JPRS ID: 9688 CHINA REPORT ECONOMIC AFFAIRS

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• Collection: JPRS
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00850R000300100051-1
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• Document Page Count: 10
• Document Creation Date: November 1, 2016
• Sequence Number: 51
• Content Type: REPORTS

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JPRS L/9688
24 April 1981
- China Re ort
p
' ECONOMIC AFFAIRS
~FOUO 2/81)
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. JPRS L/9688
24 April 1981
CHINA REPORT
ECONOMI C AFFA I RS
. (FOUO 2/81)
CONTENTS
PEOPLE~S REPUBLIC OF CHINA
NATIONAL POLICY AND ISSUES
- Resurgence of Chen Yun School of Economics Discussed
(Inada; NIHON KEIZAI SHIMBUN, 16 Mar 81) .....~.o.oo.........0 1
ECONOMYC PLANNING
Economic Tias With Japan Reported Strained
(Masahiko Ishizuka; THE JAPAN ECONOMIC JOURNAL, 10 Feb 81).~.. 4
FOREIGN TRADE
Anti-Japanese Sentiment Said Sprouting in China
(Imada; MAINICHI SHIl~tTN, 6 Mar 81) ........ooo..v.a,...o.a.. 6
-a - [III -CC -83FOU0]
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NATIONAL POLICY AND ISSUES
RESURCFNCE OF CHEN YUN SCHOOL OI~' ECONOMiCS DISCUSSED
Tokyo NIHON KEIZAI SHIMBUN in Japanese 16 Mar 81 p 2
[Article by Peking correspondent Inada]
[Text] The basic: concept of the construction of the Chinese economy has gone
back a quarter century through a time tcinnel. The 2conomic philosophy of (party
vice chairman) Chen Yun adv~ocating an "abundant society" beneficial to the people
has returned. The party Central C~mmittee and the government are now persuading
the people that this is the basis of progress and not retrogression. Since the
- expulsion of the "gang of four," the most dramatic change in Chinese society has
been a diversification of values. The people :iave gradually begun to speak their
minds. The responses to the Chen Yun economics from the ~aany factiona on the
right, left, snd the middle have varied from support to differences of opinion,
criticism, and attack. It will take some time yet before it is firmly entrenched.
But why has the Chen Yun school of economics reappeared in the China of the
_ eighties?
Theory Provided for Read3ustment Policy; Drastic Change in Environm~nt, Solution
Unknown
Recently, the "qualitative change" in China was vividly demonstrated by editorials
in Chinese newspapers about the movement for learning froffi Lef Feng, the late PLA
~oldier who became a national hero. The editorial focused on replying to
criticisms such as "Lei Feng was old-fashioned," and "he suppressed his
individuality." There is a qualitat3.ve difference 3_;1 the society compared with
~ that af 1963, when the movement for learning from Lei Feng took the country by
storm under the orders of Chairman Mao. A t;~pical example of this was shown in
- the answers to the question, "Is a socialist system superior?", in a~poll taken
by the PEOPLE~S DAILY. Those disagreeing completely or partially madia up about
30 percent of the total. Th~se doubts about the socialist system and loss of
party prestige ar~e the biggest problems besetting the g~vernment.
Similar phenomena are appearing in the field of economics as well. People are
asking a basic question in reply to establishment propaganda boasting the
superiority of a socialist economy: why is China still so poor 30 years after
liberation? The intelligentsia with some knowledge of econou~ics sigM: "If it
had not been fot the Great Leap Forward (1958) and the Cultural Revolution
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(1966-76)...." However, the average person will not take this "if " for an answer. _
Th~ failure is a problem of party leadership and the yardstick used for judgment
- by the people of China is the question: "Can one get enough to eat?"
According to figures used by economic experts, a picture of failure emerges foY
the radicsl left economic line. Since the time of the Great Leap Forward, which
is now continuaily criticized by the present regime, there has been rigid
adherence to idealistic theory.
During the 10 years of the cultural revolution, the rate of growth was about 7
percent a year in agricultural and industrial production. However, the average
wages of urban workers actually went dow~n. Due to tremendous waste of raw -
materials, fuel, and labor, the profit produced per 100 yuan of fixed assets in
state-controlled industries dropped 51.2 percent, from 23.6 yuan in 1957 to 12.1
yuan in 1967. Also, the profit including taxes per 100 yuan of investment fell
55 percent in the same period, from 34.7 yuan to 19.3 yuan. Because of haphazard
production which ignored coneumer demand, about half of the machinery and heavy
electrical equipment produced was, in a real sense, wasted. Of the total, 5 to
10 percent was a completely useless backlog and 40 percent was 3ust barely usable -
and had to be greatly reduced in pr:~:e to sell.
