THE DEVELOPMENT OF THE MACHINE-BUILDING INDUSTRY IN COMMUNIST CHINA 1949-62

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• Document Page Count: 131
• Document Creation Date: December 23, 2016
• Document Release Date: June 4, 2013
• Sequence Number: 1
• Publication Date: April 1, 1960
• Content Type: REPORT

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SECRET
ECONOMIC INTELLIGENCE REPORT
N? 87
THE DEVELOPMENT OF THE MACHINE-BUILDING INDUSTRY
IN COMMUNIST CHINA
1949-62
CIA/RR ER 60-8
April 1960
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
SECRET
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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.
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SECRET
ECONOMIC INTELLIGENCE REPORT
THE DEVELPPMENT OF THE MACHINE-BUILDING INDUSTRY
IN COMMUNIST CHINA
1949-62
CIA/RR ER 60-8
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
SECRET
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FOREWORD
This report examines the development of the machine-building in-
dustry of Communist China, with particular attention to the period of
the First Five Year Plan (1953-57). The report reviews allocations
of investment, growth of production, expansion of the product mix,
and effects of the application of Soviet industrial experience. In
connection with the application of Soviet experience; the report draws
attention to the manner in which Communist economic decisions have
been affected by political ideology.
The analysis of the difficulties of applying a highly capital-
intensive technology to a country suffering from chronic overpopula-
tion sheds light on the Soviet claim that Soviet industrial experience
can be exported anywhere. The analysis is suggestive of certain cau-
tions for underdeveloped countries of Free Asia that also suffer from
overpopulation.
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CONTENTS
Page
Summary and Conclusions 1
I. Investment 4
A. Priorities 4
1. Basic Aims 4
2. Leading Role for the Machine-Building
Industry 4
3. Specific Tasks 5
B. Capital Investment 6
1. Estimated Investment in the Machine-Building
Industry
6
a. Period of Restoration (1950-52)
6
b. First Five Year Plan (1953-57)
6
2. Allocation of Investment, by Ministry
6
3. Allocation of Investment, by Type of Product . .
7
4. Allocation of Investment to Equipment and
Construction
8
C.
Growth of Fixed Assets
9
D.
Loans for Industrial Projects
12
E.
Problems of Investment
12
1. Misallocation of Investment
12
2. Excessive Cost of Investment
13
3. Failure to Seek Quick Returns on Investments
15
II.
Production
16
A.
Machine-Building Industry in 1949
16
1. China Proper
16
2. Manchuria
17
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B.
C.
Plants
1.. Number
2. Description
Reliance on Technical Aid from the Soviet Bloc
.
.
Page
17
17
18
20
1. Period of Restoration (1950-52)
21
2. First Five Year Plan (1953-57)
22
D.
Location
24
1. Development of Industries in the Interior .
?
?
24
2. Economic Regions
26
a. Northeast China (Region I)
26
b. North China (Region III)
27
c. East China (Region IV)
28
d. Central China (Region V)
29
e. Southwest China (Region VII)
29
f. Northwest China (Region VIII)
29
g. South China (Region VI)
30
h. Other Regions
30
E.
Value of Production
30
1. Total Industry
30
2. Machine-Building Industry
31
F.
Volume and Types of Production
31
1. General
31
2. Machine Tools
32
3. Electrical Equipment
33
4. Other Power-Producing Equipment
36
5. Agricultural Machinery
36
6. Tractors
38
7. Automotive Transport Equipment
38
8. Railroad Transport Equipment
40
9. Metallurgical Equipment
41
10. Mining Machinery
42
11. Oilfield and Exploratory Equipment
42
12. Textile Machinery
43
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G. Labor Force and Productivity
H. Problems of Production
Page
43
44
1. Underutilization of Capacity -- Symptoms
and Causes 44
2. Shortages of Raw Materials 45
3. Limitations in Capacity to Absorb Domestically
Produced Machinery 49
a. Limitations in Product Mix 50
b. Low Priority for Agriculture and Light
Industry 50
Excessive Use of Foreign Equipment 51
4. Limited Capability for Independent Designing 52
5. Shortage of Skilled Labor 53
6. Low Quality 54
III. Evaluation of the Machine-Building Industry
(1953-57)
55
A. Progress Toward Chosen Objectives 55
B. Detrimental Effects of the Pattern of Development 55
C. Applicability of Soviet Technology 57
D. Implications of Chinese Experience for Communist
Economic Theory 61
IV. Development Under the Second Five Year Plan (1958-62) 63
A. Foreign Economic Assistance and Its Implications . 63
B. Restoration of Balanced Growth 65
1. New Attitude Toward Balanced Growth 65
2. Changed Approach to Self-Sufficiency 67
3. Program for Small- and Medium-Size Plants . . 68
4. Decentralization 70
5. Emphasis on Better Adaptation of Foreign
Experience 71
6. Slowdown in Regional Dispersion 73
7. 'Policy on Consumption of Fuel 73
8. Substitutes for Scarce Materials 74
9. Fuller Use of Production Capacity 75
10. Diversification of Production 76
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Page
C. Impact of Policy Shifts on the Machine-Building
Industry 76
V. Foreign Economic Relations 80
A. Foreign Trade 80
1. Value 80
2. Composition 81
3. Increase of Exports of Machinery ? ? ? 81
B. Self-Sufficiency 82
1. Achievements and Prospects 82
2. Restrictions on Imports of Foreign Capital
Equipment 82
Appendix A.
Appendix B.
Appendix C.
Appendix D.
Appendixes
Definition of the Machine-Building Industry of
Communist China
Statistical Tables 87
Ministerial Organization of the Machine-
Building Industry of Communist China 113
85
Methodology for Estimating Total Investment
in Capital Construction for Machine Building
Under the First Five Year Plan (1953-57).
of Communist China
115
Tables
1. Additions to Capacity for Annual Production by the
Machine-Building Industry of Communist China,
1953-57
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2. Number of Industrial and Machine-Building Projects
in Communist China Performed with Aid from the
Soviet Bloc, 1950-58 19
3. Fixed Assets per Production Worker in the Metal-
Processing Sector of the Machine-Building Industry
of Communist China, 1952-56 21'
4. Increase in Rated Capacity of Electrical Equipment
Produced in Communist China, 1952 and 1955-59 35
5. Indexes of Production by Selected Industries of Com-
munist China, 1952-57 47
6. Principal Construction Projects to Be Undertaken
by the Machine-Building Industry of Communist China
to Support Growth of Various Industries and Sectors
Under the First Five Year Plan, 1953-57
88
7. Investment in Capital Construction in the Machine-
Building Industry of Communist China, 1950-58 90
8. Investment in Production Enterprises in Communist China,
in Percentages of Total Investment, 1953-56 91
9. Investment in Newly Constructed Machinery and Equipment
Manufacturing Plants in Communist China, by Type of
Commodity, 1953-56
92
10. Growth of Fixed Assets of the Machine-Building Industry
of Communist China, 1952-58 93
11. Location of Production of Selected Types of Machinery
and Total Production by the Metal-Processing Sector
of Communist China, in Percentages, 1955
12. Location of Major Machine-Building Plants in Communist
China, by Economic Region, January 1950 - January
1958
13. Growth of the Gross Value of Production by the Machine-
Building and Metal-Processing Industries in Communist
China, 1949-57
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Page
14. Estimated Production of Selected Commodities by the
Machine-Building Industry of Communist China,
1947 and 1949-58 97
15. Production of Selected Commodities in Communist China
Compared with That in Other Countries, 1957 99
16. Production of Selected Commodities in Communist China
in 1957 and in the USSR in 1932 100
17. Comparison of Technical Capabilities of Selected
Machinery Produced in Communist China, the USSR,
and the US 101
18. Industrial Labor Force of Communist China, 1949, 1952,
and 1955-58 102
19. Productivity per Worker in the Metal-Processing Sector
of Communist China, 1949, 1952, and 1955-56 103
20. Park of Agricultural Equipment in Communist China,
1953-59 104
21. Sources of Imports of Machinery and Equipment by
Communist China, 1957 105
22. Imports of Machinery arid Equipment by Communist China,
1950 and 1952-57 106
23. Imports of Machinery and Equipment by Communist China,
in Percentages, 1950, 1952-53, and 1955-57 111
24. Estimated Self-Sufficiency in Selected Producer Goods
in Communist China, 1957-58, 1962, and 1967 112
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Illustrations
Following Page
Figure 1. Communist China: Indexes of Changes
for Selected Functions in .the Metal-
Processing Sector, 1952-57 (Chart) . 6
Figure 2. Communist China: Machining of Cylin-
der Blocks by Automatic Transfer
Machines in the Ch'ang-ch'un Auto-
mobile Plant No. I (Photograph) . . 20
Figure 3 Communist China: Machining of Trans-
mission Parts by Multiple-Spindle
Vertical Semiautomatic Lathes in the
Ch'ang-ch'un Automobile Plant No. 1
(Photograph)
Figure 4. Communist China: Mechanized Handling
Equipment in the Chiang-ch'un Auto-
mobile Plant No. 1 (Photograph) . .
?
Figure 5. Communist China: Mechanized Carrying
Line in Foundry Operations in the
Ch'ang-ch'un Automobile Plant No. 1
(Photograph)
Figure 6. Communist China: Ministerial Organiza-
tion of Machine Building, 1950-59
(Chart)
Communist China: Economic Regions
(Map)
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THE DEVELOPMENT OF THE MACHINE-BUILDING INDUSTRY IN COMMUNIST CHINA*
1949-62
Summary and Conclusions
The machine-building industry** of Communist China made impressive
advances under the First Five Year Plan (1953-57). With the help of
the USSR, and to a much lesser extent the European Satellites, new
industries have been established so that Communist China can now pro-
duce some large-scale precision machine tools, simple equipment for
mining and metallurgical processing, electrical equipment for medium-
size power stations, trucks, aircraft, and large locomotives. The
total gross value of production by the machinery and equipment manu-
facturing sector increased at an average annual rate of about 34 per-
cent in 1953-57, almost double the rate of growth for industry as a
whole. Rates of growth in machinery and equipment manufacturing were
extremely uneven, however, reaching a peak of 90 percent in 1956 and
falling to about 4 percent in 1957. In fact, the machine-building
industry expanded at such a rapid pace that by 1957 it had outstripped
production of raw materials and power, thus necessitating cutbacks in
production and underutilization of capacity in many branches of the
industry. In 1957 the metal-processing sector of the machine-building
industry accounted for about 16 percent of the total gross value of
Chinese industrial production and about 3 to 4 percent of gross na-
tional product in terms of value added. Nevertheless, China remains
significantly dependent on foreign sources for machinery and equipment
to support the growth of heavy industry.
Under the First Five Year Plan, approximately .7.2 billion yuan***
were invested in the machine-building enterprises of Communist China.
This amount is about 26 percent of estimated total investment in
* The estimates and conclusions in this report represent the best
judgment of this Office as of 1 February 1960.
** For a definition of the machine-building industry and its sub-
categories, see Appendix A.
*** Unless otherwise indicated, yuan values are given in current
yuan, ruble values in current rubles, and dollar values in current
US dollars throughout this report. Yuan values may be converted to
US dollars at the standard rate of exchange of 2.46 yuan to US $1,
which is not necessarily an accurate reflection of the dollar value,
and ruble values may be converted to US dollars at the official rate
of exchange of 4 rubles to US $1, which probably represents a sub-
stantial overvaluation of the ruble.
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capital construction for industry and is the largest allocation of
investment to any single branch of industry. Investment was very
uneven during the period, with severe cuts occurring in early 1957,
when many plants were made idle by shortages of raw materials. Some-
what less than 3.8 billion yuan are believed to have been invested in
plants producing military hardware and civilian goods with military
applications under the former Second Ministry of Machine Building.
Of the 7.2 billion yuan allocated to capital investment, additions
to fixed assets absorbed slightly more than 6.0 billion yuan. A
total of 89 machine-building projects were undertaken during 1950-57,
of which 47 projects were completed by the end of 1957. Projects
performed with aid from the Soviet Bloc accounted for the largest and
most outstanding plants in the industry. Although some new plants
have been dispersed in the interior, one-half of the Chinese capacity
for producing machinery is concentrated in the northeast.
At the outset of the First Five Year Plan the Chinese Communists
placed faith in the broad application of Soviet industrial experience
and technology to their own economic conditions. As a result, the
growth of the Chinese machine-building industry was closely patterned
after that of its Soviet counterpart. Toward the end of the plan
period, however, it became apparent to the Chinese that a number of
objectives toward which the industry was progressing were unsuitable
for Chinese economic conditions and that the manner in which the pro-
gram of industrialization was being carried out under Soviet guide-
lines had certain detrimental effects on economic growth, stemming
largely from the failure to take maximum advantage of the abundant
manpower in Communist China. Development had been unbalanced, waste-
ful, and costly, although any program for the development of an in-
dustrial base carried out on such a large scale and with such haste
was almost inevitably bound to incur high costs. Therefore, the
Peking regime was forced to reappraise the relevance and applica-
bility of Soviet experience to China. Accordingly, in 1958, drastic
readjustments of priorities for production and investment were made
to support lagging agricultural growth, and technological policy was
revamped to harmonize with the superabundance of labor in China.
-Except, perhaps, in mechanization of agriculture the Chinese depar-
tures from Soviet experience do not imply abandonment of such funda-
mental objectives of a Communist regime as preferential development
of heavy industry, but rather a choice of different means to the same
end. Having an economy poor in capital with an oversupply of labor,
the Chinese Communists were forced to find new approaches to (1) opti-
mum allocation 'of the factors of production, particularly labor;
(2) the choice of the best technology in the short run; and (3) conse-
quent differences in vertical and horizontal integration of plants
and production processes.
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Under the Second Five Year Plan (1958-62), more emphasis will
be given to supporting agricultural growth through the programs for
irrigation and chemical fertilization. Large-scale mechanization to
solve the problem of increasing agricultural production has been re-
jected as economically unsound because of chronic overpopulation.
More investment is required in the raw materials and fuels industries
to insure adequate quantities and variety of special steels and sup-
plies of electric power to the machine-building industry. Any slow-
down in the expansion of the industry that might be caused by bottle-
necks in raw materials, however, would be temporary. The Peking
regime is deeply committed to base future economic development in-
creasingly on the foundation of its own machine-building industry,
and this foundation, generally speaking, is still weak. Large in-
vestments must be made to correct present deficiencies in heavy ma-
chinery, precision machine tools, and instruments.
Machinery and equipment constituted between 4o and 60 percent of
all imports into Communist China under the First Five Year Plan
(1953-57). In 1957, China imported nearly $580 million worth of
capital equipment, almost one-half of which was supplied by the USSR.
The contribution of the USSR to imports of machinery by Communist
China has decreased somewhat in recent years, whereas that of the
Free World has increased. Communist China can now supply about 60 per-
cent of its requirements for machinery and will attempt to attain self-
sufficiency of from 70 to 80 percent during the Second Five Year Plan,
in bpite of a limited capacity for producing complete sets of equip-
ment. Imports of machinery will be restricted to the maximum extent
consistent with rapid growth. So far, Chinese Communist exports of
selected items of machinery have been insignificant and apparently
politically inspired. A slight increase in exports of machinery by
1962 is anticipated.
Communist China continues to depend on foreign sources for special-
ized equipment, heavy and precision machine tools, measuring instru-
ments, and some other types of .equipment. Although steps have been
taken to reduce the role of advisers and technicians from the Soviet
Bloc, their influence will probably remain strong in electronics,
synthetic fibers, metal-forming machinery, and heavy machinery. The
dependence of Communist China on the USSR during the formative stages
of its industrial development will have long-run effects because of
the need for replacement of equipment and for compatibility of design
and because of the genera' technical orientation toward the USSR,
particularly on the part of recently trained Chinese engineers. At
the same time, these engineers will be expected to adjust their tech-
nical standards and specifications to Chinese capacity for production
and to take account of the pressing need to utilize abundant manpower.
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I. Investment
A. Priorities
1. Basic Aims
The general aims of the First Five Year Plan (1953-57)
of Communist China were very similar to those of the USSR: increased
national power, rapid growth, economic independence, and the elimina-
tion of capitalistic elements in society. Priority was given to the
development of heavy industry, whereas relatively little attention
was given to the investment needs of light industry and agriculture.
These sectors were looked on primarily as sources of capital accumu-
lation for the further expansion of heavy industry.
Some of these aims had the following direct implications
for the development of the machine-building industry: the supplying
of military hardware to enhance the military power of the state, the
attainment of self-sufficiency at a rapid rate, and the transforma-
tion to socialized agriculture through large-scale mechanization.
In the USSR, however, investment priorities had not been firmly fixed
but were altered rather flexibly as disproportions in growth developed.
The necessity for such shifts reflected in part internal contradic-
tions in the basic aims. For example, the emphasis on military power
and self-sufficiency was not entirely consistent with the goal of
maximum growth.
Although the USSR employed a variety of means to achieve
its objectives, the Chinese Communists clearly assumed that the means
and the technology employed by the USSR were directly applicable to -
their program for industrializing the backward and overpopulated areas
of China. Moreover, after 1950 the Soviet approach to economic develop-
ment was inculcated through intensive indoctrination of Chinese
cadres. 1/* The Peking regime was particularly anxious for indus-
trialization to bring about a change in. the class structure of Chinese
society.. Industrialization was thought necessary to achieve two
aims: the enlargement and collectivization of farms and the trans-
fer of rural population to cities, where the people could be more
easily managed. E/
2. Leading Role for the Machine-Building Industry
Communist theory assigns great importance to the active
development of machine building at the initial stages of economic
development. According to Stalin, "The core of industrialization,
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its foundation, lies in the development of heavy industry ... or, in
the final analysis, in the development of industry which creates the
means of production -- in the development of its own machine build-
ing." 3/ This attitude was echoed by the Chinese Communists, who
asserted that the industrialization of China could not be effected
without an independent and integrated machine-building industry.
3. Specific Tasks
To achieve its basic mission, certain broad tasks were
assigned to the machine-building industry of Communist China. These
tasks included the following:
a. To supply equipment for industrial projects. Al-
though the USSR was to supply 50 to 70 percent of the equipment for
the construction projects that were to receive Soviet aid, which were
the core of the plan, the remainder of the equipment was to be pro-
duced domestically. Other projects were to depend more on domestic
sources of equipment. 4/
b. To increase military strength. In order to
establish a modern army, navy, and air force, industries for pro-
ducing armored vehicles, aircraft, and ships needed to be developed.
Previously, Chinese arsenals could produce only small arms and muni-
tions and not planes or armored vehicles. The First Five Year Plan
called for the establishment of automobile plants and shipyards as
well as aircraft plants.
c. To provide a material basis for the collecti-
vization of agriculture. It was planned that by the end of 1957
there would be more than 3 million cooperative farms under unified
management. The cooperative farms could not be consolidated, it
was believed, without the benefit of tractors and modern agricultural
machinery. 5/ It was reported that in 10 years the production of
Tractor Manufacturing Plant No. 1 at Lo-yang, which is designed to
produce 15,000 tractors -- of 54 horsepower (hp) -- annually, could
mechanize one-third of the farmland of Communist China.
To carry out these tasks the plan called for the con-
struction of new plants to produce machinery and equipment for metal-
lurgy, power, mining, transportation, and agriculture. There was
also to be some investment in the development of facilities to pro-
duce equipment for the petroleum-refining and chemical industries.*
* For the principal projects that were to be undertaken by the machine-
building industry to support growth in various industries and sectors,
as outlined in the plan, see Table 6, Appendix B, p. 88, below.
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B. Capital Investment*
1. Estimated Investment in the Machine-Building Industry
a. Period of Restoration (1950-52)
During the period of restoration the total industrial
investment in capital construction in Communist China amounted to
about 2.6 billion yuan,** of which about 14 percent was allocated to
the metal-processing sector. Most of this amount was spent for re-
equipping old plants, and very few new projects were undertaken.
During 1950-52, complete plants constituted a minor portion of the
total imports of machinery and equipment from the USSR.***
b. First Five Year Plan (1953-57)
Investment in the machine-building industry under
the First Five Year Plan is estimated at 7.2 billion yuan, which
was 4 percent more than the 6.93 billion yuan originally planned.
Investment in machine building drew 26 percent of the total invest-
ment in industrial capital construction, the largest share of any
branch of industry.
Investment in the nonmilitary sectors of the machine-
building industry rose steadily through 1956 but declined by 30 to
35 percent in 1957 compared with 1956. (See Figure 1.****) This
cutback was due to the fact that in 1957 the machine-building indus-
try was unable to operate at capacity because of serious shortages of
raw materials.t Consequently, it was decided to give more emphasis in
1957 to investment in the coal, power, and metallurgical industries. 7/
2. Allocation of Investment, by Ministrytt
Of the 7.2 billion yuan invested in the machine-building
industry under the First Five Year Plan, about 3.4 billion yuan, or
47 percent, were allocated to the metal-processing sector and 3.8 bil-
lion yuan, or 53 percent, were allocated to production of military
goods. These categories correspond roughly to the First Ministry of
All investment figures are given in current prices throughout
this report.
** See Table 7, Appendix B, p. 90, below.
*** See Table 23, Appendix B, p. 111, below.
**** Following p. 6.
t See II, H, 2, p. 45, below.
tt For a discussion of the ministerial organization of the machine-
building industry, see Appendix C.
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Figure 1
Communist China: Indexes of Changes for Selected
Functions in the Metal-Processing Sector, 1952-57
1952 = 100
300
Value of
Production
200
Investment
Fixed Assets
????
00?
Fixed Assets
per Worker
00'
1952
28370 2-60
1953
1954
1955
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1956
Produrtivity
per Worker
1957
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Machine Building, including electrical equipment, and the Second and
Third Ministries of Machine Building as these ministries were con-
stituted in 1957.
Lack of specific data does not permit separate estimates
for the Second and Third Ministries of Machine Building. Throughout
the First Five Year Plan, however, the Second Ministry was responsible
for production of weapons and ammunition and probably received the
major portion of investment in the military sector. Some of the
plants affiliated with the Second Ministry, although engaged in pro-
ducing equipment closely connected with military production, did
actually produce for civilian use such goods as telecommunications
equipment and light bulbs. Moreover, production of civilian as well
as military aircraft came under the Second Ministry.*
Of the total investment by the First Ministry of Machine
Building and the Ministry of the Power Equipmnt Industry in facili-
ties for production during 1953-56, 91 percent was allocated to above-
norm projects** and 77 percent to newly constructed enterprises.***
Relatively little investment in existing facilities was undertaken
after 1953.
3. Allocation of Investment, by Type of Product
The largest allocations of Chinese Communist investment
in the metal-processing sector during 1953-56 went to communications
and transportation equipment, electric power equipment, machine tools,
and measuring and cutting tools.**** Construction or reconstruction
of 19 machine tool plants, 32 electrical equipment plants, 11 loco-
motive and rolling stock plants, and 12 automotive transport equipment
plants was undertaken or completed during the period January 1950 -
January 1958. Most of these plants were actually constructed during
1953-57.
Moderate amounts were allocated for investment in trac-
tors, agricultural machinery, power-producing equipment (excluding
electrical equipment), and other branches.
See Appendix A.
** The term above-norm project as used in the machine-building
industry of Communist China refers to a project requiring an invest-
ment ranging from more than 5 million yuan, such as machine tool
plants, to more than 10 million yuan, such as shipbuilding, tractor,
and locomotive plants.
*** See Table 8, Appendix B, p. 91, below.
**** For investment in various types of machine building during
1953-56, see Table 9, Appendix B, p. 92, below.
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Compared with the ambitious programs for construction
carried out in those branches of the machine-building industry pro-
ducing machine tools, electrical equipment, and transportation equip-
ment, the branches producing heavy machinery (metallurgical, mining,
and oil-drilling equipment) and chemical equipment received a rela-
tively small share of the funds for investment. Under the First Five
Year Plan, however, some investment was allocated to heavy machinery
and chemical equipment plants that would come into operation in a later
period. Among these plants are the T'ai-yuan Heavy Machinery Plant,
the Fu-la-erh-chi Heavy Machinery Plant, and the Lan-chou Petroleum
and Chemical Machinery and Equipment Plant. It is probable that in-
vestment in the heavy machinery branch was accelerated in 1957, when
the equipping of some of these plants began, and that the amount of
investment that is allocated to the heavy machinery and chemical
equipment branches will be substantial until these plants are fully
equipped, probably by the end of 1960.
During 1952-56 a total of 66.55 million yuan was in-
vested in textile machinery plants under the Ministry of the Textile
Industry. !CI
4. Allocation of Investment to Equipment and Construction*
In general, the Chinese Communist practice is to expend
approximately 40 percent of the capital investment in a machine-
building plant for machinery and equipment and approximately 60 per-
cent for plant construction. 12/ This distribution of investment to
equipment and construction corresponds generally to Soviet practice.
In the USSR, approximately 60 percent of the total capital investment
is expended for construction, 30 percent for machinery and equipment,
and 10 percent for instruments, supplies, and other minor items. There
are, of course, certain variations in these proportions, depending on
the type of project and when it was constructed.** Statistics for
the allocation of investment to equipment and construction for a com-
parable group of US industries are not available. Nevertheless, the
allocation of investment to equipment and construction for certain
manufacturing industries in the US is roughly similar to the Chinese
and Soviet allocations. *
*** In 1956 the allocation of investment for the equipment and con-
struction of new enterprises in the US was as follows 12/:
Percent
Branch
Machinery, except electrical
Electrical machinery
Transportation equipment
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Equipment Construction
23.3 76.7
41.6 58.4
51.8 48.2
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C. Growth of Fixed Assets
Of the 7.2 billion yuan invested in capital construction in
the machine-building industry of Communist China, additions to fixed
assets absorbed about 84 percent, or slightly more than 6.0 billion
yuan in 1952-57.* Because of greater investment the growth of fixed
assets in production by the military goods sector is estimated to
have exceeded the growth of fixed assets in production by the metal-
processing sector, but precise figures are not available.
At the end of 1958 the fixed assets of the metal-processing
sector amounted to 6.5 billion yuan, of which about 20 percent were
nonproductive fixed assets.** About 42 percent of the fixed assets
of the metal-processing sector belonged in 1957 to nonelectrical
enterprises of the First Ministry of Machine Building.
