CONTROL RECORD FOR SUPPLEMENTAL DISTRIBUTION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79-00928A000100060001-8
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 34
• Document Creation Date: November 16, 2016
• Document Release Date: April 11, 2000
• Sequence Number: 1
• Publication Date: May 1, 1974
• Content Type: FORM

Analyst: C/TN
(Project 22. 6845)
Approved, For Release
CONTROL "RECORD 'FOR SUPPLEMENTAL DISTRIBUTION STATINTL
DISSEM: 5 Jun 74 NO ELITE
SERIES NUMBER
A (ER) 74-60
CLASSIFICATION OF REPORT
UNCLASSIFIED
DISTRIBUTION TO RC
--103
DATE OF DOCUMENT
Ma 1974
NUMBER OF COPIES
650
NUMBER J N RC
TC~? C T3
COPY
RECIPIENT
DATE
NO.(S)
SENT,
RETURNED
140 c
Rec'd from PSD
5-Jun 74
2 c s
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It
1 cy
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1 cy
ADD/OER
1 c
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1 c
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1 c
D NII- STATINTL
1 c
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1 c
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3 c s
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11 Jun 74
2 cys
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13 Jun 74
2 c s.
14Jun74
1 c
c
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353Approved for Release 2000/05/11
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Approved For Release 2000/05/11 CIA-RDP79-00928A000100060001-8
 7-
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CONTROL RECORD FOR SUPPLEMENTAL DISTRIBUTION
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53Approved F r Release 2000
 Approved For Release 2000/05/11: CIA-RDP79-00928A000100060001-8
COPY
NO. (5)
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 Approved For Release 2000/05/11: CIA-RDP79-00928A000100060001-8
Dissemination List for OER Report, A (ER) 74-60 (Job 544-286)
Recipient
25X1A
25X1A
25X1A
25X1A
25X1A
CRS/ADD/Std. Dist., Room GF28, Hq.
OSR, Room 3F50, .Hq.
DCD/SD, Room 811, Key Bldg.
OTR/II, Room 926, CoC
OWI, Room I D1612, Hq.
D/CRS, Room 2E60, Hq.
1
3
3
6
1
4
D/ OSI, Room 6 F30, Hq.
D/OPR, Room 3E58, Hq.
D/OCI via SS/ADD/CRS, Room 1G338, Hq.
INDICO, Room 7F30, Hq.
D/OBGI, Room 1011, Magazine Bldg.
OBGI/Country Profile Staff, Rm. 505,
;1
42
10
X31F 17
45
25X1A 1
25X1A
Magazine Bldg.
NPIC/IB1 Room 1S518, Bldg. 213
D/IAS, Room 1S518, Bldg. 213
IRS/HR, Room 2G40, Hq.
Chairman, COMIREX, Room 3E14, Hq.
25X1A
25X1A
DDI Management Staff, Rm. ZF20, Hq.
~~~F!ongressional Support Officer, Room 7F36, Hq.
OER, Room 3G31, Hq.
via CRS/ADD Release, Rm.. GF18, Hq.
Rrn..1015, Key Bldg. _
OCI China Task Force, Rm. 5G19, Hq.
NSA, Room 2E024, Ft. Meade, Md.
Department of the Treasury, Office of International Finance,
'Attn: Mrs. Birgitta Woods, Rm. 1438, 15th St. & Pa. Ave., N. W .
Defense Intelligence Agency, DS-4C, A Bldg., AHS
State, INR/ CC, Roorn 6510, New State Bldg.
7 - suggested distribution for Embassies in Taipei, HongKong,
Tokyo, Seoul, Kuala Lumpur, Singapore, and Bangkok'
DCD/ID/ CCS, Rm. 904, Key Bldg.
Finished Intelligence Project, Rm. 154, PSD Bldg.
CRS/DSG, Rm. 1E4816, Hq,
(see atta~- 'cYYpegtFor Release 2000/05/11 : CIA-RDP79-00928A000100060001-8
 Approved For Release 2000/1 fs iq i`1: ?R FA; A 0928A000100060001-8
Dissemination List for OER 11eport, A (ER) 74-60 (Joie 544_286)
(continued)
No. of Copies Recipient
Council on International Economic Policy, Rm. 204, EOB
Attn: Mr. F. William Hawley III
Mr. John Yeo, Office of the Special Assistant to the Secretary
for National Security, Department of the Treasury,
Room 4330, 1Sth St. & Pa. Ave. , N. W.
2 Department of Commerce, Mr. Harold E. Allen, TDB,
Rm. 1617M, Main Commerce Bldg.
Attn: Mr. Lewis Bowden
Act. Dep. Secretary, Bur. of E-W Trade, DIB
200 Mr. Nathan R. Einhorn, Document Expediting (DOCEX)
Project, Exchange and Gift Division, Library of Congress.
STOP 303
NO ELITE
1 Agency Archives
103 Agency Records Center
Total: 650 copies
(fq
F14) R IDIP, 79-00928A000100060001-8 _ 91
Approved For Release 2
 Approved For Re use 2000/05/ : --iDP79-00928A000100060001-8
Project No.
aid.
Cf-,'j
SOVIET BLOC
Bulgaria, Sofia
Czechoslovakia, Prague
Germany, Berlin
Hungary, Budapest
Poland, Warsaw
Romania, Bucharest
USSR, Moscow
Austria, Vienna
Belgium, Brussels
(1 copy of all reports for
Ralph Moore, US Mission
(1 copy for US Mission to the
European Communities)
Denmark, Copenhagen
England, London
Finland, Helsinki
France, Paris
Germany, Bonn
Munich
Iceland, Reykjavik
Ireland, Dublin
Italy, Rome
Luxembourg, Luxembourg
Malta, Velletta
Netherlands, The Hague
Norway, 0 slo
Portugal, Lisbon
Spain, Madrid
Sweden, Stockholm
Switzerland, Bern
Geneva
Yugoslavia, Belgrade
to NATO)
Australia, Canberra
Melbourne
Philippines, Manila
New Zealand, Wellington
FAR EAST
25X1A
Burma, Rangoon
,-F r mosa, Taipei
-~ Kong
Indonesia, Djakarta
j. aan, Tokyo
,.4re'a, Seoul
Laos, Vientiane
4.DkTaysi a, Kuala Lumpur
r,&1-5gapore
and, Bangkok
(2 cys - I cy for US Rep to SEATO
Vietnam, Saigon
(2 cys if report receives
Vietnam distribution)
CANADA, OTTAWA
(see reverse side)
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 SECRET .
