billion yuan); and consumer goods, 10 percent
(2.5 billion yuan).*** The machinery and equipment category perhaps in-
cludes some or all of the military imports financed by Soviet loans as
well as about 3 billion yuan in military Imports estimated to have been
financed through normal trade channels. In addition, the Chinese
* The volume and direction of foreign trade for the years 1952-57
and 1962 are shown on the chart, Figure 4, following p. 20.
** The reported overfulfilIment is based on a' cumulative total for the
years 1953757. It was' stated in the First Five Year Plan that the total
volume of imports and exports in 1957 would be 66.5 percent greater than
in 1952. It is estimated that the actual increase in total trade was
about 60 percent.
*** These percentages were given for the years 1953-56. It is assumed
that there was little change in 1957.
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Communists have estimated that during the First Five Year Plan imports
of machinery and equipment for state construction projects would account
for 15.2 percent of total investment in capital construction, or about
7,4 billion yuan.
Exports are estimated to be approximately 23.5 billion yuan dur-
ing 1953-57. Agricultural products and products processed from agri-
cultural raw materials are stated to have been 77.5 percent of total
exports, with exports, of mining products, machines, and industrial prod-
ucts contributing the remaining 22.5 percent. El/
Trade with the USSR and other Bloc countries was predominant
during this period, accounting for nearly 78 percent* of total trade for
the years 1953-57. Trade with the Free World, however, increased in
relative importance during the last 2 years of the plan period. Main-
tenance of trade with the Free World at this level while total trade was
dropping is attributable in part to the increase in trade over the past
few years with Afro-Asian countries and to the partial relaxation of
trade controls against Communist China in 1957 by some Free World coun-
tries. Minister of Foreign Trade Yeh Chi-chuang predicted in midyear
that trade with Afro-Asian countries in 1957 would be about 88 percent
above the 1950 level. 2L8/ The decline of exports in 1957, which appa-
rently caused the Chinese Communists to reduce imports, was partly a
result of a drop in exports of foodstuffs which largely would have gone
to the USSR.
An analysis of Communist China's balance of payments over the
First Five Year Plan period indicates net .receipts in the nontrade items
which enabled the financing of an import surplus of approximately 1.9
billion yuan. Payments for debt service and for foreign aid totaled
almost 3.5 billion yuan, receipts of Soviet credits were more than 3.1
billion yuan, and net receipts from all other items were more than
2.2 billion yuan, including overseas Chinese remittances, expenditures
of Soviet forces in China during 1953-55, drawings on foreign exchange
holdings, clearing account debts incurred, and exports of gold. Of the
Soviet credits received during 1953-57 -- valued at about 3.1 billion
yuan -- only about one-third can be considered as being used for economic
development purposes. In terms of funds available for industrial develop-
ment during the First Five Year flan, the Soviet economic credits were
relatively small, amounting to about 4 percent of total imports and about
5 to 6 percent of investment in machinery and equipment for capital
* This percentage would be reduced to 70 percent of total trade if the
yuan data were converted to US dollars. The discrepancy results from
the different yuan-dollar exchange rates believed to be employed in China's
trade with the West (2.46 yuan to.US $1) and with Bloc countries-(mul-
tiple exchange rates, the weighted average of which is 3.79 yuan to US $1).
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a
COMMUNIST CHINA
FOREIGN TRADE
1952-57 AND 1962
'50x)
TOTAL FOREIGN TRADE
(MILLIONS OF YUAN)
TOTAL TRADE
TOTAL IMPORTS
IMPORTS ON LOANS
6490
IMPORTS
8112
EXPORTS
4413
884
8487
1952
1953
3529
11024
6063
1657
4074
4406
1954
10865
5568
7
5297 4
4961 950
117 23
1955
5180
10350
1956
1957
7540
15440
7900
(1962) .
Estimated
DIRECTION OF FOREIGN TRADE
(MILLIONS OF YUAN)
USSR
FREE WORLD
EUROPEAN
AND
ASIAN SATELLITES
3869
11222
1952
_26810758
1953
1954
1956
50X1
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construction projects. The economic credits, in fact, were far less than
the yuan -- about 1.9 billion. -- required for repayment of principal and
interest on the total foreign debt in the plan period. In view Of state-
ments in the Chinese Communist press which suggest only limited reserves
of foreign exchange, it seems likely that Communist China will be unable,
during the Second Five Year Plan, to depend on existing foreign exchange
holdings for sizable.imports.*
F. Trends in National Finance.
Actual budget revenues and expenditures during Communist China's
First Five Year Plan almost exactly balanced at a level approximately
5 percent above the plan figures. 29/ Most of the above-plan expenditure
was allocated to economic construction, with more than half of budget
appropriations under this category devoted to industrial development.
Although profits from state enterprises and tax receipts exceeded the
Original plan, the largest increment in above-plan revenue resulted from
foreign loans, principally in the form of transfers, on credit, of Soviet
military equipment located in China. Expenditure rose more rapidly than
revenue during the plan period. Asa result, the budget surplus which
had been accumulated in the years 1951 to 1954 was exhausted by 1956,
when the government resorted to currency issue to cover the budget defi-
cit in that year. Reflecting the agricultural base of China's economy,
annual budget revenues were to a large extent governed by the harvest
results of the preceding year. Thi 6 pattern of sharp, cyclical fluctua-
tions in annual financial and economic activity during the First Five Year
Plan prompted a concerted effort in 1957 to build up state reserves of
basic grain and industrial crops and thus make possible somewhat steadier
growth during the Second Five Year Plan.
The most striking feature of Communist China's public finance in
1956 was the development of an inflationary trend revealed in deficits
appearing both in the budget accounts and in the balance sheet of the
state bank. In spite of the liquidation of 2 billion yuan of state com-
modity reserves to absorb some of the "excess purchasing power" created
by the state's overambitious construction program, there Was still an
increase in note issue amounting to nearly 1.7 billion ydan. 12/ A
series of deflationary measures adopted in 1957 included a cutback in
budget expenditures, a drastic curtailment of agricultural loans,- and a
reduction in the labor force. The necessary corollary of these measures
was a slowdown in the rate of economic growth, with state investment in
capital construction in 1957 declining for the first time and by the
sizable margin of about 15 percent. Among other trends appearing during
1956 and 1957 was the continued reduction of defense expenditure. This
* For an estimated balance of payments for Communist China for the years
1953-62, see Table 8, Appendix A, p. 57, below.
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development is a reflection of the modernization program in Communist
China's armed forces which calls for diminishing expenditure for manpower
(carried under the defense category in the budget) and for increasing
investment in military industry producing modern arms and equipment
(carried for themost part under the economic construction category in
the budget). Still another trend was the sharp contraction in receipts
from foreign aid coincident with steadily mounting foreign debt charges
and payments under Communist China's own foreign aid program.*
G. Trends in Capital Construction Investment.
1. First Five Year Plan Fulfillment.
It is estimated that gross investment in Communist China
amounted to nearly 84 billion yuan during the First Five Year Plan, of
which more than 60 billion yuan were provided by the state. The major
sources of savings for gross investment were as follows: profits and
depreciation allowances of state enterprises, 62 percent; surplus of
taxes over government noninvestment expenditures, 14 percent; and farmers'
investment expenditures out of income, 9 percent.** Nearly 80 percent of
total savings were channeled through the state budget, with most of the
remainder consisting of private savings and a small amount generated at
the enterprise level. As further evidence of the key role of agriculture
in China's economic development, more than half of total investment is
based on the output of the agricultural sector.
Although a number of somewhat fearful views of "strains,
stresses, and imbalances" created in the Chinese economy during the
First Five Year Plan emanated from Peibing in early 1957, it now appears
that the regime was eminently successful in attaining the capital con-
struction objectives laid out in the plan. In fact, it is reported that
planned investment in capital construction was overfulfilled by 14.1 per-
cent, or approximately 6.03 billion yuan above the original target of
42.74 billion yuan. 31/*** Reflecting Communist China's preoccupation
* Communist China's budget accounts for the years 1950-58 are shown
on the chart, Figure 5, following p. 22.
** For the major components of investment and savings estimated for
the First Five Year Plan, see Table 9, Appendix A, p. 58, below.
xxx It should be noted that the plan and fulfillment figures are not
strictly comparable for the following reasons. First, the fulfillment
figure is the cumulative total of investment made under the respective
annual plans which include certain types of construction (for example,
some local construction) not incorporated in the Five Year Plan. This
would have the effect of inflating the fulfillment figure. On the other
hand, as the fulfillment figure is expressed in current prices, the re-
duction in producer goods prices in 1956 gootnote continued on p. 27
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COMMUNIST CHINA -
BUDGET REVENUES AND EXPENDITURES
, 1950-58
( Billions of Current Yuan )*
REVENUES
12:967
't21
Other Revenues 6.5197,
Credits, Loans,and Insurance
4? tEiztre.
Profits of State Owned Enterprises 3%?
Agricultural Taxes
Salt and Customs Taxes "10%, 37%
Industrial and CommirCiat Paves 36%
26997 758
26.237
ffg
38%
35%
3f420:85?
27 203 28.743
30.70
2"
F
? h
k
-
?r?
34%
32%
t-44
35%
37%
37.5%
1950 1951 1952 953 1954 1955 1956 1957 1958
(Budge)
Other Expendit res
Administration
Defense
Social, Cultural,
and Educational
Economic Construction
EXPENDITURES
16.787
Foreign Aid rod Other 7g,Ds;
De bt Retirement
kg.t
6.808.
41.5%
25.5%
11.902,,
visNN
29.5%
1,0X4
44%:C.
?.'43,t0
45%
30.574
29.347
Bank Credit Fund
24.632
us
235%
50%
22%.
47%
rii
52%
1950 1951 1952 1953 1954 1955 1956
8ecause Of a.general reduction of producer goods prices in 1956, revenues and expenditures totals for
/956-58 should be increased by about one billion yuan to make them comparable with earlier years.
33.198
Figure 5
50X1
30.549
t25ioi,
3.5%
General
Reserve
ECONOMIC CONSTRUCTION
13.762
12.358
8%
5.915
7%
6%
EXPENDITURES
_ _
2.55-
4.86
17.643
0.5%
15%
Other
Trade, Banking,
Communications and
if5i1
741,E
I fill
?r'j
Or
Ve44
14%
04.5%
17.5%
48.5%
53%
8.645
71
14.5%
7.
24%
5/
15%
17%
Agriculture, Forestry, and
Water Conservanca
Industry
14%
14.55
14%
10.5%
14%
50.5%
Heavy
-Wt.
52%
54.5%
12%
11%
14%
11%
14%
39%
Heave
-
Light
40%
Heavy
Light
42.5%
Heavy
GIE
1957 1958 1953 1954 1955 956 1957 958
(Budge)
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with rapid industrial development, approximately 56 percent Of total
investment in capital construction was channeled into the industrial
sector and less than 8 percent into the agricultural sector.* The in-
creasing tempo of the regime's drive for rapid industrialization is
illustrated by the fact that about 54 percent of total investment was
concentrated in the last 2 years of the plan.