Corresponding to the increase in the value of fixed assets
was a considerable increase in the amount of installed production
equipment. During 1952-56 the number of metal-cutting machine tools
in the metal-processing sector increased from 80,000 to 157,000. 151
In addition, there were rather impressive gains in newly added capac-
ity for production in operation, particularly during 1956-57, as can
be seen from Table 1.***
* See Table 10, Appendix B, p. 93, below. Investment in capital
construction becomes an addition to fixed assets when the plant in
which the investment is made goes into operation. In any one year,
therefore, many investments in capital construction are made that do
not become additions to fixed assets until a later year. In an in-
dustry that is expanding as rapidly as the machine-building industry
of Communist China, there is a tendency for investment, in capital con-
struction in a relatively short period to be greatly in excess of
additions to fixed assets.
** The term productive investment as defined by the Chinese Com-
munists and as used in this report refers to investment allocated to
the construction of plant buildings and machinery and equipment for
the purpose of production; to railroads, highways, seaports and
wharves, and other means of transport; and to warehouses for commercial
and financial enterprises. The term nonproductive investment (or
investment in consumer construction) refers to investment allocated
to construction for such material and cultural needs of the popula-
tion as housing, schools, hospitals, cinemas and theaters, nurseries,
clubs, dining halls, and public office buildings. 211-/
*** Table 1 follows on p. 10. (Text continued on p. 12.)
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Table 1
Additions to Capacity for Annual Production by the Machine-Building Industry
of Communist China 2/*
1953-57
Additional Annual
Capacity /
Period and Commodity Unit in Operation 12V
1953-56
Metal-cutting machine tools
Turbogenerators
Number 4,270
Tons si 20,079
Steam Kilowatts 240,000
Hydraulic Kilowatts 204,000
Turbines
Steam Kilowatts 276,000
Hydraulic Kilowatts 204,000
Boilers Tons 6,050
Steam output in tons
per hour 45,218
Trucks Number 30,000 1/
* Footnotes for Table 1 follow on p. 11.
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Table 1
'Additions to Capacity for Annual Production by the Machine-Building Industry
of Communist China 21
1953-57
(Continued)
Period and Commodity
1953-57
Metal-cutting machine tools
Turbogenerators 11
Electric cable and wire
Electric motors
Switchgears f/
Transformers
Precision meters
Unit
Number
Kilowatts
Tons
Kilowatts
Number
Kilovolt-amperes
Number
Additional Annual
Capacity /
in Operation 12/
8,704
540,000
12,000
350,000
8,000
390,000
1,035,000
b. At end of period.
c. Tonnages are given in metric tons throughout this table.
d. For a discussion of estimated capacity in the motor vehicle
below.
e. This estimate overlaps the data given for 1953-56.
f. This estimate overlaps the one given for 1953-56 and should be compared with the
combined production of turbogenerators listed separately for that period.
g. Including both high-voltage and low-voltage types of switchgear.
industry, see II, F,
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D. Loans for Industrial Projects
Soviet assistance to industrial construction projects has
been one of the most significant factors in the rapid industrializa-
tion of Communist China since 1949.* This assistance has taken the
form of two economic credits totaling 1.72 billion rubles, against
which the Chinese Communists have drawn to help pay for imports from
the USSR. These imports include equipment for the construction of
the 166 major projects that the USSR promised to help China construct.
The equipment, which the USSR agreed to deliver during 1949-62, is
valued at 8.1 billion rubles, including all the technical assistance
involved. 12/
Assistance from the European Satellites for construction pro-
jects in Communist China has not been given in the form of loans but
has been financed out of current trade. Each of the Satellites has
established a special ministry within its administrative structure
that handles trade involving complete installations or projects.
This trade has been quite distinct from incidental trade in machinery,
which in some cases has been quite extensive. As of early 1958 the
Satellites had furnished China with about 27 complete installations.**
The estimated cost of these complete installations is about US $1 bil-
lion, of which about 4o percent represents plant equipment.
E. Problems of Investment
1. Misallocation of Investment
.
As previously noted, the Chinese Communists apparently
assumed that the Soviet experience in development would suit their
conditions. This assumption proved to be wrong in many cases, and,
as a result of having followed Soviet precedents closely, much of the
development of the Chinese machine-building industry was misdirected.
One of the most notable mistakes that resulted from the indiscriminate
application of Soviet experience was the costly failure of the pro-
gram for the large-scale mechanization of Chinese agriculture. Of the
Chinese investment in new machinery plants, the Peking regime spent
at least 6 percent to build plants for producing tractors and heavy
implements until, when the plants were nearly completed, it was dis-
covered that such tractors and implements were almost entirely unsuit-
able to Chinese conditions. The tractors were very expensive to build,
consumed large quantities of scarce steel materials, and required an
advanced productive technique. Moreover, this machinery would strain
the limited Chinese facilities for production of oil and would displace
For a discussion of industrial projects, see II, B, p. 17, below.
** ?See Table 2, p. 19, below.
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farm workers who could not be absorbed in other sectors of the econ-
omy. 221/ Agricultural machines were produced in large numbers in
1956, but many of them, such as double-wheel, double-share ploughs,
lay idle because they were not suited to Chinese conditions.
Moreover, Chinese Communist investments in the machine-
building industry were too widely diffused. This diffusion is ex-
plained at least in part by the fact that the regime followed Soviet
experience too closely in pursuing the aim of self-sufficiency.
Chinese leaders became imbued with the intense Soviet zeal for eco-
nomic independence from the West and regarded dependence on imports
of capital goods from capitalist countries as a fundamental struc-
tural weakness in their economy that had to be eradicated as soon as
possible. Particularly under the impetus of the Korean conflict, the
Chinese were impressed by the need for rapid improvement in the in-
dustrial support for national defense and emphasized a broad approach
to the development of the machine-building industry. As a result,
they dispersed their investments in an attempt to create simultaneously
a number of new branches of machine building instead of concentrating
on certain branches the development of which would have contributed
most to a balanced economic growth. Such action led to further
autarky in the industrial growth of the Sino-Soviet Bloc. In this
respect, Chinese mistakes in planning tended to follow the pattern
of a number of the European Satellites during the early 1950's. The
law of comparative advantage and specialization in intra-Bloc trade
was sacrificed for the political objective of self-sufficiency.
2. Excessive Cost of Investment
In the First Five Year Plan (1953-57) Chinese Communist
leaders enunciated strong aspirations to reach the most advanced
level of technology in a short time with the help of the USSR. Soviet
technology was extensively but rigidly and indiscriminately applied in
the reconstruction and development of the machine-building industry.
By 1957 the unfortunate results of this policy had become strikingly
apparent. Much industrial investment was wasted in excessive non-
productive investment. Moreover, rigid adherence to Soviet design
specifications and the overemphasis on modernization demanded very
heavy investments and a technical level which was extremely difficult.
for the Chinese machine-building industry to attain. This policy
caused underutilization of existing capacity and helped to create an
excessive demand for foreign equipment.*
The tendency of Soviet industrial plans to require a high
proportion of nonproductive investment is believed to be a source of
* See II, H, 1, p. 44, below.
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considerable dissatisfaction on the part of the Chinese Communists.
The Chinese commented with a trace of bitterness that nonproductive
investment took up 24 percent of total investment under the First
Five Year Plan. 22/ The rate of nonproductive investment declined
from 22.4 percent in 1956 to 20 percent in 1957. E.9./ The Chinese
have admitted that in numerous cases they tried to copy the most
modern industrial and municipal designs of the USSR, which called
for housing and other facilities on a scale that was lavish by
Chinese standards. 21/ This fact is well illustrated in the con-
struction of some of the largest machine-building plants at ChTang-
chtun, Lo-yang, Tiai-yuan, Fu-la-erh-chi, and other centers. A
vice minister of the First Ministry of Machine Building complained
that investments by certain enterprises of the industry were too broad
in nature, often including roads, bridges, antiflood work, water sup-
ply, schools, and even banks, post offices, department stores, and co-
operatives. 22/ Thus the Chinese apparently borrowed from the USSR
the highly integrated and detailed plans for "industrial cities,"
which provided for every facility from industrial plants to schools,
hospitals, and bus stations to be established at a new location. 21/
Excessive nonproductive investment has a retarding ef-
fect on economic growth, for when too many factors of production are
channeled into nonproductive work, the absolute growth of production
is reduced. Moreover, imbalances in raw materials are aggravated as
large proportions of scarce resources flow into nonproductive assign-
ments. These effects combineto raise the cost of investment per unit
of increased capacity for production and thus to reduce the produc-
tivity of industrial investment. The result is to hinder the improve-
ment of living standards by delaying the realization of higher employ-
ment and possibly per capita national income. An awareness of such
effects of nonproductive ii-Westment is believed to have resulted in
several corrective measures that were written into the proposals for
the Second Five Year Plan: (1) greater use of medium-scale and small-
scale plants that can be located at established centers of population
and (2) rigorous scrutiny of plans for construction borrowed from the
USSR and the European Satellites to eliminate nonessential items.*
The Chinese Communists, it is interesting to note, have had some
sobering experiences with the high cost of investment in new indus-
trial areas such as Sian and Lan-chou. The rapid influx of popula-
tion into these areas has involved considerable outlays for urban
public utilities, residential housing, and other nonproductive facili-
ties. EY In an effort to economize on investment and eliminate as
much nonproductive investment as possible, the Chinese may have recon-
sidered some of their plans for locating industries away from the stra-
tegically vulnerable coastal regions.**
* See IV, B, 5, p. 71, below.
** See IV, B, 6, p. 73, below.
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3. Failure to Seek Quick Returns on Investments
When Soviet technical assistance and aid for Chinese Com-
munist industrialization was announced in September 1953, an important
role for existing plants was clearly intended. 22/ According to the
official plan issued in 1955, 70 percent of the increase in the total
value of industrial production between 1952 and 1957 was to be derived
from existing enterprises. 2g Of the new plants under the First
Ministry of Machine Building that were scheduled to be constructed
under the First Five Year Plan (1953-57), only 24 percent were to
start operation by the end of 1957, and 38 percent were expected to
start operation in the early years of the Second Five Year Plan
(1958-62).
Under the First Five Year Plan, 85 percent of the invest-
ment in machine tool plants was scheduled to be devoted to the con-
struction of new facilities and 15 percent to the reconstruction of
old facilities. Reconstructed plants, however, were to account for
52 percent of the total production of machine tools. 27/
The task assigned was formidable, and the existing plants
were not markedly improved and remained a weak link in the production
force during the plan period. For example, Automobile Plant No. 1
at Ch'ang-ch'un, although a wholly integrated plant for major com-
ponents, is dependent on 42 outside plants that make one-third of
the parts which go into the vehicles produced, and 40 of these 42
plants are outmoded. This fact indicates that the problem of raising
the technical standards and expanding old plants must be ,faced if the
old plants are to work in cooperation with newly constructed plants
that operate at high technical levels. The improvement of the old
plants means further exploitation of their potentials by increasing
the utilization factor of their equipment. The Shanghai Boiler Plant
was remodeled between 1954 and 1956 to increase its capacity for pro-
duction considerably, but it has been stated that a further investment
of 10 million yuan could raise its capacity for production by 150 per-
cent. Investment of 3.8 million yuan in remodeling the Tungyung
Machinery Plant in Canton reportedly would increase its capacity for
production by 83 percent. 28/
It was admitted that, in spite of the early resolve to
exploit possibilities for investments yielding quick returns, this
goal had not been sufficiently emphasized during 1953-57. There was
considerable latent capacity in existing industrial enterprises, par-
ticularly those in coastal areas. 22/ An investigation of 22 state
and public-private machine-building enterprises in Shanghai (mostly
electrical equipment plants) concluded that, with an investment of
only slightly more than 42 million yuan, the total annual production
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by the rebuilt plants could be raised to 220 million yuan. 32/ Mao
Tse-tung himself, in his famous speech on "contradictions," stated in
effect that even by 1957 full use had not been made of the industrial
capacity that had existed before 1949. 31/
These experiences indicate that the Chinese Communists
lost an outstanding opportunity to get the maximum effect from funds
accumulated at great sacrifice from the populace. Small investments
in reevipping of existing plants could have yielded relatively large
gains in production. For instance, reconstructed machine tool plants
required 30 percent less investment per ton of products than did new
plants. 12J This course of action, however, was not without its draw-
backs. Conceivably, if the Peking regime had concentrated on fast-
yielding investments in machine buildingl it might have hastened or
aggravated short-run economic imbalances due to lagging growth in the
industries producing raw materials. This effect could have been some-
what mitigated, however, because a smaller construction program would
have been needed to achieve the same.levels of output. In deciding to
build spectacular modern plants in the interior to "catch up with the
West" in the shortest possible time, Chinese Communist leaders un-
doubtedly were influenced by the desire for prestige as well as the
desire not to increase reliance on vulnerable coastal areas. More-
over, the failure to exploit latent capacity in the smaller plants
was partly political. The regime was reluctant to build up these
enterprises, particularly in the coastal cities, until transforma-
tion to socialization had been accomplished by the end of 1956. la/
II. Production
A. Machine-Building Industry in 1949
The machine-building industry that the Chinese Communists
inherited in 1949 was disorganized and in disrepair. Most of the ma-
chinery had been dismantled by the USSR, and without large-scale re-
construction the industry could not support the ambitious goals for
industrialization of Chinese Communist leaders.
1. China Proper
In 1949 the machine-building industry of China proper was
virtually nonexistent, most of the firms consisting only of small re-
pair shops. Although some development of the machine industry had
taken place in the interior under the impetus of wartime conditions,
the industries of China proper had largely stagnated during 1930-49.
Capital stock in the relatively developed coastal cities had been
largely depleted before World War II. Further deterioration took
place during the war and the economic chaos that followed.
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2. Manchuria
Most of the development of the machine-building industry
in China before 1949 had been concentrated in Manchuria. During the
1930's the development of the machine-building industry in Manchuria
lagged because of restrictive Japanese policies, but the advent of
World War II altered the development of the 'industry. After 1942,
most of the machine building plants in Japan were forced to switch
to armaments, and it became difficult to supply Manchurian needs for
machinery. Consequently, the expansion of such production in Man-
churia was accelerated, and development proceeded according to a
clearly defined outline. In spite of this development, Manchurian
machine building remained weak. The industry was limited to the
assembly and installation of communications equipment and motor
vehicles and was unable to produce large machines, precision ma-
chines, and many types of spare parts. 12/ According to the Pauley
Reparations Commission Report, Soviet removals of machinery and
equipment from Manchuria reduced by 80 percent the capacity for pro-
duction by metalworking shops (excluding the railroad repair shops). ,316/
B. Plants
1. Number
During the period of the Chinese Communist First Five
Year Plan (1953-57), it was stated that the construction of more than
80 principal machinery and equipment plants would be undertaken dur-
ing 1953-61. Ei These plants were to serve as the foundation for
building a modern, independent machine-building industry for Com-
munist China.
It was reported that 33 major machine-building plants were
put into operation during the first 4 years of the First Five Year
Plan. 2/ Later, it was claimed that by the end of 1957 more than
39 above-norm machine-building projects had been completed. 12/ In
general, an analysis of available plant data supports this reported
information.* ?
* There are numerous difficulties in determining the exact number of
plants completed. For example, the Chinese Communists often speak of
"above -norm machine-building plants" or "major machine-building plants"
without giving precise definition of meaning. Consequently, although
an analysis of information on plants shows that 47 machine-building
plants were completed by 1957, it is possible that only 39 of these
are considered by the Chinese to be "above-norm" projects. Moreover,
it is not known whether or not a plant is considered completed after
first phase construction is finished and partial operation commences,
with the second phase of construction set for a later date., A third
difficulty derives from the fact that construction dates for all the
plants are not available.
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The USSR and the European Satellites have assumed an im-
portant role in the construction of industrial plants in Communist
China. As shown in Table 2,* the USSR committed itself to assist
China in the construction of 166 major industrial projects.** The
importance of these projects can be seen in the fact that the plants
built with Soviet assistance are scheduled to account for nearly
60 percent of planned production in 1962. 41/ Although Table 2 shows
that only 28 of the 89 machine-building projects started by the end
of 1957 had received aid from the Soviet Bloc, these projects were the
outstanding machine-building projects undertaken during the First Five
Year Plan. Among them were such projects as the Ch'ang-ch'ain Automobile
Plant No. 1, the T'ai-yuan and Fu-la-erh-chi Heavy Machinery Plants,
the Lo-yang Tractor Plant No. 1, and the Ch'eng-chou (Chleng-hsien) Grind-
ing Machine Plant, which represent the largest, most advanced, and most
modern plants in their respective sectors of the machine-building industry.
2. Description
To transform the weak and backward machine-building in-
dustry, the Chinese Communists established large installations with
the most modern machinery and techniques. It was impossible for Com-
munist China, with its low technological level and scarcity of mechan-
ical skills, to construct modern machine-building plants without the
massive foreign assistance that the USSR provided. In spite of the
abundance of labor in China, few labor-intensive investments were
undertaken in this industry. Instead, the large-scale, modern plants
undertaken by the Peking regime were based on advanced labor-saving
technology. Undoubtedly the decision to invest in this fashion was
based in part on noneconomic motives: the desire to achieve self-
sufficiency, greater military power, and international prestige, all
within the shortest possible time.
This pattern of investment is reflected in the general
characteristics prevalent in Chinese Communist plants constructed
with Soviet assistance -- that is, high building costs, large in-
vestments in nonproductive aspects of the plants, -large size, com-
plex and specialized equipment, and highly mechanized production
techniques. For example, the Fu-la-erh-chi Heavy Machinery Plant,
* Table 2 follows on p. 19.
** For 3 years following April 1956 the number of Soviet aid projects
was reported as 211. Of this number, only 205 were considered by the
Chinese Communists to be industrial construction projects. The re-
maining six involved the construction of research institutes and the
renovation or expansion of previously constructed projects. In April
1959 it was reported that the number of projects had been reduced
from 211 to 166 as a result of the merging of some of these projects
during their construction. )_?2/
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Table 2
Number of Industrial and Machine-Building Projects in Communist China
Performed with Aid from the Soviet Bloc
1950-58
Project
Soviet Aid
Projects
European
Satellite
Aid Projects
Chinese
Projects .2/
Total
Industrial projects
Planned 12/
Begun by end of 1957 12/
Completed by end
of 1957 12/
166
135
68
68
64
27
46o
722
333
694
921
428 .2/
Machine-building projects
Begun by end of 1957
23211/
2/
5 .01/
61 1/
89/
Completed by end of 1957
11
2/
3
33J
47 1/
Other machine-building
projects
72e
a. Above-norm projects only. The term above-norm project as used in the
machine-building industry of Communist China refers to a project requir-
ing an investment ranging from more than 5 million yuan, such as machine
tool plants, to more than 10 million yuan, such as shipbuilding, tractor,
and locomotive plants.
b. 142/
c. In addition, 109 projects had begun partial operation.
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e. These data do not agree with the Soviet statement that 28 machine-
building enterprises that had been constructed with Soviet assistance
went into full or partial production during 1953-57. 11.11/
f. Data derived by subtracting from the total number of projects the
number of projects undertaken with aid from the Soviet Bloc.
g. Including plants that were in existence before 1950, plants for
which construction dates are not available, and plants the construction
of which commenced after 1 January 1958.
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which is under construction, will be highly mechanized and auto-
matic. 'IV Reportedly its 16 shops will be equipped with remote con-
trol instruments and other automatic devices as well as highly effi-
cient machinery to permit production of such products as steel rolling
and smelting equipment, blooming machines, open hearth furnaces with
capacities of 500 tons each, and blast furnaces with capacities of
1,500 cubic meters each. 1.+?./ The recently completed Ch'eng-tu Measur-
ing Instrument Plant is also of modern design and is equipped with
the most up-to-date equipment. LT/ The workshops are equipped with
pushbutton and semiautomatic tools and automatic controls for temper-
ature, humidity, and dust. 1.4j,j These highly mechanized methods, which
are characteristic of the machine-building plants built with Soviet
aid, are clearly illustrated in photographs of the interiors of these
plants. The accompanying photographs of various shops of Automobile
Plant No. 1 at Ch'ang-ch'un show automatic transfer lines in pro-
duction of engines and the extensive mechanization of materials-
handling operations, as shown in Figures 2 through 5.*
A large portion of the equipment for these new, modern
plants was imported from the USSR. According to the Chinese Com-
munist First Five Year Plan the USSR was to supply 50 to 70 percent
of the equipment for the projects constructed with Soviet aid, and
the remainder was to be domestically produced. Other projects were
to depend more on domestic sources of equipment./22/ Because these
large plants using modern production techniques required modern and
complex machinery that the Chinese Communists could not produce them-
selves, the Chinese depended primarily on the USSR for equipment to
outfit these plants.
Another characteristic of many of the new machine-building
plants in Communist China is specialized production. For example,
several of them were designed to make only one type of machine.** OJ
As a result of emphasis on large-scale projects, there
has been a substantial increase in capital investment per worker in
the metal-processing sector of the Chinese Communist machine-building
industry, as shown in Table 3.***
C. Reliance on Technical Aid from the Soviet Bloc
Following the outbreak of the Korean conflict and the imposi-
tion of the Western embargo, the foreign trade and aid of Communist
* Following p. 20.
** For a discussion of the problems resulting from specialized pro-
duction, see IV, B, p. 76, below.
*** Table 3 follows on p. 21.
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FIGURE 2. Communist China: Machining of Cyclinder Blocks by Automatic
Transfer Machines in the Ch'ang-ch'un Automobile Plant No. 1
FIGURE 3. Communist China: Machining of Transmission Parts by
Multiple-Spindle Vertical Semiautomatic Lathes in the Ch'ang-ch'un
Automobile Plant No. 1
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FIGURE 4. Communist China: Mechanized Handling Equipment in the
Ch'ang-ch'un Automobile Plant No. 1
FIGURE 5. Communist China: Mechanized Carrying Line in Foundry
Operations in the Ch'ang-ch'un Automobile Plant No. 1
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China was reoriented toward the Soviet Bloc. Not only'because of
necessity but undoubtedly also because of ideological compatibility,
the Chinese wholeheartedly welcomed Soviet assistance in their de-
velopment program. Under these circumstances, Soviet influence spread
rapidly throughout the Chinese economic system. The Chinese enthusi-
astically studied Soviet experience as a model for their own develop-
ment, diligently and, as it later became apparent, often uncritically
applying it to their own planning.*
Table 3
Fixed Assets per ProduCtion Worker in the Metal-Processing Sector
of the Machine-Building Industry of Communist China 2/
1952-56
Year
1952 Yuan
1952
2,996
1953
3,139
1954
3,538
1955
4,357
1956
5,037
a. The fixed assets include plant
buildings and installed capital equipment used in industrial pro-
duction and do not include facilities for housing and welfare or
land used for nonproductive purposes. Valuations probably were
computed by the Chinese Communists on a gross rather than net
basis, without regard to depreciation. Production workers in-
clude workers actually engaged in production and such auxiliary
workers as porters in the enterprises and loaders in warehouses
but exclude such employees as engineers, technicians, and adminis-
trative personnel.
1. Period of Restoration (1950-52)
Technical plans and materials as well as the services of
competent advisers were apparently invaluable to the Chinese Com-
munists, in restoring levels of production after 1949. The first 3
years, which were described by the Peking regime as a "rehabilitation
period," were characterized by a stabilization of the economy, an
* See III, p. 55, below.
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extension and consolidation of political controls, and the expansion
of production with relatively little fixed capital investment. That
the economy, which had been depressed and fragmented by a decade of
war and civil war, responded favorably was caused primarily by the
restoration of political stability, better distribution of raw ma-
terials, and other similar factors. Insofar as economic recovery de-
pended on technical assistance, however, Soviet technicians and ad-
visers made an important contribution. 2/ Most of the Soviet ma-
chinery imported during this period apparently was allocated to exist-
ing machine-building facilities, and imports of complete plants were
a comparatively minor factor until 1953.* A considerable amount of
Soviet aid was expended, however, in preliminary survey and design of
new projects the actual construction of which began under the First
Five Year Plan (1953-57). There were no known machine-building pro-
jects undertaken with aid from the European Satellites during the
period of restoration.
2. First Five Year Plan (1953-57)
The first of several Sino-Soviet agreements on scientific
and technical cooperation was announced on 11 October 1954. By its
terms the USSR agreed to furnish to Communist China the following
items: (a) plans and blueprints for industrial construction, includ-
ing metallurgical and machine-building plants, power stations, and
other projects; (b) blueprints for machinery and equipment; (c) data
on techniques and methods for producing many types of industrial
goods; and (d) scientific, technical, reference, and training ma-
terials. Pursuant to such agreements the Chinese received designs
and technical data for a large number of engineering projects, in-
cluding Automobile Plant No. 1 at Ch'ang-ch'un and locomotive and
railroad passenger car works as well as blueprints for machine tools
of many kinds, mining machinery, and other products. ** 53/
Soviet advisers assisted the Chinese Communists in the
actual formulation of plans as well as the execution of plans. The
Chinese Communists had modeled their economic administration on Soviet
prototypes, a move which facilitated liaison with planning groups in
Soviet ministries.2)1/ Soviet advisers were believed to have been
assigned to all levels in the Chinese Communist economic ministries,
administrative organs, and industrial organizations.
Soviet technical aid covered the whole process of con-
struction from the selection of plant sites, collection of basic
data required for purposes of design, formulation of the task of
See V, A, 2, p. 81, below.
** See II, F, p. 31, below.
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designing, making designs, supply of equipment, and direction of
building and safe operations to production of new products, train-
ing of talents capable of mastering new technology, and supply of
technical data required for making new products. 22/ Soviet advisers
at construction sites and at ministerial planning levels thus had ex-
tensive technical authority until the actual turning out of products,
when complete responsibility devolved on the Chinese Communist tech-
nicians and managers. 6
The influence of technical advisers from the European
Satellites at the higher levels of planning and administration has
been less pervasive than that of Soviet advisers. The influence of
the Satellites was felt moie directly in plant layout, product de-
sign, and production techniques in connection with specific projects
for which these countries had supplied equipment. In this sense,
certain fields of machine building reflect substantial Satellite tech-
nical influence -- for example, Czechoslovak influence in diesel en-
gines and steam turbines; East German influence in telecommunications
equipment, electrotechnical apparatus, synthetic fibers, and abrasive
products; and Hungarian influence in electronics. Polish influence
has been slight, being significant only in machinery for refining
sugar beets.