The 5-year plans for the economy deteriorated after a short time. The ffXzd assets
formation rate of the state-~controlled induatries was 83.7 percent under the first
5-year plan (1953-57), 71.4 percent under the second 5-year plan (1958~62), and
59.5 percent under the third 5-year plan which followed a 3-year period of economic
readjustment. It made a slight comeback to 61.4 percent under the fourth 5-year
plan (1971-75). Furthermore, the investment necessary to increase the national
inCOme by one yuan rose from 1.68 yuan in the first 5-year plan to 3,76 in ths
_ fourth 5-year plan. According to the calculations of the economic intellectuals
as reportea by the paper, if the pace of the first 5-year plan had been maintained, _
"the fixed assets of the state-controlled industries would have grown to 100
billion yuan in the period from 1958 to 1978 and thE national income would have ~
grown to at least 300 billion yuan."
They conclude that "the first 5-year plan was all right," and "the future economic
policy presented by Chen Yun at the Eighth Party Congress in 1958 was correct." �
_ Chen Yun presented an economic policy report at this congress entitled, "New _
Problems After the Fundamental Achievement of Sociali~t Economic Construction."
The present regime decided that this report was "exactly suited to the present
Chinese economy." The economic intell~ctuals, led by those in the Social Science ~
Institute, were entirely won over to tihe new trend, and the return to the Chen
_ Yun school of economics was made certain.
- The basic concept of the Chen Yun school of economics is very clear. It sets
forth the purpose of socialist production as "the estahlishment of a socialist _
economy which is beneficial to the people." "Beneficial to the people" means the
existence of abundant consum~r goods. The plan for r.ealization of this kind of
economy includes three supplements to the planning system of th� previous
administration: individual management as opposed to state~^_ontroiled or group
management, free production as opposed to planned production, and a free market as
~ 2
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opposed to a state-controlled market. And in order to operate this economic plan,
an overall balance is necessary. It is necessary to begin with the production
capacity of the present and with objective production conditions. The Chinese
ecortomic policy for the immediate future is leaning heavily toward light industry.
The nature of the readjustment is tending toward a retrenchment equilibrium rather
than a expansion equilibrium. This is becauoe it is based on the Chen Yun bchool
of economics.
- The Chen Yun approach to economii:s, in brief, is "the building of an abundant
economic society." It was the basic concept pervading the party Centra]. Committee
Work Conference in January last year. Party Vice Chairman Chen Yun is the leader
in economic theory in the relations between the party Central Committe~ and the
government. On the side of the government, Premier Zhao Ziyang will beGOme head
of the Central Committee Finance and Economy Guidance Group, a warking group newly
established in the State Council. The party and the government are to work
together for thorough economic readjustment.
The Chen Yun economics has reemerged from the other side of a"time tunnel." Can
it pick up the Chinese economy and take off? Mr Okita, a[Japanese] government
representative (in charge of foreign economic matters), visited China in the middle
of February over the problem of the re~ected plant contracts. He pointed out the
differences between the present situation of the Chinese economy and the first
- economic readjustment period (1963-65) and raised a number of doubts from an
e~onomist's point of view~
The greatest problems ars connected with the change, although insufficient, from
an isolationist to an open economy. There is more exchang~ of people, goods, and
money with other countries and the roads these goods pass over are becoming more
complex. With respect to funds, ~or instance, C~ina is entering an era of
using the IMF and the World Bank. 'I'he worYd is moving at such a rate that there
is no telling what the most advanced technology will be 10 years from now. In
this situation, what effect can the Chen Yun school of economics have on the
state of the Chinese economy and what reactions will it stir up? In a China where
values are diversifying, it is impossible to find an answer right now.
" COPYRIGHT: Nihon Keizai Shimbunsha 1981
9651
CSO: 4105
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ECONOMIC PI.EINNING
~ ECONOMIC TYES WITfi JAPAN REPORTED STRAINED
' Tokyo THE JAPAN ECaNOMIC JOURNtLL No y41, 10 Feb 31 pp 1, 5
~Article by Masahiko Iahizuka~
~Text] Chine's unilateral can- ~
~ planb for the Beijing petro-
cellation of contracts for chemical 'complexes (~12.3
Japanese steelmaking facalities billion) ordered from Mitsubishi
and 15 petrochemical plants not Heavy Industries and others.
oNy is dismaying and shocking Most of these contracts were
industrymen but it also seems signed in 1979 and 1980 and
to be endangering the two ~panies. are irrevceably
_ countries' entire economic committ~ to the orders. In -
relations, including those on an many cases, r~early 50 per cent
officiallevel. of products have been com-
Toward the end of January ~ieted and shipped, while
through early February, othero aze waiting for loading
China's National TechNcal at port.
