#3057 - Week 14 Reading Four Modernizations - Chinese Economic History Since 1850

Four modernizations of – agriculture, industry, science and technology, and national defense

Goal was to turn China into a leading modern state by the year 2000

Written into the party constitution (11^th Congress, 1977)

Witten into the state constitution (5^th National People’s Congress, 1978)

By writing into the constitutions, it should not be affected by changes in leadership

“a grandiose ten-year modernization programme for 1976-1985”

Annual rate of industrial growth was set at 10 percent

Aim to complete 120 major projects

• 10 iron and steel complexes, 6 oil and gas fields, 30 power stations, 8 coal mines, 9 nonferrous metal complexes, 7 major turn railways and 5 key harbours

Production decreased under the Gang of Four despite a comeback in the early 1970s

Called for increased production to 60m tons by 1985 and 180m tons by 1999

Major projects:

• Steel complex at Chi-Tung to produce 10m tons/year under contract with German firms

• Steel complex at Pao-shan under contract with Japanese firms to produce 6m

Vast advances in 1960s with new discoveries and establishment of the Ta-Ching Oil field in Manchuria, the Sheng-li Oil Fied in Shantung and the Ta-kang Oil Field in Tientsin

Called for construction of 10 new oil and gas fields costing $60bn

Provided 70% of China’s primary energy supply but most of the mines were small and old

Called for 8 new mines along with renovation of existing ones

Aimed to double production to 900m tons per year

Production of electricity was the weakest link in the modernization plan

In 1978 China ranked 9^th in electricity production, but per capita consumption was extremely low, below both India and Pakistan

Called for construction of 30 power stations, 20 of which were to be hydropower

• To increase production by 6 to 8 million kw per year

  • But was far short of that which was required

Major projects:

• 2.7 million kw, Ko-hou-pa hydropower station on the Yangtze

• 1.6 million kw, Lung-yang Gorge Station on the Yellow River

Since 1949 had consistently received less investment than industry and defense

Cultural Revolution drove agriculture to the brink of bankruptcy

Growth of grain production was only about equal to the population growth plus the increase in grain requirements for industrial and other uses

Called for maximizing farm production through mechanization, electrification, irrigation and higher utilization of chemical fertilizers

Aims:

• Increase gross agricultural product by 4-5% per annum

• Increase food output to 400 million tons by 1985

• Mechanization of 85% of major farming tasks

• Establishment of 12 commodity and food base areas throughout China

New guidelines:

• The “production team” was replaced by the “production brigade”

• Principle “to each according to his work”

  • i.e. more pay for more work

• Encouragement of “sideline production”

Called for approaching the 1970 scientific levels of advanced nations in various fields

Increasing professional scientific researchers to 800,000

Developed up-to-date centres for scientific experiments

Identified 108 items in 27 fields as key projects for research

It was hoped that by 1985 China would be only ten years behind the most advanced nations

Chinese military technology remained some 20 to 30 years behind the West

• Exceptions were nuclear bombs and ballistic missiles

Troops were well trained, highly motivated, and politically indoctrinated

• But equipped with woefully inadequate weapons

Unspectacular Chinese invasion of Vietnam in 1979

A British source put China’s 1978 defense spending at 7-10% of the GNP

Estimated to cost $300 billion to modernize all the military by 1985

• Would require massive infusions of foreign capital and equipment

  • Therefore military modernization was given a low priority

Original TYP was more of a political wish than an economic blueprint

Economic realities soon set in to force a critical reassessment

It was decided that the top priority should be agriculture, the foundation of the economy, followed by light industry, which could meet domestic demands and earn foreign exchange, and then heavy industry

Steel production targets were slashed from 60m to 45m tons

• But coal, electric power, petroleum and building industries still retained priorities for investments

Projects that could be completed quickly and earn foreign exchange were encouraged

Bank loans rather than government appropriations were planned for future investment projects

Immediate effect of the retrenchment was the halting of 348 important heavy industry projects and 4500 smaller ones

Retrenchment was necessitated not only by China’s limited foreign credit, financial resources, and absorptive power, but also by the unexpectedly high cost of invading Vietnam in 1979

Saburo Okita (chairman of the Japan Economic Research Center and an architect of the Japanese economic miracle) was invited to China as a consultant

Freight volume increased 9.7 times from 1950 to 1978, but railway mileage increased only 1.4 times

• Thus, transport lines were strained to the limit

• Energy and transportation bottlenecks

The small increase in oil output had drastically reduced China’s ability to earn foreign currency to finance the purchase of foreign high technology