Engineering projects carried out with assistance from the
Soviet Bloc provided opportunities for Chinese Communist engineers
and technicians to gain experience under the supervision of Soviet
personnel in the design, construction, and operation of plants. More-
over, during 1953-57, some 7,000 Chinese engineers, administrators,
and skilled workers were sent to the USSR to acquire experience in
plants and other industrial institutes. 2y/ For Automobile Plant
at Ch'ang-chTun, 500 Chinese were trained at the ZIL (Zavod
imeni Likhachev) Motor Vehicle Plant in Moscow and other Soviet
automobile plants. On their return to Communist China, these trainees
set up training programs based on the knowledge they had acquired in
the USSR. 2/
In addition, Soviet influence became very prominent in
formal technical education. Soviet professors of engineering occupy
a number of important positions in the new engineering institutes of
Communist China. In the rapid expansion of engineering curricula
the technology of the manufacture of machinery and tools has been
strongly emphasized. It is not unusual for a Soviet professor to be
concurrently an adviser to an industrial ministry or a major plant. L2/
Most of the gains in efficiency and productivity in
various Chinese Communist plants have been attributed in Press re-
ports to the suggestions of Soviet technicians or of Chinese who have
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received training from Soviet technicians. It was reported that a
group of workers at the Mukden (Shen-yang) Machine Tool Plant
more than quadrupled their working efficiency by adopting an advanced
Soviet method of high-speed metal cutting demonstrated by a Soviet
lathe turner. .62/ Soviet high-speed metal-cutting methods, as well
as Soviet techniques for metal drilling, metal casting, and metal
rolling are said to have been adopted extensively with good results
in the Chinese engineering industries. _61/ Such examples involve
extremely specialized techniques, however, and are of little conse-
quence in any over-all measure of increased productivity. In addi-
tion, there are some technical problems in high-speed cutting that
make the attainment of greater productivity somewhat questionable.
Probably the real gains in productivity were accomplished primqrily
through the application of general industrial engineering technique
with little additional investment in equipment. The Chinese Com-
munists could and probably did learn most from Soviet technicians in
such fields as plant layout, preventive maintenance and repair,
methods and motion study, and simplification of design. Thus the
greatest benefits derived by the Chinese Communists from such tech-
nical assistance were a considerable improvement in the technical
level and some increase in productivity, as well as the opportunity
to imitate on a massive scale the machinery imported from the Bloc.
D. Location*
1. Development of Industries in the Interior
Before 1949 the machine-building industry, such as it was,
and most of the other industries of China were concentrated in a few
coastal cities such as Tientsin and Shanghai and in Northeast China,
where supplies of raw materials, a trained labor force, and trans-
portation had been developed, largely by foreigners. The Chinese
Communists inveighed against this pattern of location as irrational
and the result of "imperialist encroachment and Kuomintang domination."
Their First Five Year Plan (1953-57) set forth a program designed to
bring about a satisfactory location of industry in three 5-year
plans. The planned location of new industries was to be based on
certain general principles, including the development of industrial
productive capacity in all regions of the country, the location of
industry near sources of. fuels and raw materials, dispersion to
meet defense requirements, and the gradual improvement of economic
standards of backward areas. To implement these principles the First
Five Year Plan called for the utilization and expansion of existing
industrial bases, especially in Northeast China (Region I),** to
** The economic regions referred to in this report are those defined
and named on Map 25561 (5-57), Communist China: Economic Regions,
inside back cover.
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support national construction and accumulate capital; the construc-
tion of new industrial bases in North China (Region III), Northwest
China (Region VIII), and Central China (Region V) centering around
the two new Aron and steel combines to be established in Pao-t'ou
and Wu-han; and the carrying out of preparatory work for the con-
struction of a new industrial base in Southwest China (Region VII). LV
The First Five Year Plan envisioned the shifting of the
center of the machine-building industry toward the interior of Com-
munist China by construction of new enterprises. It called on the
First Ministry of Machine Building and the Ministry of the Power Equip-
ment Industry to engage in construction of new large-scale enter-
prises, of which 24 percent were to be located in maritime areas and
76 percent in the interior.* Of the projects in machine building
carried out with Soviet aid, 16 percent were to be built in maritime
areas and 84 percent in the interior. The Peking regime aimed to in-
crease the share of production by metal-processing enterprises lo-
cated in the interior from 20 percent in 1952 to 62 percent in about
1960-61, following the completion of new enterprises on which con-
struction was scheduled to start during 1953-57.
Although the Chinese Communists undertook considerable new
construction of machine-building plants in the interior, the geograph-
ical location of production was not altered appreciably by the end of
1957. The limited progress between 1952 and 1955 is indicated by per-
centages in terms of value in the following tabulation:
Percent
Metal-Processing Sector
Machinery and Equipment
Manufacturing
Area
1952
1955
1952
1955
Interior
19.9
24.7
18.0
24.2
Maritime
80.1
75.3
82.0
75.8
Total
100.0
100.0
100.0
100.0
* The maritime area is defined officially as including the seven
coastal provinces of Liaoning, Hopeh, Shantung, Kiangsu, Chekiang,
Fukien, and Kwantung and the three independent municipalities of
Shanghai, Tientsin, and Peking. All the remaining provinces of
Communist China comprise the interior.
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Further details of the location of total production and of production
of machinery in 1955 are available on such items as boilers, machine
tools, and electrical equipment* Although new bases for machine
building have been established at inland points such as Ch'ang-ch'un,
Harbin, Ch'i-ch'i-ha-erh, Lo-yang, Sian, and Lan-chou, a substantial
portion of total production still is concentrated in Shanghai and
Mukden. However, the construction of many such important inland
machine-building plants as those in T'ai-yuan, Fu-la-erh-chi, Wu-han,
Lan-chou, Lo-yang, Ch'eng-tu, and Sian, which was undertaken during
1953-57, will be completed under the Second Five Year Plan (1958-62).
The development of inland industrial bases has certain
disadvantages, both economic and military. Although, in some in-
stances, there may be compelling economic reasons for the choice of
more costly sites in the interior, these sites require the investment
of large amounts in such nonproductive construction as housing, trans-
portation, and welfare facilities. In fact, statements emanating from
the Eighth Chinese Communist Party Congress in 1956 complained that
inadequate attention was given "to the full, rational utilization of
coastal industry." LV Current plans pay more attention to older in-
dustrial areas as centers for machine building.** Moreover, the de-
velopment of machine-building plants away from vulnerable coastal
areas does not represent an unqualified gain in terms of security
from air attack. There are some factors which partly offset the ad-
vantages of defense in depth. A number of machine-building plants,
particularly some of the newest and largest, are located far from
their sources of raw materials and are, therefore, vulnerable to dis-
ruption and congestion in surface transportation. In addition, elec-
tric power grid systems are not well developed in the remoter regions,
and so plants tend to depend on a single source of power.
2. Economic Regions***
a. Northeast China (Region I)
Pursuant to the principle of expanding existing in-
dustrial bases the Chinese Communists undertook the construction of
new plants and reconstruction and expansion of older plants in North-
east China. About 30 percent of all machine-building plants started
or completed during 1950-57 were constructed in this region, which ac-
counts for 50 percent of the Chinese capacity to produce machinery. .6_/
**
***
See Table 11, Appendix B, p. 94, below.
See IV, B, 6 and 9, pp. 73 and 75, respectively, below.
The economic regions are discussed in this section in order of
economic importance to Chinese Communist machine building. For the
numbers and types of machine-building plants in each of the economic
regions, see Table 12, Appendix B, p. 95, below.
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Within Northeast China the heaviest concentration of
machine building is in MUkden. Mining machinery, metallurgical equip-
ment, construction equipment, electrical equipment, machine tools, and
other types of general industrial equipment all are being produced
here. The importance of Mukden is due largely to its initial develdp-
ment under the Japanese in an area where abundant supplies of raw ma-
terials had promoted the development of the steel and aluminum indus-
tries and to a relatively adequate transportation system.
Under the First Five Year Plan (1953-57), however,
the center of gravity of machine building in Northeast China started
to move northward as the result of a conscious effort to shift indus-
try inland and avoid overconcentration in the south. 4?_/ A large
motor vehicle plant and a railroad equipment plant were established
at Ch'ang-ch'un in Kirin Province. Farther north, at Harbin in
Heilungkiang Province, is located the new Harbin Measuring and Cut-
ting Tools Plant and the huge Harbin electrical equipment complex.
Heilungkiang Province is also the site of the new Fu-la-erh-chi Heavy
Machinery Plant.
b. North China (Region III)
North China, which has the second largest number of
machine-building plants, is also rich in mineral resources. Most of
the machine-building plants are located in Peking and Tientsin, the
two major cities of the region. Radio equipment, electronic tubes,
machine tools, and agricultural equipment are produced in Peking.
Tientsin is the site of a tractor plant and of plants producing air
compressors, diesel engines, mining machinery, textile machinery, and
machine tools. Present plans call for even greater development of
Peking and Tientsin. By 1962, Tientsin is to become the site of a
heavy industrial complex concentrating on production of high-grade,
precision, and heavy industrial products ?2/ but will continue to
stress production of -inteimal combustion engines, machine tools,
and electrical instruments. 2/
One of the largest machine-building centers in the
interior of Communist China is being developed at T'ai-yuan. Here
is located the new large T'ai-yuan Heavy Machinery Plant, which is
scheduled for completion in 1960 and will be one of four major plants
in China producing metallurgical equipment. A reconstructed mining
machinery plant is also located in T'ai-yuan.
Tsinan is an important center for production of diesel
engines and machine tools. La-yang, a new city, is now the foremost
producer of tractors, mining machinery, and antifriction bearings in
Communist China. Ch'eng-chou (Ch'eng-hsien) is the site of a textile
machinery plant and a new grinding machinery plant.
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c. East China (Region IV)
Before 1956 the Peking regime looked on this region
mainly in terms of its capacity for supporting industrial develop-
ment in the interior and had little inclination to aggravate what
the regime considered to be the irrational overconcentration of in-
dustry in this vulnerable area. Because of its past associations
with foreigners and capitalist elements, Shanghai was long regarded
with suspicion, and the full development of the potential of exist-
ing enterprises was neglected until state control had been effected.
Recently, however, new industrial areas have been established on the
outskirts of Shanghai, and current plans call for the development of
this city as a leading center for production of heavy machinery and
precision tools. 22/ A heavy machinery plant was started in August
1958.
Shanghai accounts for a large proportion of the major
commodities produced in Communist China, including one-quarter of the
total value of production of the machine-building industry in 1957.
During 1950-57, Shanghai produced 28,000 machine tools, or 22 percent
of total production during this period. In 195758, Shanghai ac-
counted for the following percentages of total production: 30 to
50 percent of diesel and gasoline engines, 10 to 30 percent of elec-
tric motors, and 10 to 20 percent of machine tools. 71/ Four plants
in Shanghai making power equipment, steam turbines, boilers, and
switchboards account for about one-half of the power generating
equipment produced in China. 12/ This proportion will diminish con-
siderably because of the increasing prominence of the heavy electrical
equipment complex in Harbin.
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machine-building industry is still dependent to a considerable extent
on this highly vulnerable target area.
At Nanking, another important machine-building center
in East China, radio equipment, trucks, and several varieties of ma-
chine tools are produced. Ho-fei, in Anhwei Province, is slated to
become a new machine-building center.
construction of four large machine-building plants, which will produce
tractors, motor vehicles, machine tools, and ball bearings, was to be
undertaken in Ho-fei.
* Tonnages are given in metric tons throughout this report.
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d. Central China (Region V)
The First Five Year Plan called for the construction
of two new industrial bases in Central China. A new iron and steel
combine second only to that at An-shan will be established at Wu-han.
Here is located Communist China's new Wu-han Heavy Machine Tool Plant,
which is in partial operation. A motor vehicle plant, possibly to
have a capacity larger than that of the Chlang-ch'un Automobile Plant
is scheduled for location at Wu-han. The second new industrial 50X1
zone in this region is in Hunan Province and is centered about the
machine tool and electrical equipment industries of Ch'ang-sha and
Hsiang-t'an.
e. Southwest China (Region VII)
Because Southwest China was lacking in adequate
transportation facilities and supplies of iron and coal, it did not
receive much ,emphasis in the industrialization program of the First
Five Year Plan. 152 Whatever machine building took place in this
region under the First Five Year Plan was confined primarily to
Ch'eng-tu and Chungking. The largest measuring and cutting tools
plant in Communist China was constructed at Ch'eng-tu in Szechwan
Province, as were two radio equipment plants and a ball bearing
plant. In Chungking, the center of a small munitions industry dur-
ing World War II, a reconstructed machine tool plant was put into
operation in 1953 with Soviet assistance. Recent plans call for the
development of Chungking into a modern industrial city with iron and
steel, machine-building, and electrical machinery enterprises. In-
vestments in capital construction in Chungking in 1958 are to be
double those of 1957. II/ -Machine tools are also being produced at
K'un-ming in Yunnan Province.
f. Northwest China (Region VIII)
Machine building in Northwest China, the largest of
the economic regions, was rather limited under the First Five Year
Plan. As in Southwest China, attention during this period was de-
voted primarily to the development of transportation facilities and
to prospecting for mineral resources. Machine-building construction
has been largely confined to the cities of Lan-chou and Sian. The
development of machine building in Lan-chou, which is the capital of
Kansu Province and the railroad hub of Northwest China, is closely
related to the importance of the region in production of petroleum.
A new petroleum-drilling equipment plant and an oil-refining and
chemical industry equipment plant, the first of its kind in China,
are being constructed in Lan-chou.
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Sian, another rising industrial center in Northwest
China, is slated to become an important base for production of elec-
trical equipment. Recently completed in Sian is the new Sian Electric
Capacitor Plant, the first modern power capacitor plant in Communist
China. :EY A new high-voltage switch plant will soon be put into
operation in Sian, which will also become a center for production of
instruments. A plant which will produce apparatus and meters to con-
trol and measure temperature and various types of thermo-tecWcal
apparatus and meters for the artificial and synthetic fiber and the
chemical fertilizer industries is being built in Sian with East
German aid. 12/ Various types of geological surveying instruments
are being produced at the new Sian Geophysical Instruments Repair and
Manufacturing Plant.
g. South China (Region VI)
Until 1958, production in South China was limited
almost entirely to consumer goods, the handicraft industry account-
ing for a major share of total production. What little machine build-
ing took place was confined largely to Canton in Kwangtung Province.
Sugar-refining equipment, necessary for the sugar refineries in this
area, was produced in Canton, along with agricultural equipment. Now
more attention is being given to production of heavy machinery in this
region, the completion of a heavy machinery plant in Shao-kuan
(ChTu-chiang) being scheduled for 1960.
h. Other Regions
There was virtually no development of the machine-
building industry in the Inner Mongolian Autonomous Region (Region II),
the Sinkiang Uighur Autonomous Region (Region IX), and Tibet (Region X)
under the First Five Year Plan. There are no major machine-building
plants in Tibet, and only a few agricultural equipment plants in the
Inner Mongolian and the Sinkiang Uighur Autonomous Regions.
E. Value of Production
1. Total Industry
Communist China made impressive progress in total indus-
trial production under the First Five Year Plan (1953-57), the gross.
value of such production (excluding the handicraft industry) increas-
ing about 133 percent. In 1957 the gross value of total industrial
production reached 62.8 billion yuan,* an increase of 9.25 billion
yuan above the goal of 53.5 billion yuan set by the First Five Year
* See Table 13, Appendix B, p. 96, below.
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Plan. The average annual rate of growth in total industrial produc-
tion under the plan was 18.4 percent, or 3.7 percent higher than the
target of 14.7 percent. Although the average annual rate of growth
of total industrial production was high, it was uneven, increasing
sharply in 1956, the year of the high tide of industrialization, and
declining to about 7 percent in 1957, a year of consolidation and
restoration of balance.
2. Machine-Building Industry
Under the First Five Year Plan, there was a large in-
crease in gross value of production by the metal-processing sector,
including machinery and equipment manufacturing. The value of pro-
duction by the metal-processing sector in 1957 reached 10 billion
yuan and accounted for about 3 or 4 percent of the gross national
product on a basis of value added. Machinery and equipment manu-
facturing, the most Important component of the metal-processing sec-
tor, attained a value of production slightly less than 6 billion
yuan, representing more than 5 percent of the gross national product.
From 1952 through 1957 the gross value of production of machinery
and equipment manufacturing .increased approximately 326 percent. This
gain exceeds the planned increase of 250 percent for the 5-year
period. .?2/ The share of the metal-processing sector in total indus-
trial production increased from 11 percent in 1952 to about 16 percent
in 1956-57, and the share of machinery and equipment manufacturing
increased from 5 percent in 1952 to almost 10 percent in 1956-57..
The average annual rate of growth in machinery and equip-
ment manufacturing under the Five Year Plan was approximately 34 per-
cent. This rate of growth was uneven, increasing to about 90 percent
in 1956 but declining to about 4 percent in 1957. Such unevenness
was due to the fact that the ambitious surge forward in industry in
1956 necessitated some consolidation in 1957 to smooth out imbalances.
F. Volume and Types of Production
1. General
Considerable increases in the volume of production were
made in several branches of the machine-building industry of Com-
munist China under the First Five Year Plan (1953-57).* Most note-
worthy were the increases in production of machine tools, agricul-
tural equipment, textile machinery, locomotives and rolling stock,
and electrical equipment. Production of some types of heavy equip-
ment, such as metallurgical equipment, mining equipment, and oilfield
* For the estimated production of selected machinery and equipment
items, see Table 14, Appendix B, p. 97, below.
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and exploratory equipment, was limited under the First Five Year Plan,
but capacity to produce will be increased considerably under the
Second Five Year Plan. In spite of the advances made in production
by the machine-building industry Sunder the First Five Year Plan, Com-
munist China still lags far behind the advanced industrial nations
in production of most types of machinery.* Moreover, production of
most types of machinery in Communist China at the end of the First
Five Year Plan was considerably lower than that in the USSR at the
end of the Soviet First Five Year Plan in 1932, although this dif-
ference was due primarily to the fact that Communist China started
its First Five Year Plan with a much smaller production base than did
the USSR.**
The projects of the machine-building industry of Communist
China actually constructed under the First Five Year Plan were de-
signed not only to augment capacity for producti.on but also to pro-
vide a greater diversity of products. Under the plan both trial
production and actual production of a considerable number of new
types of products were undertaken. It should be noted, however,
that the increase in the number of products manufactured was due
in large measure to the completion of projects undertaken with aid
from the Soviet Bloc and, moreover, that the designs for many of
the new products. were supplied by the Bloc. Approximately 90 per-
cent of the 3,000 new products that the Chinese Communists claim
have been produced by the machine-building industry since 1953 are
based on designs provided by the USSR. .?.1./ As production expanded,
the technical capabilities of Chinese machinery increased.***
2. Machine Tools
The increase in production of machine tools during 1953-57
was largely due to expansion and reequipping of existing facilities.
Of the 19 major machine tool plants established by the end of 1957,
only 3 have been identified as new plants. Other factors contribut-
ing to higher production were Improvements in the productivity of
labor and Soviet technical assistance. Before 1953, Communist China
produced only a few types of general-purpose machine tools, most of
whidh were obsolete. In 1954 and 1955, production in terms of units
was cut back, and plants shifted to production of heavier and more
modern types.****
15,
This change in emphasis brought about considerable
Appendix B, p. 99, below.
See
Table
**
See
Table
16,
Appendix B,
p.
100, below.
***
See
Table
17,
Appendix B,
p.
101, below.
****
See
Table
14,
Appendix B,
p.
97, below.
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diversification of production by the end of 1957, when the industry
was producing a few automatic and precision machine tools. These
new types include single-spindle automatic lathes, transfer machines,
precision surface-grinding machines, automatic centerless internal
grinding machines, multitool semiautomatic lathes, and universal
tool grinders.L.92/ Semiautomatic gear shapers, ball bearing grind-
ing machines, Single-purpose machine tools for production of loco-
motives and for the metallurgical industry; multispindle lathes;
double-column vertical lathes; and double-housing planers were suc-
cessfully trial produced but had not entered serial production by
the end of 1958.
The simultaneous export and shortage of machine tools
indicates an insufficient range of types and slowness of the indus-
try to expand product mix. !.41_31 Thus the overabundance of machine
tools experienced by the Chinese Communists in 1957 did not consti-
tute an oversupply of all machine tools but only of the limited
variety that they produced.*
The machine-building industry registered few gains in
heavy machinery. The heaviest machine tool produced in Communist
China in 1956 weighed about 100 tons. LI" Production of heavy i.-
chine tools tools can increase considerably, however, because of the com-
pletion of the Wu-han Heavy Machine Tool Plant in 1958. Closely
related to this shortcoming is the lag of the industry in produc-
tion of metalforming machinery. Production of 2,500-ton presses was
only at the trial stages in 1958. Because metalforming machinery is
an essential requirement for metalworking processes, it is believed
that the Chinese Communists will place greater emphasis on this cate-
gory under the Second Five Year P1an'(1958-62). Most of the ma-
chine tools produced in Communist China in 1953-58 were copies of
Soviet or European Satellite models. Toward the end of the First
Five Year Plan, however, Chinese engineers were attempting some de-
gree of independent designing. L32/
?
3. Electrical Equipment
Production of various types of electrical equipment in-
creased considerably under the First Five Year Plan. From 1952 to
1955, such gains depended for the most part on the greater utiliza-
tion of existing plant facilities. By contrast, additions of
new capacity were responsible for the rapid advances in production
after 1955. This new capacity, including both new construction and
renovation, permitted the goals of the First Five Year Plan for
turbines, generators, motors, and transformers to be met a year ahead
* See II, H, 4, p. 52, below.
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of schedule. Large investments in Capacity for production of heavy
turbogeneratbrs were completed in Harbin in 1956 and 1958. The
construction and renovation that were completed in 1956 at the Harbin
Power Equipment Plant and the Shanghai Electrical Machinery Plant
brought the combined annual capacity of these two plants alone to
240,000 kilowatts (kw) of generators, or double the total capacity
in 1955. L32/ Marked increases in production of switchgear and wire
and cable in 1956 were due primarily to the completion of the Mukden
Low Voltage Switchgear Plant and the Mukden Electric Cable Plant.
Since 1952, there has been an impressive rise in the
rated capacity of the most important categories of electrical equip-
ment, as shown in Table 4.* Production is planned for both steam
and hydraulic turbogenerators with capacities, of up to 100,000 kw
each in the recently expanded H.rbin Power Equipment Plant. High-
tension transformers with a maximum load of 40,o00 kilovolt-amperes
(kva) were being produced in 1957. .?.:131
On completion of expansion about the end of 1955 the
Mukden Transformer Plant is expected to produce 123,500-kva trans-
formers. fi52 Communist China produces a fairly wide range of elec-
tric motors, including some as large as 1,900 kw for heavy steel
rolling mills and special types that operate under water and in
combustible and humid atmospheres. 22/ Numerous types of electric
instruments now are produced in Communist China. These instruments
include fuel gauges, water temperature and oil pressure gauges,
speedometers, and ammeters used by the Chiang-ch'un Automobile Plant
1 A limited variety of circuit breakers and switchgear was 50X1
turned out in 1953-57. Nearly all the new models of electrical
equipment introduced duringthis'period were copied from the Soviet
or the Satellite models.
In spite of considerable development in the electrical
equipment industry, Communist China supplies a relatively low per-
centage of its own requirements.** Moreover, the program for con-
struction of power stations was greatly accelerated in 1958 com-
pared with the rate which prevailed under the First Five Year Plan
(1953-57). 22/ It is expected that production of heavy electrical
equipment will lag behind these increasing demands for power genera-
tion under the Second Five Year Plan (1958-62). Plans call for
domestically produced electrical equipment to fulfill about one-
quarter of the requirements for new hydroelectric capacity and about
one-half of the requirements for new thermal electric capacity during
this period. Although the outlook for the supply for power
Table 4 follows on p. 35.
** See Table 24, Appendix B, p. 112, below.
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Table Ii-
Increase in Rated Capacity of Electrical Equipment Produced in Communist China
1952 and 1955-59
Commodity
Unit
1952
1955
1956
1957
1958
January-June
1959
Hydroelectric turbogenerators
Kilowatt
1,000
10,000
15,000
15,000
N. A.
72,000/
Thermal electric
Electric motors,
current
turbogenerators
alternating
Kilowatt
Kilowatt
2/
940
6,000
1,900
12,000
N. A.
12,000
N. A.
25,00012/
N. A.
50,000 I:1
Electric motors,
direct current
Kilowatt
300
1, 343
N. A.
N. A.
N. A.
2,800 12/
Transformers
Kilovolt-amperes
15,000
31,500
N. A.
40,500
N. A.
75,000 12/
c. No production of a complete turbogenerator.
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generating equipment with high capacity improved considerably as the
result of the expansion of the Harbin Power Equipment Plant in 1958,
it would require 3 to 5 years to build additional plants to manufac-
ture high-temperature and high-pressure generators of 25,000 kw and
thermal electric powerplants of more than 500,000 tg 700,000 kw. 96/
I. Other Power-Producing Equipment
Moderate improvements have been made in increasing vol-
ume and variety of production of nonelectrical power-producing equip-
ment, which includes basically diesel engines and boilers. In 1953,
ComMunist China began to produce 40-hp, high-speed, small-scale
diesel engines. By the end of 1955, 25 types of diesel engines
ranging in size from 8 to 400 hp were being produced. There was
also successful trial production of 165-hp, .a1-71 type, high-speed
diesel engines for both marine and land use. 22/ Although success-
ful trial production of a 600-hp marine diesel engine, the largest
diesel engine made in-Communist China, was reported in 1956L serial
production of this type of engine has not been confirmed. 21Y In 1958,
trial production of the first 450-hp diesel engine produced in Com-
munist China was completed. It is now planned that both 1,200-hp
and 2,000-hp diesel engines will be produced by 1961. 22/
Most of the diesel engines produced in Communist China
were patterned after Soviet or European Satellite models. For
exanple, the designs for the 600-hp marine diesel engine were based
on Czechoslovak and other data. 100/ The 90-hp diesel engine pro-
duced at the Tsinan Diesel Engine Plant is a copy of the Czechoslovak
Skoda model 4S160. 101/ In spite of the use of foreign technical
designs, the performance of Chinese engines has not always been up
to standard. Moreover, the Chinese have encountered serious problems
with regard to adequate fuel'supplies.*
New types of boilers also were produced under the First
Five Year Plan. Late in 1956 the major producing plant at Harbin
ssuccessfully produced a boiler with a steam-raising capacity of
35 tons per hour. 102/ A year later, this plant completed a medium-
pressure boiler with a capacity of 130 tons per hour.
5. Agricultural Machinery
The Peking regime placed considerable emphasis on in-
creasing production of agricultural machinery to supply the material
basis for the implementation of collectivization. Increases in pro-
duction during 1952-56 were based on a fairly sizable program of
See II, H, 3, b, p. 50, below, and IV, B, 7, p. 73, below.