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AFRICA NEAR EAST AND SOUTH ASIA
Algeria, Algiers
Botswana, Gaberones
Burundi, Bujumbura
Cameroun, Yaounde
Central African Republic, Bangui
Chad, Fort Lamy
Congo, Kinshasa
Dahomey, Cotonou
Ethopia, Addis Ababa
Gabon, Libreville
Gambia, Bathurst
Ghana, Accra
Guinea, Conakry
Ivory Coast, Abidjan
Kenya, Nairobi
Lesotho, Maseru
Liberia, Monrovia
Libya, Tripoli
Malagasy Republic, Tananarive
.Mali, Bamako
Malawi, Zomba
Mauritania, Novakchott
Mauritius, Port Louis
Morocco, Rabat
Mozambique, Lourenco Marques
Niger, Niamey
Nigeria, Lagos
Rhodesia, Salisbury
Rwanda, Kigali
Senegal, Dakar
Sierra Leone, Free Town
Somalia, Mogadiscio
South Africa, Pretoria
Sudan, Khartoum
Swaziland, Mbabane
Tanzania, Dar es Salaam
Togo, Lome
Tunisia, Tunis
Uganda, Kampala
Upper Volta, Ouagadougou
Zambia, Lusaka
Afghanistan, Kabul
Ceylon, Colombo
Cyprus, Nicosia
Egypt, Cairo
Greece, Athens
India, New Delhi
Iran, Tehran
Iraq, Baghdad
Israel, Tel Aviv
Jordan, Amman
Kuwait, Kuwait
Lebanon, Beirut
Nepal, Katmandu
Pakistan, Rawalpindi
Saudi Arabia, Jidda
South Yemen, Aden
Syria, Damascus
Turkey, Ankara
Argentina, Buenos Aires
Bahamas, Nassau
Barbados, Bridgetown
Bolivia, La Paz
Brazil, Rio de Janeiro
Chile, Santiago
Colombia, Bogota
Costa Rica, San Jose
Dominican Republic, Santo Domingo
Ecuador, Quito
El Salvador, San Salvador
Guatemala, Guatemala
Guyana, Georgetown
Haiti, Port au Prince
Honduras, Tegucigalpa
Jamaica, Kingston
Mexico, Mexico City
Nicaragua, Managua
Panama, Panama
Paraguay, Asuncion
Peru, Lima
Trinidad, Port of Spain
Uruguay, Montevideo
Venezuela, Caracas
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 %"P_ 1111
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28 May 1974
MEMORANDUM OR: St/_.I DS
FROM: we" St/P/C;
Dissemination of A (ER) 74-60, China:
Role of Small Plants in Economic
Development (Project 22. 6845),
UNCLASSIFIED
You wi.l.l roccive 42 copies of subject report. It is requested
.. below,
that they bu di.sspi? ix APH 1= 1_)iu'.Ca,..i
S t. / : I}
VMS
D/ (8-C/IN; I-C/RE; 1-C/IN)
}/r
DIS
Di D
St/P/ C
25X1A
 U I or Release NOW"
CORD OF REVIEW OF OER PUBLICATIONS FOR SECURITY/SANITIZATION APPROVAL
SUBJECT
l
l
-60
j
~
/
SECURITY REVIEW IZING
INST UCTIONS
ITEM
DATE
INITIALS REM
UNEDITED DRAFT
25X1 A
EDITED DRAFT
25X1C
DELETE
910
?-~
RELEASABLE TO
25X1C
SUBSTITUTE
25X1 C
REMARKS
25X1A
25X1A
MEN
EM
25X1 C
1~~
25X1 C
Vmk= ~&62&t
-8
GROUP -I
Excluded from automatic
SECRET
n F'
1 d
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 ~1~1 1 I -00928
STATINTL
STATINTL
STATINTL
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 Approved For Release 2000/05/11 : CIA-RDP79-00928A000100060001-8
2 3 JLL_ 1974
MEMORANDUM FOR: CRS/ADD Release
Release of A (ER) 74-60, China: Role of
Small Plants in Economic Development,
May 1974, Unclassified, to Foreign
Governments
1. It is requested that the attached copy of subject report be
forwarded as follows:
25X1 C
1 copy
2. All OER responsibilities as defined in the DDI memorandum
of 13 August 1952, "Procedures for Dissemination of Finished
Intelligence to Foreign Governments, " as applicable to this report
have been fulfilled.
25X1A
Chief, St/P/C/ER
.I[',asoiti a~rlinn r.=qucst~'I by
tlr? rnenornndum hez been completed;
BY: `--7 )-)- ,
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 STATINTL
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Next 7 Page(s) In Document Exempt
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 Approved For Release 2000/05/11 : CIA-RDP79-00928A000100060001-8
'EliMSEARCH AID
china: Role of Small Plants
in Economic Development
A (ER) 74-60
May 1974
CI 1: (+Qrv SJ ~ ,.JyY t 11.1 .S ~ ...1
Approved For Release 2000/05/11: CIA-RDP79-00928A000100060OD1-8
 Approved For Release 2000/05/11 : CIA-RDP79-00928A000100060001-8
This publication is prepared for the use of U.S. Government
officials. The format, coverage, and contents of the publi-
cation are designed to meet the specific requirements of
governmental users. All inquiries concerning this document
from non-U.S. Government users are to be addressed to:
Document Expediting (DOCEX) Project
Exchange and Gift Division
Library of Congress
Washington, D.C. 20540
Approved For Release 2000/05/11 : CIA-RDP79-00928A000100060001-8
 Approved For Release 2000/05/11 : CIA-RDP79-00928A000100060001-8
China: Role of Small Plants
in Economic Development
May 1974
Approved For Release 2000/05/11 : CIA-RDP79-00928A000100060001-8
 Approved For Release 2000/05/11 : CIA-RDP79-00928A000100060001-8
China's small plants program has speeded up the
modernization of the countryside by broadening the
base of important industrial branches-agricultural ma-
chinery, chemical fertilizers, cement, hydroelectric
power, coal, and iron and steel.