2. Industrial Capital Construction.
It is estimated that 27.38 billion yuan Were invested in
industrial capital construction during the First Five Year Plan. Approxi-
mately 21 billion yuan of this sum represents the gross value of industrial
fixed assets newly added during this period, an amount slightly higher
than the net value of all industrial fixed assets existing in 1952. 2/
One result of such a rapid expansion of industrial capital in Communist
China has been the appearance of serious dislocations and imbalances be-
tween the different industrial sectors. As illustrations of the imbalance
in industrial development that occurred during the plan period, the
Chinese Communists have cited lagging production in the fuel and raw
material extraction industries relative to the manufacturing sector as
well as the uneven development of various branches of the machine building
industry.
The proportionate distribution of investment funds between
heavy industry and light industry has continued to be a topic of much
discussion among Chinese Communist planners. In spite of a temporary
shift in favor of light industry in 1956, the ratio of heavy to light in-
dustry investment for the 5-year period was approximately the same as
that provided in the plan, about 7.9 to 1. ,3./ The major obstacle to
expanding production of consumer goods is not so much lack of productive
capacity as a shortage of raw material supplies from the agricultural
sector. The Chinese Communists have realized belatedly that increased
investment in agriculture and in the machinery and chemical fertilizer
industries which support agriculture provides the only basic solution to
the continuing problem of insufficient consumer goods. For this reason,
the heavy industry - light industry ratio loses much of its significance
as an indicator of trends in economic planning in Communist China.
would have the effect of understating the investment totals for 1956 and
1957 in relation to the plan prices. Thus the two factors tend to com-
pensate for each other.
* For a breakdown by major economic sector of capital construction in-
vestment during the First Five Year Plan, see Table 10, Appendix A,
p. 59, below.
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II. Economic Trends Under the Second Five Year Plan (1958-62).
A. ,Introduction.
A
In formulating their 1958 annual economic plan the Chinese Com-
munists have demonstrated a new awareness of the fundamental need for
expanding agricultural production, especially food grains and fibers, as
the only practical way to provide both increased investment funds and
consumption goods. A change in emphasis in their priorities has occurred
in that although heavy industry will continue to receive the largest
share of investment, increased investment will be accorded to those heavy
industries providing fertilizers, agricultural chemicals, irrigation
equipment, and implements for agriculture. A crash program to construct
new chemical fertilizer plants, combined with a rising level of imports,
is expected to make available by 1962 at least 7.5 million tons of chemi-
cal fertilizers, a threefold increase over the amount available in 1957.
At the same time, it has been recognized that important increases in
production have resulted from raising procurement prices in the past, and
further price adjustments for certain industrial crops may be planned.
Whether these shifts in investment and incentives in favor of the
peasants will be sufficient to improve production to the necessary extent
cannot yet be estimated, but it is at least clear that the new "policy
of developing industry and agriculture simultaneously on the basis of
priority to the growth of heavy industry" is a realistic adaptation of
Communist policy to conditions existing in China.
B. Gross National Product.
It is estimated that total output of goods and services (GNP)
will increase about as rapidly during the Second Five Year Plan (1958-62)
as during the First Five Year Plan (1953-57). The estimates of GNP for
1962 are based on trends in commodity production, government purchases
and investment, and consumption expenditures. The estimates show that
in general sufficient funds probably will be available to finance the
investment required to achieve the projected increases in production
during the Second Five Year Plan. As shown in Table 11,* GNP at market
prices will increase by about 45 percent in 1962 above 1957, or 7 to 8
percent per year. In the distribution of total output, investment will
increase its share from 20 percent in 1957 to 24 percent in 1962, largely
at the expense of consumption expenditures which will decline from 70
percent to 66 percent of the total. In spite of its lower proportion,
the total consumption expenditure will still permit some increase in
per capita consumption.
* For projected trends in GNP by end use for the period 1952-62, see
Table 11, Appendix A, p. 60, below.
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Among the trends projected to 1962 for national income by sector
of origin, the most significant finding is the continued progress toward
Communist China's major goal of industrialization. According to these
estimates the industrial sector will contribute about 26 percent of total
gross income in 1962 as against 20 percent in 1957 and 13 percent in
1952.* Industrial output will increase at a somewhat slower rate (91
percent) during the Second Five Year Plan than in the first plan period
(109 percent), in large part because of increasing reliance on new ca-
pacity to achieve production increases. On the other hand, agricultural
output is expected to increase at a faster rate (17 percent compared with
13 percent in the First Five Year Plan), in keeping with the new emphasis
on agricultural development in Communist China's economic planning.
C. Agricultural Production.
The Peiping regime has decided that an all-out effort must be ,
made to increase agricultural output during the Second Five Year Plan.
Accordingly, agriculture will receive a larger share of investment than
it did in the First Five Year Plan. Direct investment by the state, to
be used primarily on large-scale irrigation and water conservancy projects,
will increase from 7.8 percent of total capital construction in the first
plan to about 14 percent of total investment in 1958. 311-/ Indirect invest-
ment also will increase significantly; for example, investment in the
chemical fertilizer industry will rise from 1 percent of the total during
the First Five Year Plan to about 3 percent in the Second Five Year Plan.
The bulk of agricultural investment, however, will continue to be financed
out of funds accumulated by the collectives, with primary emphasis on
small-scale irrigation projects which permit expansion of double cropping
and an immediate increase in agricultural production. Substantial in-
creases in production are planned for both food and industrial crops.
It is estimated that the increase in grain output by 1962 will
be on the order of 30 million tons. Applied to the production of grain
of 185 million tons in 1957, it is felt that production of grain in 1962
will be approximately 215 million tons. This figure is considerably less
than the original plan goal of 250 million tons, but plan revisions have
already been made, with a recent drop to 240 million tons. 35/ Other
revisions probably will follow. By comparison, the 1962 target for pro-
duction of cotton is conservative -- 2.15 million tons, having recently
been lowered from 2.4 million tons. It is estimated that production of
cotton in 1962 will reach 2 million tons.
Factors considered in making the above estimates include the
increase in irrigated area, the increased availability of chemical and
* For projected trends in national income, by sector of origin, for
1952-62, see Table 12, Appendix A, p. 61, below. See also Figure 2,
following p. 10, above.
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organic fertilizers, and the increased sown area obtained through recla-
mation and multiple cropping. Underlining the importance of Communist
China's program for rapid expansion of the chemical fertilizer industry,
about one-fourth of the increases in production estimated as possible
by 1962 are expected to result from increased application of chemical
fertilizer. The amount available in 1962, including imports, is expected
to be four times that in 1957, totaling approximately 7.5 million tons
of both nitrogenous and phosphorous fertilizers.
In order. to increase production, incentives must be offered which
will complement the physical Improvements made. So far, incentives for
collective farm peasants are not satisfactory. Many socialized peasants
have suffered disillusionment instead of experiencing increased'itcen
tives. With increased labor requirements for construction, crop cuitt
vation, and livestock raising, increased competition for land among
grain,- industrial, and fodder crops, and an increasing gap between urban
and rural income, the work of collectivized peasants must be properly en-
couraged with increased incentives in procurement prices of agricultural
products and in better supplies Of consumer goods if the estimated in-
creases in production, are to be.realized.
In general, in view of the recent realistic adaptation of
Communist policy to conditions in China, agricultural production during
the Second Five Year Plan Is expected to keep pace with the basic food
requirements of Communist China's rapidly growing population and to
permit some expansion of light industry. It is doubtful whether any
significant surplus will appear in the agricultural economy. Even the
achievement of the production figures for 1962 will require a flexible
approach to the problems of management of the collective farms. Possible
modifications of the present agricultural program which may result from
increasing strains on the cooperatives include organizational changes,
the readjustment of planned allocations of resources to agriculture, and
the raising of state procurement prices.
D. Industrial Production.
During the Second Five Year Plan, Communist China will advance
a step further toward creating an independent, socialized .industrial
economy, building upon the foundations laid in the First Five Year Plan
(1953-57). No finalized plan has been released, but the proposals put
before' the Eighth Congress of the Chinese Communist Party for increases
in industrial output apparently are still the basis for detailed plan-
ning. 1?./ If anything, these now appear to be generally conservative.*
The proposed 1962 targets.were based on the original First Five Year
* For different versions of 1962 plan goals for both agricilltureand-
industry, see Table 13, Appendix A, p. 62) below.
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Plan goals. Thus, in the case of those commodities '(such as crude Oil
and edible oils) which failed to meet the original targets,- attainment:-
of the Second Five Year Plan goals is doubtful. In other cases the 1957
target was significantly overfulfilled, and achievement ofthe 1962 goals.
appears likely.*
Heavy industry (including the chemical industry) will continue
to receive priority development, with greater emphasis being devoted
to those industries which support agricultural production. This is
especially true of the chemical fertilizer industry and the production
of farm and irrigation works equipment. A greater part of the heavy
industrial investment will be in newly developing industrial areas in
northern Manchuria, North-Central China, and the Northwest, based upon
extensive inland deposits of industrial raw materials. Increased
production during the second plan will rely heavily on new capacity.
(much of which was designed, partly constructed, or completed during
the first plan), whereas rehabilitation of existing capacity and
improved technology were important factors in achievement of the first
plan goals. Significant proportions of the increased output of the
iron and steel industry and the coal extraction industry will come
from production of small- and medium-size producing units, under the
program for effecting a rapid increase in local industries.
The product mix of Chinese industry will continue to expand
rapidly and by 1962 will be capable of supplying many basic materials
as well as medium- and some large-scale machinery and equipment. By
1962 the plan calls for the machine building industry to furnish
about 80 percent of machinery requirements compared with about 60
percent in 1957. In addition to the priority development of the chemi-
cal and machinery industries, it is expected that production of petro-
leum and copper will be emphasized. Chinese production of petroleum,
however, is far below requirements for consumption, and even if the
1962 proposed target is met, it is estimated that imports of finished
petroleum products will remain slightly higher than the 1957 level.
E. Foreign Economic Relations.
1. Foreign Trade.
The economic development program of Communist China will
necessitate continued growth in its foreign trade. During the First
Five Year Plan, more than 12 percent of total imports were financed
by credits from the USSR. Assuming no great change in the world situa-
tion through 1962, it is believed that no significant economic credits
* The growth of selected industries for the period 1952-62 is shown on
the chart,' Figure 6, following p. 28.
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50X1
2000
1900
1800
1700
1600
1500
1400
1300
1200
1100
1000
900
800
700
600
500
400
300
200
100
COMMUNIST CHINA
INDEXES OF GROWTH
OF SELECTED INDUSTRIES, 1952-62
1952=100
,
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26809 7-58
Data plotted on semi-logarithmic grid.
Figure 6
Chemicals
Machine Building
Non-ferrous
Iron and Steel
Petroleum -
Electric Power
Modern Transport
?Cement
Modern Industry
'Timber
Coal
Food Processing
Textiles
1962
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will be received by Communist China. Therefore, the level of imports
-will be largely determined by export capabilities.
In the First Five Year Plan period, Communist China's
exports increased at an average annual rate of under 540 million yuan.
It is believed that exports will be pushed strenuously over the period
of the Second Five Year Plan, but the export expansion will be limited
considerably, as indicated by the 1957 cutbacks, by the demands for
domestic consumption. It is estimated, therefore, that the potential
increase in exports over the Second Five Year Plan period will be on
roughly the same order of magnitude in absolute value terms as that
experienced during the years 1953-57 -- that is, assuming an average
annual increase of 500 million yuan, with exports being able to reach
approximately 7.9 billion yuan by 1962, about 46 percent above 1957.