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reconstruction and expansion.. In addition to the major agricultural
equipment plants, numerous handicraft cooperatives and small work-
shops made an important contribution. Production by individual plants
was small but loomed large in the aggregate, especially in the pro-
duction of traditional types of such hand Implements as spades,
rakes, scythes, picks, and hoes. Included in the total number of
units produced during 1950-57 were 2,023,000 two-wheel, one-bottom
and two-bottom plows; 1,950,000 walking plows; 1,790,000 waterwheels;
85,000 discs; 43,000 rollers; 64,000 drills; 457,000 cultivators;
19,000 horse-drawn harvesters; 454,000 rice threshers; 3,200,000 hand
sprayers; more than 530,000 hp of irrigation pumps; and other items.
Drawing heavily on Soviet experience, the Chinese Com-
munists pressed the development of equipment for use with tractors
before 1958. Such tractor-drawn machines included five-bottom and
three-bottom plows, cotton seeders, 24-row and 48-row seed drills,
cultivators, grain combines, disc harrows, three-bar mowers, and
fertilizer spreaders. Besides being heavily dependent on a high
level of mechanization that did not materialize during 1953-57, a
number of these Soviet types of machines proved to be entirely un-
suitable to Chinese soil and topographical conditions.- This factor,
combined with overproduction in 1956 and inadequate attention to the
popularization of the new equipment, led to severe cutbacks in pro-
duction in 1957.
In its effort to supply machinery suitable to the agri-
cultural conditions in all areas, the Peking regime continues to de-
velop new varieties of products. 104/ These products include paddy-
rice harvesters, cotton-planting machines, fertilizer-spreading
carts, and new models of combine grain harvesters. 105/ The "leap
forward" campaign of 1958 stressed the stimulation of initiative to
turn out simple agricultural equipment suitable for local needs.
Current plans call for a shift in emphasis from mechanized farming
to production of drainage and irrigation equipment, along with the
rapid expansion of production of chemical fertilizers. With some
rearrangements of facilities, production of pumps can be increased
considerably. The main problem is the motive power to be used for
the pumps. Electrical equipment plants can turn out numerous light
electric motors for irrigation, but this approach requires vast im-
provement in rural electrification. Because of limitations in fuel
supply, diesel engines cannot be used extensively. Production of
coal-gas and other engines using local fuels, now being rushed, prob-
ably will have significant effects in a relatively short time.
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6. Tractors
Extensive investments in new facilities for production
of tractors were made under the First Five Year Plan.
ties comprise the large, new Lo-yang Tractor Plant completed 50X1
in 1959, and the expansion, begun in 1957, of the Tientsin Tractor
Plant. The Lo-yang plant, although still unfinished, with less than
4o percent of its equipment installed, turned out its first proto-
type 54-hp diesel crawler tractor in July 1958.* 107/ The Tientsin
plant produced the first Chinese Communist tractor, the T-240, pat-
terned after the Soviet "Belarus," in April 1958. 108/
No tractors were produced until 1958, when 957 units
were produced. Plans for 1959 call for production of 3,000 trac-
tors. 109/ The Tientsin plant was scheduled to produce 150 tractors
in 1958 and may have a maximum capacity of 13,000 units per year. 110/
Originally designed to produce only the 54-hp crawler tractor at the
rate of 15,000 units annually, the Lo-yang plant now is said to have
the capacity for producing annually 30,000 units of various types,
including smaller multipurpose types. 111/ During the hectic "leap
forward" campaign of 1958, it was reported that tractors were being
produced at numerous smaller plants throughout China. This claim is
highly suspect. Only a few of these tractors are believed to be
genuine Chinese products, the others probably being superficially
altered foreign tractors or tractors hastily assembled from parts of
inoperative machines.
These facili-
7. Automotive Transport Equipment
Production of trucks began in 1956 with the completion
of the gigantic Ch'ang-ch'un Automobile Plant which is still 50X1
the only important producer in Communist China. This plant produces
the 4-ton, 6-cylinder, 90-hp, "Liberation" model** patterned after
the Soviet ZIL-150. During the first 2 years of operation of the
plant, only a stake-body type of truck was produced, but during 1958
several new versions were introduced. These versions included 4-ton
cross-country trucks, model SA-40 dump trucks, and trucks equipp'ed
with gas-generator units as substitutes for gasoline engines. In
addition, "Liberation" chassis have been fitted with bus bodies to
produce buses of roughly the same configuration and capacity as US
school buses.
* A copy of the Soviet DT-54 model.
** Variously referred to as the CA-10 or CH-10 truck.
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The production capacity of the Ch'ang-ch'un plant was
originally rated at 30,000 trucks annually on a two-shift basis, ac-
cording to Soviet planning norms. In April 1958, as the "leap
forward" campaign gathered momentum, capacity was determined to be
70,000 units. 112/ Finally, it was reported in November 1958 that
capacity for annual production could be raised_ to the fantastically
high level of 150,000 vehicles in 1959 with an additional investment
of 40 million yuan. 113/ Apart from this investment, which appears
to be extremely small, the foundation of the claim of 150,000 trucks
per year is not known. Although the maximum capabilities of the
plant are believed to have been considerably underestimated by Soviet
engineers, 114/ its known machinery park, particularly the 3,500-ton
press imported from the USSR, suggests an annual capacity of not
more than 60,000 vehicles.
The Ch'ang-ch'un plant has experienced continued diffi-
culty in procuring adequate supplies of materials. During 1957 and
most of 1958, there were critical shortages of cold-rolled steel
and steel alloys. 115/ In early 1957 the plant was operating only
in the morning on less than one shift a day. 116/ At that time,
46 percent of the steel required for production of trucks could not
be produced domestically. 117/ The Chinese Communists, therefore,
attempted to remedy the situation by importing cold-rolled steel
from the West and by experimenting with substitute materials which
could be produced domestically. Because only a few of the approxi-
mately 200 types of metal needed to produce a truck were available
in Communist China, the regime has depended on the USSR to supply
most of the remainder. It is believed that Soviet deliveries have
been irregular and at high prices. 118/ That the goal of producing
7,000 trucks in 1957 was fulfilled may indicate that the regime in-
curred further financial loss to increase imports of the necessary
materials rather than suffer the "loss of face" resulting from failure
to meet the goal for this important item. By the end of 1958 the
shortages of rolled steel and alloys were still restricting the rate
of production at the Ch'ang-ch'un plant, but the situation probably
was less critical than in the early months of 1957. 119/ Neverthe-
less, the plant remains completely dependent on foreign sources for
at least a few essential materials.*
Production of other types of motor vehicles is not of
great significance. About 500 three-wheel trucks with a capacity
of 1 to 1.5 tons each were produced in Shanghai in 1958. Shanghai
also turns out a number of jeeps similar to those produced in the US.
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A few trial models of passenger automobiles were produced in 1958.
A trial model of the "East Wind" six-seater passenger automobile,
which bears a striking resemblance to the Soviet "Volga" model, was
assembled at the Chlang-ch'un plant. The sudden appearance in 1958
of a passenger automobile industry, which as of 1957 was not scheduled
to produce its first automobile until about 1962, is regarded with
suspicion. It is believed that these automobiles were produced
mainly for purposes of prestige, with little prospect for serial
production j.n the near future. Designs for a second large motor
vehicle plant, to be located in Wu-han, were completed in 1958, but
construction has not yet been undertaken.
Chinese Communist capabilities for producing motor
? vehicles are reasonably satisfactory. There is capacity available
at the main truck plant for large increases in production, so that
by 1962 Communist China should be able to fill a large share of its
requirements.*
8. Railroad Transport Equipment
There were sizable increases in production of locomotives
and rolling stock under the First Five Year Plan of Communist China.**
These increases resulted from the reconstruction and expansion of
existing facilities and from increased efficiency. Since 1950 the
number of plants engaged in production of railroad equipment has
varied from year to year, depending on the needs of the economy.
The main producing plants, which were under the jurisdiction of the
First Ministry of Machine Building, accounted for all the locomotives
and about 70 percent of the freight cars produced during 1949-57.
The remaining freight cars were produced by various repair plants
subordinate to the Ministry of Railroads.
Cumulative production of mainline steam locomotives and
freight cars in 1953-57 fell slightly below the planned levels of
571 locomotives and 35,000 cars. Existing locomotive plants are being
expanded, however, and a new one under construction at Ta-t'ung has a
capacity of 400 units, which is more than twice the total national pro-
duction in 1956. Reconstruction and expansion will increase the ca-
pacity of the Dairen Locomotive and Rolling Stock Plant to 270 units.
Thus by 1960 these two plants alone will have a minimum capacity for
annual production of 670 units, more than enough to meet estimated
requirements for mainline steam locomotives through 1962. Two plants
producing freight Ars are being expanded and production is expected
to increase substantially thereafter. A new plant that can produce
* See V, B, p. 82, below.
** See Table 14, Appendix B, p. 97, below.
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500 railroad passenger cars per year is under construction at Ch'ang-
ch'un. The Chinese Communists consider passenger traffic of minor
importance, however, and it is believed that they do not intend to
produce passenger cars on a significant scale in relation to produc-
tion of freight cars.
Communist China produces a considerable variety of main-
line railroad equipment. In 1956 the following types were being pro-
duced: Mikado No. 1 freight steam locomotives, soft-seat and hard-
seat passenger and sleeping cars, mail cars, 50-ton gondolas, boxcars,
hopper cars, oil-tank cars, acid-tank cars, and refrigerator cars.
During 1956, production of 1-5-1 freight steam locomotives and
Pacific-6 passenger steam locomotives was undertaken.
The Chinese produced their first mainline diesel loco-
motive in 1958. Plans call for production of 200 diesel locomotives,
as well as 2,000 steam locomotives, during the period 1958-62. No
data is given for the planned production of electric locomotives.
Although such locomotives could be used profitably in Northwest and
Southwest China, they probably will be produced only to a limited
extent during 1958-62. During this period, Communist China will
produce most of its steam locomotives, while importing some diesel
and electric locomotives from the Soviet Bloc and the West. Imports
of passenger cars, special-purpose freiglit cars, particularly re-
frigerator cars, and narrow-gauge equipment probably will continue
but will become less significant as domestic production increases.
9. Metallurgical Equipment
Production of metallurgical equipment under the First
Five Year Plan of Communist China was very small and the range of
products limited. Some progress was made in producing equipment
for ore crushing and ore dressing, iron and steel smelting, and
coking. 121/ The first blast furnaces with capacities of 1,000
cubic meters each and open hearth furnaces with capacities of 185
tons each were turned out by the end of 1957. 122/ Although Com-
munist China was able to meet about 40 percent of its requirements
for smelting equipment, rolling mill equipment remained a critical
deficiency.* By the end of the Second Five Year Plan (1958-62),
when heavy machinery plants at T'ai-yuan and Fu-la-er-chi are to be
completed, the prospects for supplies of rolling mill equipment are
expected to be improved considerably. For the immediate future,
Communist China cannot produce oxygen-making equipment or the neces-
sary power equipment for the oxygen-smelting process of converter
furnaces.
* See Table 24, Appendix B, p. 112, below.
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10. Mining Machinery
Starting with production of small, simple mining machinery
in 1952, the Chinese Communists have gradually progressed to the pro-
duction of more complicated types. Various types of machinery pro-
duced under the First Five Year Plan include a Soviet model of a
coal-loading machine, mechanical conveyors, coal-washing equipment,
and drilling machines. 123/ Trial production of such heavy mining
machinery as "Donbass" coal combines, rock loaders, and electric
coal loaders reportedly took place during 1952-55, but it is doubt-
ful that serial production was undertaken by the end of 1957. 124/
Neither the volume of production nor the range of prod-
ucts was adequate for the extensive mining operations of Communist
China. In October 1956, Chen Yu, Minister of the Coal Industry, com-
plained that the country had neither sufficient large electric
shovels and electric locomotives for open-cut-coal mines nor other
types of equipment needed for coal shafts. 125/ Although trial pro-
duction of the first Chinese electric mine locomotive took place in
1958, Communist China must rely on imports of this commodity for
some time. Very significant improvement in the volume and variety
of production of heavy mining machinery is expected by the end of
the Second Five Year Plan as a result of the completion of the Lo-yang
Mining Machinery Plant in 1958.
New hydraulic mining techniques, which are now being
promoted, may require new types of machinery. The T'ang-shan Coal
Science Institute is designing special water pumps and studying needs
for new machinery for water removal.
11. Oilfield and Exploratory Equipment
Under the First Five Year Plan, Communist China de-
pended heavily on the USSR and Rumania for oil-drilling equip-
ment.* Although several plants in Shanghai were organized to pro-
duce drills, roller bits, sets of joints, and gate valves for oil
pipelines and an oil-drilling machine capable of boring 1,200 meters,
the level of production was not significant.** 126/ Since the com-
pletion of the Sian Geophysical Instruments Repair and Manufacturing
Plant in 1956 the supply of geological surveying equipment for the
petroleum industry probably has been fairly adequate. A hew petro-
leum machinery plant in Lan-chou, which was to be completed in 1959,
will enhance the presently limited capacity of China for.producing
drilling and refining equipment*** to support the present extensive
p. 81, below, and Table 24, Appendix B, p. 112, below.
See
V, A,
2,
**
See
Table
14,
Appendix B, p. 97, below.
***
See
Table
24,
Appendix B, p.
112, below.
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exploration for oil. Because of Chinese inexperience, however, several
years must elapse before the new capacity is fully exploited. It is
estimated, therefore, that a significant increase in production will
not be realized before 1961.
12. Textile Machinery
The development of the textile machinery industry to the
point of making Communist China virtually self-sufficient in such
equipment represents a notable achievement in machine building. Al-
though there were a number of plants in operation before 1949, the
machine-building industry succeeded in turning out many new types of
machinery, the more significant advances occurring since 1953. 127/
Substantial gains in production were obtained by consolidating small
machine shops into state-owned or state-managed plants.* Moreover,
the effort to increase production was greatly facilitated by the
availability of a labor force familiar with the repair and produc-
tion of textile machinery. Production was uneven during 1952-57,
having increased sharply in 1954, when the new Ching-wei Textile
Machinery Plant, the largest and most modern in China, went into
operation, and declined about 38 percent in 1955 because of a poor
cotton crop. A similar decline occurred in 1957, probably because
of overproduction in 1956 that satisfied a portion of the needs for
new construction in 1957.
Although Communist China has achieved self-sufficiency
in most cotton textile machinery and has exported complete sets of
this machinery to underdeveloped countries, it continues to import
other types of textile machinery. 128/ For example, during 1957-58,
Communist China ordered dyeing and finishing machines and wool tex-
tile equipment from the UK. 129/ Present, plans call for the attain-
ment of self-sufficiency in all types of textile machinery in 1960-61. 130/
Substantial progress has been made in producing automatic silk looms,
but there has been little development of machinery for production of
fabrics from artificial fibers. 131/
G. Labor Force and Productivity
By the end of 1957, there were 1,760,000 workers and employees
in the metal-processing sector of the machine-building industry of
Communist China. This number is roughly 27 percent of the labor force
employed in machine building and metalworking in the USSR. 132/
Under the First Five Year Plan (1953-57), more than 900,000 new
* The development and production of textile machinery is under the
jurisdiction of the Ministry of the Textile Industry rather than the
First Ministry of Machine Building.
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workers were employed in the metal-processing sector, a doubling of
the worker force,* and the relative importance of metal processing
as an employer of industrial labor increased significantly. Never-
theless, nonagricultural occupations, including machine building,
absorbed only a small part of the total increase in population dur-
ing 1953-57.** 133/
Under the impetus of general economic recovery and acceler-
ated investment, productivity per worker nearly doubled between 1952
and 1956.*** However, because of short-run cutbacks in production
and underutilization of capacity resulting primarily from shortages
of raw materials, productivity declined in 1957. (See Figure 1.****)
H. Problems of Production
1. Underutilization of Capacity -- SyMptoms and Causes
By the end of 1957, grave disproportions had developed
in the economic growth of Communist China. These disproportions were
particularly accentuated after the upsurge of production in 1956.
The extremely rapid development of machine building in relation to
other industries and sectors created imbalances in the demand for
products and the supply of raw materials that intensified the prob-
lem of underutilization in 1957 in such industrial sectors as those
producing trucks, locomotives, freight cars, small and medium diesel
engines, machine tools, deep-drilling machines, agricultural machin-
ery, textile machinery, steam boilers, electric motors, and trans-
formers. The First Ministry of Machine Buildingt planned production
valued at 2.31 billion yuan in 1957, but production valued at 3 bil-
lion yuan could have been attained, according to official statements,
if plants had been able to operate at full capacity. Thus about
23 percent of the capacity for production of these sectors of the
machine-building industry was not utilized in 1957. 134/ Accentua-
tion of the problem of latent capacity is illustrated in the rate
of utilization of metal-cutting machine tools in enterprises of the
First Ministry of Machine Building, as shown in the following tabu-
lation 135/:
* See Table 18, Appendix B, p. 102, below.
** The failure of the development policies of the Peking regime
to maximize employment is discussed below, III, B, p. 55.
*** See Table 19, Appendix B, p. 103, below.
**** Following p. 6, above.
t The First Ministry of Machine Building as it was constituted
before the reorganization of 1958. See Appendix C.
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Year
Percent of Utilization
1953
61
1954
58
1955
59
1956
75
1957
65
Factors which contributed to these difficulties are discussed in the
following sections.
2. Shortages of Raw Materials
One of the most serious manifestations of disproportions
in the industrial growth of Communist China was the widespread short-
age of raw materials. In 1955, about 66 percent of total machine
stoppage time was attributable to "no work," meaning lack of raw ma-
terials for the most part. The comparable figure for 1956 was 61
percent. 136/ An even higher rate of stoppage because of shortages of
materials in 1957 is probable. In addition, shortages of electric
power appeared in a number of important industrial areas. Such
shortages of materials and power were caused by errors in planning
connected with the speed-up in the program for construction in 1956.
The planners apparently failed to recognize the full impact on re-
sources that would come about as construction was accelerated and as
140 new plants and mines began operation in 1956. The target for
capital construction had been set too high in 1956, calling for ex-
cessive investment expenditures of 1.5 billion to 2.0 billion yuan,
which required additional supplies of 375,000 to 500,000 tons of
steel. In addition, about 150,000 tons of steel were wasted in 1956
in the overproduction of farm implements that were not suited to
Chinese agriculture. 137/
The basic reason for these shortages of raw materials was
the fact that the new machine-building plants which emerged toward
the end of the period 1953-57 caused a shift in the pattern as well
as an increase in the volume of demand. The inadequate development
of facilities for mining and dressing ore acted as a brake on fur-
ther expansion of production in the iron and steel industries. Al-
though significant advances had been made in production of rolled
steel, the iron and steel industry was unable to supply the increas-
ing variety of steel required by the advancing technological level
of Chinese Communist industry. 138/ For example, there were particu-
larly acute shortages of boiler steel plates, cold-rolled steel
plates, large steel products, and alloy steel products. 139/
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Thus the shortage of raw materials was not of a tempo-
rary nature. Moreover, trade adjustments could not cope with the
problem adequately, although they could have been better managed.
Under the First Five Year Plan (1953-57), it was possible in many
instances to satisfy demand for steel by supplementing domestic
production with imports. During 1953-55 the supply and demand for
steel generally was balanced through large imports of both steel
materials and machine equipment; and although supplies of some goods
(for example, medium plate) did not satisfy demand in these years
and there were slight surpluses of certain goods (for example, small-
scale steel materials), both state reserves and stockpiles increased
each year. In 1956, however, shortages of raw materials became ex-
tremely critical because of the particularly rapid increase in machine
building and in investment in capital construction. The result was
a greater increase in the demand for steel than in production of
steel, while at the same time imports of steel dropped and exports
increased. 140/
The machine-building industry of Communist China accounted
for approximately 25 percent of the total demand for steel in 1953-55
and approximately 30 percent in 1956-57. This percentage is very low
compared with that of industrially advanced countries and is perhaps
typical for an underdeveloped country beginning the process of indus-
tria3ization. In the USSR the machine-building industry for many
years has accounted for about 40 percent of the total demand for
steel. In the US this percentage was between 35 and 37 percent an-
nually from 1947 to 1954, and in Japan it was about 39 percent from
1936 to 1940. The main reason for the lower percentage in China is
that under the First Five Year Plan a great deal of. machinery was
imported, while at the same time large basic construction resulted in
relatively large allocations of steel for building and installation
and a correspondingly low allocation of steel for processing in the
machine-building industry. 141/ As more industrial projects for the
'machine-building industry were brought to completion in 1956-57 the
demand for steel for actual processing increased rapidly.
The abrupt changes in the balance between the machine-
building industry as a consumer of raw materials and those segments
of the economy producing raw materials and power are reflected in
the comparative rates of growth for the machine-building, steel,
and electric power industries. Indexes of production by these in-
dustries in 1952-57 are shown in Table 5.*
* Table 5 follows on p. 47.
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Table 5
Indexes of Production by Selected Industries of Communist China
1952-57
1952
= 100
Industry
1952
1953
1954
195,5
1956
1957
Machinery and equipment
manufacturing.../
Finished steel 12/
Crude steel 12/
Electric power 12/
100
100
100
100
154
134
132
126
189
157
165
151
216
200
212
169
411
353
331
227
426
403
396
264
a. Data are based on value of production, as shown in Table 13,
Appendix B, p. 96, below.
b. Data are based on volume of production
As shown in Table 5, the growth of the machine-building
industry of Communist China was in fairly even balance with that of.
'crude steel and finished steel through 1955, which coincided with a
fairly even distribution of steel products between transportation,
construction, and machine building. The disproportionate advance of
machine building in 1956 disturbed this balance and caused widespread
shifts in the allocation of steel products. As a consequence, in-
vestment in the machine-building industry was cut back in 1957. It
was also planned to cut back production somewhat, but this plan did
not materialize. The rapid expansion of machine building, howevery
was brought practically to a standstill, thus affording time for the
iron and steel industries to catch up partly, so that by the end of
1957 a better balance was restored. The disproportionate increase
in production by the machine-building industry in 1957 was greater
when compared with that of crude steel and less when compared with
that of finished steel.*.
The index of production by the electric power industry
of Communist China shows a consistent lag behind that for the major
* Because finished steel includes some recirculated scrap, it is
believed that the comparison between machine building and crude steel
is more meaningful. Moreover, there is firm evidence from official
sources that figures for finished steel involve some double-counting
of billets and therefore show an unduly favorable comparison with
machine building. 143/ The extent of the distortion is not known.
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consuming industries. It was reported that in 1956 a total of 23
industrial districts were not receiving adequate power, the more
important districts being Peking-Tientsin-T'ang-shan, Tsinan, Sian,
Cheng-Chou, Ch'eng-tu, Chungking, and Canton. 144/ For strategic
reasons the Chinese decided to build up industries in the interior
and, according to a Communist economic journal, it was expected that
one-half of the country would be faced with a shortage of power by
the end of 1957. 145/ At the end of 1958 the shortage of power in
industrially important Northeast China was severe. The iron and
steel industry and the machine-building industry, followed by the
chemical industry, were given priority in the consumption of elec-
tricity. Nevertheless, in spite of strict rationing, these same
industries suffered reductions in production. 146/
many of the older
and most important industrial areas, where shortages of power have
been acute and Where there is the greatest capacity for adjusting
power load through grid systems. The shortages, however, have not
been quite uniform throughout China. In some inland areas, for
example, the expansion of electric-generating capacity has actually
kept ahead of industrial requirements, and there is concern that a
shift in economic policy toward greater dependence on existing indus-
trial bases will result in underutilization of this capacity. Never-
theless, shortages of power in the major industrial areas remain one
of the most serious hindrances to economic growth.
According to official statistics, several bureaus under
the First Ministry of Machine Building consumed the following amounts
of iron and steel for each 10,000 yuan value of production in 1955 148/:
Average per 10,000 Yuan
Bureau
All machine building
Second Machine Bureau (lathes and tools)
Third Machine Bureau (heavy-duty and
mining machinery)
Locomotive Engine and Vehicle Bureau
Bureau of Electric Appliance Industry
All
Ferrous Metals
5.33 tons
3.7 tons
13.0 tons
8.6 tons
1.1 tons
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Finished
Steel
1.4 tons
0.1 ton
1.9 tons
3.5 tons
0.3 ton
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The estimates of 5.33 tons and 1.4 tons in this tabulation imply an
annual requirement for the machine-building industry as a whole of
1,615,000 tons of ferrous metals, including 424,000 tons of finished
steel products.* Statistics for the latter part of the First Five
Year Plan indicate that the machine-building industry required 1.5
tons of rolled steel per 10,000 yuan of finished machinery products,
or about 450,000 to 900,000 tons annually. 149/
The critical shortage of raw materials has had signifi-
cant repercussions in plans for the machine-building industry and
is believed to have caused the reduction of investments in certain
less essential machine-building plants in early 1957. For example,
investments in the construction of the Tientsin Tractor Plant and
the Peking Lathe Plant were suspended, and those in the Lo-yang
Tractor Plant and Wu-han Heavy Machine Tool Plant were re-
duced. 150/ During 1953-56, more investment had been allocated to
machine building than to the steel industry. In view of the scar-
city of iron and steel and the existence of considerable latent
capacity in the machine-building industry, it was decided that in
the plans for 1957 the allocation of investment should favor pro-
duction of steel at the expense of machine building. 151/
Shortages of raw materials persisted in 1957 in spite of
these corrective measures. In August 1957, it was announced that
investments in capital construction in the machine-building industry
would be reduced in 1958 compared with 1957 and that the vigorous
development of industries producing raw materials, fuel, and electric
power would be stressed.**
3. Limitations in Capacity to Absorb Domestically
Produced Machinery
Underutilization of productive capacity in the machine-
building industry of Communist China also was caused by the inability
of the economy to absorb the maximum production of some machinery
products. Plants producing lines such as small- and medium-size diesel
engines, some types of metal-cutting machine tools, deep-drilling ma-
chines, agricultural machinery, textile machinery, steam boilers, and
electric motors and transformers either did not operate at capacity
or, as a consequence of overproduction, were forced to curtail pro-
duction. 1.52/ Factors which contributed to this development are
discussed below.
* For the value data for the machine-building industry on which
this estimate was based, see Table 13, Appendix B, p. 96, below.
** For further details, see the discussion of the Second Five Year
Plan in IV, B, 1, p. 65, below.