Given China's vast population and inadequate land
and capital plant, the program makes sense economically
through:
? Provision of additional materials, equip-
ment, and power needed to boost agri-
cultural production;
? Productive use of resources that have
meager alternative employment, espe-
cially China's huge supply of unskilled
and semi-skilled labor;
? Diffusion of capital plant and technology
into the countryside; and
? Increase in local control over local eco-
nomic tasks, which lessens the burden on
central administrative resources.
Difficulties with the program stem mainly from over-
zealous implementation during periods of political up-
heaval, such as the Leap Forward (1958-60). In addition,
even though much of the equipment and materials used
in the program comes from local sources, a certain
portion must be furnished by the modern sector.
Finally, local authorities must make sure that labor is
not diverted from the fields at peak planting and harvest
time.
Small plants currently contribute to China's indus-
trial output as follows:
Agricultural machinery Almost all the simple farm tools and a substantial portion of basic
farm machinery.
More than 50% of nitrogen fertilizer output (by weight) and 75%
of phosphate fertilizer output (by weight); vital to the agricultural
sector, even if not top quality.
50% of national output; sufficient in quantity and quality for
practically all local needs.
Hydroelectric power About 5% of national electric power capacity and a large part
of rural needs, especially for irrigation.
30% of national output; used mostly for local industry, cooking,
and heating.
Iron and steel 20% and 15%, respectively, of national output; used in rural
industry and construction.
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 Approved For Release 2000/05/11 : CIA-RDP79-00928A000100060001-8
In addition, small plants furnish an appreciable part of
the output of transportation equipment, electronic
products, and light industrial products.
Chinese spokesmen tout the small-plants program as
a key part of Chairman Mao's general political design:
? The program is an important factor in
preventing the dominance of a central
elitist bureaucracy;
? It helps reduce the cultural differences
between city and countryside;
? It makes feasible the establishment of a
vigorous rural economy in contrast to the
"drift to the cities" found in other
developing countries; and
? It fosters regional self-sufficiency, which
is necessary to China's military strategy of
defense in depth.
The small-plants program has been administered
unevenly over the years. Under the Soviet-style industri-
alization program of the 1950s, small plants were
de-emphasized. I n the Leap Forward, the frenzied
construction of small plants quickly outstripped raw
material supplies and administrative capabilities. Most of
the small plants were closed down in the retrenchment
program of the early 1960s. By the middle of the
decade, a more orderly program to build small plants--
mainly in support of rural economic development-had
been established. At the end of the Cultural Revolution
(1966-69), this program had reached boom proportions,
and some excesses of the Leap Forward began to
reappear. In 1972, China's leaders again re-evaluated and
trimmed back the program. The anti-Confucius cam-
paign, which began in January 1974, so far has had no
noticeable effect on the small-plants program.
For the foreseeable future, small plant; almost
certainly will retain their role as an invaluable supple-
ment to modern industry in providing essential commod-
ities to the countryside. Modern industry will remain the
cutting edge of China's drive for economic development;
small plants will continue their important mission of
satisfying demands in the outlying sectors of the
economy by making efficient use of growing supplies of
low-cost labor and materials.
In this report, the term small plants refers to
Chinese enterprises distinguished by a combination of:
? Location in rural areas,
? Direct or indirect support to agriculture,
? Dependence on local resources, and
? Local administration (usually below the
provincial level).
The plants vary in size from a few workers to a
thousand or more, depending on the type of output. The
report excludes (a) small plants in urban areas, (b)
handicraft establishments, (c) plants that are part of the
new, modern industrial complexes being built in the
countryside, and (d) rural plants that are essentially
feeder plants to large urban establishments.
According to the official Chinese press, the "five
small industries" to be developed in rural areas are
agricultural machinery, chemical fertilizers, cement, elec-
tric power (mostly hydroelectric), and mining (mostly
coal). Iron and steel plants are often brought into these
discussions as a sixth category.
This report deals with the economic role of small
plants as defined above. The text describes the economic
and political advantages of the small-plants program and
sketches its historic development. An appendix provides
specific detail on each of the six industries featured in
the program.
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 Approved For Release 2000/05/11 : CIA-RDP79-00928AO00100060001-8
Support to Agriculture
After the near-starvation years of 1959-61, the
modern sector of the economy began to support
agriculture with large and growing amounts of agricul-
tural implements, irrigation equipment, chemical fertil-
izers, pesticides, and construction materials. This switch
in economic strategy reduced the resources available for
investment in industry and for military production. The
leadership naturally hoped that a well-organized small-
plants program would reduce the drain on the modern
sector and would ultimately take over the job of shoring
up the agricultural sector.
program is not pushed to extremes as in the Leap
Forward. Machinery is handed down from more modern
plants, salvaged from the scrap heap, or put together by
local handymen. Local raw materials often are used,
materials that perhaps cannot meet the standards of
larger plants or that cannot be transported economically
over long distances. For example, a small coal mine can
be built with gangs of labor, readily available hand tools,
and primitive machinery. As coal deposits are wide-
spread in China, most deposits in the hinterland will not
be needed for development by the modern sector in the
near future. A second example is the construction of
hydroelectric plants on streams too small for major
projects and the equipping of these plants with machin-
ery handed down from larger installations.
By 1973, small plants were accounting for about
60% of chemical fertilizer output, 50% of cement, 30%
of coal, 15% of steel, and 5% of electric power. This
substantial production, all of which was going directly or
indirectly to support agriculture, helped agricultural
production keep abreast of China's rapidly growing
population. In short, the small-plants program has
substantially reduced the pressure on China's modern
industrial sector and has thereby permitted higher rates
of growth in the non-agricultural parts of the economy.
Low Opportunity Costs
Furthermore, the contribution of small plants has
been achieved at low cost in labor and materials. About
85% of China's huge population of some 900 million
resides in rural areas. Although labor-intensive methods
predominate in agriculture, great numbers of people are
available for other work, especially during the slack
farming periods. This surplus labor can be used-either
full-time or part-time-to operate small mines and
industrial plants with little sacrifice of production
opportunities in the important farming sphere. More-
over, with the rapid growth in the rural labor force and
the gradual mechanization of agriculture, additional
labor is continuously becoming available for non-farm
activities.