Assuming that Communist China exploits this export poten-
tial fully, approximately 4..0 billion yuan, or more than 11 percent -
of exports during the Second Five Year Plan, will be required for, debt
service and foreign aid grants and credits. It is estimated that 700
million yuan in foreign exchange may be received by Communist China
during this period from overseas Chinese remittances_. If miscellaneous
foreign exchange payments and receipts are approximately in balance and
if foreign exchange holdings are at approximately the same level at the
end of 1962 as they were as of 1 January 1958, Communist China's import
potential for 1958-62 would be approximately 31.2 billion yuan,* a
23-percent increase above total imports during the First Five Year Plan.
Total trade in 1962 would be approximately 15.4 billion yuan, a 49-per-
cent increase above 1957.
The foregoing estimate' of Communist China's ability to
pay for imports and the estimates of import requirements during the
next 5 years suggest that Communist China probably will have suffi-
cient foreign exchange to finance the level of investment goods
imports apparently planned for the Second Five Year Plan.
2. Economic Dependence or Self-Sufficienc .
One of the long-term goals of Communist China is the
achievement of a high degree of economic self-sufficiency. In the
industrialization program to date, however, Communist China has been
dependent on outside assistance, largely from the USSR, in the form
of imports of investment and military goods, technical assistance, and,
to a much lesser extent, economic credits. Imports of investment
goods refer primarily to machinery, equipment, and installations for
* Calculated on the basis of multiple yuan-dollar exchange rates.
The total import figure would be somewhat lower if calculated on the
' basis of a single exchange rate. See footnote, p. 20, above.
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industrial construction, principally the 211 (205 being industrial) con-
struction projects receiving complete Soviet aid which are said to form
the core of Communist China's industrialization program. Although most
of this aid has come from the USSR, the aid from the European Satellites
has not been insignificant, with Czechoslovakia alone reported as as-
sisting in the construction of 27 industrial enterprises. Communist
China's dependence on other, largely Bloc, countries for imports needed
for industrialization is indicated by the following tabulation, which
shows the degree of self-sufficiency claimed by the Chinese Communists:
Canmodity
Proportion Domestically Produced
(Percent) Period
Machinery and equipment 6o..T/ 1953-57
70 to 80 13/ 1958-62
Steel (rolled) a2/ 61 1953
88 - 1957
Metals More than 8o 112/ 1957
Technical assistance, most notably in the form of technical
data, planning, and technicians furnished for specific construction pro-
jects, has been of considerable importance to Communist China's indus-
trialization. Technical assistance, however, has not been confined to
construction projects. In the reconstruction period especially, when
the shortage of trained technical personnel was most acute, Soviet ad-
visers and technicians worked with virtually every ministry and agency
in the government and with many individual enterprises. Technicians
provide on-the-job training for Chinese workers, and, in addition, about
7,000 Chinese have been sent to the USSR for training. Soviet Bloc
technical data have been utilized extensively.
With the continuing industrialization of the Chinese economy
and the expansion of trained personnel in various fields, the dependence
on Soviet Bloc technicians will gradually decline. Chinese Communist
statements suggest some dissatisfaction with Soviet designs and techni-
cal advice and indicate that foreign technical assistance must be adapted
to the actual conditions prevailing in China. Lli This may be an indi-
cation that Communist China will endeavor to rely increasingly on its
awn technical resources. In view, however, of the many technically com-
plex projects (including a number in the electronics, synthetic fiber,
metalforming machinery, and precision tool industries) in the planning
or preliminary stage of construction, it appears likely that the need
for technical assistance from the Bloc will remain strong throughout the
Second Five Year Plan.
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F. National Finance and Investment.
1. Financing the Second Five Year Plan.
Estimates of gross investment and sources of savings for the
period 1958-62 indicate that sufficient funds probably will be available
to finance the level of expenditures for capital construction outlined
in the Draft Proposals for the Second Five Year Plan.* The estimate of
budget savings, which are expected to account for about 85 percent of
total savings in the economy, is based on an analysis of trends in taxes
and profits and. depreciation funds of state enterprises in terms of pro-
jected increases in production of commodities and services. The other
savings components, including increases in bank deposits, savings at the
enterprise and farm level, and net foreign investment, are estimated on
the basis of trends observed in the years 1953-57. Given an estimate of
total savings, gross investment is derived in the same ratio to savings
as in the period of the First Five Year Plan.** Individual estimates,
again based on trends observed in the First Five Year Plan period, for
agricultural investment outside the budget; increases in inventories;
and major repair expenditures and supplementary budget expenditures for
agriculture, water conservancy, and forestry are then aggregated and
subtracted from the gross investment total. The residual is then treated
as the amount available for state investment in capital construction
during the Second Five Year Plan.
The resulting estimate of state investment, roughly double
the amount provided in the original First Five Year Plan, corresponds
with the proposed level of expenditures for capital construction as
announced in the Draft Proposals for the Second Five Year Plan.Ligi
Thus, on the basis of present economic policies and in view of trends
in production and consumption, Communist China's program for mobilizing
investment capital during the Second Five Year Plan period is considered
to be probably feasible.
2. Allocation of Investment.
Estimates of investment-output ratios by sector for the First
and Second Five Year Plans show higher ratios of investment in relation
to output in the years 1958-62 than in the First Five Year Plan period.XX
* For estimates of the major components of investment and sources of
savings for the Second Five Year Plan, see Table 14, Appendix A, p. 63,
below.
** See Table 9, p. 58, below.
xxx For estimates of major components of investment and investment out-
put ratios for the Second Five Year Plan, see Table 15, Appendix A,
p. 64, below. '
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This finding reflects the increasing necessity of relying on newly added -
capacity rather than on greater utilization of existing capacity in
order to achieve planned expansion of production. In the First Five
Year Plan the targets for investment were high in relation to production
goals for 1957, and most of the goals were achieved in 4 years. The
proposed level of investment in the Second Five Year Plan is not likely,
however', to lead to a similar overfulfillment of the 1962 targets.
Recent discussions of the 1958 plan reveal a new pattern of
state investment allocation designed to correct the imbalances in eco-
nomic development appearing under the First Five Year Plan. Greater
emphasis on agricultural development is seen in the rising proportion
of capital construction investment in agriculture as against industry
(1 to 4.7) compared with the corresponding ratio (Ito 6.6) under the
First Five Year Plan. Beavy industry, particularly the chemical fer-
tilizer and farm equipment industries which support agriculture, oc-
cupies an even more favored position in relation to light industry than
in the First Five Year Plan, the new ratio being 8.9 to 1 compared with
7.9 to 1 in the years 1953 to 1957. The reason for this decision at a
time when supplies of consumer goods are far from meeting demand is that
expansion of light industry must await the prior development of produc-
tion of raw materials in the agricultural sector. Another characteristic
of the 1958 investment plan is an increase in the ratio of investment
between the fuel and raw material extraction industries on the one hand
and the processing and manufacturing sectors on the other, the ratio
rising from 2.5 to 1 in the First Five Year Plan to 4.6 to 1 in 1958.
Finally, in recognition of the problem of rising investment cost per
additional unit of production, more investment is to be allocated to
small- and medium-size mining and industrial installations under the
jurisdiction of local levels of government, projects for which the in-
vestment cost per unit of capacity is considerably lower than for large-
scale, highly mechanized plants and mines. This trend is reflected in
the ratio between central and local government investment in 1958, their
respective shares changing from 4.1 to 1 in the First Five Year Plan to
3.2 to 1 in the first year of the Second Five Year Plan.)1.3./ ?
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III. Problems of Economic Development.
A. Introduction.
The salient fact about the Chinese economy is the enormous popu-
lation relative to the quantity of arable land. In most periods the
extremely high birthrate of the peasant population has been largely
offset by a high death rate. In any period, however, when wars, disorder,
natural calamities, and disease have been mitigated, there has been an
immediate response by growth in population. This unrelenting pressure
of population on food supply is the basic problem with which any Chinese
regime is faced regardless of its other objectives.
The Chinese Communists have had remarkable success not only in
forwarding their major objective of industrializing China but also in
restoring general economic activity and in improving agriculture and the
food supply. This success has borne its usual fruit of growth in popu-
lation. The rate of growth which in 1950-52 was about 1 to 1.5 percent'
per year is now estimated to have reached 2.4 percent in 1957. The
average annual growth of agriculture for 1953-57, nearly 3 percent,
provided a mall margin above the average growth in population of 2 per-
cent. The margin, however, has diminished as growth in population in-
creased.
The gains in agriculture over the past 5_years resulted from
relatively simple and inexpensive measures. Future gains are likely
to become slowly more difficult. Only a small decrease in growth of
food production would lower it below the rate of growth in population.
The First Five Year Plan (1953-57) demonstrated the ability of the
Chinese Communists to mount a program of rapid industrialization. But
the Malthusian problem will remain to confront the Chinese Communists
regardless of their success in industrialization.
The problem of population versus food supply is discussed in
more detail below. Communist China's economic policies and plans are
evaluated in the light of this problem.
B. Population and Labor Force.
The population of China in mid-1957 was 631 million compared with
about 575 million in 1952.* The increase over the 5 years averaged about
2 perc,nt per year, well above the rate of the period 1950-52 and perhaps
3 to 4 times the rate of 1930-50. This acceleration of growth poses not
* For data on China's population for the period of the First Five Year
Plan, see Table 16, Appendix A, p. 65, below.
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only a problem of food supply but also the problem of maintaining full
employment with equitable income distribution.
Before 1956 the Chinese Communists were inclined to flaunt their
large population as an attribute of national power and prestige. Accelera-
ting growth in population, however, gradually brought home to them the
difficulty of maintaining the average consumption of the total population.
When demands for austerity in consumption failed to achieve the desired
rate of saving, important consumer goods such as grain, vegetable oils,
and cotton cloth were rationed. The insufficiency of agricultural pro-
duction to meet both ration commitments and desired levels of state
reserves influenced a change in the official attitude toward population
and the formulation of a positive policy on the subject. An extensive
campaign is now being waged to encourage birth control and to make large
families economically unattractive.
The new policy on population is not expected to do much more
than level off the rate of growth at about 2.4 percent, so that the
estimated population will be about 710 million in 1962 and 799 million
by 1967. The present shortage of medical services probably will prevent
the birth control program from making much headway in the rural areas,
where more than 8o percent of the population resides. The gains which
are achieved are likely to be largely offset by reductions in the death
rate. The estimated increase in population of 13 percent during the
Second Five Year Plan (1958-62) will continue to press heavily on the
supply of food and consumer goods.
A similar awakening:has taken place in Chinese Communist employ-
ment policy. The goal of mechanizing industry as rapidly as possible
has been replaced by plans to devote more investment funds to projects
which offer maximum employment. Planning for agricultural mechanization,
originally based on Soviet experience which substituted large-scale
tractors and combines for scarce labor, has been revised drastically to
feature small-scale, multiple-purpose machinery designed to supplement
rather than displace China's abundant agricultural labor force.
Various steps have been taken to stiffen the policy preventing peasant
migration into the cities and even to transfer large numbers of present
urban residents back to the countryside. These increments to the agri-
cultural labor force will tend to depress further the low per capita
income of the rural population but will not materially increase agricul-
tural output, because there is already an ample supply of rural labor.
The prospects for a new labor force policy that will provide
proportionally greater nonfarm employment opportunities in the Second
Five Year Plan and the Third Five Year Plan (1963-67) than were provided
by the First Five Year Plan are not promising. A brief review of labor
force trends during the First Five Year Plan provides a basis of com-
parison.