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a. Limitations in Product Mix
The capacity of the machine-building industry to
produce ordinary low-grade equipment is comparatively large and, in
some instances, actually exceeds national requirements. At the same
time, Chinese plants are weak in the techniques and facilities neces-
sary for production of the large, complicated machinery required for
the program of capital construction. As a result, the economy was
unable to utilize fully the existing capabilities of the industry,
while the industry could not meet the requirements of the industriali-
zation program, thus necessitating heavy imports to supply the short-
age. For the most part, the development of new products was slow
under the First Five Year Plan (1953-57).
b. Low Priority for A.griculture and Light Industry
In the formulation of the First Five Year Plan,
Chinese Communist planners paid lip service to the interdependence
of heavy industry, light industry, and agriculture. Relatively lit-
tle investment, however, actually was allocated to these sectors .
during the plan period. Consequently, the Peking regime made only
limited concessions to the needs of agriculture and light industry
for machinery and equipment. Notwithstanding the fact that the
economy was nearly totally planned and therefore had complete con-
trol of supply and demand, the policy of slighting investment in
agriculture and light industry may have been somewhat self-defeating.
In view of the economic Importance of these sectors, their potential
as outlets for machinery is considerable. There might have been
less of a problem of overproduction in certain low-grade lines of
products if agriculture and light industry had been allocated more
investment to absorb machinery under the First Five Year Plan. In
1957 the Peking regime became genuinely concerned about the lag in
agricultural growth. In a general reaffirmation of the importance
of agriculture, the regime rediscovered (1) its heavy dependence on
this slowly growing sector, both as a source of capital for invest-
ment and as a market for the products of heavy industry, and (2) the
necessity of accelerating the development of agriculture in order to
avoid retarding the program for industrialization. 153/ These points
were stressed by Mao Tse-tung in his famous speech on "contradic-
tions." 154/
In some cases, declines in the demand for machin6ry
reflected not a reduction in the absolute level of production in con-
suming industries but rather a cessation or decline in the rate of
growth of these industries. For example, periodic failures of crops
necessitated a reduction in the rate of increase in production of
textiles. The decline in production of textiles, in turn, reduced
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the demand for textile machinery for purposes of expansion. In 1953,
1955, and 1957, production of cotton-spinning machinery actually
fell below the level of the previous years, and in 1955 and 1957 the
same was true for production of cotton looms.* Diesel engines are
a somewhat analogous case. Because of the shortage of diesel fuel
and the high cost of imported fuel, diesel engines cannot be widely
used. 155/
The Peking regime has shown a marked tendency to
export capital equipment that cannot be absorbed readily by the
economy. That Communist China, a country poor in capital, should
export machinery produced at a high cost and sell it probably at a
loss is a measure of the fundamental dislocations and failures of
planning within its economy.
c. Excessive Use of Foreign Equipment
The considerable underutilization of capacity in
the machine-building industry of Communist China during 1957 was
attributed in part to discrimination in favor of foreign equipment,
which resulted in an insufficiency of orders for domestic plants. 156/
Since early 1957 the Chinese Communists have expressed increasing
dissatisfaction with the results of heavy dependence on Soviet advice
and rigid adherence to Soviet designs. This policy caused excessive
demand for imported equipment, which placed an additional strain on
the Chinese balance of payments. Toward the end of the First Five
Year Plan, reliance on imported capital goods actually conflicted
with the development of markets for domestic machinery. 157/
A number of factors contributed to the excessive de-
mand for Soviet capital equipment. The very fact that the Chinese
Communists sought a rapid advance to the highest technical levels
meant that the productive possibilities of the existing plants, most
of which were at a very low technical level, were neglected. 158/
Moreover, the Chinese Communists themselves admit that they "over-
stressed specialization and regularization," 159/ indicating that
the failure to make full use of domestic machinery was attributable
in part to rigidity in the application of Soviet industrial specifi-
cations, which called for highly specialized techniques and standard-
ized equipment. In addition, the presence of Soviet advisers through-
out the planning hierarchy naturally encouraged the use of Soviet ma-
chines and techniques. Another factor tending to increase the use of
Soviet capital equipment is the fact that Chinese planners borrowed
such Soviet planning aids as productivity norms for machinery. Be-
cause these indexes were based on Soviet equipment, the Chinese
* See Table 14, Appendix B, p. 97, below.
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probably desired that Soviet equipment be used for the sake of
standardization. 160/ Finally, there was a strong preference on
the part of some Chinese planners for foreign, particularly Soviet,
equipment and a lack of faith in the quality of the domestic substi-
tute. 161/
4. Limited Capability for Independent Designing
The effects of limitations in the product mix were aggra-
vated because of the inability of the machine-building industry of
,Communist China to respond to changing needs for new types of equip-
ment. It is also possible that Chinese Communist planners overesti-
mated the capacity of agriculture and light industry to absorb the
types of machinery and thus could have selected too large a scale of
production. Much inflexibility, however, was built into facilities
for production as the result of too much stress on specialization,
adherence to Soviet designs, and reliance on Soviet specialized
equipment. A number of machine-building plants were designed to
produce only one product or a limited range of products. It was
found, however, that a considerable variety of such items as agri-
cultural machinery and machine tools were needed to satisfy the
diverse needs of such a large area as mainland China and that the
limits of the market for any one type soon were reached. A major
problem in production arose because the Chinese went directly into
large-scale production of certain items before they had improved
their capabilities for independent designing. Otherwise, their pro-
duction system would have had greater flexibility, which would have
permitted, as a matter of course, shifts from model to model or even
to production of other items as temporary imbalances occurred.
Before 1949, both the level of production and the tech-
nology of the machine-building industry were low. As the result of
extensive aid from the Soviet Bloc, however, Chinese technical capa-
bilities have gradually improved. One of the goals of Communist
China was to manufacture machinery suitable to the land and people.
Insofar as possible, this goal was to have been accomplished by using
materials produced by the Chinese in machinery designed by themselves.
In practice, however, the Chinese produced or designed important ma-
chinery and equipment by adopting the specifications established by
the Soviet Bloc or requested these countries to do the designing. Not
only was time wasted but also very often the equipment was unsuited
for conditions in China.
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The machine-building industry of Communist China is not
in a satisfactory position with respect to designing its own ma-
chinery and adapting foreign machinery to Chinese conditions. Tech-
nical designing has begun to emerge from a period of imitation, but
the process is a slow one. The present limited capability for in-
dependent designing constitutes a serious handicap in undertaking pro-
duction of heavy and precision machinery. Furthermore, the transi-
tion is made more difficult because confidence in the previous guide
to technical progress, the example df economic development in the
USSR, has been shaken by the difficulties experienced in applying
Soviet techniques to the peculiar conditions in China.
5. Shortage of Skilled Labor
When the Peking regime launched the program of industrial-
ization, it was immediately apparent that one of the most serious
obstacles would be the shortage of skilled workers and technicians.
Plans for large-scale economic construction demanded technical skills
that were extremely scarce. The rapid influx of new workers into
the machine-building industry during 1953-57 presented a very serious
training problem.* The Chinese Communist stress on advanced tech-
nology required highly skilled workers -- although in relatively small
numbers -- and training was facilitated by wholesale imitation of
Soviet technology.
To overcome the general shortage of skilled and technical
manpower, the Chinese Communists used foreign technical assistance,
a system of strict allocation of available technicians, intensive
on-the-job training, and a greatly expanded educational program. 164/
The First Five Year Plan (1953-57) called for an admittedly inade-
quate_but relatively ambitious increase of 174,000 in the number of
specialists and skilled workers in machine building. 165/ In spite
of these measures, however, the level of technical experience was
still low at the end of 1957. This problem is one of the main fac-
tors restricting the expansion of production of heavy-duty and pre-
cision machinery. 166/ Moreover, the inexperience of the labor
* See II, G, p. 43, above.
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force -- along with poor management and excessive pressure onplant
personnel to reach and exceed the high goals for production -- has
contributed to the faulty Maintenance of equipment observed in many
machine-building plants. 167/
6. Low Quality
Although the Chinese Communists achieved noteworthy
increases in the volume of production of machinery and equipment
under the First Five Year Plan, the quality of production often
was below standard. This is not to say that all the machinery and
equipment produced in Communist China during this period was of
poor quality, but the need to improve quality was so great that it
was often stated by the Chinese themselves to be one of the most
serious problems in the machine industry.
The inferior quality of machinery and equipment may be
attributed to the following factors:
a. Lack of emphasis on quality. Much emphasis was
given to the fulfillment of quotas for volume and value of production
and to production of new types of machinery and equipment, but very
little emphasis was given to the quality of products.
b. Lack of standards for quality. In many instances,
there was a failure to specify accurately and clearly the standards
and technical requirements for the products.
c. Insufficient research. Many plants allowed
full-scale manufacture of products without adequate research and
development, with the result that products failed to meet standard
specifications.
d. Poor inspection. Although there are inspection
sections in the plants, there has been a serious shortage of quali-
fied inspectors. 168/
e. Poor quality of raw materials. In some cases
the raw materials used were of poor quality and resulted in inferior
finished products. 169/
The Chinese Communists have become increasingly aware of
the need for improving the quality of the machinery and equipment that
they produced. Numerous statements have been made by Chinese leaders
on the importance of improving quality. ? In 1957 it was reported that
the idle time of workers resulting from the shortage of raw materials
would be spent on improvements in quality. 170/. Moreover, it is
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reasonable to assume that the experience gained in machine building
under the First Five Year Plan will aid in improving quality in
future production. On the other hand, serious shortages of raw ma-
terials and the use of inferior substitute materials probably will
continue to be a major problem in any attempt to improve the quality
of machinery and equipment.
III. Evaluation of the Machine-Building Industry (1953-57)
A. Progress Toward Chosen Objectives
In terms of the objectives to which Chinese Communist leaders
dedicated themselves,* the progress of the machine-building indus-
try under the First Five Year Plan was gratifying. Through heavy
investments in large, modern plants the Chinese Communists had greatly
enhanced their prestige and military power, had accelerated economic
growth, had markedly improved their economic independence, and had
provided a stronger material base for the consolidation of political
Controls over Chinese society. Although the Chinese mainland still
was predominantly agrarian, the advance toward an industrialized
society in the short span of 5 years was unprecedented. Thus the
decision to give priority to the development of heavy industry ap-
peared to be amply vindicated. Even though this investment policy
has been largely responsible for the lag in agricultural growth, it
remains a firmly fixed principle of the regime. Recently, however,
adjustments have been made to increase support to agriculture by
heavy industry.**
B. Detrimental Effects of the Pattern of Development
Notwithstanding the positive results of Chinese Communist
decisions on investment, the manner in Which the development program
was carried out had certain detrimental effects on the economy as a
whole. These effects are particularly noteworthy because they re-
veal important reasons for the drastic shifts in economic policy
under the Second Five Year Plan.***
Instead of allocating adequate resources for investment in
quick-yielding projects, the Chinese concentrated almost entirely
on slow-yielding investments in large-scale heavy industrial
plants.**** In addition, uncoordinated planning of the timing of
the completion of investment projects in subsidiary and related in-
dustries often made it Impossible to make full use of completed
See I, A, p. 4, above.
See IV, B, 1, p. 65, below.
See IV, p. 63, below.
See I, E, 3, p. 15, above.
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facilities. Such uncoordinated planning has taken place in the machine-
building industry of Communist China, where, fOr example, Ch'ang-ch'un
Automobile Plant No. 1, which cost 600 million yuan to build, operates
at a fraction of its rated capacity because of insufficient supplies
of critical materials.
Another effect of slow-yielding investments is the slower
increase in industrial employment. By emphasizing modern, large-
scale, capital-intensive plants, Chinese Communist industrial plan-
ners used the bulk of their scarce capital in investments that
made relatively little use of the enormous supply of manpower in
production, as distinguished from construction. The machine-
building industry became increasingly capital-intensive under the
First Five Year Plan (1953-57). Most of the new plants were hielly
mechanized.* There is evidence that greater employment could have
been obtained by the investment of the same amount of capital in
small-size and medium-size plants. 171/
In addition, as a consequence of the inability of the machine-
building and other industries to absorb the increase in manpower,
the Chinese Communist economy experienced a slower rise in national
income. An article in a Chinese magazine contained the following
illuminating statement:
According to statistical data, the per capita
equipment of the workmen in our country in terms
of fixed assets is assessed at 5n average of7
4,000 to 5,000 yuan; in the case of modernized,
big industry, it is around 10,000 yuan, while in
medium and small industrial undertakings where
light machines are used, each workman is equipped
to the extent of 2,000 to 3,000 yuan. The aver-
age value produced by each workman annually is
14,000 to 15,000 yuan in modernized, big industry,
or 7,000 to 8,000 yuan in medium and small indus-
try. However, as in big industry the capital of
10,000 yuan is just enough to equip one workman
and in medium and small industry the same amount
can equip three to five workmen, every 10,000 yuan
of fixed assets in modernized big industry nets
14,000 to 15,000 yuan in terms of values produced
annually, whereas the same amount of fixed assets
in medium and small industry nets 20,000 to 30,000
yuan annually in terms of values produced, small
See II, B, 2, p. 18, above.
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industry faring a little better than medium in-
dustry. Under the present conditions in our
country, apart from building a few technically
advanced large enterprises, we must therefore
launch more small enterprises that require small
investment and produce quick results in order
to bring about an effective increase of the na-
tional income. 172/
This quotation strongly suggests that the increase in na-
tional income could have been greater if the newly created plants
had been less capital-intensive. Although the state would have.
realized a lesser improvement in labor productivity per industrial
worker than with larger concentrations of capital, larger over-all
gains in production and in productivity would have resulted from
the larger number of workers employed in industry. This fact fol-
lows from the markedly higher productivity of workers in industry
compared with those of agriculture. 173/ A Chinese writer for a
Soviet economic journal in 1957 made the statement: "In such a
country as China the most important factors for increasing social
accumulation are maximal absorption of labor resources into pro-
duction and the regime of the economy." 174/ Plans for the de-
velopment of the machine-building industry announced since 1957 have
emphasized increased inputs of labor.*
In summary, the patterns of investment in the machine-building
industry under the First Five Year Plan, by following closely the
Soviet model and by adopting Soviet technology wholesale, hindered
full use of economic resources, particularly labor. As a result, na-
tional income and accumulation of capital for further investment
were lowered to the extent that it would have been feasible to in-
vest in a less concentrated fashion in development of the industry.
Given the overriding goals of rapidly establishing a large, heavy
industrial base and assimilating advanced technology, substantial
reliance on large-Lale modern enterprises was indispensable. Never-
theless, in retrospect it appears that this policy was pursued to
excess., and it is clear that by the end of 1957 the Chinese Communists
saw the need for some modifications.
C. Applicability of Soviet Technology
, As production technology in the machine-building industry of
an underdeveloped country advances and the product mix expands, in-
creased Importance is placed on the casting, fabrication, and ma-
chining of large work pieces that will satisfactorily meet the design
* See IV, B, 5, p. 71, below.
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specifications. As the technological progress continues, higher
standards of precision are attained; parts of both very small and
large dimensions are finished to increasingly close tolerances, and
the use of more specialized metals and alloys is mastered.
Although historically the initial emphasis in technical im-
provements has been on increasing the. variety and complexity of
products, technology in machine building is concerned also with
development of more efficient methods of production. This search
for efficiency has been, essentially oriented toward saving labor,
particularly in areas where wages are high, but other important
cost factors, such as the reduction of inputs of materials, have
figured prominently.
In Communist China, which has started the process of wide-
spread industrialization at a relatively late period, technological
advancement is occurring in a number of areas simultaneously -- for
example, in production of models of greater capacity, in produc-
tion of products requiring much greater precision, and in the in-
troduction of more efficient techniques and processes of production.
Chinese Communist experience suggests that Soviet technology is not
always appropriate for an economy with surplus labor. Sweeping
generalizations in this'field tend to be somewhat hazardous because
various levels of technology are found in the Soviet economy, and
technology that is advanced by Soviet standards may be more appro-
priate under Chinese conditions in one industry than in another.
The existence of technological alternatives between labor and capi-
tal, however, now is recognized by Chinese planners.
In attempting to make greater use of their labor resources,
the Chinese Communists can control both the range of products and
the processes of production. In some cases, advanced technology
may be linked so intimately with a more efficient and sometimes
unique process of production that the choice of means to achieve
this process may be very limited, and neither the required quantity.
nor the quality can be Obtained by cruder methods of production.*
Therefore, rolling mills, for example, must be imported or produced
when Chinese goals call for expanding production of iron and steel.
In addition, Communist China has decided to produce at an early
stage of its industrial development most of the common types of ma-
chinery and equipment such as machine tools, trucks, tractors, and
* The difficulties experienced by the Chinese Communists with the
extremely low quality and usability of pig iron produced by crude
"native-style" blast furnaces are instructive in this respect. The
regime now speaks of "small, modern furnaces," indicating that their
range of technological choices lies mainly in scale.
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electrical machinery. China retains the option, however, of empha-
sizing the fairly simple type and sizes that can be produced with
minimum amounts of capital equipment and the lower skill levels
that are characteristic of its labor force. Such a policy economizes
on equipment, labor skills, and, probably more important, on scarce
designing and engineering talent. Moreover, the Chinese Communists
face important choices as to complexity and specialization in machine
building. Much of the equipment that they need does not require great
precision in production and can be produced in batches. Other types
of equipment require too much precision or are so specialized that
only small quantities are required. In either case it probably would
be worthwhile for China to import such types rather than to expend
a disproportionate effort in attempting domestic production.
At the same time, Communist China can economize on the use
of complicated capital equipment in all of the industrial processes
associated with machine building. The most obvious area for saving
is in the use of labor instead of equipment for the intraplant trans-
fer of all raw and semifinished materials except very heavy items.
Increased employment of labor could also be achieved by redesigning
the product to permit the greater use of labor in performing more of
the simple industrial operations, by using less machinery in produc-
tion, and at the same time, using general-purpose machinery to reduce
the requirements for complicated specialized and automatic machinery
and auxiliary equipment, which often has a high rate of obsolescence.
The recognition of these alternatives by Chinese planners
is indicated in the following statement:
The most advanced equipment, it is true,
has the advantage of high efficiency, better
quality of products, low cost and less manpower
employed, but such equipment calls for a highly
developed machine-building industry and more
investments and takes more construction time.
The present conditions of our country are such
that our capital is limited, abundant manpower
remains to be utilized, and the technical level
of the machine-building industry is too low to
make such advanced equipment. To adopt too much
of the most advanced and automation equipment
will, on the one hand, call for Imports of more
equipment and, on the other, prevent the produc-
tion capacity of our machine-building industry
from being exploited and its technical level from
being rapidly elevated. 175/
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The problem of technological alternatives is closely linked
with the problems of scale and obsolescence. The use of simpler
techniques permits considerable freedom to vary the scale of produc-
tion. In market economies a reduced scale of production may be the
only one which is economically feasible, as shown by the following
statement:
Modern technology ... tends to be designed
for large-scale production units, whereas the
narrower market in poor countries dictates
small-scale operations; this may require that
the large-scale production process be broken
down into amaJler scale and simpler procedures
which involve a reduction in the degree of
mechanization. 176/
Similar choices of scale of production may also be necessary for
underdeveloped countries, even though they operate under a planned
economy. The inability or unwillingness of Communist China to
spread investments broadly in agriculture and light industry has
had effects similar to market restrictions, which confront certain
branches of the machine-building industry with difficult problems
of selecting the optimum scale of production. The same principle
does not necessarily apply to all consumer goods merely because per
capita purchasing power is low. Countries with a large population
may be able to sustain mass production of certain consumer neces-
sities, in spite of widespread poverty, by tapping the large aggregate
purchasing power of small individual consumers who are attracted by
goods of suitable quality at low prices.
Moreover, large-scale production and a high degree of mech-
anization are associated with a high rate of obsolescence. It is
interesting to contrast the Chinese Communist experience with Soviet
technology in this respect with the plan for Chinese industrializa-
tion after World War II that was drawn up by the former US Foreign
Economic Administration. Taking account of the problems of scale
and obsolescence, the US plan proposed that -- although in the US,
where all factors favor large-scale production, the average invest-
ment required per man employed was $10,500 (in wartime prices) --
the average investment in China should be only $6,000 per man em-
ployed. In scale of operation, China and the US were compared to
the Studebaker and Ford corporations, respectively.
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The Studebaker organization is tremendous by
non-American or even by non-Detroit standards.
But, alongside the Ford organization, it is small.
The Ford Company has a production volume large
enough to make the cost of new equipment nominal;
it puts a premium on the value of specialized,
single-purpose machines and accelerates the rate
of obsolescence of entire batteries of mutually
supplementary machines. Studebaker, on the other
hand, with less than 25 percent of Ford's produc-
tion, needs much less automatic and specialized
tooling than Ford ... . Each organization uses
the type of equipment that is most efficient for
its purpose and that involves the most satisfac-
tory rate of obsolescence. 177/
Accordingly, the US plan emphasized those types and sizes of equip-
ment the obsolescence of which could be controlled most easily until
China could acquire the facilities for replacements and the maintenance
of which was simple enough to offset the lack of repair facilities and
skilled labor.
D. Implications of Chinese Experience for Communist Economic
Theory
From the point of view of the Chinese Communists, rapid eco-
nomic development, although the main consideration, was not the only
one. It may be tempting to judge Chinese performance by Western
standards, but such procedures are to a large extent invalid, because
Western concepts are often irrelevant to the totally planned economy.
Western judgments of performance require reference to economically
rational criteria.for the selection of the most efficient or produc-
tive of alternative choices for investment. In the Communist economy,
however, the scope for the application of strictly economic criteria
is very limited because overriding state Objectives, which are decided
essentially by a political process, invariably predetermine the broad
outlines of development. Whereas Western theory stresses immediate
productivity of investments without regard for the type of investment,
Communist economic criteria are allowed, for example, to suggest no
more than the most productive means to fulfill set plans for expand-
ing production. Nevertheless, there is usually some room for the
application of economic criteria, for economic policymakers of the
higher echelon cannot make all the decisions pertaining to choices
for investment in a complex economy. ,A planning bureaucracy must
step in at some point to develop specific and detailed plans for im-
plementing the directives of higher authority. In this sense, then,
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it may be asked whether or not investment choices in the machine-
building industry were made wisely under Soviet guidance.
By both Western and Communist standards, Communist China
undertook prematurely too many new projects that could become pro-
ductive only after several years, whereas a number of investments
in the reconstruction of existing facilities, which could have
yielded relatively quick returns in higher productivity, were over-
looked. Moreover, criteria that took account of the abundance of
labor in China would have dictated more labor-intensive projects
and fewer capital-intensive projects. Although no orthodox Chinese
Communist would permit such considerations to place light industry
above heavy industry, it is very significant that there is con-
siderable latitude for the application of labor-intensive techniques
in heavy industry, as the present plans for small and medium-size
plants now show.
The necessity of foregoing a Wholesale advance to the highest
level of technology may make it exceedingly difficult for the Chinese
Communists to adhere to certain aspects of orthodox Soviet economic
theory. According to Marxist theory, all value is created by labor,
and capital does not create value, as such, but merely represents
past or "stored up" labor. As a corollary to this principle, the
,relative effectiveness of investment projects is measured in terms
of improvements in labor productivity or, more precisely, in savings
of inputs of labor value. 178/ Thus, in theory at least, there is
an inherent bias toward a high degree of mechanization in the Soviet
economic system.* 179/ Emphasis on mechanization suits conditions
in the USSR reasonably well, inasmuch as industrial labor tends to
be relatively scarce. In China, however, where labor is super-
abundant and capital is relatively scarce, the drive to achieve sav-
ings in labor value, in the Marxist sense, need not be pressed for
the sole purpose of conserving manpower. Therefore, theory in the
Chinese- context should provide criteria for economizing the use of
* That Soviet leaders do not rigorously apply this theory in actual
practice should not necessarily be construed from their present de-
ficiencies in mechanization and automation. They readily admit that
they lag behind the US in many fields of automation, that their am-
bitious plans for introducing new equipment have not been fulfilled,
and that there are certain heavy restraints in the economy which
militate against the rapid elevation of the technical level of indus-
try. In relation to the former state of development of Soviet in-
dustry, however, considerable progress toward automation has been
made. Moreover, current Soviet .policy places great emphasis on mech-
anization and automation, which was one of the main topics of the .
Plenum of June 1959.
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capital. The attempt to grapple with the economic facts of life
within the framework of orthodox Marxist theory has forced the
Chinese into such tortuous paths of reasoning as the following:
In suggesting that in certain fields we do
not need to try to attain a high level of mech-
anization and should not merely consider the
improvement in labor productivity, we do not
mean to say that we do not need to raise labor
productivity. What we mean is that, in making
arrangements for construction projects, we can-
not merely consider the improvement of labor
productivity, although the existing and the newly-
established enterprises should retrench personnel
and make efforts to increase labor productivity. 180/
There is also evidence that the Chinese have started a campaign to
convince Soviet economists that a more labor-intensive approach
geared to Chinese conditions and based on smaller-scale undertakings
is not in conflict with Lenin's theories that large-scale industry
must form the material-technical basis of socialism. 181/
IV. Development Under the Second Five Year Plan (1958-62)
? A. Foreign Economic Assistance and Its Implications
At the end of the First Five Year Plan (1953-57) the founda-
tion of the Chinese Communist machine-building industry was, gener-
ally speaking, still weak. In spite of the construction projects
that had been undertaken, some important sectors of the industry were
not developed. Among these sectors were those producing heavy-duty,
forge-press equipment; steel-rolling equipment; nitric fertilizer
equipment; cement equipment; diesel and electric locomotives; equip-
ment for making artificial and synthetic fibers; precision lathes
and measuring instruments; scientific instruments; and instruments
for automatic control. In order to correct these deficiencies, as
presently intended, substantial investments are required, particu-
larly in heavy and precision machinery and chemical-engineering
equipment, during the remaining period of the Second Five Year Plan.
Although medium and small machines were overproduced in 1957, the
plants turning out this equipment cannot easily be diverted to pro-
duction of heavy and precision machinery, because of restrictions
in equipment and technical force. The lack of heavy machinery capac-
ity will be considerably alleviated when projects begun under the
First Five Year Plan are completed by 1961. The scientific instru-
ments and chemical-engineering equipment industries, however, were
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relatively neglected up to 1958 and must be greatly expanded under
the Second Five Year Plan.
According to the terms of the Sino-Soviet agreements on eco-
nomic assistance in August 1958 and February 1959, the USSR agreed
to build for Communist Cliina 125 industrial enterprises in addition
to the remainder of the projects prescribed by earlier agreements.
Projects specified under the agreements, which include facilities
for production of chemicals, coals, metals, machinery, radiotech-
nical equipment, building materials, electric power, and other com-
modities,. are to be undertaken in 1959-67 at a reported cost of 5 bil-
lion rubles (equivalent to $1,250,000,000 at the official rate of
exchange, which overvalues the ruble). Essentially, the present
agreement represents another in a series of long-term Soviet commit-
ments to supply, on a compensated basis, machinery and equipment for
specific industrial projects in China, the deliveries of such ecuip-
ment being scheduled under trade agreements annually negotiated.