The small plants use large amounts of labor in
relation to capital and other resources. Although produc-
tion per man is low compared with large- and medium-
size plants, the use of manpower in this fashion is more
productive than in any alternative use-provided that the
Although the costs in labor, materials, and equip-
ment are generally low-as measured in terms of the best
alternative opportunity forgone-in some cases the
small-plants program has resulted in substantial costs.
The burden of constructing and operating small plants is
heavy for local authorities and sometimes reduces
administrative and material resources needed for other
programs. Whereas the labor devoted to the small-plants
program is only about 1% to 2% of the rural labor force
as a whole, the percentage in the most advanced areas
can reach much higher levels. To assure sufficient labor
for agriculture, the authorities now try to limit employ-
ment in small plants to 5% of the labor force of the
counties. Small-plant activity is reduced during peak
periods of agricultural activity and the People's Liber-
ation Army and the cities are called on to supply
additional labor. During slack season, maintenance and
construction of irrigation systems also require large
numbers of workers.
Depending on the branch of industry, small plants
compete with modern industry for a portion of their
materials and machinery. For example, coal is a major
input in the production of chemical fertilizer. Because
output of coal is insufficient to supply both small and
large fertilizer plants, small fertilizer plants have begun
to use local, inferior grades of coal as a substitute for
higher grades. Small cement, fertilizer, and hydroelectric
plants require equipment from large machine building
plants, reducing the amount of equipment that can be
supplied to the modern sector. In short, Peking must
take into account certain costs-in the form of labor
allocation and supplies of raw materials and equip-
ment-in weighing the advantages of small plants.
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 Approved For Release 2000/05/11 : CIA-RDP79-00928A000100060001-8
Integrated industrial groupings are slowly being
established at the local level-for example, in the county
administrative centers. They encompass a wide variety of
industrial activity from mining to production of machin-
ery. Ideally, chemical and steel plants are built near the
source of raw materials. Power is made available through
construction nearby of small hydroelectric plants and
coal mines. Cement and other construction materials
also are supplied locally. Because of the short distances
between production sectors, most materials can be
transported by primitive means-shoulder poles, carts,
barges, and occasionally a locally built truck. As the
products are used locally, transportation to the con-
sumer can be similarly simple. Other advantages of the
close proximity of raw materials, production, and
distribution are reduced deterioration of fertilizers
(ammonium bicarbonate does not store well, making
rapid distribution essential), the ease of administration,
and the ready transfer of labor from one occupation to
another.
Spread of Technology
'The small-plants program speeds up the process of
,diffusing technology to the countryside. Not only are
several million peasants brought into immediate contact
with machinery, technology, and industrial discipline,
but also the industrial products produced by the small
plants are introduced to China's villages in larger volume
at an earlier stage. China is unique among the less
developed countries in that rural society has been
stabilized and a "drift to the cities" prevented. China
does not need an influx of ambitious rural youth into
the cities, because the urban population of roughly 135
million already provides a vast reservoir of manpower.
The government has vowed to decrease the technical gap
between the city and countryside. It presumably wants
to avoid blighted conditions in rural China experienced
in the development process in practically all the devel-
oping nations of Latin America, Africa, and Asia.
The process of spreading technology is enhanced by
a number of related movements initiated by Mao. The
education system, for example, gives impetus to tech-
nological training by offering short technical courses on
industrial fundamentals. Technicians from large factories
are sent to the countryside to train the local workers and
to provide help in setting up plants. The hsia fang
(down-to-the-countryside) movement, whereby city
students are sent to the villages to be toughened by hard
work, adds another dimension to the program--a youth-
ful look from the outside. Similarly, the movement of
cadre to the rural areas probably provides new insights
into solutions of rural problems. Simultaneously, pro-
duction brigades are selecting their most likely youth for
training in the universities and technical institutes,,
following which they will be reassigned to their own
villages.
The decentralization associated with the small-
plants program has allowed the Chinese government to
economize on scarce central administrative resources
while providing for local needs. The autonomy at the
local level also creates an atmosphere of accomplishment
when peasants in a local area combine to set up and
operate a simple plant. The ability of the Chinese
Communist regime to maintain enthusiasm for produc-
tion in the absence of large increases in consumption
rests on this sense of pride (reinforced by propaganda),
as well as on egalitarianism, organizational efficiency,
and coercion. Administrative decentralization also is
consistent with the need for flexibility in the small-
plants program-with respect to hours of operation,
sources of raw material, and quality of output. During
the Cultural Revolution, when a large part of the
government and party apparatus was shattered, the
administrative apparatus in the countryside proved
entirely adequate to carry on basic economic tasks.
Small plants figure prominently in Mao's concept of
avoiding excessive bureaucracy. Mao excoriates the
Soviet leadership for allowing the development of a
highly paid bureaucracy which lords it over the workers
and peasants. Decentralization of administrative control
in China allows local party committees to make oper-
ational and policy decisions, thereby reducing the power
of central organs. To avoid a slowdown in revolutionary
momentum, Mao has proclaimed a number of measures
designed to eliminate bureaucratic entrenchment. His
motto "Fewer troops, simpler administration" has
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meant sizable cuts in the bureaucracy. Sedentary city
bureaucrats are sent to "7 May" schools for a few
months of physical labor and reindoctrination. Cadres
and technicians are assigned to the countryside. The
small-plants program fits neatly in with this political
philosophy.
Developing the "New Communist Man"
Mao's concept of the "New Communist Man" is an
all-around man, both "red" and "expert," rural and
urban, student and teacher. Mao tirelessly advocates the
eradication of three differences: between the worker and
the peasant, between the city and the countryside, and
between mental and manual labor. People are to become
technically competent and ideologically motivated to
work for the State rather than for the individual. The
small-plants program is a means to raise the technolog-
ical level of the peasants, who are the life blood of
Communist influence in China and are seen as more
dependable ideologically than urban dwellers.
Insuring Regional Self-Sufficiency
I n the Leap Forward, small plants were assigned a
key role in the frantic drive to speed up industrial and
agricultural production. The communes, which became
the prime rural administrative units in 1958, built
200,000 small industrial plants,1 and thousands more
sprouted up in the cities. Although large amounts of
coal, cement, pig iron, and agricultural machinery were
produced by these plants, the products were often
unusable, and the plants wasted enormous amounts of
labor and raw materials.
With the exhaustion of industry, the withdrawal of
Soviet technicians, and three successive bad agricultural
years, Peking had to abandon the Leap Forward.