Import Corporation notifed Even if work is yet to be
- Japanese plant makers of started. cancellation of con-
decisions to cancel contracts, tracts is certain to prove a
or suspend projects, involving serious blow to manufacturers
- over ~ 300 billion worth of in- as they suddenly find their
_ dustrial plants ardered from capacities idled. There even is -
them. mentioned the possibility that
They include a hot rolling mill some of the hundreds of
c worth ~ 95 billion) ordered smaller firms involved as sub-
from Mitsubishi Heavy Indus- contraMors may go bankrupt
tries, Mitsubishi Electric, and a ~a~ of the lost job. -
cold roUing mill c~ 13 bitlion) But China has not yet clari-
ordered frorn Nippon Steel, both fied whether it is ready to pay
for the Baoshan steel complex; ~ompensation. for damages
six plants for Nanjing petro- caused by contract cancella- -
chemical complex (~f 106.3 tions, whiie a high official of
billion) ordered from Mitsui the technology import cor-
- Petrochemical. Mitsui Engi- poration is scheduled to arrive
neering & Shipbuilding, C, itoh in Japan soon to work ~things
& Co., Mitsui & Co. and others; out.
seven plants for the Shengli As rsasons ~ for the cance-
petrochemical complex 114 llation, the Chinese GQvern-
billion) ordered from Mitsui ment cited huge fiscal deficits-
Toatsu Chemicals, Shin�Etsu and foreign c~arency s;,ortag~.s
Chemical, Mitsui & Co., Mitsu- in the midst of the "economic -
bishi Corp. and others; two adjastmer~t" undcr way.
4
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Japaneae bustnessmen are
generally pessimistic about "It seems that the Chinese
China's ability to pay compen- aze not aware of the serious-
sation ur price for the portiaa oE ness of th~e situations they are
orders already completed. creating in this aU. Their sheer
"They stopped projecta simply i~orance ot international b~ui-
because the;; don't have ness practices and niles is
money. Haw can we expect amazing," both basinessmen
them to pay anyway?" some and government officials say.
~Y� The prospect that China is
Majar trading companies are abandoning all major projects
not trying to hide their anger. that need big industrial plants
. "Cancellation of these inter- poses grave concern over the
national deals has been made fu
ute~To
f~~ifa~eral-Tong-
_ entirely on account of Chiaa's term trade agreement which
domestir problems and this essentially consists of barter
hardly i~ acceptaWe from the deals of China's cevde ~oil for
viewpoint of internatioaal Japan's industrial plants.
faith," an of~cial of a trading T1~e agreement si~ed be-
company said. tween the two govecnmentg in
In view of the deterioratioa of 1978 calls for trade aggregating
China's economic. situatioas SZO billion-3o billioa each way
since last summer, Japanese during 13 years through 1990.
oompaniea say, they repeatedly OY~e major assumption for the
asked the Chinese if they a~ight trade arrangement has already
safely go ahead with work on been seriouslY JeoWac'dized as
= the orders and every time they China's. capacity to export
were given reassurance. - cru~e oil to Japan has proved
Under the circumstances. the drastically smaller than 9nitial
Japanese Government, which commitmeat "If China dces
~d a~~~ not have much oil to sell,
policy on this matter, is begin- ~~y don't have money to buy
" ning to get worried. plants frnm Japan either," ob-
The Ministry of Int~rnational ser.vers point out.
Tlrade & Industry last weet Implications of the massive
asked China to reconaider can- contract cancellations do not
cellation of the contracts or at seem to be limited to deals on
least pay adequate aompea- pr~vate basis. Some officials
sations to Japanese companies. ~press concern that cr~dits on
If China jgnores the warning, concessionary terms which the ~
MITI officials say, Japanese Japanese Government agreed
manufacturers and exporters to provide to China could stay
wiDl claim payment from the u{~ in the air if Ct?ina remains
_ government-run export in- ~~gative about big projects.
surance and should that 6ap- ,vre8d ~ 106 billion in such
~pen, China will be cl ~assed as a ~~~t hays been committed to
_ bankrupt country, which
makes it impossible to apply help China with several basic
the export insurance to futurc W'ol~~ such as hydropower
deals with it. This is bound to plantg, railroads. and ports and -
seriousiy hamper export and ~~0~�
credit to the country.
COPYRIG~iT: The Nihon Keizai Shimbun, Inc
CSO: 4120
S
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FOREIGN TRADE
ANTI-JAPANESE SENTIMENT SAID SPROUTING IN CHINIA
Tokyo MAINICHI SHII~3UN in Japanese 6 Mar 81 p 8
_ [Article by special corresgondent Tmada, Beijing]
[T~xt] Anti-Japanese sentiment is sprouCing ~n part of China. ~he direct caus e
for the rekindling of this sentiment was related to the question of who was
responsible for the second economic ~eorganization centered around the stoppage
of Baoshan Steel Company construction. However, in view of the historic anti-
- Japanese sentj,:nent and the leaders' embarrassment surrounding the modernization,
its future development should be of no small concern.