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The official data on the number of office staff and factory
workers indicate that they totaled about 24.2 million in 1956, or less
than 10 percent of the estimated total labor force. During the First
Five Year Plan, only 5.2 million new office and factory workers were
added to the labor force* out of a total population increase of more
than 50 million. A national rate of participation in the labor force
of 47 percent of the population has been indicated in several sample
studies. Applied to the estimated 1956 nonfarm population of 104 mil-
lion, this meant a total nonfarm labor force of 49 million in that
year. Besides the 24 million office and factory workers, 20 million
more were accounted for in such categories as handicrafts, military
forces, and services. The remaining 5 million probably were unemployed
or casual laborers.
In the early years of the Second Five Year Plan, the population
increment annually reaching employment age will be about 5 million or
6 million. Assuming a participation rate of 70 percent for this age
group, nearly 20 million jobs will be required during the plan period.
Moreover, this increase in job requirements is in addition to the need
for employment of those at present unemployed or undetemployed. Toward
the end of the Second Five Year Plan and to a much greater extent in -
the Third Five Year Plan, about half of the annual population increments
of 15 million or more will be seeking employment in the labor market.
The only employment goal expressed in the Second Five Year Plan
is to increase factory and office employment by 6 million to 7 million
persons. /12/ Although this goal was fixed before the recent emphasis
on small-. and medium-size industrial installations, rough estimates in-
dicate that thiS new program can provide at best no more than 1 million
additional jobs during the period of the Second Five Year Plan. Another
major source of nonfarm employment, the handicraft industry, is not
encouraged by the Chinese Communists, for the reason that expansion of
handicrafts would enlarge the demand for scarce agricultural raw materials
and interfete with planned production in the modern industrial sector.
It is probable that nearly half of the 20 million entering the labor
force during the Second Five Year Plan will be underemployed in agricul-
ture, if not unemployed.
C. Investment Allocation.
The Chinese themselves have viewed their present problems pri-
marily as a question of investment allocation -- that is, the share of
total output devoted to investment and the allocation of investment
among various sectors.
* For the sector distribution of this labor force for the years 1952
and 1956, see Table 17, Appendix A, p. 65, below.
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At the Eighth Party Congress and thereafter, a number of speeches
and articles took issue with the official Communist doctrine of the over-
whelming priority of industry, especially heavy industrial development,
in Chinese Communist planning. The three general themes of those advancing
such views follow. First, the ratio of "accumulation" (the Communist
term for net investment) to total output in the First Five Year Plan
period was about the maximum that could be achieved in China. Although
this rate of investment (about 22 percent) was lower than that attained
in the USSR during its several Five Year Plans (about 25 percent), it
could not be raised, because of the consumption requirements of China's
enormous population. 1.?W Second, the share of industrial investment
allocated to light industry in the First Five Year Plan was too low,
accounting for less than 12 percent of total industrial investment. La/
This pattern of allocation was preventing increases in light industrial
output which would in turn provide investment funds for heavy industry
by incteasing budget income from the state's light industry enterprises
and from indirect taxes. The small share of investment in light industry
and existing price and trade policies had resulted in production by
light industry of poor-quality goods. By improving the quality and
variety of the products of light industry, it was argued, living stan-
dards could be raised and exports of these commodities could be greatly
increased. Third, the rate of increase in agricultural output was too
small in relation to increases in the nonagricultural sectors, causing
consumption to rise too slowly in relation to investment. Moreover,
peasant consumption was increasing much more slowly than wages of em-
ployees in the nonagricultural sector, and prices paid for agricultural
products were too low to support an increasing peasant standard of living
and to provide incentives for increasing agricultural production.
These criticisms were directed at some of the major features of
Communist China's investment program during the First Five Year Plan.
For the 5-year period 1953-57, gross domestic investment at current
prices averaged about 17 percent* of GNP, a percentage which is roughly
comparable with that achieved in recent years in the US. The allocations
of investment expenditures to heavy industry were 30 percent of total
v investment in 1952 and rose steadily each year up to nearly 50 percent
in 1957. The average annual rate of increase in investment in heavy in-
dustry from 1953 through 1957 was nearly 24 percent as against an average
annual rate of increase in other investment of a little less than 10 per-
cent.
* This estimate is based on a study of China's national accounts. The
percentage given in Chinese Communist statistics is larger mainly because
a number of expenditures and reserve funds which they include in the
"accumulation" figure are not considered to be investment as defined in
the West.
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It is noteworthy that this increase in investment in heavy in-
dustry has, taken place simultaneously with a modest increase in over-all
per capita consumption and in general without serious strain on the
economy. The difficulties that appeared in 1956 and led to a reduction.
of investment in 1957 resulted from investment ,(and current production)
outstripping the supply of industrial materials (and inventories of all
kinds) rather than an excess of investment at the expense of consumption.
Corrective measures were .taken in 1957 to raise investment in raw, materials
industries relative to processing industries. Moreover,, the allocation
of nearly nine-tenths of total industrial investment to heavy industry
in the First Five Year Plan period was not excessive in the light of
China's needs. Even with the modest development of the light industry
sector during the period 1953-57, most of the major consumer goods in-
dustries were producing well below capacity in 1957 because of the short-
age of raw material supplies from the agricultural sector.
Thus the critics of Communist China's investment program sensed
a basic problem in the economy, but their analysis was only partly cor-
rect. Only the third of the criticisms cited above approaches the
essential problem. This problem is not that total investment has been .
necessarily too high but that the burden of saving for the investment
has been too heavily concentrated on.the.agricultural population, whose
per capita consumption probably rose little if at all during thA First
Five Year Plan. The basic question is whether the investment, manage-
ment, and incentives in agriculture are adequate: to produce sufficient
food and fibers' for a rapidly growing population and in addition to
provide a surplus to support investment programs in other sectors of
the economy.
D. Agriculture.
1. Investment.
Agricultural prospects hinge on two kinds of factors': first,
the physical potentiality of the land and the cost of exploiting this
potential, and, second, the impact of socialization and other Communist
policies on peasant incentives, and hence on.productivity.
Investment planned for agriculture for 1958-62 represents
a larger share of planned total output and of total investment than in
the preceding 5 years.. State investment will concentrate on large-scale
water conservancy projects which will not contribute substantially to ,
production until after 1962. Investment by the peasants themselves will
center' about small-scale irrigation projects.which will have a.more
immediate effect On production. As nearly as one can tell, the:target
for expanding irrigated (and thus multiple-cropping) area is. about the,
maximum that can be achieved. In addition to the direct investments in
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agriculture, a major effort to increase production of chemical-fertilizer
will contribute materially to agricultural output. In this Case, the
revised 1962 production target of more than 10 million tons of chemical
fertilizer appears to be in excess of what is feasible.
Thus it appears that the Second Five Year Plan calls for
doing nearly all that can be done to increase agricultural output. The
success of the plan, however, is contingent on the cooperation of the
peasants. Of an estimated total investment of 33 billion yuan for agri-
culture, forestry, and water bonservanoy, it is estimated that more than
half is to come from the collectives' and cooperatives' income -- that
is, out of the peasants' awn income.* In practice it may prove impas-
sible to exact such a large amount of forced savings frol the peasants,
in which case the discrepancy would have to be made good by the state
in the form of loans or subsidies.
Most of the funds for state investment also came from the
agricultural population through the mechanism of state procurement at
fixed low prices. The impact Of these policies is reflected in Peasant
income.
. Trends in Worker-Peasant Income Differentials.
Trends in worker-peasant per capita incomes, measured in
constant prices, for 1952, 1957, and 1962 are presented in the follow-
ing tabulation (in yuan per year):
1952
1957
1962
(a)
Peasant**
77.4
83.3
89.8
(b)
-Worker**
1483
189.5
236.8
Ratio of (a) to (b) 1 to 1.9
1 to 2.3
1 to 2.6
These estimates cannot be considered an exact measurement of comparative
consumption, because they do not take into account the higher prices
(25 to 30 percent) of commodities in cities, the different consumption
patterns in urban and rural areas, and the additional expenses incurred
by workers for housing, utilities, and transportation. Nevertheless,
* See Table 14, Appendix A, p. 63, below.
** Worker income is derived from the total wage bill, excluding fringe
benefits; peasant income is derived from estimates of both cash income
and farm home consumption.
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they do indicate that the income differential, already substantial in
1952, was even greater in 1957 and that it will become even more pro-
nounced during the period of the Second Five Year Plan.
The Chinese Communists themselves have expressed concern
over this large disparity between worker and peasant incomes, especially
as it affects peasant Morale and productivity and stimulates peasant
migrations into the alreRay overcrowded cities. The regime has taken
certain measures, mainly in 1956-57, which seek to narrow the differ-
ential. Procurement prices for farm products have been raised on the
average relative to retail prices. According to Official announcements,
the index of state procurement prices in 1956 was 16.6 percent higher
than in 1952. @./ On the other hand, average retail prices of indus-
trial products sold in rural areas were claimed to be approximately the
same in the 2 years in question. Other measures to stimulate production
were directives to the cooperatives to allow more time and labor points
for subsidiary industry and to increase from 5 to 10 percent the pro-
portion of land held in individual plots. Finally, recent directives
on wages of unskilled workers attempt to meet the problem in a reverse ,
manner by lowering the initial wages for city jobs for which the peasants
might qualify.
These measures apparently had little net effect on narrowing
the differential in 1956-57, and estimates for 1962 indicate that the
discrepancy between worker and peasant incomes will increase. A solu-
tion to this problem would be simply to increase significantly the
prices paid for agricultural goods. .Then, however, a way would have
to be found to lower urban incomes, or aver-all investment would have
to be reduced.
3. Collectivization.
Incentives depend not only on income but also on the way in
which incomes are tied to individual performance. Collectivization
removes land and capital from individual ownership and responsibility.
Wherever it has been tried, it has had a negative effect to one degree
or another on agricultural productivity. Whether this will happen to
a significant extent in China remains to be seen. In the USSR a large
export surplus and an initially adequate diet provided a cushion for
the reduction in output that accompariied collectivization. A comparable
reduction in China, where a large portion of the population is on the
edge of malnutrition, would be much more serious.
China's collectivization experience is still too short to
provide the basis for judging its ultimate success. Experience to date*
See I, p. 7, above.
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provides both favorable and unfavorable signs. Over-all agricultural
output has increased somewhat. Although grain procurement declined in
2 successive years, 1955 and 1956, it probably rose again in 1957.
There was a precipitous decline in the number of hogs in 1956 but a
recovery in 1957 when hogs were returned from the collectives to the
individual peasants. On the other hand, the downward.trend in draft
animals continued, and because of peasant dissatisfaction with collec-
tivization,.there has been a large influx of peasants into cities.
In general, the Chinese Communist leadership has displayed
considerable flexibility in adjusting to problems arising from collec-
tivization, as illustrated by the increase in the size of the peasant's
private plot in 1957, by increases in procurement prices during 1956
and 1957, and bY the return of hogs to private care in 1956. Flexibil-
ity is limited, however, by the overriding procurement objectives of
the state.