The average annual level of Soviet "assistance" under the new agree-
ment is generally considered to be somewhat lower than that provided
under previous agreements. One reason for this decline is that the
Chinese Communists will increase their participation by providing
"the major part of the accessory equipment" for the enterprises
stipulated in the agreement. It should be noted, however, that
Chinese economic dependence on the USSR is not determined merely
by the level of "assistance" in a given period but also by the more
or less cumulative effects of steady Soviet technical influence,
which will predominate through 1967. The heavy reliance of China on
Soviet technology during the formative stages of the machine-building
industry will have long-run effects because of the need for replace-
ment of equipment and for-compatibility of design and because of the
general technical orientation toward the USSR. Although steps have
been taken to reduce the role of advisers and technicians from the
Soviet Bloc and to increase the capabilities of Chinese engineers
for independent designing, the influence of the Bloc will probably
remain strong for an indefinite period in electronics, synthetic fibers,
metal-forming machinery, and heavy machinery.
Data on the participation of the European Satellites in Chi-
nese Communist industrial development under the Second Five Year Plan
are incomplete._ The cost of complete sets of equipment for industrial
plants of all types that Poland will deliver to China between 1956
and 1962 amounts to 221 million rubles ($55.2 million). In connec-
tion with the protocol on scientific and technical cooperation, signed
in 1957, Czechoslovakia agreed to turn over to Communist China tech-
nical documents on production of various machines and appliances and
information on construction of hydroelectric stations; East Germany,
data on production of optical apparatus, machinery and equipment for
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Chemical and textile industries, machine tools, typographical ma-
chines4 ships, and transformers; Hungary, data on production of
radiotechnical apparatus, cable, motor vehicles, and tractors; Ru-
mania, data on production of petroleum equipment and other items. 182/
The new Sino-Soviet assistance agreement is further evidence
that Communist China is playing a more significant role in its own
industrialization. At the same time, buoyant assertions of reduced
Chinese dependence on the USSR underscore the fact that the Peking
regime is now deeply committed to base future economic development
on the foundation of its own machine-building industry. In view of
the grave imbalances which developed in the Chinese economy and the
enormously wasteful misallocation of resources under the First Five
Year Plan, Chinese economic planning can be characterized as somewhat
primitive and inept. Now that the Chinese Communists have assumed
greater responsibility for equipping their own industrial projects,
the effect of miscalculations on planning could be magnified. Disloca-
tions would be the more difficult to overcome because the Chinese
industrial base is smnli and additional capacity would often have to
be created in order to produce items for which demand had not been
foreseen. As a result, the progress of industrial construction pro-
jects could be delayed under the Second Five Year Plan.
B. Restoration of Balanced Growth
Notwithstanding continued Soviet economic assistance, al-
though at a reduced rate, the Chinese Communists have formulated
general outlines for the Second Five Year Plan (1958-62) which rep-
resent a considerable departure from Soviet experience. The appear-
ance of grave imbalances and dislocations toward the end of the First
Five Year Plan (1953-57). posed a serious challenge to economic policy-
makers in Peking. With considerable dissatisfaction the planners
realized that the doctrinaire pattern of concentrating almost exclu-
sively on the development of large-scale heavy industry put excessive
demands on Chinese technology and capacity to import, at the same
time neglecting agriculture and full use of Chinese manpower. Fol-
lowing this reappraisal the regime responded vigorously to the chal-
lenge with new ideas and programs.
1. New Attitude Toward Balanced Growth
Discussions of the Second Five Year Plan in 1956-57 re-
flected a more realistic attitude that recognized the need for inter-
sectoral balance in economic development. The Peking regime had be-
come concerned with the accelerated rate of population increase, which
placed a population obviously too large on land that was too small
and poorly cultivated. Food and clothing were, therefore, the two
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chronic worries of the government. In addition, the dependence of
heavy industry on agriculture for investment funds and markets was
recognized. Thus the lag in agricultural growth was seen as a drag
on the entire economy, and drastic corrective measures were deemed
necessary.
Although greater attention will be given to the needs of
agriculture in the allocation of investment under the Second Five
Year Plan, agriculture will not displace heavy industry as the pri-
mary aim in economic development. Rather, there will be some shifts
in priorities within industry to support agricultural growth. The
revised "general line for socialist construction," adopted at the
Chinese Communist Party Congress in May 1958, called for the "simul-
taneous development of industry and agriculture, while giving priority
to heavy industry." Accordingly, components of the machine-building
industry associated with production of chemical fertilizer equipment
and irrigation equipment are to be expanded at an accelerated rate.*
Moreover, the new plan sought to restore a balance'be-
tween industries producing raw materials and those consuming raw ma-
terials. Within heavy industry the greatest stress will be given to
the fuel, power, metallurgical, and chemical industries. Whereas
the ratio of investment in industries producing raw materials to in-
vestment in the metal-processing industries during 1953-57 was 2.5
to 1, it was to be raised to 4.6 to 1 beginning in 1958. 183/ This
change implies high priority within the machine-building industry for
metallurgical equipment and power-generating equipment, which is
actually in effect in the program for capital construction in 1959.
Chinese Communist planners assumed that machine building
would require an increasing proportion of steel, whereas the propor-
tion of steel used in construction and installation would decrease
correspondingly. They estimated that under the Second Five Year Plan
the quantity of steel used by the machine-building industry would
account for about one-third of the total demand for steel. 184/ On
the basis of this heavy demand a number of Chinese economists con-
cluded that, compared with the First Five Year Plan, the steel indus-
try should be allocated relatively more investment than the machine-
building industry under the Second Five Year Plan.
This allocation of investment appears to be sound. It
is expected that industries producing raw materials should experience
more rapid growth than machine building for a considerable time. At
present the industries producing raw materials must supply both the
reconstructed machine-building facilities and the new plants that
* See IV, C, p, 76, below.
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have been constructed. In addition, they must meet the needs of the
over-all program of capital construction. A number of large machine-
building projects begun under the First Five Year Plan will initiate
production during 1958-60. As new capacity comes into production and
the demands for capital construction continue, the industries produc-
ing raw materials may be even more hard pressed to meet their commit-
ments,- especially if the Chinese also desire to reduce such imports.
2. Changed Approach to SelfaSufficiency
In the light of their tremendous economic problems the
Chinese Communists have profoundly altered their approach to economic
independence and self-sufficiency. Whereas previously they had cast
Communist China in the same role as the USSR before 1936, they found
in 1957 that
The international environment in which
we now find ourselves is different from
that in which the Soviet Union found itself
when building socialism. Ours is not an
isolated and sole socialist country. The
Soviet Union. and, in particular, the Peo-
ples' Democracies of East Europe generally
speaking have a great capacity of machine-
building industry and hope to supply our
country with more machines From the
standpoint of international cooperation
between socialist countries, it would
appear that our country may produce fewer
machines for the time being and solve our
problem through international cooperation
and concentrate more construction capital on
projects which are more essential. 186/
This new attitude may be, in part, a reflection of certain changes
in the position of the Soviet Bloc on self-sufficiency since the
death of Stalin. Communist economic thought has become somewhat less
doctrinaire on the requirement that every member must develop heavy
industry and now differentiates between the more and less advanced
Communist economies, maintaining that the former should supply ma-
chinery and equipment to the latter, who in turn would generally
supply agricultural and mineral products to other members of the
Bloc. A greater measure of discrimination in pursuing self-
sufficiency clearly implies a change in Chinese trade relations with
other countries of the Bloc. Extensive relaxation of autarkic ten-
dencies which prevailed through 1957 would be required. Perhaps with
the purpose of reassuring the European Satellites of this intention,
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a Chinese 'contributor to a Soviet economic journal stated: "The
creation in gommunist Ching of an integrated industrial system
will not lead to a weakening of its ties with other countries of the
socialist camp ... . Division of labor and specialization of prod-
ucts within these countries, in correspondence with their economic
possibilities and natural resources, will receive further develop-
ment." 187/ A logical consequence of a program for specialization
would be greater Chinese participation in CEMA (Council for Mutual
Economic Assistance -- Sovet Ekonomicheskoy Vzaimopomoshchi).
The Chinese Communists are not likely, however, to pur-
sue the principle of international specialization to its logical
ultimate conclusion. An article in a Soviet economic journal indi-
cated that, if the socialist countries cooperated on the basis of an
international socialist division of labor, it would be possible to
determine the effectiveness of investments not only on a national
scale but also in respect to all countries of the Sino-Soviet Bloc
and thus to increase the rational use of all productive resources.
It noted that this plan would involve a comparative analysis of the
productivity of labor and costs of production for each commodity. 1Z/
From only a hasty glance at the cost structure in Communist China
compared with those in the Soviet Bloc, it is expected that the
Chinese would have a comparative advantage in labor-intensive lines
of production. It seems certain, however, that the Chinese would
not allow themselves to specialize permanently in labor-intensive
products, neglecting to give priority to the development of heavy
industry in general and of the machine-building industry in particu-
lar. In fact, the Chinese Communists look upon international tech-
nical and economic cooperation as a way to overcome their weaknesses
in producing heavy machinery, precision machine tools, and instru-
ments, in spite of the fact that they do not have a comparative ad-
vantage in these industries. 189/
3. Program for Small- and Medium-Size Plants
The new emphasis on the construction of smaller units is
one of the key policies in the drive for quicker returns on invest-
ment and represents a very significant departure from the typical
Soviet techniques heretofore employed in Communist China. More re-
liance is to be placed on local investment, manual labor, and tra-
ditional methods of production in contrast with the large-scale,
highly mechanized, and specialized plants built with Soviet assist-
ance and controlled by the central government. In his report on
5 May 1958, Liu Shao-chi described the advantages of smaller plants
in the following general terms:
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It is necessary for the central, pro-
vincial, municipal, and autonomous region
authorities to build a certain number of
big enterprises. Big enterprises which
have a big output and a high technical
level can solve key problems having a
decisive bearing on the national economy.
They form the backbone of the force that
pushes forward the industrial development
of the country. But small- and medium-
size enterprises have the advantage over
big enterprises in that they require less
investment and can more easily absorb funds
from scattered sources; they require less
time to build and produce quicker results;
they can be designed and equipped locally;
they can make do with various types of
equipment which are readily available in
the localities. They can be set up over a
wide area so as to facilitate industrializa-
tion of the country as a whole and promote
the training of technical personnel through-
out the country and a balanced development of
the economies of the various regions. They
can reduce transport costs and make flexible
use of available resources, making it easier
to bring about a satisfactory relation be-
tween supply, production, and sales. It is
easier for them to make flexible use of the
labor power available in the countryside and
of casual labor, depending on the amount of
work to be done, and thus help reduce the
differences between city and countryside,
between workers and peasants. 190/
What part small- and medium-size plants are to play in
the development of the machine-building industry has not been clearly
defined. It would not seem possible to rely principally on smaller
plants for production of heavy machinery, which is to be greatly ex-
panded under the Second Five Year Plan. Rather, the new heavy ma-
chinery plants at Ttai-yuan, Wu-han, and Fu-la-erh-chi will bear the
primary responsibility in this field. The smaller plants may serve
to support the larger units and fill the remaining gaps. Production
at the large, new enterprises has tended to be highly specialized,
so that there might be opportunities for smaller plants to produce
accessory equipment and thus to broaden the range of products.
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Moreover, smaller plants can serve to supply parts and subassemblies
and Other items to large plants.
It is feasible, nevertheless, to assign important tasks
in production of lighter machinery to the small- and medium-size
plants. The First Ministry of Machine Building reportedly has de-
veloped about 120 standardized designs for such machinery and elec-
trical equipment plants. The designs are mainly for plants that are
to serve special districts, hsiens, and hsiangs, with a few to be
managed at the provincial level. The plants include general machinery
plants, agricultural machinery plants, power-producing machinery
plants, chemical fertilizer equipment plants, antifriction bearing
plants, electrical equipment plants, electric wire plants, and light-
bulb plants. Investments range from less than 50,000 yuan to more
than 1.5 million yuan.
Provincial or special district plants are designed to
support heavy industry, consumer industries, and agricultural pro-
duction (especially with respect to chemical fertilizer equipment
and irrigation equipment). The small plants below the hsien level
are designed to meet the needs of rural villages and will emphasize
repair of tractors and agricultural machinery. 191/ Small, local
plants should prove much better suited than larger plants, both from
an administrative and a technical point of view, in coping with a
limited demand for a wide range of products.*
4. Decentralization
During 1958, there was considerable discussion of decen-
tralization in the machine-building industry as a means of coordinat-
ing production between larger and smaller plants. According to Chao
Erh-lu, Minister of the First Ministry of Machine Building, a number
of "economic coordination areas," each embracing a population of up
to 100 million, will be established. Plants under the direct control
of the ministry will be transferred "step by step and trade by trade"
to regional authorities. The devolution of authority would appear
to cover control of production arrangements and raw materials. The
ministry would retain responsibility for general planning, technical
guidance, and supervision. Within the areas, plants would be com-
bined and production integrated so as to insure self-sufficiency
in ordinary machinery requirements, whereas interarea coordination
would be achieved in production of commodities that are heavy and
large and require complicated techniques. Thus a considerable
measure of regional specialization would be preserved, especially
where the additional purpose of reducing costs of transportation
* See II, H, 4, p. 52, above.
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could be served. For example, heavy machine-building enterprises
would be established in the vicinity of large metallurgical combines,
mining equipment bases near large coal mines, marine equipment bases
along the coast, and precision tool and instrument plants in areas
where the technical standard is traditionally high and skilled per-
sonnel are relatively concentrated. 192/
There is little solid evidence that decentralization is
actually being implemented in the machine-building industry, except
to a limited extent in electrical equipment. Central government
plants have given some assistance to local machinery enterprises,
but it appears that the ministries retain control over the large and
technically advanced plants that account for the most significant
production of machinery.
It is possible that the trend toward decentralization,
at least insofar as many existing plants are concerned, will not be
pressed, because of the overriding need for coordination in produc-
tion of complete sets of equipment. 193/ For example, production of
thermal turbogenerator sets with a capacity of more than 12,000 kw
involves coordination among more than 80 large- and medium-size ma-
chinery plants in various parts of Communist China. 12)1/
5. Emphasis on Better Adaptation of Foreign Experience
Under the Second Five Year. Plan, the criteria for indus-
trial design are to be fundamentally changed. Native engineers will
be expected to adjust their technical standards and specifications
to Chinese productive capacity and to take account of the pressing
need to utilize abundant manpower.
Chinese engineers are said to be capable of designing
machine tool plants, steam turbine and boiler plants, diesel engine
plants, plants producing tractor and automobile parts, plants pro-
ducing metallurgical and mining equipment, plants for locomotives
and rolling stock, and shipyards for building both inland and ocean-
going vessels. 195/ According to the terms of a Sino-Soviet technical
assistance agreement signed in November 1958, most of the 1+7 indus-
trial projects to be constructed or expanded were to be surveyed and
designed by the Chinese, the main equipment being supplied by the
USSR. The USSR agreed to provide many up-to-date designs, blueprints
of new products, and other technical data. 196/ This agreement prob-
ably is significant as an indication of the extent of Chinese partici-
pation in the designing of large projects. It is believed that, until
their capabilities for really original designing have greatly improved,
Chinese engineers will play their most important role in modifying
Soviet design so as to eliminate nonessential housing, amenities,
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materials handling, and other operations where labor can be used in-
tensively. Soviet concepts of city planning in connection with in-
dustrial projects probably will be discarded in most cases. Since
early 1958, all blueprints for above-norm projects must be scruti-
nized and approved at the ministerial level. 197/
In response to the need for modification of Soviet de-
signs, Chinese Communist designers of the Ministry of Light Indus-
try prepared a number of prototype designs for small plants, such
as paper-mBlcing plants, breweries, and sugar refineries. These de-
signs are said to be based on the principle of "using more manual
labor, fewer steam boilers, and less electricity and improving
quality." Little investment is required, and construction can be
completed in a short time. 198/
In addition to paring "nonproductive" facilities from
investment schedules, the new technological policy of Communist
China calls for less emphasis on automation and highly complex ma-
chinery where appropriate. In connection with new development pro-
jects, executives of the Communist Party have urged greater atten-
tion to the possibilities of absorbing more workers into the in-
dustrial sector of the economy. Sectors selected for labor-intensive
development include mining, construction of buildings, water conser-
vancy, communications and transportation, forestry, and handicrafts
in addition to agriculture. 199/
This trend will affept the type of machinery that the
machine-building industry will be requited to produce to support
development in such fields as mining machinery, construction equip-
ment, transport equipment, and agricultural machinery. In such
instances, simple and light machinery and equipment can be turned
out by local industries and agricultural cooperatives to meet local
needs. In many applications, full mechanization is not feasible
under Chinese conditions. This fact is recognized by the Chinese
Communists, who are pressing forward a technological revolution of
a character which may be extremely effective in a labor-surplus
economy, although it would seem unimpressive to most Westerners.
This program is based on the principle of combining mechanization
with semimechanization, improvement of tools, and manual methods,
and its goal is not to replace labor, as in advanced industrial
countries, but to magnify its effectiveness. Thus the efficiency
and productivity of labor are to be increased through the use of
better hand tools, the replacement of carrying poles by push carts
drawn by men, and similar measures.
There do exist considerable opportunities for the ap- ?
plication of this approach to production of machines. Machines
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are indispensable in building tools and other machines. Conceivably
a policy of intensification of labor inputs would not only improve
industrial employment but also might alleviate problems of production
caused by shortages of some of the more complex and .specialized ma-
chine tools. The crux of the matter seems to be in simplifying the
production processes so as to be able to use the simpler machinery
made in Communist China. For example, if a certain' machine tool
could handle five operations but was in short supply, the same job
could be done by five operators using simple lathes. Unskilled
labor can be used to replace some materials handling operations.
The program for development of mall- and medium-size plants would
seem to offer some of the best opportunities for setting up such
production processes.*
6. Slowdown in Regional Dispersion
Considerable development of the machine-building industry
in the interior of Communist China will take place under the
Second Five Year Plan. This development is made possible largely
by the accelerated construction of the new iron and steel bases at
Wu-han and Pao-t'ou. The new industrial center of Pao-t'ou in Inner
Mongolia will receive five times as much capital construction invest-
ment under the Second Five Year Plan as under the First. .200/
From recently established criteria, it is possible to in-
fer that the Chinese Communists have decided, however reluctantly,
not to press too rapidly plans to locate new plants in remote and
less vulnerable areas. In the past, too much investment had to be
funneled into dormitory and municipal construction, and new railroad
links had to be created to support undertakings in underdeveloped
areas. The new policy is to utilize small- and medium-size towns
to the fullest extent as bases for new plants. 221/ Such use will
maximize the return on investment and reduce costs of production.
Shanghai and Tientsin, two vulnerable coastal cities, are to be de-
veloped as centers for producing heavy machinery.
7. Policy on Consumption of Fuel
The machine-building industry is making strenuous efforts
to develop engines and motors suited to supplies of fuel and power in
Communist China. Plans. outlined by the National Technological Com-
mission call for the development of tractors consuming solid fuels.
Because of the shortage of petroleum, no large requirements for liquid
fuels are to be considered for agricultural machinery. Instead of
diesel engines for the countryside, therefore, plans call for produc-
tion of coal-gas and steam engines that can be adjusted to the
* See II, H, 3, c, p. 51, above, and III, B and C, pp. 55 and 57,
respectively, above.
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various characteristics of coal in different regions and to the em-
ployment of such local fuels as millet, stalks, and hay. After the
coal is steamed at low temperature and liquid fuel and chemical ma-
terial are extracted, the semicoked charcoal is to be used in agri-
cultural machinery. 202/ A number of the trial models of new trac-
tors that have appeared are fitted with coal-gas engines. Moreover,
some "Liberation" trucks in 1958 were scheduled to have coal-gas
engines. 203/ Although a few diesel, steam, and electrically driven
engines will continue to be used in mechanized irrigation, the
greatest emphasis will be placed on equipment powered by coal-gas
engines, which have proved more efficient and cheaper to produce
and operate than steam engines for this purpose. 204/ The use of
electrically driven water pumps would be highly desirable, but
opportunities are limited because of the slow pace of rural elec-
trification. Motor vehicles and tractors using coal gas operate
at reduced efficiency and considerably lower power, but this sacri-
fice is deemed expedient in view of the paramount necessity of re-
ducing the demand for petroleum. Although promising discoveries
of oil were announced in 1958, plentiful supplies of petroleum prod-
ucts still appear a long way off. Moreover, it seems likely that
the Chinese Communists will not hasten to expand oil imports from
the USSR but instead will continue to restrict requirements to the
most essential uses.
8. Substitutes for Scarce Materials
As a means of alleviating shortages of certain raw ma-
terials, machine--building enterprises have undertaken the extensive
substitution of more plentiful materials. In production of motor
vehicles, substantial savings in the consumption of nickel have re-
sulted from the use of chromium-manganese-titanium steel instead of
nickel-chromium steel and chromium casting iron instead of nickel-
chromium casting iron. Manganese steel or quality carbon steel has
been substituted for structural chromium steel, straight carbon
steel for quality steel, hot-rolled sheet for cold-rolled sheet,
and aluminum for copper. 205/ Plants producing electrical equip-
ment have experimented successfully with aluminum alloys as substi-
tutes for copper in electric motors. 206/ Designs have been modi-
fied to eliminate unnecessary metal, and plants producing equipment
of inferior design are to emulate the most economical producers. 207/
Proposals made by workers on the "leap forward" campaign within
the First Ministry of Machine Building requested, perhaps somewhat
overoptimistically, that the ministry "within 3 years, raise its
metallurgical materials utilization rate 8 percent and substitute
other steel materials for nickel-chromium steel in 90 to 95 percent
of the cases. The copper consumption rate should also be lowered
30 to 40 percent within 3 years. Use of powder metallurgy and
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plastics to substitute for metal parts such as ordinary bearings and
cutting tools, etc., should be expanded." 208/ An effort is being
made to increase production and to popularize the use of oil-
impregnated bearings as substitutes for ball and roller bearings in
order to solve the shortage of bearings during the "leap forward"
campaign. The oil-impregnated bearings can be applied in machinery
having high sIeed, low load, and low thrust. Such bearings thus
are suitable for light electrical equipment and textile machinery,
but not for heavy machinery, transport equipment, and the like. In
the development of agricultural machinery the use of wood is being
emphasized. 209/
There is evidence to suggest that many substitute ma-
terials are of inferior quality. Although industrial personnel
are exhorted to conserve materials in a number of ways, the reiterated
warnings to preserve quality indicate that there is little leeway in
substitution before reaching the point at which quality suffers. 210/
Deterioration of quality is believed to be a factor that will assume
increasing importance as Communist China strives to increase the pro-
portion of machinery produced for export.*
9. Fuller Use of Production Capacity
According to the draft plan announced by Po I-pol "pro-
duction in the machine-building industry in 1958 is planned in a way
that will make fuller use of the capacity of the various machine-
building departments ... ." 211/ As previously pointed out, there
is considerable latent capacity in machinery plants, particularly in
the coastal cities.** Now, however, both Shanghai and Tientsin are
taking advantage of their industrial experience and comparatively
advanced technical force to shift over to production of relatively
high-grade, precision and specialized heavy machinery. 212/ In addi-
tion, a major improvement in utilization is to be accomplished by
the diversion of some capacity for military production to meet urgent
civilian requirements. Plants producing military items are reported
to be capable of making wrist watches, bicycles, sewing machines,
cameras, oil compressors, motor vehicles, measuring and cutting in-
struments, automobile parts, tractors, water pumps, diesel engines,
agricultural machinery, well-drilling equipment, and other commodi-
ties. 213/
This shift came about in connection with the smalgama-
tion in February 1958 of the First Ministry of Machine Building, the
Ministry of the Power Equipment Industry, and the Second Ministry
See II, H, 6, p. 54, above.
** See I, E, 3, p. 15, above.
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of Machine Building. The First Ministry is reported to control
directly 110 large state plants producing machinery for civilian
use. The Ministry of the Power Equipment Industry is believed to
have controlled directly some 20 state plants producing equipment for
power stations and transmission grids, as well as powerplants for
ships and some other purposes. The Second Ministry of Machine Build-
ing is believed to have controlled about 100 state plants engaged in
production of munitions and other military items.* The aim of the
amalgamation of these three Ministries appears to be closer integra-
tioh of civilian and military production. 214/ It is probable that
the Chinese Communists expect to realize great gains from fuller use
of the capacity of existing plants, at least during the early years
of the Second Five Year Plan (1958-62). The greatest underutilized
capacity, however, exists in coastal cities, where many plants have
obsolete equipment and cannot produce high-grade, precision machinery
until their facilities have been modernized.
10. Diversification of Production
During 1958, there was much criticism of the excessive
specialization prevalent in many new plants established with aid
from the Soviet Bloc. In conjunction with the emphasis on local
industry and decentralization, more stress was placed on converting
highly specialized plants into multipurpose plants to serve local
needs for machinery, especially for metallurgical equipment. In
October 1958, when Vice Chairman Chu Te was inspecting petroleum,
chemical engineering, and machinery plants in Lan-chou, he declared
that "there should be an integral industrial system at various
places and that, from now on, factories along a special line should
develop into multiple-purpose plant." 215/ He pointed out that
smaller units should not attempt to satisfy national requirements
for one type of product but that the largest units, such as the
Tiai-yuan Heavy Machinery Plant, should undertake production of a
wider variety of items. 216/
C. Impact of Policy Shifts on the Machine-Building Industry
Because of the drastic changes in over-all policies concern-
ing its development, the machine-building industry of Communist
China must undergo major adjustments in production, especially with
regard to support for agricultural development. The industry ap-
pears to have been assigned two primary economic missions: (1) pro-
duction of equipment for the projects undertaken with Soviet aid
and other major undertakings and (2) direct and indirect support for
agricultural development. The assumption of greater responsibility
* For a discussion of ministerial organization, see Appendix C.
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for equipping the large construction units will require great ef-
forts on the part of the machine-building industry, for produc-
tion of heavy machinery is weak, most of the existing plants are de-
signed to make single machines, and the capability for supplying
complete sets of equipment is at present very low. 217/ As has been
pointed out already, great stress is being placed on completion of
construction of heavy machinery plants under the Second Five Year
Plan.
