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Economic Prospects for Communist China*

Published online by Cambridge University Press:  18 July 2011

Richard Moorsteen
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Communist China is the most populous country in the world and the largest after Canada and the Soviet Union, but its influence in international affairs, mainly because of its economic backwardness, is still far from commensurate to its great size and strategic location. How long will this continue to be true? The question takes its immediacy from the speed with which the economy of another Communist giant, the Soviet Union, was transformed.

Type
Research Article
Information
World Politics , Volume 11 , Issue 2 , January 1959 , pp. 192 - 220
Copyright
Copyright © Trustees of Princeton University 1959

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References

1 For example: “China is overpopulated, undernourished…. Her resources are meager…. Her industry is small, backward, despoiled in Manchuria, and destined to laborious struggle by lack of means to acquire the necessary materials and equipment for expansion.” Acheson, Dean, Power and Diplomacy, Cambridge, Mass., 1958, p. 129.CrossRefGoogle Scholar

2 The term “heavy industry” is used here, as in Communist parlance, to refer to the extractive industries, electric power generation, timbering, and that part of manufacturing devoted to munitions and producers goods, such as metals, machinery, and building materials.

3 The figures in the table refer to total output. Per capita data would materially reduce China's relative standing. The importance of heavy industrial output for a country's international stature, however, usually depends more on total than on per capita output. An obvious illustration is die case of munitions: total availability is the crucial factor. It is for this reason that attention here is focused on total output. The significance of per capita production is not to be denied, but overemphasis on it by Western analysts has at times been a source of misguided complacency.

4 Soviet technical and material aid to China is illuminatingly discussed by Whiting, Allen S., “‘Contradictions’ in the Moscow-Peking Axis,” Journal of Politics, xx, No. 1 (February 1958), pp. 127–61.CrossRefGoogle Scholar

Soviet writers estimate Western credits to the USSR during its First Plan to have exceeded a billion rubles in prices of the time. Soviet economic credits to China during the First Chinese Plan apparently amounted to just a billion rubles; see note 8, below. The interval between the two Plans, however, undoubtedly witnessed a sizable reduction in the purchasing power of the foreign trade ruble.

5 Sec Dostizheniya Sovetskoi Vlasti Za 40 Let (Moscow, 1957), pp. 44–46, which show the rate at which output of heavy industrial products grew, and p. 212, which shows the concurrent increases in productive capacity put into operation.

6 See, e.g., Gardner Clark, M., The Economics of Soviet Steel, Cambridge, Mass., 1956CrossRefGoogle Scholar, chs. 8 and 9.

7 For example, it is the importation of tin from China that has permitted recent Soviet excursions into tin exportation, with its burdensome consequences for nonCommunist tin-producing countries.

8 Announced Soviet credits for economic construction have amounted to about 1,720 million rubles ($430 million), including 720 million rubles during 1950–1952 and a billion during the First Plan proper (1953–1957). These credits would pay for around 5 per cent of total Chinese imports from the Bloc during the same period. The much larger sums of “Soviet assistance” occasionally cited in Sino-Soviet sources refer generally to matériel supplied by the USSR, but paid for on current account by the Chinese. Repayment of the various Soviet loans by the Chinese has begun, with the result that China now must run a substantial export surplus (about $200 million in 1957) with the Soviet Union.

9 For an analysis of the economic advantages and limitations of the Sino-Soviet component of this trade, see Eckstein, Alexander, “Sino-Soviet Economic Relations,” in Boorman, H. L., et al., Moscow-PeKing Axis, New York, 1957, and Allen S. WhitingGoogle Scholar, op.cit.

10 For example, in the case of machinery, the procurement of which was the principal aim of the early Soviet import program, less than 20 per cent of the USSR's requirements in the First Soviet Plan, and less than 5 per cent in the Second Plan, were obtained through foreign trade.

11 The dominance of political over economic considerations in Chinese trade policies toward these countries probably explains the rupture of Sino-Japanese trading relations which occurred in May 1958. Existing contracts were canceled unilaterally by die Chinese, and negotiations toward a new trade agreement were broken off. The principal reason cited was that the Japanese government, which does not recognize Communist China, permitted the Communist flag to be flown in Japan only as private property and not with the status of a national flag. If the Chinese had placed a greater economic value on the trade, this political difficulty could surely have been overcome. The Communists were apparently trying to influence the Japanese elections and to induce Japan into political concessions that would undermine its relations with the United States and Taiwan.