This limitation is illustrated by the abortive "free market"
policy introduced at the Eighth Congress of the Chinese Communist Party
in September 1956. 112/ By this time, almost all peasants' sales of major
agricultural products were restricted to the procurement and purchasing
agencies of the state. In an attempt to stimulate the lagging production
of subsidiary agricultural commodities, a state-regulated free market
was to be Opened for such secondary agricultural products as poultry,
vegetables, farm handicrafts, and fruit and aquatic products from
scattered sources. In effect, this was merely a recognition of a tra-
ditional, long-existing marketing system whichup to that time the
Chinese Communists had not brought under,state control,'
By November 1956 a free market had been established in nine
provinces, and, as predicted, the supply of vegetables, poultry, fish,
and handicraft products had increased rapidly in response to demand and
favorable prices. In spite of controls, however, alleged abuses of the
free market system soon spread. .22/ Commodities on the lists of goods
restricted to planned state procurement and unified purchase, especially
grains and edible oils, found their way into the free market before the
state purchasing quotas had been fulfilled. Although production of
grain in 1956-57 was reported as 5 percent above that of the previous
grain year, purchases of grain by the state decreased by 5 percent.
One of the reasons why peasants left the cooperative farms was to engage
in full-time commercial. activity. In some cases, whole cooperatives
apparently collaborated in selling their produce before fulfilling state
quotas. Prices of some products soared, and a black market flourished.
In October 1957, all sales of major agricultural commodities
except to state trading agencies were prohibited, and in addition the
list of commodities which could be sold in the free market was greatly
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reduced. Even these items may be brought under government procurement
and sale by local governments in those areas where particular items are
produced in large quantities. Thus the end result of the free market
experiment was to subject even more of agricultural production to the
state's procurement and pricing policies.
E. Large Versus Small Industrial Units.
During the First Five Year Plan, Communist China's industrial
investment program stressed capital-intensive Projects which failed to
make optimum use of the vast labor existing in China. The ch6ice of
capital-intensive technology has two consequences that are serious in
the light of Communist China's problems and objectives: (1) output
gains probably are not so large, particularly in the short run, as they
could be under a labor-intensive investment program; and (2) a consider-
able part of the increase in labor force becomes unemployed or is pushed
back into agriculture where low per capita income is already a problem.
With increasing growth of the labor force over the next decade, it will
became Even more urgent to provide productive employment outside of
agriculture. Chinese Communist plans for developing small-scale plants
indicate an awareness of this problem. On the basis of available in-
formation, however, the scope of. these plans does not appear to be ex-
tensive enough to contribute significantly to a solution of the employ-
ment problem. Moreover, the planning and supervision Of many small-
scale plants is clearly more difficult than would be the case with a
relatively few large plants.
The industrial planners of Communist China entered upon the
First Five Year Plan with a predilection for large-scale, integrated
industrial plants like the new iron and steel combines under construc-
tion at Wuhan and Pao-t'ou. During 1957, however, a combination of
factors relating to the allocation of resources influenced the Chinese
Communist economic planners to consider favorably the relative economy
of investment in small- and medium-size heavy industry installations
and the expansion of existing plants in such old manufacturing centers
as Shanghai and Tientsin. Such plants would require more laborers than
large-scale plants but would permit exploitation of additional natural
resources, reduce transportation costs of raw materials, utilize domes-
tically produced equipment, and enable more rapid completion of construc-
tion.
During the course of the First Five Year Plan the Chinese Com-
munist planners learned from experience that labor costs in construction
are relatively low and that the costs of imported designs and heavy
automatic equipment are relatively high. Thus in some industries in
China the investment cost per unit of capacity of a small- or medium-
size installation may be substantially lower than the cost of a large
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one. On the other hand, this initial advantage may be somewhat counter-
balanced by a higher production cost per unit of output. The following
figures, which were taken from a Chinese Communist review of coal mine
investment and production costs, 21/ illustrate these points:
Investment
Cost (Yuan Production
Time Required
to Reach
Mine Capacity
per Ton Cost (Yuan
Design Capacity
(Tons per Year)
Category
of Capacity) per Ton)
(Years)
Below 150,000
Small
18.0 11.7
3-
210,000 to 300,000
Small
24.2 11.7
5
450,000 to 600,000
Medium
27.6 11.17
7
600,000 to 900,000
Large
28.0 9.75
8
Another advantage of the small- and medium-size mines is that they can
help meet the growing shortage of coal for household consumption, at the
same time reducing the load on the railroad system and freeing the large
mines to produce for industrial demand. Also, China is able to provide
production eqUipment for the small- and medium-size mines from domestic
resources, thus reducing the pressure on its limited holdings of foreign
exchange. As a result of all of these considerations, it is now planned
to have small mines (with an annual production capacity of 300,000 tons
or less) account for well over one-third of the new capacity to be added
to the coal industry during the Second Five Year Plan. 22/
In the iron and steel industry it has also been found that
limited increases in productive capacity can be realized by improving
some existing small plants and building similar ones for less cost per
ton of capacity than would be involved in building a large integrated
plant. The small-plant program will alleviate local shortages of iron
and steel, will permit exploitation of a number of scattered small iron
deposits, and will enable the large mills to make economies by mass-
producing for large consuming industries. The original small-plant
program 'called f6r the construction of about 18 plants at widely dis-
persed locations with a combined production of 1.6 million tons of
steel and for a total cost of about 600 million to 700 million yuan. 2,V
By comparison, a large iron and steel plant with an annual production
of 1.5 million tons of steel has required more than 1 billion yuan in
capital investment. It is expected that these small plants will con-
tribute more than one-fourth of the new capacity to be added to the
steel industry during the Second Five Year Plan.
This trend toward economizing on capital investment, with em-
phasis shifting to smaller, less mechanized plant facilities, has
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characterized .planning in other heavy industries as well. Several non-
ferrous metals processing plants have been planned to utilize less
mechanized units, more domestically produced equipment, and more labor-
intensive processes, with the result that the plants can be constructed
more quickly. A similar program is under way for the chemical fertilizer
industry, with numerous medium- and small-scale plants planned for con-
struction within a relatively short period of time.?
E. Prospects.
Whether or not the agricultural policies of Communist China will
lead to serious difficulties is difficult to predict. China cannot
afford a decline in agricultural production, and, in this Sense, some
of these policies might be considered risky in that they provide rela-
tively low incentives for the peasants. The Chinese Communists are
following the Soviet example in collectivization and in financing in-
vestment by savings extorted primarily from the rural population. They
are proceeding, however, without the margin of diet and production of
surplus food that the USSR had and in the face of a rapid and possibly
accelerating growth in population.
The Chinese Communists can, of course, modify their program to
counteract the more pressing difficulties should these policies prove
detrimental to agricultural production. .Peasant incomes could be raised
and urban incomes reduced while leaving investment intact, although in
practice this procedure probably would be both administratively and poli-
tically difficult. A,safety valve is available in foreign trade in that
agricultural exports can be reduced or agricultural imports increased, ,
although this latter expedient would likely be at the expense of imports
of investment goods and would thus affect to some extent the planned level
of investment. Another measure which the Chinese Communists might adopt,
and one which appears ,to be the most 'promising, is substantially increas-
ing imports of chemical fertilizers. These imports would tend to pay for
themselves through expanded agricultural production, which in turn would
both increase the domestic food supply and permit increased agricultural
exports.
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APPENDIX A
STATISTICAL TABLES
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Table 2
Communist China: Gross National Product and Index of Per Capita Gross National Product
1952-57
Billion Yuan in 1956 Prices
Category
1952
1953
1954
1955
1956
1957
Consumption Expenditures
Retail Sales and Nonagricultural Services
29.94
34.05
37.74
40.24
46.19
46.95
Imputed Farm Home Consumption and Agricultural Purchases
of Services
27.75
28.59
26.84
28.94
31.30
30.86
Total consumption
57.69
62.64
64.58
69.18
77.49
77.81
Government Purchases
9.42
11.19
11.14
11.32
11.80
10.87
Net Foreign Investment
-0.77
-0.50
-0.20
-0.76
+0.47
+0.56
Gross Domestic Investment
9.52
12.08
14.53
14.23
16.82
22.75
Total gross national product
75.86
85.41
90.05
93.97
106.58
111.92
Index of gross national product (1952 = 100)
100
113
119
124
140
148
,Index of per capita gross national product (1952 = 100) 2/
100
110
115
117
130
134
a. Growth in population is calculated at an annual average rate of 2 percent year.
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Table 3
Communist China: Gross National Product and Percentage Distribution
1952-57
Category
1952
1953
1954
3955 1956
1957
Billion Yuan in Current Market Prices
Personal Consumption Expenditures
50.77
59.73
63.07
67.50
77.49
79.92
Gross Domestic Investment
10.09
13.46
15.83
14.95
16.82
22.84
Net Foreign Investment
-0.77
-0.85
-0.15
-0.92
-0.47
0.59
Government Purchases of Goods and
Services
7.92
10.20
10.40
10.73
11.80
11.18
Gross national product
68.01
82.54
89.15
92.26
106.58,
114.53
Percentage Distribution
Personal Consumption Expenditures
74.7
72.4
70.7
73.2
72.7
69.8
Gross Domestic Investment
14.8
16.3
17.8
16.2
15.8
19.9
Net Foreign Investment
-1.1
-1.0
-0.2
-1.0
Q14.
0.5
Government Purchases of Goods and
Services
11.6
12.3
11.7
11.6
11.1
9.8.
Gross national product
100.0
100.0
100.0
100.0
100.0
100.0
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Table 4
Communist China: Income Originating by Economic Sector
1952-57
' Billion Yuan in 1956 Prices
Economic Sector
1952 2/
1953
1954
1952
1956
3957
Agriculture 12/
42.73
43.3
41.9
44.9
? 47.0
48.3
Industry (including
individual handicraft)
9.61
11.7
13.8
14.6
18.7
20.1
Modern Transportation
and Communications
1.85
2.5
3.0
3.3
4.o
4.4
Trade, Native Trans-
portation, and Miscel-
laneous Business Services
7.33
8.4
9.1
9.9
10.8
11.5
Construction ,
1.73
.2.8
3.1
' 3.4
4.6
4.3
Government
4.18
4.3
4.2
4.3
4.5
4.4
Consumer Services and
'
House Rent 12/
6.29
7.2
8.0
8.6
9.5
10.2
Total gross national
product at factor cost
73.72
80.2
83.1
89.0
99.1
103.2
Estimated value of indirect
taxes
4.34
5.3
5.9
6.5
7.5
8.2
Gross national product
at 1956 market prices
76.06
E5.5
89.0
95.5
106.6
111.4
Index of gross national
product at factor prices
(1952 = 100)
100
109
113 '
121
134
140
Index of gross national
product at market prices
(1952 = 100)
100
110
_114
122
137
143
a, Figures for 1952 are carried to two plates for use with indexes.
b. Imputed agricultural services are included under Consumer Services and
House Rent.
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Table 5
Communist China: Estimated Production of Selected Agricultural Commodities
and Aquatic Products
1952-62
1957
(First Five Year
Commodity
Unit
1952
1953
1954
1955
1956
Plan Goal)
1957
1958
1959
1960
1961
1962
Rice
Million metric tons
75
76
71
78
82
82
85
88
91
94
97
99
Wheat
Million metric tons
22
22
23
23
25
24
25
26
27
27
28
28
Other grains
Million metric tons
53
52
49
55
53
55
53
55
56
58
60
62
Tubers (grain equivalent)
Million metric tons
18
19
17
19
22
21
22
23
24
24
25
26
Total grains
Million metric tons
' 168
169
160
175
182
182
185
192
198
203
210
215 2/
Soybeans
Sugar cane
Million metric tons
Million metric tons
9.5
7.1
9.5
7.2
9.1
8.6
9.1
8.1
10.2
8.7
11
13.2
9.7
10.8
11
11.6
11.1
12.4
11.3
13.3
11.5
14.1
12.5)2i
14.9
Sugar beets
Thousand metric tons
1+79
505
989
1,596
1,644
2,135
1,700
1,967
2,234
2,502
2,769
3,036
Peanuts
Thousand metric tons
2,316
2,127
2,767
2,926
3,337
N.A.