Resources had to be concentrated on preventing starva-
tion and insuring a minimum flow of industrial goods.
To end the hemorrhage of raw materials and the flood of
useless output, small plants were closed down by the
tens of thousands, and workers returned to the fields.
The Maoist program of regional self-sufficiency is
derived from concepts of guerrilla warfare and multiple
lines of defense. Each jurisdiction is to develop a
comprehensive economic system which can carry on in
the event supplies from other areas are cut off. Small
plants are an integral part of this picture, being
dependent as far as feasible on local manpower, mate-
rials, machinery, and administration.
Until 1958 the Chinese followed the Soviet model
of industrialization, with emphasis on heavy industry
and on construction of large modern plants. In 1949,
small plants (handicraft establishments and other locally
operated enterprises) accounted for nearly one-half of
China's industrial production. The idea of small-scale
industry to support agriculture was advanced but made
little headway because planners were preoccupied with
grand designs for the economy. I n 1957, small plants-
producing mostly consumer goods and handicrafts-
contributed less than one-third of industrial production.
As the economy recovered in the mid-1960s, the
small-plants program was gradually revived, mainly to
support agriculture. Standardized plants for producing
cement and chemical fertilizer were particularly favored.
In the late stages of the Cultural Revolution, Mao's
political-economic policies once again attained ascend-
ency. Thousands of small plants were built in both the
countryside and the cities in another massive effort to
increase output with minimum investment. This effort,
however, never achieved the scope, the intensity, or the
disastrously wasteful results of the Leap Forward.
Despite the care with which China's leaders ap-
proached the small-plants program following the post-
Cultural Revolution, they recognized by 1972 that the
program was taking too many resources away from
agriculture and modern industry. As a result, the center
1. This figure does not count the 600,000 small backyard
"steel" furnaces, which sprung up in urban and rural areas.
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tightened control over local construction and local
industrial operations. Investment in small plants was cut
back. I n 1973, press reports on industry as a whole
called for (a) increases in production at existing plants,
(b) savings of raw materials, (c) solution of technical
problems at the local level, (d) cutbacks in adminis-
trative staffs, and (e) the primacy of large backbone
plants in the production process. Few new small plants
were built.
So far in 1974, the anti-Confucius campaign has had
no noticeable effect on the small-plants program. A
demand for greater self-reliance has arisen during the
campaign, and China's dependence on foreign tech-
nology has been increasingly criticized. As the campaign
unfolds, additional support thus may be given to the
small-plants program.
The small-plants program fits in so harmoniously
with China's economic requirements and Maoist political
goals that it almost certainly will play a prominent role
for the foreseeable future. The following factors guar-
antee its continuing importance:
? Above all, the continued rapid growth of
the labor force and the absence of alter-
native opportunities for useful employ-
ment of additional workers; even if the
population control program cuts the
growth rate from 2% to 1%, enormously
large numbers will be reaching working
age for the next two decades.
? The never-ending process of upgrading the
different levels of technology in the econ?
omy, starting with modern weapons at
the top, through heavy industry, down to
small plants, and finally to agriculture and
handcrafts; the small plants are a logical)
link in this transmission process.
? The increasing complexity of the eco?
nomic problems that must be sorted out
by the central leadership; considerable
autonomy for small plants and locall
industrial groupings is essential to the
practical management of China's sprawl..
ing economy.
? The political and strategic goals of self-
reliance and self-sufficiency, which are
not likely to be altered, no matter what
the character of the post-Mao leadership.
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Small plants in China are especially important in the
agricultural machinery, chemical fertilizer, cement,
hydroelectric power, coal, and iron and steel industries.
In addition to these industries, this appendix briefly
treats small plants in the transportation equipment,
electronic products, and light industries.
20,000 factories manufacturing and repairing agri-
cultural machines and implements and 123,000 estab-
lishments processing agricultural products. In 1960, 83%
of the total investment in capital construction in the
farm machinery industry was raised and expended
locally.
The machine building facilities established in rural
areas are mainly involved in providing equipment for the
support of agriculture. Mechanization of agriculture was
one of the items incorporated in the National Program
for Agricultural Development, 1956-67. The first big
push occurred during the Leap Forward with its vast
program to build small water control projects and
industrial plants. The communes-the supercollectives
established as part of the Leap-alone had more than
As in other branches of industry, the rapid expan-
sion of small agricultural machinery plants led to
prodigious waste of raw materials and a huge outpouring
of crude products. Half of China's farm machinery
plants (mostly local plants) were closed down in
1961-63, and the number of workers was cut by
two-thirds. By 1963, investment in farm machinery
plants had fallen to 16% of the 1960 level, with local
investment accounting for only 23% of the total. But the
government, as part of its new policy of pouring
resources from the modern sector into agriculture, began
in 1962 to increase production of farm machinery and
equipment in central modern plants-irrigation pumps,
tractors, piping, etc. And the best-equipped local plants
were retained in operation and continued to turn out a
large volume of farm implements.
During and following the Cultural Revolution, a
new program was started to advance the pace of
agricultural mechanization through use of local re-
sources. Machines and tools were redesigned so that they
could be produced in small local plants. Among these
products are small pumps, one-man threshers, simple
harvesters, rice transplanters, and garden tractors. Some
counties reportedly have plants that produce more
complicated machinery such as water turbines, diesel
engines, and transformers.
Total output from the small agricultural machinery"
plants cannot be measured from available information.
Certainly, it is a useful supplement to the vigorous
support given agriculture by China's modern machinery
sector. The small plants play a major role in bringing
technology to the countryside. The Chinese have re-
ported that 96% of the counties now have their own
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Small farm machinery factories. An increasing number of
i:umrnunes and briqacles not only have their own
machinery repair shops but also are beginning to
ii oduce machines and farm tools.
tion of spare parts. The problem is especially serious
because locally produced equipment requires frequent
repair.