Since the reappraisal of the agricultural situation in Com-
munist China in 1957, there has been a marked shift in the require-
ments imposed on the machine-building industry for agricultural ma-
chinery. It was found that large-scale mechanization of farming
operations was not feasible for most farmland in China and actually
was detrimental to full employment. In addition, reclamation of
wasteland was economically sound only to a limited extent. Primary
reliance is not to be placed on tractors, butr tractors will perform
subsidiary functions in reclaiming wasteland and in relieving tem-
porary manpower shortages during peak periods. The greatest improve-
ments in agricultural production that were at the same time consist-
ent with the maximization of farm income lay in increasing the aver-
age yields per acre of land already under cultivation. The extension
of irrigation and the use of chemical fertilizers held the greatest
promise of increasing the productivity of the available manpower.
Rapid increase in industrial support to agriculture along these lines
would require the machine-building industry to accelerate production
of equipment for the chemical industries and to expand production
of irrigation equipment -- for example, motors of various types,
pumps, and valves. Local machine works and communes could handle
production of light tools and implements, fertilizer appliances, in-
secticide machines, and simple transportation equipment. 218/
Notwithstanding earlier doubts about mechanization, the
Peking regime announced, in October 1959, a grandiose plan for
modernizing agriculture in Communist China. Eventual mechaniza-
tion of agriculture has been a leading long-term goal since July 1955,
when Mao Tse-tung called for the complete technical transformation
of agriculture in four or five 5-year plans. The new program, how-
ever, declared to be "the new content under new circumstances" of
the old Party policy and outlined by economic planner Vice Premier
Po I-po, is more specific and has shortened the timetable. The
stated intent of the program is that by 1969 land suitable for ma-
chine cultivation will "in the main" be worked by mechanical in-
stead of animal traction, that motorized pumps will replace manual
waterwheels in irrigation, that motor vehicles will lift most of
the age-old burden of rural transportation from the backs of men and
animals, that the use of chemical fertilizers will become predominant,
and that electric power will be in 'common use. . The program is to be
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carried out gradually, with the first 4 years devoted to laying an
initial foundation. The immediate goal of mechanization is at
least a doubling of production of grain, whereas the ultimate objec-
tive is to release millions of farm laborers for work in industry. 219/
If this program were to be vigorously implemented, it would
require a major shift in investment resources from building up heavy
industry for maximum production of military equipment and self-
reproductive machinery to a more selective buildup of those heavy
industries that directly support the technological transformation
of agriculture.* At present, however, the machinery possessed by
agricultural activities is still insignificant in comparison with
the goal of complete mechanization. For example, existing machines
can only accomplish about 10 percent of the required amount of mechan-
ical irrigation. In addition, agriculture is expected to have about
250,000 kw of electrical capacity in rural areas by the end of 1959.
The consumption of chemical fertilizers increased from 592,000 tons
in 1953. to 2,708,000 tons in 1958. ,220/
Obviously it is too early to attempt to evaluate how seriously
the Peking regime is determined to allocate to agriculture a greater
share of the developmental resources. Earlier plans for mechaniza-
tion were given prominence in public discussion for a time but later
were allowed to slide quietly into oblivion. Some doubt can be
raised as to whether or not the Communists will follow through with
the present program, for they have vacillated in the past over the
timing, speed, and even the practical value of mechanizing farm tasks.
Furthermore, heavy industry still is accorded overriding priority
in plans for economic growth. Moreover, although the Communists
have hailed the communes as having unique potentialities for modern-
izing agriculture and have designated them as the principal agencies
for implementing the present program, the Communists said the same
things about earlier forms of collectivization. To emphasize that
mechanization will be approached gradually, these communes have been
instructed to exploit fully their potential for improving simple
tools and to develop locally managed small- and medium-size plants
for producing simple implements and low-grade chemical fertilizers.
The communes are cautioned not to slacken their practical efforts
at mechanization by merely waiting for tractors and other modern
machinery, for some years will be required to fulfill the machin-
ery needs of the communes. 221/ Nevertheless, renewed stress on
mechanization is indicated in the establishment in August 1959 of a
* For Chinese Communist statistics on the increase in the holdings
of agricultural machinery in China, see Table 20, Appendix B, p. 104,
below.
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specialized Ministry, the Ministry of the Agricultural Machine-Building
Industry, to accelerate industrial support for agricultural modern-
ization.*
To support the vitally important chemical fertilizer program,
it will be necessary to enlarge the capacity for making heavy-duty
compressors, high-pressure reactors, turbocompressors, oxygen-making
equipment, pumps, and other chemical engineering equipment. 222/ It
is intended that nearly all machines and installations for the manu-
facture of chemical fertilizer will be made in Communist China, with
only a very small number of automatically controlled tools and imple-
ments to be imported. Shanghai is to undertake the production of
large amounts of machinery and equipment for local chemical ferti-
lizer works with a production capacity of 2,000 to 25,000 tons
each. 223/ In 1958 the Harbin Boiler Plant trial-produced a high-
pressure ammonia converter used to make synthetic ammonia, an essen-
tial raw material for nitrogenous. fertilizer. 224/
Production of chemical fertilizer equipment is a formidable
engineering task for the relatively inexperienced machine-building
industry of Communist China. The principal machines and equipment
have never been produced before in China and require a relatively
high level of technique, especially for the high-pressure reflex
cylinders and high-pressure air compressors. For example, the large
air compressors on order weigh 290 tons each, the largest single
ca8ting'weighing more than 20 tons. Driven by huge 4,000-kw motors,
the rotors of the compressors must be delicately balanced to attain
high precision in revolution. Moreover, certain difficult problems
in raw materials must be worked out in production of such complicated
equipment. 225/ Because much of the chemical equipment requires large
forgings and castings, substantial advances in production are depend-
ent on the completion of heavy machinery plants now under Construc-
tion. 226/ Inadequate capacity in heavy machinery may prove to be a
crucial bottleneck.
Production of equipment for mechanized drainage and irriga-
tion was reportedly increased sharply in 1958. Although official
statistics tend to blur the distinction between agricultural power
machinery (nearly all of Which is for irrigation) and all power ma-
chinery, it appears that about 60 to 70 percent of total power ma-
chinery is allocated for agricultural purposes. 227/ The total pro-
duction of agricultural power machinery in 1958 was 1.2 million hp,
compared with production of probably less than 500,000 hp in 1957.
Some of the larger plants making diesel engines are involved in this
* For a discussion of Ministerial organization of the machine-building
industry, see Appendix C.
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task, but most of the irrigation equipment is being produced by small-
and medium-scale machine shops run by local governments. 228/ Al-
though numerous press accounts in 1958 indicated that this item would
get high priority in the allocation of resources and transportation,
the evidence so far suggests great improvement, but not a "crash"
program. 229/
V. Foreign Economic Relations
A. Foreign Trade
1. Value
About 60 percent of all Chinese Communist imports during
1953-56 reportedly consisted of machinery and equipment. 230/ This
proportion declined in 1957 to about 40 percent.* In 1957, Communist
China imported about $578 million worth of machinery and equipment,
almost one-half of which came from the USSR.** The total value of
such imports from the USSR reached a peak in 1956 but declined some-
what in 1957,*** whereas imports of machinery from East Germany and
Czechoslovakia, the two most important Satellite sources, continued
to increase. Imports of machinery from the Free World were rela-
tively insignificant through 1955, but the volume of trade has in-
creased markedly since then. Since 1955 the Free World has outranked
Poland, Hungary, Rumania, and Bulgaria and by the end of 1957 was
nearly as important as Czechoslovakia, the second most important
Satellite.
There has been a striking increase in the proportion of
machinery and equipment in Chinese imports from the USSR and the
Free World.**** This increase reflects the efforts of the Peking
regime to accelerate industrialization under the First Five Year
Plan (1953-57), following the period of economic recovery (1950-52).
Quantitative data on Chinese Communist exports of ma-
chinery and equipment are somewhat scanty. Such exports to countries
of the Soviet Bloc are probably negligible. Exports to the Free
World consisted of sewing machines, radios, batteries, bulbs, tex-
tile machinery, transport equipment, general industrial machinery,
and other items. Exports of machine tools were insignificant in
1957, amounting to only $130,000, but were greatly expanded to about
$788.000 in 1958. Such exports, however, were limited primarily to
On the basis
of Chinese Communist
data on value. 231/
**
See Table
21,
Appendix B,
p.
105,
below,.
***
See Table
22,
Appendix B,
p.
106,
below.
****
See Table
23,
Appendix B,
p.
111,
below.
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Hong Kong and Thailand, and considerable difficulty had been ex-
perienced in selling Chinese Communist machine tools to other mAr-
kets. 232/ A sizable quantity of textile machinery has also been
exported under grants and credits to Burma and Indonesia.
2. Composition
Complete sets of equipment for new plants have been by
far the most important item in Chinese Communist imports of machinery
and equipment from the Soviet Bloc. Trade in complete plants was not
significant during 1950-52 but expanded rapidly under the First Five
Year Plan. In 1957, complete plants accounted for more than three-
quarters of Chinese imports of machinery and equipment from the USSR*
and for 4o to 60 percent of such imports from East Germany and
Czechoslovakia.
Of the machines imported that were not included in the
category of complete plants, the most important were petroleum equip-
ment, metal-cutting machine tools, mining machinery, transportation
equipment, construction equipment, electrical and communications
equipment, agricultural machinery, and precision instruments. During
1953-56, Communist China reportedly imported 21,723 metal-cutting ma-
chine tools, more than 1,400 mining drills, 1,562 freight cars, more
than 40,000 trucks, and 15,973 tractors.**
In 1957, imports of Soviet tractors and agricultural ma-
chinery by Communist China decreased precipitously. The number of
trucks imported in 1957 was only one-tenth that of 1956. This de-
crease reflected the opening of the Chinese truck plant at ChTang-Ch'un.
To some extent, increased Chinese self-sufficiency was responsible
for the reduction in imports of machinery in 1957, but shifts in
policy on agricultural mechanization and a reduced volume of capital
construction were also contributing factors. 234/ Imports of chemical
equipment, associated with the expanded program for chemical fertilizers,
increased in 1957 but did not reach the level achieved in 1955.
3. Increase of Exports of Machinery
In spite of numerous offers to export machinery, the
seriousness of Chinese Communist intentions to export a significant
proportion of its production has not been established conclusively.
Chinese activity at trade fairs appears to be directed more toward
* See Table 23, Appendix B, p. 111, below.
** On the basis of statistics on the growth of the Chinese Communist
agricultural tractor park, it is believed that a large share of the
tractors imported were for nonagricultural uses. 233/
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displaying machinery and equipment to show the native population the
industrial development achieved under Communism in China than toward
finding a market for these products. 235/ Nevertheless, exports of
machinery, although still small, are increasing rapidly, and the
Peking regime does appear to be genuinely desirous of increasing
such exports. Achievement of this goal would have the advantage of
relieving the strain on Chinese agriculture as a source of goods for
export.
B. Self-Sufficiency
. 1. Achievements and Prospects
One of the long-term goals of Communist China is the
attainment of a high degree of economic self-sufficiency. Although
heavily dependent on the Soviet Bloc for technical assistance and
capital goods under the First Five Year Plan, China achieved consider-
able success in this endeavor. By the end of 1957, domestic produc-
tion satisfied 60 percent of Chinese requirements for machinery and
equipment, including 42 percent of the complete sets of equipment re-
quired for the 166 projects receiving Soviet aid.* 236/
The draft plan for 1958 called on the machine-building
industry to provide about 6o percent of all equipment needed for the
projects receiving Soviet aid. 237/ Communist China seeks to supply
70 to 80 percent of its requirements for machinery under the Second
Five Year Plan (1958-62). 238/ Goals for self-sufficiency in certain
individual commodities to be attained during the period 1958-67 are
indicated in Table 24.** Although by 1962 the Chinese Communists
might well achieve production of 70 to 80 percent of their require-
ments for all types of machinery, it is doubtful that some of the
specific goals will be reached, particularly for items not developed
under the First Five Year'Plan (1953-57).
2. Restrictions on Imports of Foreign Capital Equipment
There are strong indications that Communist China intends
to pursue a vigorous program of restricting imports of capital equip-
ment. The Chinese Communists know the advantages of importing cer-
tain specialized materials or intricate equipment instead of produc-
ing them under unfavorable conditions. China, however, will avoid
imports that do not prove technically superior and economically ad-
vantageous. 239/ The Chinese Communists intend to curtail the variety
of imports of machinery and equipment, 240/ and under this program
* For examples of Chinese self-sufficiency in some major producer
goods, see Table 24, Appendix B, p. 112, below.
** See Appendix B, p. 111, below.
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imports of simple machine tools, transport equipment, light electrical
equipment, some types of Metallurgical equipment, and machinery for
light industry probably will be reduced. Nevertheless, it is expected
that machinery and equipment will continue to constitute a high pro-
portion of total imports.
As to the relative costs of domestic machinery versus
imported machinery, several Chinese Communist statements Imply that
the cost of imported machinery is sometimes two to three times
greater than that of domestic equipment of the same specifications. 241/
Such statements are believed to be misleading because nearly all of
the imported machinery was of higher quality and complexity than
Chinese machinery, which, for the most part, consisted of single ma-
chines rather than complete sets. Po 1-po probably had in mind the
more meaningful objective of replacing imports of heavier and more
complex machinery when he stated that "any machinery that can be
made in China should not be imported or imports should be reduced,
even if quality is lower and the price higher than the imported ma-
chinery." 242/ The cost of production of the Chinese "Liberation"
truck in 1958 reportedly was 60 percent higher than that of a com-
parable imported vehicle. 243/ It would be normal for the Chinese
to experience such increased costs during the early years of produc-
tion, although real costs might not be reflected accurately in higher
prices, because of the hidden subsidies and below-equilibrium prices
to be found in an arbitrary price system. Nevertheless, expenditures
on imported machinery have been high, and it is likely that the Peking
regime could realize large savings in the long run from domestic pro-
duction of some items. However, one of the most significant indica-
tions of Chinese ability to curtail imports of capital goods is the
ability to produce complete sets of equipment, and in this the Chinese
Communists are expected to experience considerable difficulty.
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APPENDIX A
DEFINITION OF THE MACHINE-BUILDING INDUSTRY OF COMMUNIST CHINA
In Chinese Communist statements the concept of machine building is
somewhat ambiguous and confusing. Most commonly the term is used ge-
nerically and refers to that group of industries engaged in metal'pro-
cessing, including production of machinery and equipment. At times,
however, the phrase refers specifically to machinery and equipment,
especially in doctrinal discussions describing the strategic role of
the machine-building industry in the rapid development of the economy.
As used in this report, the term machine building is broadly de-
fined to cover all types of metal processing. This definition includes
production of military goods, which is believed to have been under the
jurisdiction of the former Second Ministry of Machine Building. In
Communist China, as in the USSR, there is very little acknowledgement
of the responsibility of the machine-building industry for production
of military goods.
As defined in outline form the machine-building industry may be
said to include the following:
1. Metal-processing sector
a. Machinery and equipment manufacturing
b. Fabrication of other metal products
c. Repair
2. Military goods sector
a. Weapons and ammunition
b. Military and civil aircraft
c. Other military transportation equipment .
d. Most military and civil electronics equipment
This classification follows Soviet usage very closely.*
For purposes of this report, consideration of shipbuilding, pro-
duction of aircraft, and various types of military production is
limited to investment.
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APPENDIX B
STATISTICAL TABLES
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Table 6
Principal Construction Projects to Be Undertaken by the Machine-Building Industry of Communist China
?to Support Growth of Various Industries and Sectors Under the First Five Year Plan 2/*
1953-57
Industry to Be Supported
Number of Plants
Project New Rebuilt Total Annual Capacity When Completed
Metallurgical and mining b/
}Boiler
Heavy machinery and equipment plant
2
2
4
Mining machinery plant
1
5
6
Petroleum machinery plant
1
0
1
Pneumatic tool plant
0
1
1
Electric power d/
plant
2
0
2
Steam turbine plant
2
0
2
Generator plant
2
0
2
.
Electrical machinery plant
1
1
2
Electric wire and cable plant
1
1
Electric meter and instrument plant
1
1
Carbon brush plant
1
1
Transformer plant
1
1
Low-voltage switch plant
1
1
Transportation 2/
Motor vehicle plant
2 .
0
2
Motor vehicle accessory plant
1
0
1
Locomotive plant
1-
0
Locomotive and rolling stock plant
0
2
2
Locomotive repair plant
N.A.
N.A.
5
Rolling stock repair plant
1
1
2
Railroad passenger car plant
1
0
Footnotes for Table 6 follow on p. 89.
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75,000 metric tons of smelting, re-
fining, rolling, and coking equip-
ment
81,000 metric tons of mining and ore-
dressing equipment
15,000 metric tons of oil-drilling
equipment
20,000 sets 1/
800,000 kilowatts of power-generating
equipment
90,000 trucks
930 locomotives and 9,000 freight cars
1,500 passenger cars
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Table 6
Principal Construction Projects to Be Undertaken by the Machine-Building Industry of Communist China
to Support Growth of Various Industries and Sectors Under the First Five Year Plan 2/
1953-57
(Continued)
Industry to Be Supported
Project
Number of Plants
Annual Capacity When Completed
New
Rebuilt
Total
Agriculture
Tractor manufacturing plant
2
0
2
15,000 54-horsepower tractors 1/
Combine grain harvester plant
1
0
1
Chemical industry
Oil refining machinery plant
1
0
1
Chemical industrial machinery and
repair plant
1
0
I
Machine-building industry 12/
Machine tool plant
N.A.
N.A.
4
30,000 machine tools
Ball-bearing plant
3
0
3
At least 10 million units a/
Measuring tool plant
1
0
1
Tool plant
1
0
1
Emery wheel plant
1
0
1
Other industries and sectors
Textile machinery - construction and
reconstruction of an unspecified
number of plants N.A. N.A. N.A.
Building and construction machinery -
construction and reconstruction of an
unspecified number of plants N.A. N.A. N.A.
Broadcasting equipment plant or plants N.A. N.A. N.A.
Measuring and weighing equipment plant N.A. N.A. N.A.
b. Projects were to be carried out during 1954-60.
c. Information that was released in 1957 probably refers to this plant.
d. Projects were to be carried out during 1955-61.
e. Excluding shipbuilding. Projects were to be carried out during 1955-60.
f. The capacity for the plant that was completed in 1959.
g. Po I-po, Chairman of the National Economic Commission, in setting forth the annual economic plan for 1959, stated that the ball-bearing plants
at Lo-yang and Harbin would have an annual capacity of-10 million units when completed. 247/
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Table 7
Investment in Capital Construction in the Machine-Building Industry of Communist China 2/
1950-58
Million Current Yuan
Sector 1950-51 1952 1950-52 1953 1954 1955 1956 1957 1953-57 1958
Total industry N.A. N.A. 2,605 3,222 4,279 4,643 7,509 7,955 27,608 N.A.
Machine building 12/ N.A. N.A. N.A. N.A. N.A. N.A. N.A. N.A. 7,180 3,800 2/
Of which:
Metal processing 112 250 362 460 660 720 950 620 3,410 1,800
Of which:
Machinery and equipment manufacturing N.A. 190 N.A. 320 460 570 730
Military goods N.A. N.A. N.A. N.A. N.A. N.A. N.A.
500s/
N.A.
2,580
3,770 1/
1,400 s/
2,000 2/ 1/
a. Data include values for both plant and equipment
b. For methodology, see Appendix E.
c. Estimated.
d. Residual.
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Table 8
Investment in Production Enterprises in Communist China, in Percentages of Total Investment 2/
1953-56
Percent
Type of Enterprise
1953
1954
1955
1956
/
Four-Year Total
Above-norm12/
89.7
89.9
92.3
91.0
91.0
Newly constructed
56.0
81.1
87.1
75.1
77.0
a. Data cover investment for the First Ministry of Machine Building and the Ministry of the Power Equipment
Industry only.
b. The term above-norm project as used in the machine-building industry of Communist China refers to a
project requiring an investment ranging from more than 5 million yuan, such as machine tool plants, to
more than 10 million yuan, such as shipbuilding, tractor, and locomotive plants.
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Table 9
Investment in Newly Constructed Machinery and Equipment Manufacturing Plants
in Communist China, by Type of Commodity 2/
1953-56
Commodity
Million Current Yuan
Percent
Machine tools and measuring
and cutting tools
Heavy machinery and
mining machinery
221.9
123.1
14.6
8.1
Electric power equipment and
electrical equipment
361.8
23.8
Communications and
transportation equipment 12/
670.3
44.1
Tractors
94.2
6.2
Other
48.7
3.2
Total
1 520 0
100.0
a. Data include values for both plant and equipment.
The total value is estimated for the First Ministry of Machine
Building and the Ministry of the Power Equipment Industry.
b. Including construction of shipyard facilities.
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Table 10
Growth of Fixed Assets of the Machine-Building Industry of Communist China p.../
1952-58
Million 1952 Yuan
Sector
1952
1953
1954
1955
1956
1957
Absolute
Increase
1958 1952-57
Metal processing
Type
2,117
2,530
2,962
3462
4,719
5,000 12/
6,500 12/
2,880
Productive 2/
1,685
1,939
2,300
2,757
3,749
4,000 y
5,290 y
2,315
Nonproductive 2/
432
591
662
705
970
1,000
1,300
565
Ministry
First Ministry
of machine building -
(excluding electrical
equipment enterprises)
d/
620
820
990
1,190
1,880
2,080
2,800 12/
1,460
Other
1,497
1,710
1,972
2,272
2,839
2,920
3,700
1,420
Military goods production
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
3,200 12/
Total
6,080
a. Data include values for both plant and equipment
b. Preliminary estimate.
c. The term productive fixed assets as defined by the Chinese Communists and as used in this table
refers to plant buildings and machinery and equipment for the purpose of production; to railroads,
highways, seaports and wharves, and other means of transport; and to warehouses for commercial and
financial enterprises. The term nonproductive fixed assets (consumer types of fixed assets) refers to
fixed assets for such material and cultural needs of the population as housing, schools, hospitals,
cinemas and theaters, nurseries, clubs, dining halls, and public office buildings.
d. 252/
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Table 11
Location of Production of Selected Types of Machinery
and Total Production by the Metal-Processing Sector of Communist China, in Percentages 2/
1955
Percent
Boilers
Machine Tools
Generators 12/
Electric Motors 12/
Transformers
Total Production
Machinery and Equipment
All Metal-Processing
In Terms
In Terms
(In Terms
In Terms
In Terms
In Terms
In Terms
In Terms
In Terms
Manufacturing Enterprises
Enterprises
Location
of Units
of Steam Output
of Units)
of Units
of Kilowatts
of Units
of Kilowatts
of Units
of Kilovolt-amperes
(In Terms of Value)
(In Terms of Value)
Maritime
Peking
7.8
. 6.0
4.4
Negligible
Negligible
6.3
1.2
3.2
4.o
Tientsin
12.8
6.9
3.7
Negligible
Negligible
5.6
2.5
5.5
1.8
7.2
8.5
Shanghai
30.2
62.4
30.5
96.5
68.1
4o.o
30.3
51.4
24.5
25.4
27.0
Liaoning
35.6
18.3
23.7
19.8
7.7
19.2
67.5
27.5
21.8
Shantung
1.3
0.6
4.6
18.7
5.2
2.9
0.2
5.5
4.3
Subtotal
91.0
222,
88.5
2.7.2
68.4
84.4
45.8
212
96.2
75.8
75.3
Interior
9.0
4.9
11.5
2.1
31.6
15.6
54.2
10.0
3.8'
24.2
24.7
Total
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
a. L.5_31
b. Alternating current only.
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Table 12
Location of Major Machine-Building Plants in Communist China, by Economic Region 2/
- January 1950 January 1958
Number of Plants
Type of Plant
Northeast
China
(Region I)
Inner Mongoliari
Autonomous Region
(Region II)
- North
China
(Region III)
East
China
(Region IV)
Central
China
(Region V)
South
China
(Region VI)
Southwest
China
(Region VII)
Northwest
China
(Region VIII)
Sinkiang Uighur
Autonomous Region
(Region IX)
Tibet
(Region X) Total
Machine tool
6
6
4
2
2
20
Measuring and cutting tool
1
1
2
Mining machinery
4
5
2
1
1
13
Textile machinery
1
4
4
1
10
Metallurgical equipment
1
1
1
1
4
Power-producing equipment
other than electrical
.1
3
3
1
812/
Oilfield machinery and
exploratory equipment
1
2
3
Agricultural equipment
4
3
3
1
1
1
1
14
Automotive transport
equipment
2
1
2
3
1
1
1
11
Locomotive and rolling stock
4
4
2
10
Construction equipment
2
2 2,/
Electrotechnical equipment
11
4
11
2
4
3
35
Chemical equipment
2
1
3 11
Tractors
2
2
Machinery to support
light industry
1
1
1
3
Antifriction bearings
2
2
I
5
General industrial equipment
6
3
2 '
3
1
1
16
Total
la
4
40
.3..1.
1.-1.
.2
11
I
1
_
161
a. The economic regions referred to in this table are those defined and named on Map 25561 (5-57), Communist China: Economic Regions, inside back cover. Data comprise major
plants the construction of which was completed or underway during this period.
b. Power.,producing equipment other than electrical equipment is also produced at the Shanghai Steam Turbine Plant, which is counted in the category of electrical equipment.
c. Although only two construction equipment plants are listed, various pieces of construction equipment are being produced at other plants listed under the heading of
general industrial equipment.
d. Although only three chemical equipment plants are listed, various pieces of equipment used in the manufacture of chemicals are being produced at other plants listed
under the heading of general industrial equipment. -
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Table 13
Growth of the Gross Value of Production by the Machine-Building and Metal-Processing Industries
in Communist China 2/
1949-57
Sector
Unit
1949
1950
1951
1952
1953
1954
1955
],956
1957
Total industry 12/
Million yuan 2/
10,781
14,058 2/
20,214 2/
27,014
35,577
41,513
44,748
58,661
62,810 2/
Of which:
Natal processing 2/
Million yuan 2/
733
1,178
2,093
2,852
4,412
5,355
5,749
9,327
10,000 f/
Percent of
total industry 6.8 8.4 10.4 10.6 12.4 12.9 12.8 15.9 15.9
Of which:
Machinery and equipment
manufacturing Million yuan 2/ 291 2/ 524 2/ 976 2/ 1,401 2,157 2,645 3,030 5,764 5,967 2/
Percent of
total industry 2.7 3.7 4.8 5.2 6.1 6.4 6.8 9.8 9.5
Index of growth of machinery
and equipment manufacturing 1952 = 100
21 37 70 loo 154 189 216 411 426
50X1
, Excluding cooperative handicrafts and individual handicraft industry but including handicraft industry in workshops.
c. In 1952 constant prices.