Although the Chinesa Government has officially stated that "the responsibility "
for cancellation o~ the plant importation "rests entirely with China," it has not
sufficiently explained the actual situation to its people. As a result, one
leftist-controlled Hong Kong newspaper accused Japan of "immoral commercial
practices." And among the Japanese tourists are some "ugly Japanese" who go out
souven3r hunting spending mone~ like water, or who make fun of women and thus
~ hurt the feelings of the Chinese people.
Baoshan was made vi.ctim during the third meeting of the fi�th National People~s
Congress. During the meeting, although mar~y representatives pointed out the
unfavorable location, excessive investment, insufficient preparation by the
government authorities, and the wastefulness as the causes for failure, there were
some who held that "Japan played a trick on China with Baoshan by not making any
reparation" and "Japanese design was unreliable."
About this matter, the (then) Deputy Prime Minister Li Xiannian spoke to the
~ Japanese delegate: "We who made a too hasty decision are to blame for the
Baoshan problem." However, when a sitnilar question was raised by either
people's representative or the reporter, the domestic newspaper printed only
the question without explanation. �
When the decis~on was made to discontinue the second stage construction pro3ect
at Baoshanr the comm~ercial firms and maker circles in Bei~3ng were l~d to
believe that "Japanese sold an unnecessarily large unit 3ust t~ make money" and
"Baoshan was chosen as the site in apite of its unfavorabla locar_ion because it
was advantageous to Japan." Those engineers who were drafted from various parts
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of China to Buoshan to work on the pro~ect and were now discharged because of a
reduction in the scale of ~the project also tended to b].ame Japan for their dis-
satisfaction.
~~~d it was the foreign press and newspapers which set the fire for this mo~d. _
When Okit$, representing the Japanese Government, was visiting Ch:~.na, the
western press reported Okita as saying "China was pampered" in Bei3ing. Upon
hearing this, some of the cadres not only lost confidence in Japan but began to .
harbor anti-Japanese sentiments, which led to the criticism of Japan by a Hong
- Rong newspaper. Ttxe Japanese press association has never heard this kind of
speech by Okita at any one of the public appearances~made by him. _
The problem was further complicated by the entanglement betwE~n the awakening of
antt-Japanese sentiment and China's current domeatic politica' situation.
Dissatisfaction toward the leadership, resistauce toward the modernization policy,
and denuncia~ion of its failure may have emerged in the form o� anti-Japanese
senL~.ment. Tt:is possibility should not be ~�~erlooked.
According to a western anal~sis, the domestic inflation under the new economic
policy has risen 2-3 times and the lives of the masses are threatened. The term
"Japanese devil" which was used during the period of anti-Japanese struggle is
said to have cropped up again in th2 underground publication of the anti-system
' group. Japan is denounced for "playing a*_rick on China to waste Baoshan while -
the masses suffer from inflation as a result." Moreover, the loan made by the
Japanese Government to the Chinese Gover.-nment has been painted as "an aid to be
~ used as a lever against the present sy~~tem, an aid with plenty of strings
attached, an excuse to take away oil and coal from China."
I11-mannered Japanese Tourists Are to Blame
The situation in Japan has been more frequently introduced to China in recent _
years through t.v. and various publications. To those who view these, apart from
- pure concern and admiration toward 3apan, the anti-Japanese sent3.ment is made
even morE complex by a great display of Japan's showy material life and the memory
of past Sino-Japanese relations is revived. Some young people criticize
~ Japanese prosperity as "a comfortable life earned by an economic animal at the
eupense of other nations."
To be sure, the greater ma~ority of the Chinese people express genuine ~riendship
toward Japan. Howevery am~ng the recent Japanese tourists were some who, no
saoner than setting foot on Shanghai, aeked the Chinese guide to make arrangements
for female companicnship, saying "you should have some around here," and were thus
~ frowned upon by the Chinese.
The anti-Japanese criticism centered around Japanese imperialism once carried
out vehemently during the period of the Cultural Revolution has been hushed since -
1972 when the two nations normalized diplomatic relations, Especially after the
fall of the "gang of four" and today under the open door policy, we may say that
we are en3oying a Sino-Japanese "honeymoon" period. However, if we take this
"honeymoon" moo.d in too much of an easygoing manner, we may come to be surprised
by a terrible retaliation.
COPYRIGHT: Mainichi Shimbunsha 1981 -
9113
� CSO: 4105 END -
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