Many of the machines manufactured by small plants
.ire riot built from scratch, Some local facilities are
re imarily assembly plants, which purchase parts or
scavenge them from wornout machines. This is partic-
rilarly true of repair plants that are said to produce
retire machines. Examples are generators produced at
power equipment repair plants and trucks produced at
ar, to maintenance plants,
.A problem of particular difficulty has been the
es~rablishment of a proper balance between production
arrd repair, Plants with a dual role in manufacture and
repair have found their greatest profit in turning out new
rn,ichines and often neglect repair work :?nd the produc-
A hectic attempt to prod ice fertilizers from small
plants during the Leap Foiward was successful ii
producing only small tonnage, of useful output. Some
production of nitrogen tertilier was achieved by 1960
after a variety of plants wer developed and tested
Programs to produce crude frurms of fertilizer such as
ammonia water and crushed phosphate rock were largely
neftective.
The Chinese made an ir,nortant advance in the
small-scale production of cheri real fertilizer in 1964-65
with the development of a +andard plant rated at
3,000-5,000 tons of svi ,thetic ammonia and
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10,000-15,000 tons of fertilizer annually. The develop-
ment of the standard plant permitted an increase in the
proportion of nitrogen fertilizer produced by small
plants from 100X, of the national total (by weight) in
1964 to more than 50% in 1973. At present, China has
more than 1,00() small nitrogen fertilizer plants. The
following tabulation shows the production of nitrogen
fertilizer by small plants:
1957 .
1958
1959
1960 .
Negl.
0.68
0.68
Negl.
1.01
1.01
Negl.
1.36
1.36
0.17
1.55
1.72
1961
0.21
0.84
1.05
1962
0.06
1.45
1.51
1963
0.16
1.88
2.04
1964
0.24
2.12
2.36
1965
0.37
2.72
3.09
1966
0.50
3.10
3.60
1967
0.41
2.49
2.90
1968
0.69
3.61
4.30
1969
2.38
3.72
6.10
1970
3.31
4.39
7.70
1971
4.17
5.53
9.70
1972
6.12
5.88
12.00
1973
7.89
6.72
14.61
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Small phosphate fertilizer plants now number sev-
eral hundred with an annual output of more than 7.5
million tons-75% of national output by weight. In the
recent drive, the Chinese again built numerous tiny
plants producing a variety of fertilizer materials such as
ammonia water and bacterial fertilizers. These contrib-
ute only a minor portiion of total effective fertilizer
output.
About 60% of China's output of all varieties of
fertilizer, in terms of gross weight, is derived from small
plants. I n terms of effectiveness, the output of small
nitrogen fertilizer plants should be discounted by about
25% relative to that of large plants. Ammonium bicar-
bonate, the chief product of small nitrogen fertilizer
plants, is an inferior fertilizer that is not used much
outside of China. It decomposes easily; poor storage
facilities have contributed to unusually rapid decom-
position. By the time it is applied to the fields, it
probably contains only about 15% nitrogen. Nitrogen
fertilizers produced in China's modern plants have an
average nitrogen content of 20% or more. The product
from the small phosphate plants also is inferior to that
from large plants because it is not absorbed into the
soil as readily.
Attempts are being made to modify the small plants
to use local fuels so they will not compete with large
fertilizer plants for hard coal and coke. Recent orders
for 13 large nitrogen fertilizer plants from the West
indicate that large plants will overshadow small plants
even more by the end of the 1970s.
The standardized small fertilizer plants are equipped
mainly by large machinery plants. More than 400
factories of all sizes in Shanghai are making equipment
for small chemical fertilizer plants. According to the
Chinese press, in 1970-72 Shanghai provided "300 sets
of key equipment for these plants, including 25,000
pieces of machinery, motors with a total capacity of
several hundred thousand kilowatts, various kinds of
instruments and meters, and high- and middle-pressure
valves."
Small cement plants in China use stationary verti-
cal-shaft kilns, whereas large plants use rotary kilns.
Small plants range in capacity from several thousand
tons per year to a maximum of about 32,000 tons. The
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annual capacity of large plants goes as high as 900,000
tons.
The 32,000-ton small plants use 16,000-ton kilns of
a standard design developed by a central design institute
in the late 1950s. This type of small cement plant
requires grinders, crushers, and other machinery pro-
duced by provincial or central factories, machinery that
sometimes must be shipped over long distances at
considerable expense.
A second kind of small cement plant is the
"small-native-mass" type that proliferated during the
Leap Forward movement and following the Cultural
Revolution. These plants, which vary greatly in size and
quality of output, use improvised or hand-me-down
machinery; no machinery is obtained from central
sources.
Peking claims that output of small plants accounted
for 50% of cement production in 1973. This claim
appears reasonable. Estimated production from small
plants and modern plants is shown in the following
tabulation:
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969 .
1970
1971
1972
1973
Small Plants
Modern Plants
Total
1.0
6.9
7.9
1.4
9.3
10.7
1.7
10.6
12.3
3.0
9.0
12.0
1.9
6.0
7.9
1.5
5.6
7.1
2.4
6.9
9.4
2.2
9.0
11.2
4.0
11.2
15.2
4.5
12.9
17.4
3.7
11.0
14.6
4.2
11.3
15.5
6.1
13.0
19.1
6.4
13.3
19.7
9.2
13.8
23.0
13.6
14.8
28.4
15.4
15.4
30.8
Under the Leap Forward, hundreds of small cement
plants sprang up in rural areas, with output scheduled to
soar to 5 million tons in 1960. This target was not
reached. After the collapse of the Leap, these jerry-built
plants were shut down. Production was confined to
modern plants and small plants with comparatively
modern equipment. This program was not revived on a
massive scale until 1968-69, during the final phases of
the Cultural Revolution. Press reports in late 1972
maintained that there were about 2,400 small cement
plants in China, an increase of 600 from the 1,800 small
plants claimed in 1971.
Cement is a high-tonnage item. Localized produc-
tion helps reduce the burden on China's transport
system. Cement from small plants is suitable for most
rural construction purposes; the output of large modern
cement plants can be largely ticketed for advanced
industrial and military construction. Agricultural pro-
jects use 70% to 80% of the local cement. These projects
include simple bridges, small hydropower stations, grain
drying courts, granaries, water tanks, hog pens, houses,
telephone poles, and water conservation projects.
In some cases, standardized small cement plants
have been in use for over 10 years. The primitive
"native" plants are probably being phased out as the
number of standardized plants expands. Their product is
not worth the cost in fuel and raw materials.
In the 1950s the new Chinese government built
only large, modern powerplants, in the Soviet manner.