3,473
3,577
3,684
3,795
3,909
4,026
Rape seed
Thousand metric tons
932
879
878
895
921
1,000
1,000
1,224
1,260
1,:g
1,v)75
1,377
Sesame seed
Thousand metric tons
525
428
330
367
390
N.A.
413
436
459
525
Tung oil
Thousand metric tons
N.A.
N.A.
85
85
90
N.A.
100
105
110
115
120
125
Tea
Thousand metric tons
82
85
92
108
120
112
125
131
142
153
164
175
Meat
Thousand metric tons
5,771
6,377
6,817
6,265
5,944
N.A.
7,713
8,195
8,671
9,153
9,634
10,110
Poultry
Thousand metric tons
338
345
352
360
368
N.A.
376
385
392
401
410
417
Aquatic products
Thousand metric tons 1,663
1,900
2,294
2,518
2,640
2,807
2,800
3,167
3,514
3,870
4,227
4,584
Eggs
Thousand metric tons 921
941
960
981
1,000
N.A.
1,021
1,043
1,065
1,087
1,110
1,132
Cotton (ginned)
Thousand metric tons
1,305
1,175
1,065
1,518
1,445
1,635
1,640
1,635
1,726
1,817
1,908
2,000 a/
Wool (grease)
Thousand metric tons
34
34
35
36
37
N.A.
38
38
39
40
41
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Domestic silk (cocoons)
Thousand metric tons
62
59
65
67
.72
93
80
N.A.
N.A.
N.A.
N.A.
N.A.
Wild silk (cocoons)
Thousand metric tons
61
12
26
64
62
62
75
N.A.
N.A.
N.A.
N.A.
N.A.
Tobacco (flue-cured)
Thousand metric tons
222
213
232
298
399
390
350
390
431
471
512
552
Cattle (including buffalo)
Million head
56.6
60.1
63.6
66.0
66.8
73.6
73.6
76.9
80.1
'83.5
86.7
90.0 12/
Sheep and goats
Million head
61.8
72.0
81.3
84.2
92.1
113.0
106.0
114.8
123.6
132.4
141.2
150.0 12/
Hogs
Million head
88.8
98.1
101.7
87.9
84.o
138.3
114.0
123.2
132.4
141.6
150.8
160.0 Li./
Donkeys, horses, and mules
Million head
19.5
19.6
20.4
21.4
20.9
24.3
24.2
25.4
26.4
27.5
28.7
29.9
a. Estimate differs from Chinese Communist goal.
Estimate agrees with Chinese Communist goal.
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Table 6
Communist China: Estimated Production of Selected Commodities
? 1952-62
1957
(First Five Year
Commodity
Unit
1952
1953
1954
1955
1956
Plan Goal) ?
1957
1958
-1959.
1960
1961
1962
Pig -iron
Thousand
metric tons
1,900
2,175
2,962
3,630
1.-,777
4,674
5,847
8,000
9,000
10,000
11,000
12,000
Crude steel
Thousand
Finished steel
metric tons
Thousand
1,349
1,774
2,225
2,853
4,465
4,120
5,235
7,000
8,000
9,000
10,000
12,000 ai*
metric tons
1,110
1,487
1,740
2,220
3,921
3,045
4,478
4,900
5,500 ?
5,800
6,100
9,000
Coke
Thousand
metric tons
1,885
2,375
4,500
.5,500
5,570
6,685
6,685
7,870
8,700
9,500
10,400
11,000
Iron ore .(50 percent Fe)
-Thousand
metric tons
3,900
4,800
6,200
7,614
12,890
N.A.
14,900
16,900
18,745
21,370
25,170
26,270
Tungsten (concentrate',
68 percent W03)
Thousand
metric tons
15.8
17.4
19.0
20.5
22.1
N.A.
23.7
N.A.
N.A.
N.A.
N.A.
N.A.
Manganese ore
Thousand
(+ 35 percent Mn).
metric tons
123.8
134.7
168.4
196
400
N.A.
469
550
590
620.
650
690
Molybdenum (metallic
Thousand
equivalent of MmS2) -
metric tons
0.550
0.575
0.575
0.600
1.5
N.A.
1.8
1.65
NA.
N.A.
N.A.
3.0
Copper (refined)
Thousand
metric tons
8.0
10.9
12.6
12.9
13.2
N.A.
13.6
17.7
23
30
38
50
Tin
Thousand
metric tons
9.8
11
13
16
19
N.A.
21
'22
24
26
28
30
Lead
Thousand
metric tons
7
12.3
22.2
22.5
22.8
23.1
27
32
37
43
50
Zinc
Thousand
metric tons
3.5
5.2
6.8
7.9
8.3
N.A.
11
15
20
27
37
50
Antimony
Thousand
metMic tons
10
11
11
11
11
N.A.
11
11
11
11
11
11
Mercury
Flasks of
76 pounds-
2,600
4,500-
7,800
13,000
26,000
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
. Aluminum
Thousand
metric tons
0
0
2
10
? 15
N.A.
40
50
60 .
80
90
loo s/
Fluorspar
Thousand
metric tons
120
127
134
142
150
N.A.
160
170
180
190
200
210
Electric power
Billion kilo-
Coal y
watt-hours
Million
7.3
9.2
11.0 _
13.4
16.6
15.9
19.03
22.45
26
31
37
44 s/
Crude oil
metric tons
63.5
66.6
79.5
93.6
105.9
112.985
122.44
129 to 134
142 to 150
157 to 168
173 to 189 190 to 210 a/
Natural
Thousand
Synthetic
metric tons
Thousand
182
298
409
476
633
,
.863
1,100
1,450
_.1,800
2,000
2,300
metrid tons
254
324
380
490 .
530
580
600
650
700
1,000
1,200
Total
Thousand
metric tons
436
622
.

1,443
1.,192 .
2,100
2,500
.11.2.22.
12222. 2/ .
. Footnotes for Table 6 follow on p. 55.
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I ? 1
Declassified in Part - Sanitized Copy Approved for Release 2013/06/05: CIA-RDP79R01141A001100120001-4
S-E-C-R-E-T
Table 6
Communist China: Estimated Production of Selected Commodities
1952-62
(Continued)
1957
(First Five Year
Commodity Unit 1952 1953 1954 1955 1956 Plan Goal) 1957 1958 1959 1960 1961 1962
Finished petroleum
products
Gasoline Thousand
metric tons 126 166 194 223 286 N.A. 319 340 430 520 600 700
Kerosine Thousand
metric tons 48 72 86 103 .129 N.A. 152 200 250 .300- 350 400
Diesel fuel Thousand
metric tons 20 33 39 47 56 N.A. ? 63 85 100 120 150 180
Lubricating oil Thousand
metric tons 13 22 27 32 39 N.A. 43 55 72 96 100 120
Residuals (fuel oil,
asphalt, coke, and - Thousand
Other residuals) metric tons 295 415 502 635 699 N.A, 782 830 1,000 . 1,200 1,400 1,700
Total Thousand
metric tons 502 1:-.: -6 848 1,04o 1,209

_ N.A. 1.1.122 141192.1.42 2,230 L,J2312 1,1122
Turbines Thousand :
kilowatts 6:7 15 45 90 200 164 240 336 470 658 921 1,289 2/
Batteries Metric tons_ 9 lo 13 ' 15 17 N.A. 21 25 30 36 43 52
Electric lamps Million
units 29 32 34 36 39 N.A. 43 52 62 74 ,89 107
, Electric wire and
Cable Million US $ 22.9 25.4 30.7 64.1 90.4 N.A. 117.2 164 230 322 451 631
.....e. Electric motors Thousand
kilowatts 639 902 713 524 1,068 1,048 1,368 1,751 2,451 3,431 4,803 6;724
Electric generators Thousand
kilowatts 30.0 59.4 61.8 108.0 287 227 284 420 588 823 1,152 1,400
Transformers Thousand kilo-
volt-amperes 1,167 1,961 1,961 2,079 2,846 2,610 3,598 5,037 7,052 9,873 13,822 19,351
Switchgear and
switchboard apparatus Thousand US $ 3,600 5,600 6,100 6,400 10,034 N.A. 12,022 16,830. 23,562 32,987 46,182 64,655
Radio receivers Thousand
unite 129 175 225 275 500 N.A. 670 . 993 1,191 1,429 1,714 2,056
Telephone handsets Thousand .
units 64 135 284 600 .690 N.A. 793 952 1,142 1,370 1,644 1,973
Telephone switchboards Thousand ,
lines 31 36 42 48 5'7 N.A. 62 74 89 107 128 154
9 Textile machinery
Spindles Thousand
units 250 286 400 500 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.
Looms Thousand
units 6 8.5 13 8 N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A.
Thousand
units 13.7 20.5 15.9 13.7 21.7 12.7 24.8 27 33 40 50 6o til
Thousand
metric tons 16.3 24.0 23.5 23.0 '26 29.3 N.A. N.A. N.A. N.A. N.A.
. %chime tools.
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S-E-C-R-E-T
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Declassified in Part - Sanitized Copy Approved for Release 2013/06/05: CIA-RDP79R01141A001100120001-4
S-E-C-R-E-T
Table 6
Communist China: Estimated Production of Selected Commodities
1952-162 -
(Continued)
1957
(First Five Year
Commodity
Unit
1952
1953
1954
1955
1956
Plan Goal)
1957
1958
1959
1960
1961
1962
0," Agricultural equipment
Thousand
(new type only)
units ,
300
343
429
1,300
2,100
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
Mainline locomotives ,
Units
20
10
52
98
184
200
170
380
330
320
450
46o
Freight cars
Units
5,792
4,500
5,445
9,258
6,387
8,560
6,000
10,000
10,000
11,000
11,000
12,000
Passenger cars
Units
6
50
100
200
300
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
Trucks
Units
0
0
0
0
1,654
4,000
7,000
13,000
15,000
19,000
26,000
32,000
Three-wheel trucks
Units
0
0
0
0
0
N.A.
50
500
500
1,000
1,500
2,500
Tractors
Units
0
0
0
0
0
N.A.
0
150
1,500
3,000
4,500
5,500
Naval vessels
Thousand
standard ,
displace-
ment tons
1
3
3
5
13
N.A.
20
26
30
34
37
4o
Merchant vessels
Thousand
gross reg-
ister tons
7
11
17
22
15
21
37
56
78
100
120
Inland vessels-
m
.
Self-propelled
Thousand
horsepower
4
4
14
26
24
N.A.
4o
55
66
75
84
Non-self-propelled
Deadweight
.29
tons
14
1
26
51
93
N.A.
117
135
148
157
163
170
Fishing vessels
Thousand
gross reg?
.
ister tons
0.
0
3
6
0
N.A.
N.A.
N.A.
N.A.
NA.
N.A1
N.A.
Aircraft, fighter
Units
0
0
0
0
0
N.A.