50X1
e. gjd
f. Preliminary estimate.
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Table 14
Estimated Production of Selected Commodities ?
by the Machine-Building Industry of Communist China 2/*
1947 and 1949-58
Commodity
Unit
1947
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
Steam turbines
Number
O
o
o
.
o
o
o
0
NA.
23
N.A.
N.A.
Thousand kilowatts
O
o
o
o
o
o
o
36
121
144
12/
Hydraulic turbines
Number
O
o
N.A.
N.A.
11
N.A.
N.A.
N.A.
37
N.A.
N.A.
Thousand kilowatts
0
0
N.A.
N.A.
6.7
17
10
33
103
72
12/
Electric generators 21
Number
N.A.
N.A.
N.A.
N.A.
746
N.A.
N.A.
2,517
6,883
N.A.
N.A.
Thousand kilowatts
23
10
23
32
30
59
61
108
288
340
420
Electric motors si
Number
N.A.
N.A.
N.A.
N.A.
91,147
N.A.
N.A.
107,387
184,571
N.A.
N.A.
Thousand kilowatts
51
N.A.
200
335
639
N.A.
N.A.
607
1,069
1,370
1,430
Transformers
Number
N.A.
N.A.
N.A.
N.A.
16,185
N.A.
N.A.
55,660
110,514
N.A.
N.A.
Thousand kilovolt-amperes
147
N.A.
570
815
1,167
N.A.
N.A.
1,926
2,891
3,590
3,900
Boilers
Number
690
209
479
782
1,000
N.A.
N.A.
1,274
1,033
N.A.
N.A.
Evaporation capacity in tons
per hour
N.A.
N.A.
N.A.
N.A.
1,222
N.A.
N.A.
2,059
3,022
4,020
N.A.
Internal combustion engines 21
Number
N.A.
N.A.
N.A.
N.A.
1,528
N.A.
N.A.
N.A.
29,234
N.A.
N.A.
Thousand horsepower
13.8j1/
N.A.
N.A.
N.A.
27.6 g/
N.A.
N.A.
N.A.
541
690
2,000
Metal-cutting machine tools LI/
Number
5/390 i
1,582
3,312
5,853
13,734
20,502
15,901
13,708
25,908
28,297
50,000
Tons
N.A.
N.A.
N.A.
N.A.
16,298
24,039
23,530
N.A.
N.A.
N.A.
N.A.
Mainline steam locomotives
Number
22
N.A.
N.A.
N.A.
20
10
52
98
184
167
350
Freight cars
Number
257
3,155
696
2,882
5,792
4,5oo
5,445
9,258
6,376
7,300
11,000
Railroad passenger cars
Number
N.A.
N.A.
N.A.
N.A.
6
50
loo
200
311
350
N.A.
Medium trucks
Number
0
0
0
0
0
0
o
1,654
7,500
15,000
Three-wheel trucks
Number
o
o
o
o
o
o
o
o
Negligible
500
Passenger automobiles h/
Number
0
0
0
0
0
0
0
0
Negligible
500
Tractors
Number
0
0
0
0
0
0
o
o
o
957
Agricultural machinery 1/
Thousands
N.A.
N.A.
N.A.
N.A.
300
343
429
1,300
2,100
550
1,400
Combine grain harvesters
Number
o
o
o
o
o
0
2
20
124
545
Power-operated threshing machines
Number
0
0
0
0
0
0
0
. 0
0
740
Irrigation pumps
Thousand horsepower
NA.
N.A.
N.A.
N.A.
60
70
80
80
90
150
500
Antifriction bearings
Thousand sets
N.A.
138
414
371
1,179
N.A.
N.A.
N.A.
4,400
6,000
13,300
Metallurgical equipment
Thousand tons
NA.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
13
30
Mining machinery
Tons
NA.
N.A.
N.A.
N.A.
Negligible
N.A.
N.A.
N.A.
N.A.
400
1,500
Oil-drilling equipment
Tons
o
o
o
o
o
o
1,600
3,000
4,000
5,000
* Footnotes for Table 14 follow on p. 98.
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1/
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Table 14
Estimated Production of Selected Commodities
by the Machine-Building Industry of Communist China .9/
1947 and 1949-58
(Continued)
Commodity
Unit
1947
1949
1950
1951
1952
1953
1954
1955
1956
1957
1958
Cotton-spinning machinery
Thousand spindles
220
N.A.
N.A.
N.A.
383
287
489
304
784
484
1,000
Cotton looms
Sets
N.A.
N.A.
N.A.
N.A.
6,470
9,650
15,120
9,290
19,250
15,000
31,000
Paper-making equipment
Thousand tons
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
7
15
Sugar-refining equipment
Thousand tons
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
9
15
7-7517-71 have been accepted in most cases as the basis of estimates. Estimates for 1958 are preliminary.
b. Estimated combined production of steam and hydraulic turbines in 1958 was 600,000 kilowatts.
c. Alternating current only.
d. Tonnages are given in metric tons throughout this table.
e. Including diesel, gasolihe, gas generator, and steam engines.
f. Diesel engines only.
g. Of the 27,600 horsepower, 17,995 horsepower were diesel engines and 7,458 horsepower were steam engines.
h. In terms of weight, production in 1952, 1953, and 1954 was 16,298 tons, 24,039 tons, and 23,530 tons, respectively. The disparity between unit production and
production in terms of weight was caused by shifts to heavier models.
i. In 1941, the year of highest production before 1949.
j. Excluding so-called native-style machine tools not produced in regular plants. In spite of this qualification, production in 1958 may not be quite comparable
to that of other years, because of the inclusion of categories not previously reported.
k. Including jeeps.
1. New types only.
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Table 15
Production of Selected Commodities in Communist China
Compared with That in Other Countries 2/
1957
Commodity
Metal-cutting machine tools
Mainline locomotives
Mainline freight cars
Mainline passenger cars
Commercial vehicles 12/
Tractors
Transformers
Electric motors
Unit
Thousands
Number
Thousands
Number
Thousands
Thousands
Thousand
kilovolt-amperes
Thousand kilowatts
Communist China USSR
28.3
350 sl/
7.3
350
15.5 1/
0.96 21/
3,590
1,370
US UK West Germany Japan
130.9 62 70 12/ 2/
670 1,320 2/ 1,142
38.3 100.0 e 67.8
1,856 841 E/ 2,420
381.8 1,100 1/ 288
204.0 265.9 147
N.A. N.A.
2,898 1/ N.A.
a. Data for Communist China were obtained from Table 14, p. 97, above/
N.A.
N.A.
N.A.
227 12/ El
5.04
2,458 12/ 1.1
253
118
N.A.
N.A.
India
34.8 N.A.
72 12/ f N.A.
6.97fJ N.A.
569 12/ ij N.A.
135 11.9
N.A. 2.13
3,535.9
1,219.2
349.8
c.
d.
e.
f.
Shipment or sales for 1948.
In 1958.
Units put
In 1956.
g. Factory shipments.
h. Including light and heavy trucks, wheeled tractors
data for which include production of trucks only.
i. Factory sales, including parts shipped for assembly
j. Excluding motors of less than 100 kilowatts.
into service
on first-class
railroads
in 1957.
for road haulage,
abroad.
-99-
50X1
special vehicl'es, and buses except for India and Communist China,
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Table 16
Production of Selected Commodities
in Communist China in 1957 and in the USSR in 1932 2/
'Communist China
USSR
Commodity
Unit
1957
1932
Turbines
Thousand kilowatts
216
239
Electric generators
Thousand kilowatts
340
1,085
Electric motors
Thousand kilowatts
1,370
1,658
Metal-cutting machine
tools
Thousands
28.3
19.7
Mainline steam
locomotives
Number
35012/
827
Freight cars
Number
7,300
15,200
Tractors
Number
0
48,900
Trucks
, Number
7,500
23,700
Internal combustion engines
Thousand horsepower
690
96
Combine grain harvesters
Number
124
10,000
a. Data for Communist China were obtained from Table 14, p. 97, above
b. In 1958.
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Table 17
Comparison of Technical Capabilities of Selected Machinery Produced
in Communist China, the USSR, and the US 2/
Commodity
Characteristic
Unit
Produced by End of 1956
Under Development, 1957-58
Communist China
USSR
US
Communist China
USSR
US
Steam boilers
Steam turbogenerators
Hydraulic turbogenerators
Transformers (3-phase)
Horizontal lathes
Evaporation capacity
Capacity
Capacity
Tension
Capacity
Distance between centers
Tons per hour 12/
Thousand kilowatts
Thousand kilowatts
Kilovolts
Kilovolt-amperes
Meters
150
12
15
154
40,500 El
5
660
200
150
400
123,000
20
750
300
150
330
150,000
3o q/
N.A.
25
72.5
N.A.
N.A.
N.A.
900
300
200
N.A.
200,000
N.A.
N.A.
450
N.A.
N.A.
360,000
N.A.
Vertical lathes
Diameter of working
platform
Meters
3.2 to 3 .4 2j
18
14
8
22
N.A.
Cranes
Lifting capacity
Tons
14o fJ
500
45o
150
N.A.
N.A.
Excavating machinery
Bucket capacity
Cubic meters
3
25
46
N.A.
50
N.A.
Hydraulic presses
Pressure
Thousand tons
2
50
68
N.A.
N.A.
N.A.
Blast furnaces
Capacity
Cubic meters
1,000
1,513
1,800
N.A.
2,000
N.A.
Open-hearth furnaces
Capacity per heat
Tons
185
500
550
N.A.
N.A.
N.A.
Cargo trucks
Payload
Tons
4
25
75
N.A.
4o
N.A.
b.
c.
d.
e.
f.
Tonnages are given in
In 1957.
Approximate maximum 1
In 1958.
An overhead traveling
metric tons throughout this table.
ength of standard types of lathes.
crane designed for the An-sham Steel Works.
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Table 18
Industrial Labor Force of Communist China
1949, 1952, and 1955-58 2/
Sector
Unit
1949
1952
1955
1956
1957
1958
Total industry 12i
Thousand workers
3,060
5,260
6,121
7,170
7,907
N.A.
Metal processing
Thousand workers
377.
846
960
1,338
1,760 2/
3,000 1/
Percent of total industry
12.3
16.1
15.7
18.7
22.3
N.A.
a. Data are for the end of the year
b. 263/
c. 264/
d. 265/
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Table 19
Productivity per Worker in the Metal-Processing Sector
of Communist China 2/
1949, 1952, and 1955-56
Year
1952 Yuan
1949
2,962
1952
6,767
1955
10,814
1956
12,569
a. 266/. Data are for state-operated, local-state operated,
and state-private jointly operated cooperative enterprises
only. Productivity probably was computed on the basis of the
total number of workers on the production line rather than on
the basis of employees. The latter method was used in com-
puting productivity for Figure 1, following p. 6, above.
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Table 20
Park of Agricultural Equipment in Communist China 2/
1953-59
Type of E.suipment
'Unit
1953
1954
1955
1956
1957
1958
1959
(Planned)
Tractors12/
Standard (15-horsepower) units E/
113
778
2,377
9,864
12,176
25,197
55,000
Animal-drawn implements
Thousands
629
991
1,973
4,606
5,114
N.A.
N.A.
Combine grain harvesters 12/
Number
N.A.
N.A.
N.A.
N.A.
N.A.
3,452
4,500
Threshers 12/
Number
N.A.
N.A.
N.A.
N.A.
N.A.
5,516
7,500
Tractor-drawn implements
Thousands
N.A.
N.A.
N.A.
N.A.
N.A.
80
100
Mechanized drainage and irrigation
equipment'
Thousands
N.A.
N.A.
N.A.
N.A.
N.A.
1,600
2,800
Trucks
Number
N.A.
N.A.
N.A.
N.A.
N.A.
12,700
13,000
Insecticide spraying machines
Number
N.A.
N.A.
N.A.
N.A.
N.A.
1,100
N.A.
Total power machinery
Thousand horsepower
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
5,200
0. Bearly all items in these categories were imported. Compare production of these items given in Table 14, p. 97, above.
c. The 15-horsepower unit is a statistical measure used in the Sino-Soviet Bloc to convert tractors of various types and
horsepower into comparable units for purposes of planning and accounting. It is calculated by dividing the "rated" draw-
bar horsepower of the tractor by 15. Thus the Soviet DT-54 tractor with a drawbar horsepower of 36 equals two and two-
fifths 15-horsepower units. Drawbar horsepower may be defined as the horsepower equivalent of the pull exerted on the
drawbar which is affixed to the rear of the tractor, This rating differs from ratings in terms of engine horsepower
(more specifically brake horsepower) which measure the power delivered by the engine -- generally, the more powerful the
engine, the greater the drawbar pull, regardless of the type of traator. However, two engines of the same brake horse-
power, one installed in a wheeled tractor and the other in a crawler type, would usually exert different drawbar pulls
because of the different efficiencies of the two modes of traction. The wheeled tractor makes less efficient use of the
power of the engine but is indispensable in cultivating row crops. Thus the ability of diverse types of tractors to pull
drawn implements may be most significantly compared by means of ratings in drawbar horsepower.
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Table 21
Sources of Imports of Machinery and Equipment.
by Communist China'aj
1957
Source
Soviet Bloc
Million Current US $ Percent
USSR
271.6
47.0
East Germany
95.2
16.5
Czechoslovakia
73.9
12.8
Poland
27.0
4.7
Hungary
26.8
4.6
Rumania
14.0
2.4
.Bulgaria
3.2
0.6
Subtotal
511.7
88.6
Free World
65.8
11.4
Total
577.5
100.0
a. Derived from Table 22, p. 106, below.
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Table 22
Imports of Machinery and Equipment by Communist China 2/*
1950 and 1952-57
Million Current US $
Source and Type of Import
1950
1952
1953
1954
1955
1956
1957
Free World
Total
N.A.
269.3
284.3
292.6
314.5
432.2
523.2
Of which:
Machinery and equipment12/
N.A.
12.0
20.9
13.3
15.0
41.6
65.8
USSR
Total
388.2
554.2
697.6
N.A.
748.4
733.0
544.1
Of which:
Machinery and equipment
41.4
156.6
163.6
N.A.
229.6
304.7
271.6
Of which:
Complete plants
1.0
40.7
49.3
N.A.
141.5
217.0
209.0
* Footnotes for Table 22 follow on p. 110.
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Table 22
Imports of Machinery and Equipment by Communist China 2/
1950 and 1952-57
(Continued)
Million Current US $
Source and Type of Import
1950
1952
195
1954
1955
1956
195T
East Germany
Total
N.A.
N.A.
6o.4
99.5
97.4
94.9
105.8
Of which:
Machinery and equipment 2/
N.A.
N.A.
54.4
89.6
87.7
85.4
95.2
Of which:
Complete plants
N.A.
1/
N.A.,
N.A.
N.A.
26.6 2/
44.4 1/
Czechoslovakia
Total
N.A.
N.A.
60.7
64.4
57.6
64.7
81.2
Of which:
Machinery and equipment Li
N.A.
N.A.
N.A.
N.A.
37.4
'55.0
73.9
Of which:
Complete plants Li
N.A.
N.A.
N.A.
N.A.
12.1
32.4
44.7
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Table 22
Imports of Machinery and Equipment by Communist China 2/
1950 and 1952-57
(Continued)
Million Current US
Source and Type of Import
1950
1952
1953
1954
1955
1956
1957
Poland
Total
6.3
23.8
31.0
37.0
34.8
50.3
44.8
Of which:
Machinery and equipment 12/
0.6
2.3
7.8
15.9
13.9
27.2
27.0 .12/
Hungary
Total
N.A.
20.5
29.6
30.9
36.5
31.0
29.8
Of which:
Machinery and equipment 12/
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
26.8 1/
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Table 22
Imports of Machinery and Equipment by Communist China 2/
1950 and 1952-57
(Continued)
Source and Type of Import
Million Current US p
1950 1952 1953 1954 1955 1956 1957
Rumania
Total Negligible N.A. N.A. N.A. 7.0 1/ 17.0 15.0 1/
Of which:
Machinery and equipment N.A. N.A. N.A. N.A. N.A. 14.0 1/
Of which:
Complete plants N.A. N.A. N.A. N.A. h/ N.A. 3.8 1/
Bulgaria
Total N.A. 0.6 5.3 N.A. 4.6 5.2 5.0 1/
Of which: .
Machinery and equipment12/ N.A. N.A. N.A. N.A. N.A. N.A. 3.2 1/
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Table 22
Imports of Machinery and Equipment by Communist China 2./
1950 and 1952-57
(Continued)
a. Ruble values have been
converted to current US dollar values at the official rate of 4 rubles to US $1. Data do not
include unrecorded trade. Instruments and a few other minor items are included in the Soviet
and probably the Satellite definitions of machinery and equipment but are defined otherwise for
the Free World.
b. Data on exports of complete plants not available.
c. Machinery and equipment accounted for "almost 90 percent" of Chinese Communist imports from
East Germany, presumably as a general average during 1953-57. EL/
d. Complete plants accounted for 2 percent of Chinese Communist imports from East Germany in
1952 and 42 percent in 1957. 270]
f. Machinery and equipment accounted for 65 percent of Chinese Communist imports from
Czechoslovakia in 1955, 85 percent in 1956, and 91 percent in 1957. 272/
g. Complete plants accounted for about 21 percent of Chinese Communist imports from
Czechoslovakia in 1955, more than 50 percent in 1956, and 55 percent in 1957. 273/
h. Exports of complete industrial installations amounting to $9.3 million were planned for
1957. 2
i. Machinery and equipment accounted for about 90 percent of Chinese Communist imports from
Hungary in 1957. 2 5
j. Preliminary estimate.
k. Petroleum equipment and complete sets of equipment for electric power plants accounted
for more than 50 percent of all Chinese imports from Rumania in 1955. 2 6
1. Machinery and equipment accounted for 93 percent of Chinese imports from Rumania in 1957,
and 25 percent of such imports represented complete installations for thermal electric power
stations. 277/
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Table 23
Imports of Machinery and Equipment by Communist China
in Percentages pi
1950, 1952-53, and 1955-57.
Source and Year
Free World
1950
1952
1953
1955
1956
1957
USSR
Machinery and Equipment
as Percentage of
Total Imports
Complete Plants
as Percentage of
Machinery and Equipment
N.A. 0
4.5 0
7.4 0
4.8 0
9.6 0
12.6 0
1950 10.7 2.4
1952 28.2 26.0
1953 23.5 30.1
1955 30.7 61.6
1956 41.6 71.2
1957 49.9 77.0
a. Derived from Table 22, p. 106, above.
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Table 24
Estimated Self-Sufficiency in Selected Producer Goods in Communist China 21
1957-58, 1962, and 1967
Percent of Total Requirements
Commodity
1957
1958
1958-62
1962
1967
Medium trucks
Machine tools
Metallurgical equipment
Iron-smelting equipment
Steel-smelting equipment
Rolling mills
Heavy electrical equipment
Steam turbines
Generators for steam turbines
Hydraulic turbines
Generators for hydraulic turbines
14
50 2/
Less than 20
4o
4o
3
N.A.
13
13
10
10
30
75 12/
35
?
50
50
Very low
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
45 I)/
45 12/
27 12/
27 13./
90 21
90-95 12/
60
80
80
4o
50 12/
N.A.
N.A.
N.A.
N.A.
100 12/
loo Li
85
loo
loo
75
100 12/
N.A.
N.A.
N.A.
N.A.
Machinery for light industry
Oil-drilling and exploratory equipment
Chemical-engineering equipment
Cutting tools
Measuring instruments
Grinders
Abrasives
Casting equipment
Forge-press equipment
Presses
Hammers
90
20
Less than 3
0
Very low
Unsatisfactory
Low
N.A.
N.A.
Low
Satisfactory
90
25
Negligible
Very low
Very low
N.A.
N.A.
N.A.
N.A.
Low
Satisfactory
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
100 12/
100
Low
95 12/
95 IV
9512/
100 12/
86 12/
80 12/
N.A.
100
100
100
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
100
D. Planned.
c. In 1956.
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APPENDIX C
MINISTERIAL ORGANIZATION OF THE MACHINE-BUILDING INDUSTRY
OF COMMUNIST CHINA
Orginally, machine building in Communist China was controlled by
the Ministry of Heavy Industry, which was established in 1950. In
1952 the First Ministry of Machine Building and the Second Ministry
of Machine Building were created out of the Ministry of Heavy In-
dustry, leaving the latter responsible for metallurgy, chemicals,
and building materials until its abolition in 1956. (See Figure 6.*)
The First Ministry of Machine Building was given responsibility for
production of machine tools, locomotives and rolling stock, auto-
mobiles, electrical equipment, mining machinery, general industrial
machinery and equipment, and auicultural tools and equipment, as
well as shipbuilding. Production of arms and munitions was placed
under the Second Ministry of Machine Building.
In April 1955 the Third Ministry of Machine Building was estab-
lished as a step to centralize control over the smaller plants that
did not come under the direct control of the First and Second Minis-
tries of Machine Building. The Third Ministry of Machine Building
was responsible for the direction of machine and electrical engi-
neering industries of local-state, joint state-private, cooperative,
and private enterprises.
In 1956, there occurred a general trend toward ministerial
specialization. The Third Ministry of Machine Building was abol-
ished in May 1956, a move which coincided with the virtual comple-
tion of socialization of priv6,te and joint state-private enterprises.
In November 1956, however, a high-ranking Communist was appointed
Minister of a new Third Ministry of Machine Building, apparently
with a new responsibility. 279/ The Ministry of Power Equipment
was established in 1956, apparently to supervise production of elec-
trical and medical equipment. 280/ Thus this ministry probably ab-
sorbed part of the functions of the old First and Third Ministries.
A basic reorganization of the machine-building industry oc-
curred in February 1958. The Chinese State Council announced
on 11 February 1958 that the former Second Ministry of Machine
Building and the Ministry of Power Equipment had been merged with
the First Ministry of Machine Building and that the Third Min-
istry of Machine Building had been renamed the Second Ministry
of Machine Building. The incorporation of the Ministry of Power
* Following p. 114.
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Equipment into the First Ministry was not unusual, because, as pre-
viously noted, the First Ministry of Machine Building controlled -
production of this equipment until 1956. More significant was the
merger of the former Second Ministry of Machine Building, which was
charged with production of military items, with the First Ministry
of Machine Building. In November 1957, it was announced that in-
dustrial enterprises engaged in defense production would produce
50 types of products for civilian use in 1957. Moreover, the head
of the new First Ministry of Machine Building is General Chao
Erh-lu, a man with ordnance experience and Minister of the former
Second Ministry of Machine Building since its establishment in
1952. His current appointment as head of the new First Ministry
of Machine Building probably will insure the proper considerations
of defense and civilian interests within the enlarged responsibility
of the new ministry.
In August 1959 a Ministry of Agricultural Machinery was estab-
lished with the purpose of accelerating the mechanization of ?
Chinese agriculture. 281/ The newly completed Lo-yang Tractor Plant,
which had been subordinated to the Sixth Industrial Control Bureau
of the First Ministry, was immediately transferred to the new min-
istry. 282/ Actually, production of tractors, agricultural imple-
ments, and generating equipment used in agriculture, previously the
responsibility of three bureaus, had been concentrated in the Sixth
Bureau since February 1958. .2.L./
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Communist China: Ministerial Organization of Machine Building, 1950-59
1950 1951
Ministry of
Heavy Industry
28369 2-60
1952 1953 1954 1955 1956 1957
Ministry of the Metallurgical Industry
Ministry of Heavy Industry Ministry of the hemical Industry
First Ministry o
Second Ministry o
Machine Building
Machine Building
Ministry of the
Building Ma erial Industry
1958
iAFirst Ministry of achine Building
Ministry of Power Equipment Industry
Second Ministry of
Machine Building
Third Ministry of
Machine Building
ilhird Ministry of
'Machine Buildind
First Ministry of
Machine Building
Second Ministry of
Machine Building
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Figure 6
1959
Ministry of the
Metallurgical
Industry
Ministry of the
Chemical Industry
First Ministry of _,
Machine Building
Ministry of
Agricultural
Machinery
Second Ministry of_
Machine Building
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APPENDIX D
METHODOLOGY FOR ESTIMATING TOTAL INVESTMENT IN CAPITAL CONSTRUCTION
FOR MACHINE BUILDING UNDER TEE FIRST FIVE YEAR PLAN (1953-57)
OF COMMUNIST CHINA
According to the announcement on fulfillment of the First Five Year
Plan (1953-57) of Communist China, total state investment in capital con-
struction amounted to 49.3 billion yuan, of which 56 percent, or 27 bil-
lion yuan, went to industry. 284 During this period the machine-building
industry reportediy received 26 percent of all industrial investment in
capital construction. 285/ Therefore, investment in capital construction
in the machine-building industry would have amounted to 7.18 billion yuan.*
Reported data for investment in actual machine building -- that is,
for machinery and equipment manufacturing or for the metal-processing
sector -- fall far short of the figure of 7.18 billion yuan. The metal-
processing sector accounted for 3.41 billion yuan, or 47.5 percent of
the total of 7.18 billion yuan. Moreover, it appears to be fairly clear
that the plants comprising the metal-processing sector were subordinate
to the First Ministry of Machine Building and the Ministry of Power Equip-
ment Industry until the end of 1957. 287/ The remaining investment (3.77
billion yuan, or 52.5 percent of the total of 7.18 billion yuan) is
assumed to have been allocated to industries engaged in military pro-
duction under the former Second Ministry of Machine Building.
This conclusion is reinforced by an analysis of information on
plants. It seems impossible that investment both for military pro-
duction and for civilian machine building could be included in the
figure of 3.41 billion yuan given for the metal-processing sector or
the 2.58 billion yuan given for machinery and equipment manufacturing.**
Construction costs for only five major plants amounted to 1.6 billion
yuan.xxx In that event, only 1.8 billion yuan would be left for all
other construction, both civilian and military, a situation that
seems quite unlikely in comparison with the scope of the construction
program.
* It should be noted that the percentage figure for machine build-
ing coincides with the planned distribution of investment to machine
building (6.93 billion yuan out of a total of 26.7 billion) under the
First Five Year Plan. 2.?..Y
** See Table 7, Appendix B, p. 90, above.
xxx The five plants are the Lo-yang Tractor Plant the Tientsin 50X1
Tractor Plant, the Ch'ang-ch'un Automobile Plant the Fu-la-erh- 50X1
chi Heavy Machinery Plant, and the T'ai-yuan Heavy Machinery Plant.
Part of this construction extended beyond 1957, the terminal year of
the First Five Year Plan.
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COMMUNIST CHINA
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Aurolous uiGnue
Nolvi
REGION
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