In the frenzy of the Great Leap Forward, the construc-
tion of numerous small power stations was undertaken;
by the end of 1960, China had 520,000 kilowatts (kw)
of rural hydropower capacity, compared with about
20,000 kw at the beginning of 1958. Most of the small
power stations were scrapped in the early 1960s, and by
1966 probably less than 200,000 kw remained in service.
Policy reverted to distributing power from the large
central stations into the rural areas. Large power
distribution systems were developed in such areas as the
Yangtze River delta, the Pearl River delta, and the
Tung-ting Lake area. Nonetheless, the task was so
enormous that only a fraction of China's rural area was
adequately supplied.
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After the Cultural Revolution, China again turned
to widespread installation of small generators in numer-
ous local powerplants. These plants, most of which are
hydro-powered, range in size from about 1 kw to about
1,000 kw, with an average size of about 30 kw.
By the end of 1973, 50,000 rural hydroelectric
plants had been built with a total capacity of about 1.5
million kw. Small steam and diesel powerplants also
number in the thousands; their capacity is at least as
great as that of rural hydroelectric plants. These latter
are often isolated stations, which provide power to a
single user such as mines or small factories. Local plants
probably provide nearly 15% of national electric power
capacity. Most of these plants are used only about
1,000-2,000 hours annually, compared to 4,000-6,000
hours for large modern plants. Thus, small plants
produce perhaps 5 billion kilowatt-hours, or about 5% of
national power output. Capacity of rural hydroelectric
plants is shown in the following tabulation:
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
Rural Hydro-
electric Plants
Modern
Powerplants
Total
0.02
4.5
4.5
0.13
6.2
6.3
0.40
9.1
9.5
0.52
10.4
10.9
0.4
11.3
11.7
0.3
11.8
12.1
0.2
12.4
12.6
0.2
12.8
13.0
0.2
13.5
13.7
0.2
17.3
17.5
0.2
19.6
19.8
0.2
20.6
20.8
0.3
23.7
24.0
0.6
25.0
25.6
1.0
25.3
26.3
1.4
26.0
27.4
1.5
27.3
28.8
About 80% of the electricity used on China's farms
is for irrigation and drainage. In South China, small
hydroelectric stations are an important source of power
for flooding the rice paddies. In North China, 1.2 million
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power-operated wells had been built by the end of 1973,
an(! many of these receive their power from small plants.
I he main source of power for major irrigation and
drainage systems-for example, in the deltas of the
Yarigtze and Pearl Rivers---are the large central stations.
Other important users of the power from small rural
electric stations are local industrial plants, radio diffu-
sion networks, and electric lighting, which the peasants
are permitted to install in meager amounts (bulbs of
10-15 watts are common).
1lie small powerplants are built largely with local
labor and construction materials. Sometimes, salvaged
generating equipment is used. The plants require little
copper for power transmission. The peasant can readily
understand their construction and operation. These
plants make use of power sources-especially small
streams.-that could not provide power in any other way;
in many instances, they represent a bonus use of dams
required for flood control and water conservation. On
the other hand, the small power stations are unreliable
and technically inefficient. Streams supplying small
hydroelectric plants are often inadequate during dry
spelis when energy for irrigation pumps is in greater
demand. Moreover, although first costs are low, outputs
are low too, and the investment cost per kilowatt is
about double that of large power stations. Thus their
justification rests on savings in transmission costs, the
low opportunity costs of resources used in their con-
stntetion, and the fillip they impart to the peasant's
acquaintance with modern technology.
Small coal mines administered by local units prob-
abiy number nearly 100,000. Production in 1973 is
estimated at 115 million tons, about 30% of total coal
production. A small mine is usually little more than a
small open pit, or a shaft, producing less than 1,000 tons
of coal a year. A few "small" mines may produce as
much as 100,000 tons annually. Many small mines are
run part time by production teams in the off season. The
following tabulation shows production from small
mini s:
Million Metric Tons
Small
Coal Mines
Modern
Coal Mines
Total
1957
36
95
131
1958
73
157
230
1959
100
200
300
1960
80
200
280
1961
50
120
170
1962
40
140
180
1963
40
150
190
1964
40
160
200
1965
45
175
220
1966
50
190
240
1967
45
145
190
1968
42
163
205
1969
57
201
258
1970
75
235
310
1971
85
250
335
1972
100
257
357
1973
115
263
378
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Small mines contributed more than one-third of the
astounding increase in coal production during the Leap
Forward, when output more than doubled, from about
130 million tons in 1957 to about 300 million tons in
1959. In 1962, most of the small pits were closed as part
of the general retrenchment in production. Small mines
used lavish amounts of rural labor, constituted in the
aggregate a substantial drain on equipment and supplies,
and often turned out a notoriously poor quality of coal.
The larger of the small mines continued to operate and
to be improved throughout the 1960s. In 1969-70 a new
drive was started to construct small mines. Many of the
mines opened in 1969-70 are being expanded and
improved, and output is increasing even though con-
struction of new small mines has waned in the last three
years.
Small mines have the advantage of low capital
requirements, speed of construction, and saving of
transport. For example, one mine is reported to have
started with "46 miners, a few shovels, and several dirt
baskets." Without any state aid, the workers at this mine
went on to make their own equipment and tools. The
mine now has 16 shafts and is said to produce 65,000
tons of coal annually.
Small mines usually take less than a year to design,
build, and put into operation. A large number of the
new small mines have been built south of the Yangtze
River where coal previously was shipped from North
China. Not all areas have coal deposits, and coal of
different types is needed for various industrial processes.
Thus some coal must still be shipped considerable
distances.
Household use, mostly for cooking, accounts for a
substantial portion of local coal. It effectively replaces
wood or grass in firing bricks, tile, and lime. Other local
industry, particularly cement and metallurgy, depends
on the output of small coal mines. A movement is now
under way to use local coal in small nitrogen fertilizer
plants. In May 1973, 300 small nitrogen fertilizer plants
had been renovated to use local coal and charcoal.
Small coal mines are inappropriate where the veins
are deeply imbedded or where underground water is a
major problem. Where deposits are shallow, the rate of
production often falls rapidly after two or three years as
easily accessible coal is exhausted. The mines must then
either be shut down or mechanical equipment must be
installed to continue operations to greater depths. As
more mechanical equipment is needed, capital and
operating costs tend to rise and small-scale mining is no
longer economically feasible. Cave-ins and accidents
occur frequently in small mines because of inadequate
pumping equipment, shortages of pitprops, poor venti-
lation, technical incompetence of workers and cadre,
and the shortcut style of operation.