Q
60
90
100
loo
100
Cement
Million
metric tons
2.9
3.9
4.6
4.5
6.4
6.o
6.69
7.8
8.8
9.9
11.1
12.5
Timber
Industrial ? Thousand
production cubic
meters 7,611 9,643 10,906 12,501 10,751 N.A. 15,931 N.A. N.A. N.A. N.A. 25,000
Total production
Thousand
cubic
meters
10,020 14,171 17,855 20,476 . 20,558 20,000
52 -
26,580 N.A. N.A. N.A. N.A.
43,000 2/
a Declassified in Part - Sanitized Copy Approved for Release 2013/06/05: CIA-RDP79R01141A001100120001-4
Declassified in Part - Sanitized Copy Approved for Release 2013/06/05: CIA-RDP79R01141A001100120001-4
?
Communist China:
S-E-C-R-E-T
Table 6
Estimated Production of Selected Commodities
1952-62
(Continued)
1957
(First Five Year
Conmodity
- Unit
1952
1353 '
1354
1955
1956
Plan Goal)
1957
1958
1959
1960
1961
1962
Ammunition (all types)
Thousand
metric tons
54
54
22
24
N.A.
25 -
26
28 '
30
30
30
Artillery
Thousand
'
.3
pieces
1.0
1.2
1.4
1.6
1.6
N.A.
0.6
0.6
0.6
0.8
0.8
8.8
Mortars
Thousand
pieces
. 5
6
7
8
3
3
3
3
3
3
3
Machineguns
Thousand
pieces
4-
6
10
15
15
N.A.
6
6
6
6
6
6
Small arms
Thousand
pieces
200
230
260
266
150
N.A.
150
150
150
150
150
150
Rocket launchers
'Thousand
units
8
9
5
5
2
2
2
2
2
2
2
Recoillegs rifles
Thousand
units
3
3
2
2.4
-2.4
N.A.
2
2
2
2
2
2
Chemical fertilizer
Thousand
Nitrogen fertilizer
metric tons
Thousand
194
, 264
354
426
663
N.A.
800
1,180
1,870
3,200 ,
4,600
6,000 s/
metric ton's
194
264
343
414
586
578
680
930
1,450
2,500
30460
4,090 :
Phosphorous
Thousand
fertilizer
metric tons
.0
0
11
12
77
V.A.
120
250
420
700
1,200
2,000
Synthetic ammonia
Thousand
.
metric tons
31.9
41
57
68
105
123
174
280
501
678
798
Sulfuric acid
Thousand
metric tons
190
259
356
388
500
N.A.
611
737
1,200
2,000
2,900
3,400
Nitric acid
Thousand
metric tons
18.4
27
45
69
101
110
196
270
417
461554
Calcium carbide
Thousand
.
Metric tons
12
14
17
30
33
43
-69
84
94
100
125
Soda ash '
Thousand
metric tons
192
223.
310
405
485
476
478
515
575.
650
750
850
Caustic soda '
Thousand
metric tons
79
89.3
116
137
156.4
154
178
205
230
260
300
34-0
Chlorine
Thousand
metric tons
22
25
32
37
41
N.A.
46
52
57
62
70
75 .
Refined benzol
Thousand
metric tons
19
23
29
36
36
N.A.
44
51
54
57
60
65
Toluol
Thousand
-
metric tons
2.2
2.8
3.5
4.2
4.3
N.A.
5.1
6.1
6.4
6.8
7.1
7.3
Refined naphthalene
Thousand '
metric tons
4
5
7
8
8
N.A.
10
12
13
13
14
14
Refined phenol
Thousand
metric tons
0.4
0.5
0.6
0.8
0.8
N.A.
0.9
1.1
" 1.2
1.2
1.3
1.3
Penicillin
Billion
units
45.9
578.3
1,973.7
6,316
12,980
8,7001,
14,800
N.A.
N.A.
N.A.
N,A.
N.A.
-53-
S-E-C-R-E-T
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k
Declassified in Part - Sanitized Copy Approved for Release 2013/06/05: CIA-RDP79R01141A001100120001-4
S-E-C-R-E-T
Table 6
Communist China: ,Estimated Production of Selected. Commodities
, 1952-62
. (Continued)
? 1957
(First Five Year
Commodity Whit 1952 1953 1951i 1955 1956 Plan Goal) 1957 1958 1959 1960 1961 1962
Chloromycetin ,
(syntomycin) Metric tons 0 0 0 3.0 8.5 6.0 15,0 N.A. N.A. N.A. N.A. N.A.
Sulpha drugs Metric tons 80.6 300 806 887 1,475 844 1,650 N.A. N.A. N.A. N.A. N.A.
Motor vehicle tires Thousand ,
units 417.2 488.1 701.3 593.2 761.4 760.0 873.0 1,000 1,200 1,500 1,750 2,000
Shoes, rubber Million pairs 60.1 .70.3 78.0 89.7 93.0 109.3 136 143 150 157 165 174
Cotton yarn
Factory Thousand
metric tons 656 745 834 720 ' -952 907.1 837.9 944 1,936 1,137 1,248 1,370 2/
Native Thousand ?
' metric tons 140 N.A. N.A. N.A. N.A. 80 N.A. N.A. N.A. N.A. N.A.
Cotton cloth
Factory Million /
meters 3,017 3,643 4,135 3,1185 4,600 N.A. 4,000 4,508 4,912 5,353 5,833 6,354 a/
Handicraft A/ Million ,
meters 756 1,359 1,406 - 1,025 1,261 N.A. 1,000 1,127 1,228 1,338 - 1,458 '1,589 a/
Wool yarn Thousand
metric tons 4.4 5.5 5.8 10.6 ? 15.7 N.A. 18.8 20.7 22.8 25.0 27.5 30.3
Wool cloth Million
meters 4.0 5.0 5.2 9.6 14.3 7.5 17.1 18.7 20.6 22.6 24.9 27.4
Silk cloth Million
meters 38.8 44.1 47.1 62.5 80.3 69.2 138.7 N.A. N.A. N.A. N.A. N.A.
Gunny bags Million
bags 67.4 60.4 6o.o 53.4 78.7 68.0 78.14 82.1 86.2 90.5 95.0 99.8
Cigarettes Million
cases 2,650 3.552 3.728 3.587 3.916 4.7 4.326 4.5 4.8 5.0 5.2 5.5
Matches Billion
boxes 9.11 8.02 10.35 11.188 12.025 12.7 12.7 13.6 14.6 15.6 16.7 17.9
'Machine-made paper Thousand
metric tons 372 427 556 589 746 655 890 940 1,056 1,187 1,334 1,500 a/
Newsprint Thousand
metric tons 47 61 79 120 N.A. N.A. N.A. , 188 211 237 267 300
Native-made paper Thousand
metric tons. 167 183 290 256 N.A. 237 N.A. N.A. N.A. N.A. N.A. N.A.
Wheat flour Thousand
metric tons 2,995 3,390 3,724 4,530 5,020 4,670 5,030 5,220 5,420 5,620 5,830 6,060
Edible sugar .
Industrial pro- Thousand
duction metric tons 249 298 347 410 518 686 558 656 N.A. N.A. N.A. 1,194
Total production Thousand -
metric ,tons 451 * 487 597 726 807 1,100 850 1,023 1,160 1,330 1,530 1,750 E/
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S-E-C-R-E-T .
Declassified in Part - Sanitized Copy Approved for Release 2013/06/05: CIA-RDP79R01141A001100120001-4
2 ?
Declassified in Part - Sanitized Copy Approved for Release 2013/06/05: CIA-RDP79R01141A001100120001-4
S-E-C-R-E-T
Table 6
-Communist China: Estimated Production of Selected Commodities
. 1952-62
(Continued)
1957
(First Five Year
Commodity
Unit
1952
1953
1954
1955
1956
Plan Goal)
1957
1958
1960
1961
1962
Edible vegetable oils
Industrial production
Thousand
.1959
-:
metric tons
724
767
944
898.
862
1,552
881
1,028
N.A.
N.A.
.N.A.
2,530
Total.production
Thousand
metric tons
983
1,025
1,260.
1,142
1,176
1,794
1,450
1,690
1,960
2,290
2,660
3,100
Salt
,
_
Industrial production
Thousand
Metric tons
3,460
2,683
3,300
5,895
3,832
5,932
6,300
N.A.
N.A.
N.A.
N.A.
8,600
Total produCtion
Thousand
.
metric tons
4,945
3,783
4,700
7,571
4,921
7,554
8,260
8,500
9,000
9,600
10,200
10,500
a. Estimate agrees with Chinese Communist goal.
b. 'Excluding handicraft production.
c. Estimate differs from Chinese Communist goal.
d. Including homespun 1952 through 1957.
- 55 -
S-E-C-R-E-T
Declassified in Part - Sanitized Copy Approved for Release 2013/06/05: CIA-RDP79R01141A001100120001-4
Declassified in Part - Sanitized Copy Approved for Release 2013/06/05: CIA-RDP79R01141A001100120001-4
S-E-C-R-E-T
Table 7
Communist China: Estimated Volume and Performance of Transportation
1952-62
Industry
1952
1953
1954
1955 1956
1957
(First Five Year
Plan Goal)
1957
1958
1959
1960
1961
1962
Million Metric Tons
Tons originated
Railroads
132.1
160.4
192.6
193.4 246.0
245:5
274
310
347
389
436
488
Motor vehicles
20.7
30.4
43.5
50.1 - - 79.1
67.5
105
131
161
193
228
262
Inland waterways
(excluding junks).
9.41
15.3
20.5
26.3 35.4
36.9
40.6
45.7
50.9
56.0
61.2
66.3
Coastal waterways
(excluding junks)
5.76
5.92
9.91
10.4 10..8
11.5
13.9
15.8
17:5
19.4
21.2
23.0
Total
167..97
212.02
266.51
280.2 371.3
361.4
433.5
' 502.5
576.4
657.4
746.4
839.3
Performance
Billion Ton-Kilometers
Railroads
60.2
78.1 ,
93.2
98.1
120.4
120.9
134.6
152-
170
191
214
239
Highway
0.678
118
1.87
2.52
3.50 -
3.2
3.79
5.24
6.44
7.72
9.12
10.5
Inland waterways
3.64
5.63
7.89
10.4'
12.9
15.3
15.7
17.7
19.7
21.7
23.7
25.7
Coastal waterways
5.0
4.65
8.04
8.38
8.6
10.7
11.1
12.6
14.0
15.5
17.0
18.4
Total
69.518
89.56
111.0
119.4
145.4
150.1
165.19
187.54
210.14
235.92
263.82
293.6
- 56 -
S-E-C-R-E-T
a Declassified in Part - Sanitized Copy Approved for Release 2013/06/05: CIA-RDP79R01141A001100120001-4
Declassified in Part - Sanitized Copy Approved for Release 2013/06/05: CIA-RDP79R01141A001100120001-4
Communist China:
Category 1953 1954
Payments
Imports, c.i.f.
Debt service
Foreign aid grants
and credits
Total payments
Receipts
Exports, f.o.b.
Overseas remittances
Foreign credit receipts
-4,624 -4,413
a/ -138
12/
-4,624 -4,851
-300
3,488
200
438
Total receipts 4,126
Other (including errors
and omissions) si 498
4,074
200
884
5,158
-307
S-E-C-R-E-T
Table 8 .