12 A pronounced quickening of Chinese activity in this area was already noticeable in 1958, as Japanese and Indian exporters began to suffer from Chinese competition in their traditional markets for cotton textiles, sugar, cement, steel products, and even certain types of light manufacturing equipment. In many instances, incidentally, China's opening wedge into these markets has been designs copied from Japanese, Indian, and Western producers, a familiar pattern.

13 It is by no means clear that Chinese and Soviet interests in mese areas coincide in all respects. China's efforts to reduce her economic dependence on the USSR, there fore, could lead to political competition between the two countries in the neutralist areas. This in turn would reinforce China's stimulus toward economic independence. In this way, the centrifugal forces wimin the Sino-Soviet Bloc tend to compound each odier.

14 More precisely, the small plants are a response to a high internal interest rate and a low price for labor in Chinese relative scarcities.

15 Widespread construction of small plants would also serve to decentralize productive capacity, a development of military significance.

16 See, for example, Holzman, Franklyn D., “The Soviet Ural-Kuznetsk Combine,” Quarterly Journal of Economics, LXXI, No. 3 (August 1957), PP. 368–405.CrossRefGoogle Scholar

17 See, for example, Ikle, Fred, Growth of China's Scientific and Technical Manpower, The RAND Corporation, Research Memorandum RM-1893 (ASTIA No. AD 123545), April 24, 1957.Google Scholar

18 Money wages for the non-agricultural labor force more or less kept pace with prices of consumers goods during 1928–1929, but lagged ever further behind thereafter until about 1933; see Hubbard, L. E., Soviet Trade and Distribution, London, 1938, pp. 269, 277–78Google Scholar, and Schwarz, Solomon, Labor in the Soviet Union, New York, 1951, pp. 138–39Google Scholar, n. 19. The decline in labor productivity occurred with the reduction in real wages, during 1929–1932; see Hodgman, Donald, Soviet Industrial Production, 1928–1951, Cambridge, Mass., 1954, p. 113.CrossRefGoogle Scholar The decline in capital productivity is shown by the fact that plant capacity was increasing more rapidly than output; sec Dostizheniya Sovetskoi Vlasti Za 40 Let, op.cit., pp. 44–46, 212.

19 This may explain the reduction in Soviet industrial employment which occurred in 1933, an event otherwise quite out of keeping with the expansionary tenor of Soviet economic development.

20 The Communists claim an increase in food crop output of about a third between 1936, the peak pre-Communist year, and 1957, but this is based on data for 1936 of dubious reliability. Judging from the estimates of Twanmo, Chong (Production of Food Crops in Mainland China; Prewar and Postwar, The RAND Corporation, Research Memorandum RM-1659, ASTIA No. AD 95138, March 22, 1956)Google Scholar, the total output levels of die 1930's were barely restored by 1957. The growth of the rural population during this interval is not known with any precision, but it was probably considerable. Thus per capita output may well have declined—perhaps substantially.

21 In absolute terms, therefore, between 13 and 20 million per year.

22 Naum Jasny estimates the annual rate of increase during this period at 1.2 per cent; see The Socialized Agriculture of the USSR, Stanford, Calif., 1949, p. 775.

23 See Chong Twanmo, op.cit.

24 The organization of the commune, however, does allow flexibility in this respect, and if the needs of agriculture should prove inadequately served, it would be possible, though with some difficulty, to redirect workers back into the fields.

25 As may be imagined, it also provides the state with an instrument for enforcing discipline of unprecedented effectiveness. The Communists have already reported that this measure has evoked a notable increase in responsiveness on the part of the peasantry. The communalization of household services must have an enormous impact on the Chinese peasant family, generally. The effects cannot all be desirable from the regime's point of view. However, it does provide a means for influencing personal matters that formerly eluded state control. This could be quite important, for example, should the problem of population become acute.

26 This is not to imply that agricultural output could grow at annual rates approaching IO per cent throughout the twenty years. Primary reliance on the expansion of crops is necessary initially, because the total increase in consumption must come from agriculture. With industrialization, it becomes possible to substitute synmetic products for fibers and other technical crops. Thereafter, food output can grow more rapidly than agriculture as a whole. An increase of agricultural output by one or one and a half times, therefore, might permit a doubling of the population along with a major shift into non-agricultural employment.

27 There were fluctuations within the period, but the pre-Plan standards (i.e., 1928) were probably not exceeded until the 1950's.