Small iron and steel plants range from the 600,000
backyard furnaces* of the Leap Forward to fairly
modern units using basic oxygen mini-converters and
continuous casting machines. Nearly one-half of China's
pig iron and almost 30% of its steel were produced by
local plants in the peak year 1960. After a sharp cutback
in the post-leap period, small plants have made a
comeback since 1968; production in 1973 accounted for
20% and 15%, respectively, of total pig iron and steel
production. The following tabulation shows production
of pig iron and crude steel from small plants:
1957
1958
1959
1960
1961
1962
1963
1964
1965
1966
1967
1968
1969
1970
1971
1972
1973
Pig Iron Crude Steel
Small Modern Small Modem
Plants Plants Total Plants Plants Total
Negl.
5.9
5.9
Negl.
5.4
5.4
4.1
9.6
13.7
3.0
8.1
11.1
9.6
10.9
20.5
3.4
10.0
13.4
13.4
14.1
27.5
5.4
13.0
18.4
Negl.
9.0
9.0
Negl.
8.0
8.0
Negl.
9.0
9.0
Negl.
8.0
8.0
Negl.
10.0
10.0
Negl.
9.0
9.0
Negl.
11.0
11.0
Negl.
10.0
10.0
Negl.
12.5
12.5
Negl.
11.0
11.0
Negl.
14.5
14.5
Negl.
13.0
13.0
Negl.
12.0
12.0
Negi.
10.0
10.0
Negl.
14.0
14.0
Negl.
12.0
12.0
1.0
16.0
17.0
Negl.
15.0
15.0
3.6
15.9
19.5
2.5
15.5
18.0
4.6
19.4
24.0
3.0
18.0
21.0
6.0
21.0
27.0
3.5
19.5
23.0
6.0
23.0
29.0
3.9
22.1
26.0
* The backyard furnaces were quickly abandoned and are not
covered in the remaining discussion of small plant technology.
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The blast furnaces in small plants range in capacity
from a few thousand tons of pig iron up to 125,000 tons
annually. The typical small blast furnace, which has
primitive blowing equipment and skip hoists and low-
quality furnace linings, produces less than 10,000 tons
of pig iron per year.
Types of transport equipment produced in local
plants include trucks, bicycles, carts, and boats of
various kinds, including concrete boats. Some jurisdic-
tions report the production of ball bearings, mainly for
use in carts.and other simple equipment.
In the 1950s, local plants largely relied on side-
blown converters for steel making. They are small and
inexpensive and their frequent heats are especially suited
to small bar mills and to foundries making steel castings.
The high nitrogen content of steel produced in convert-
ers causes it to be more brittle and less easily worked
than open hearth steel. Converters also have difficulty
removing impurities such as sulfur and phosphorus,
which are common in pig iron from small native blast
furnaces. Some of the early local plants had electric
furnaces as well as converters. Today, side-blown con-
verters and electric furnaces are still in use, but, in
addition, some 40 converters similar in operation to the
modern basic oxygen furnace have been installed.
At least two of the new small steel plants have
installed continuous casting equipment to supply billets
for the finishing mills, thus eliminating the need for
ingot casting and soaking and for blooming mills. Most
plants use extremely simple finishing equipment to
produce small bars, sheets, light rails, wire, and tubes.
The steel produced by small plants is used, mainly
for local construction and for production of farm tools.
More complex machinery, including some agricultural
machinery, requires higher grade steels than those
ordinarily produced in small plants. Small plant output
allows large steel plants to devote most of their activity
to support of modern industry, transportation, and
construction.
Small steel plants face severe problems of quality
control. Much of the iron ore used is produced locally
and varies widely in grade. Attempts to use local coal as
a substitute for coking coal have not been fruitful, so
coking coal often must be transported from distant
points and the small plants must compete with large
plants for tight coking coal supplies. Equipment limit-
ations add to the difficulty of producing a product of
uniform quality with a small percentage of impurities.
The products made of steel from the small plants tend to
wear out more quickly and to be bulkier and heavier
than those made of steel from large plants.
Most of the small truck plants produce only a few
trucks each year, and many are motor vehicle repair
shops or parts producers. The trucks apparently are used
locally in the province or in an area near the plant.
Since the Cultural Revolution, attempts have been
made to establish small-scale electronics production
facilities at the local level. At least 1,000 of these plants
have been established throughout the country. Local
electronics plants, both in urban and rural areas, may
now account for about 5% of total national electronics
output.
Two types of small production facilities are in-
volved-urban plants employing as many as 500 em-
ployees and rural plants usually employing fewer than
50 persons. The urban plants normally are associated
with major electronics plants and receive production
equipment as well as technical assistance from the major
plants. The function of the urban plants is to supply the
parent plant with materials such as monocrystalline
silicon and germanium and with components. Occa-
sionally, small urban plants produce finished products
for local and state consumption. Rural plants, in
contrast, often fabricate their own production equip-
ment and usually produce simple products such as
resistors, capacitors, and radios for local consumption.
Their products meet lower specifications than the
products of the urban local plants.
The program has had some success in expanding
electronic products to both urban and rural consumers.
In 1973, at least 150 small plants produced transistor
radios for local sale. Moreover, the urban plants have
become important sources of input materials and prod-
ucts for major electronics plants. At the same time, the
program is plagued with problems of non-standardized
products, wasted raw materials, and shortages of skilled
labor.
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 Approved For Release 2000/05/11 : CIA-RDP79-00928A000100060001-8
The expansion of light industry is considered an
essential ingredient in the drive for self-sufficiency.
Traditionally, substantial amounts of China's sugar,
flour, and paper have been produced in small plants.
Most traditional handicraft products such as art goods,
metal ware, and pottery, as well as "items of everyday
use", such as thermos jugs, flashlights, and batteries are
produced in small shops. Also much of home produc-
tion-sewing, tanning, straw weaving, carpel: weaving,
shoe making, and the like-has been incorporated into
the local small plant system, a natural development of
increased specialization.
For the purposes of this report, these light indus-
tries are not part of the "small plants program" because
they do not share with the industries described above
the deliberate massive infusion of new technology into
the countryside.
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