Estimated Balance of Payments
1953-62
Million Yuan in Current Prices
5-Year Total
5-Year Total
1955
1956
1957
1953757
1958-62
1962
-6,063
-518
-5,297
-602
-4,950
-669
-25,347
-1,927
-31,200
-3,200
-7,540
-500
-393
-404
-454
-1,551 ,
-800
N.A.
-6,974
-6,303
-6,073
-28,825
-35,200
N.A.
4,961
5,568
5,400
23,491
34,500
7,900
200
175
150
925
700
140
1,657
117
23
3,119
0
6,818
5,860
5,573
27,535
35,200
8,o4o
156
443
500
.1,290
0
a. Slight interest payment only. Estimates for 1954-57 are from budget data.
b. Assumed to be none.
c. For example, this item Includes known Chinese payments for which specific value estimates are not
available, such as the cost of Chinese students studying in other Bloc countries, the cost of tech-
nical services received from the Bloc, the maintenance of diplomatic missions abroad, and the like,
.andrChinese receipts for similar expenditures by other countries in China. In addition, this item in-
cludes changes in foreign exchange holdings and clearing account balances.
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- Table 9
Communist China:. Gross InVestment and Savings
Five Year Total for 1953-57
Billion Yuan in Current Prices.
Investment
State investment
Budget appropriations-for capital
construction
Major repair expenses of state
enterprises
Supplementary expenditure for
agriculture, water conservancy,
and forestry
Total state investment
Increases in inventories (except
for construction included above)
Private investment (other than
changes in inventories)
Agricultural
Other
Total
Sources of Savings
Budget savings
Profits and depreciation allowances
53.21 of state enterprises
Taxes and nontax receipts
3.02 Government payments
Surplus of taxes over government
noninvestment expenditures
Bond purchases net of repayments
4.32
60.55
8.45
11.80
3.10
83. 0
Total budget savings
Other savings
Increases in bank deposits
Major repair funds of state
enterprises
Net foreign investment in China
Farm gross investment financed out
of current income la/
Nonagricultural nonstate invest-
ment financed out of current in-
come ,
Total
56.47
71.25
58.35
Percent '
61-.8
12.90 14.1
2.23 2.4
71.60 78.3
4.13
3.53
0.86
8.24
3.10
4.5
3.9
0.9
9.0
91.46 loo.o
-Transfer items, unaccounted for
investment, and-discrepancy 12/ -7.56
? a. This figure is derived by subtracting the net increase in agricultural loans including loans by credit cooper-
atives of 3.56 billion yuan from nonbudgeted agricultural investment expenditures.
b. For exampTh, 1.76 billion yuan of capital construction appropriations have been subtracted as additions to cash
reserves for construction enterprises, and figures for state profits and depreciation allowances include returned
,.working capital.
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Table 10
Communist China: Estimated Completed Capital Construction Investment Ln the First Five Year Plan
1953-57 '
Million Yuan
Economic Sector
1953
1954
1955
1956
1957
Plan Target
Actual Total
Fulfillment
(Percent of
Plan)
Percent of
Total
Investment
IndustrY 2/
Transportation, Post
and Telecommunications
Agriculture, Forestry,
and Water Conservancy
Urban Public Utilities
Other 11
Total
3,116,
1,016
667
250
1,457
6,506
4,044-
1,447
371
232
1;404
7,498
4,924
1,935
642
233
898
8,632
7,866
2,849
1,160
361
1,750
13,986
7,430
1,94 8
941
258
1,578
12,155
25,400
8,210
2;460
1,600
5,070
42,740
12/
12/
27,380
9,195
3,781
1,334
7,087
48,777
.
2/ .
107.8
112.6
153.7
83.4
139.8
114.1
56.1
18.9
' 7.8
2.7
14.5
a. Including estimated state investment in local industry.
b. The original targets in the First Five Year Plan for these categories were 24,850 million and 2,680 million
yuan. The new targets are derived from Li Fu-chunts estimates of overfulfillment of the plan given on 7 Decem-
ber 1957. LI-/ It is probable that the upward revision of the industrial target is the result of including
550 million yuan of the planned investment in the lumber industry by the Ministry of ,Timber Industry (created in
May 1956).under industrial investment. The remaining 250 million yuan of investment originally planned for the -
lumber industry cannot be specifically located at the present time.
c. 51/
d. Residual composed of the First Five Year Plan Categories of "Trade, Banking, and Stockpiling Departments,"
"Cultural, Educational, and Health Departments," and "Other Items."
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Table 11
Communist China:
Trends in Gross National Product, by End Use
1952, 1957, and 1962
Billion Yuan in 1956 Market Prices
Average Annual Increase
Average Annual Increase
1952-57
1957-62
End Use
1952 2/
1957
1962..
(Percent)
Consumption Expenditures
57.7
77.8
..(Percent)
6.1
104.9
6.2
Government
9.4
10.9
3.0
16.5
8.6
Net Foreign Investment
-0.8
0.5
o
0.6
o
Gross Domestic Investment
9.5
22.8
19.1
38.8
11.3
Total gross national product
75.9
112.0
8.1
160.8
7.5
a. The total is derived independently from unrounded data and does not agree with the sum of its rounded
components.
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Table 12
Communist China: Economic Gross. National Income, by Sector of Origin
1952, 1957, and 1962
Economic Sector
1952 1957
(Billion Yuan '
in 1956 Prices)
Percent
Increase
1952 to 1957
- 1962
(Billion Yuan
in 1956 Prices)
Percent
Increase
1957 to 1962
Percentage
Distribution
of 1962 Total
Agriculture
42.7
48.3
13
56.6
17
38
Industry
9.6
20.1
109
38.3
91
26
Modern Transportation
and Communications
1.9
4.4 '
140
8.3
89
5
Trade, Native Transportation,
and Miscellaneous Business
Services
7.3
11.5
57
16.6
44
11
Construction
1.7
4.3
153
8.7
102
6
Government
4.2
4.4
5
5.6
27
4
Consumer Services and
House Rent
6-3
10.2
62
14.3
11.0
10
Total gross national
product at factor cost
73.7
103.2
40
148.4
44
loo
Indirect taxes
4.3
8.2
89
14.6
78
Total gross national
product at market prices
78.0
111.4
43
163.0
46
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Table 13
Communist China: Selected 1962 Plan Goals
Product
Unit ?
Original 1962
Goal 2/
Revised 1962
Goal 12/
1962
"Struggle
Goal" Ei
Electric power
Billion kilowatt-hours
4o to 43
44
50
Coal
Million metric tons
190 to 210
230
300
Crude oil
Million metric tons
5- to 6
5 to 6
5 to 6
Steel
Million metric tons
10.5 to 12.0
12
15
Chemical fertilizers
Million metric tons
3.0 to 3.2
7
15 to 20
Cement
Million metric tons
12.5 to 14.5
12.5
N.A.
Salt
Million metric tons
10 to 11
N.A.
20
Edible vegetable
oils
Million metric tons
3.1 to 3.2
N.A.
. 5.47
Sugar
Million metric tons
2.4 to 2.5
N.A.
7.0
Paper
Million metric tons
1.5 to 1.6
N.A.
3.85
Grain
Million metric -tons
250
240
N.A.
Cotton
Million metric tons
2.4
2.15
N.A.
a. Adopted by the Eighth National Congress of the Communist Party of China on 27 Septem-
ber 1956. 5.W
b. Presented by Li Fu-chun at the Eighth All-China Congress of Trade Unions on 7 Decem-
ber 1957. 21/
c. Goals presented since February 1958. "Struggle goal" is a Chinese Communist term in-
dicating a desired production target as opposed to an official plan goal.
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Table 14
Communist China: Estimated Gross Investment And Savings
in the Second Five :Year Plan
1958-62
Billion Yuan in Current Prices
Investment
State Investment _
Budget appropriations for capital
construction
Major repair expenditures
Supplementary expenditures for
agriculture, water conservancy,
and forestry
Total state investment
Increases in inventories (except
for construction included above)
Private investment (other than
increases in inventories)
Agricultural
Other
Total
Sources of Savings-
Budget Savings
Profits and depreciation allowances
98.7 of state enterprises
6.0 Total taxes and nontax receipts
Less: estimated government
payments
8.1 Surplus of taxes over government
noninvestment expenditures
113.1 Bond purchases
Bond repayments
Bond purchases net of repayments
12.3
Total budget savings
Other savings
17.1 Increases in bank deposits
3.8 Major repair funds of state
enterprises
146.3 Net foreign investment in China
Farm- gross investment expenditures
financed out of current income
Nonstate investment financed out
of current income
Total
Transfer items, unaccounted for
investment, and discrepancy
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Pereent
107.9 67.6
103.9
76.8
27.1 17.0
3.8
-2.9
0.9 0.6
135.9_ 85.2
6.0 3.8
7.2 4.5
-3.5 -2.2
10.1 6.3
3.8 2.4
159.5 100.0
-13.2
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Table 15 ?
Communist China: Proposed Allocation of Gross Investment
and Ratios of Investment to Increases in Output
1958-62
Billion Yuan in 1956 Prices
Increase in Income
Originating,
Ratio of Investment to
Increases in Output in
Ratio of Investment to
Increases in Output in
Economic Sector
Investment
as Projected
1952-57
1957-62
Industry 12/
59.1
20.3
2.4 to 1
2.9 to 1
Heavy .
52.5
15.3
2.7 to 1
3.4 to 1
Light
6.6
5.0
1.2 to 1
1,3 to 1
Modern Transportation
and Communications
16,0
3.9
3.4 to 1
4.1 to 1
Agriculture
33.2
8.7
3,4 to 1
3.8 to 1
All other sectors s/
15.8
12.3
1.0 to 1
1.3 to 1
Total
124.1
45.2
2.2 to 1
2.7 to 1
/
. a. , State expenditures for capital construction are allocated by sector in terms of the pattern of in-
Vestment proposed for the Second-Five Year Plan. Major repairs and increases in inventories are ex-
cluded as well as that portion of state capital construction allocated for Stockpiling of equipment and
materials. Agricultural investment includes state capital construction expenditures, state supplementary
expenditures, - and nonbudgeted investment by the peasants themselves.
b. Excluding individual handicraft and construction under heavy industry,
c. Including individual handicraft.
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Table 16
Communist China: Population Based on 1953-54 Census
1953-57 .
Census Year
Population Midyear
'(Million)
Annual Rate of Increase
(Percent)
Annual Growth
(Million)
1953
1954
1955 '
1956
1957
.582.6 2/
591.6 12/
603.2 2/
616.5 1/
631.0 2/
1.5
2.0
2.2
2.4
9.0
11.6
13.3
14.5
a. Census announcement.
- b. ORR estimate.
C. /82
d' 562/
e. _2/
Table 17
Communist China: Workers and Staff 2/
1952 and 1956
Thousand
Economic Sector
1952
1956
Industry
5,260
7,170
Construction
1,050
2,950
Transportation and Communications
1,130
1,560
Banking
305
377
Agriculture, Forestry, and Water Conservancy
239
610
-Municipal Public Utilities
41
96
Social, Cultural, and Educational
2,282
2,600
State Administration
1,523
1,600
Commerce 12/
3,970
7,227
Total workers and staff
15,800
24=,190
2/
Less: former entrepreneurs and the like reclassified
as workers and staff, 1953-57
Workers and staff, net
3,180
, 15,800 21,010
a. Year-end data.
b. Residual, perhaps including some native transportation workers.
c. It is believed that total workers and staff in 1957 were approxi-
mately equal to the 1956 total.
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