Reival: China's Finance and Trade: A Policy Reader (1978)

A Policy Reader

Gordon A. Bennett

• Publisher: Routledge
• Year: 2017
• Print ISBN: 9781138045064
• eBook ISBN: 9781351697002
• Edition: 1
• Topic: Ciencias sociales
• Subtopic: Estudios étnicos

This title was first published in 1978. For students of politics the documents in this collection offer an opportunity to analyze a broad policy area - finance and commerce - in search of specific mechanisms by which dictatorship and popular will are both given expression in political life.

PART ONE
General Economic Line

All policy-making in China is tied closely to ideology. Out of the theoretical tradition of Marxism-Leninism and the concrete practice of the Chinese revolution has been derived the Thought of Mao Tse-tung, described in Chinese statements as a scientific guide to correct action. As expressed in Mao's widely noted "mass line" style of leadership:

In all the practical work of our Party, all correct leadership is necessarily from the masses, to the masses. This means: take the ideas of the masses (scattered and unsystematic ideas) and concentrate them (through study turn them into concentrated and systematic ideas), then go to the masses and propagate and explain these ideas until the masses embrace them as their own, hold fast to them and translate them into action, and test the correctness of these ideas in such action. Then once again concentrate ideas from the masses and once again take them to the masses so that the ideas are persevered in and carried through. And so on over and over again in an endless spiral, with the ideas becoming more correct, more vital and richer each time. Such is the Marxist-Leninist theory of knowledge, or methodology....¹

Amid China's great diversity of nationalities, regions, climates local economies, generations, groups, political factions and intellectual orientations, Mao sought to make possible purposeful and effective governmental action on the basis of ideological consensus. To accomplish this feat he prevailed upon the Central Committee of the Chinese Communist Party to arrive at a hierarchy of correct "lines" (lu-hsien) and "directions" (fang-chen) which implementing localities and units would strive to study and follow. Political debate was to be restricted to the mass line process before legislation. Arguments advanced afterward against the officially adopted lines and directions would be denounced as incorrect "deviations" to the Right or to the Left, and people making such arguments would either be regarded patronizingly as "hoodwinked" members of the masses or actually be attacked as "capitalist-roaders" or "enemies of the people." A primary instrumental value was to "unify our thought" (t'ung-i ssu-hsiang). Consequently, differences over policy questions in China have been elevated rather easily to differences over ideological formulations believed to be favorable to one policy outcome or another.

In May 1958 a "general line for socialist construction ("going all out, aiming high and achieving greater, faster, better, and more economical results in building socialism") succeeded the previous "general line for the period of transition to socialism" ("simultaneous development of socialist revolution and socialist construction") dating from 1952.² As of 1977 the "general line" (tsung lu-hsien) for socialist construction was still in effect. More specific economic lines and directions in 1977, early in the era of Chairman Hua Kuo-feng's leadership, are expressed in Hua's report to the Eleventh Party Congress:

The change in our country's economic situation since the smashing of the "gang of four" proves conclusively that tremendous power can be generated once we grasp the major class struggle to expose and criticize the gang and grasp the revolutionary mass movements to learn from Taching in industry and from Tachai in agriculture. We must combine this struggle and these movements more closely, conduct them in a more deepgoing way, build our country independently and with the initiative in our own hands, through self-reliance, hard struggle, diligence and thrift, be prepared against war and natural disasters, do everything for the people and push the national economy forward. We should work hard for several years and, in pursuance of the original plan, turn one-third of our country's enterprises into Taching-type enterprises and one-third of our counties into Tachai-type counties in the period of the Fifth Five-Year Plan, in accordance with the respective requirements set down....

To push the national economy forward, we must conscientiously carry out the general line... and the complete set of policies known as walking on two legs, and we must bring the country's entire economy into the orbit of planned, proportionate and high-speed socialist development, take agriculture as the foundation and industry as the leading factor, and achieve coordinated growth and an all-round leap forward in agriculture, light industry, heavy industry and other sectors.... We must build an independent and fairly comprehensive industrial and economic system in our country by 1980. By then farming must be basically mechanized, considerable increases in production must be made in agriculture, forestry, animal husbandry, side-line production and fishery, and the collective economy of the people's communes must be further consolidated and developed

Among the broad masses the communist attitude toward labor should be energetically encouraged through ideological education, while in economic policy the socialist principle of "from each according to his ability, to each according to his work" should be upheld and collective welfare gradually expanded. The livelihood of the people should be improved step by step on the basis of increased production. The life of the Chinese people is far better than before liberation, but the standard of living is still low.³

Specific policies, however much they might vary from place to place, are all supposed to conform to these common standards.

The overall performance of the Chinese economy under Communist Party rule has been impressive, even while experiencing dramatic ups and downs. China's GNP has grown at an annual rate of approximately 6 percent in real terms since 1952, by when the Communist Party had consolidated its takeover of government and had begun to collect fairly reliable statistics. The mid-1950s were an up-period, benefiting from the return of domestic peace to the country after decades of war and revolution and from much Soviet financial and technical assistance. A down-period followed during the late 1950s through the mid-1960s as the Soviet Union withdrew its aid, severe weather struck three years in succession, and adjustments had to be made in the ambitious programs of the 1958-59 Great Leap Forward. Some further economic disruption occurred during the opening stages of the Cultural Revolution. Another up-period began in later stages of the Cultural Revolution and has been reinforced by new imports of advanced technology, some of it from the United States after President Nixon's visit in 1972, and by heightened investment in sectors directly supporting agriculture (including small industries in rural areas). Some leading estimates of growth rates broken down by period are presented in Table 1.

Table 1 Estimates of Average Annual Growth Rates in China by Sector and by Period

	1952-59	1959-66	1966-74	1952-74
GDP (Eckstein, p. 225)	10.5%	1.6%	6.5%	6.2%
Industrial Production (Eckstein, p. 219)
Official Chinese series reconstructed by R. M. Field, N. Lardy and J. P. Emerson (Reassessment, p. 170)	23.1	0.2	9.1	11.4
R. M. Field estimate (Reassessment, pp. 149-50)	18.0	4.0	8.0	11.0
Grain Output (Eckstein, p. 210)	2.2 (1952-57)	6.0 (1963-67)	<2.0	2.0

Sources: Alexander Eckstein, China's Economic Revolution (New York: Cambridge University Press, 1977). China: A Reassessment of the Economy, a compendium of papers submitted to the Joint Economic Committee, Congress of the United States, 94th Congress, 1st Session (July 10, 1975).

In comparative terms, according to one estimate, China had achieved by 1975 a GNP of about $237 billion (16 percent of the U.S.'s, and 30 percent of the USSR's). Thus China, with over 20 percent of the world's population, generates about 4 percent of the world's income. Assuming a population then of 850 million, per-capita income in 1975 would have been roughly $280.⁴ Looking ahead, a recent United Nations study makes several projections for a region defined as "Asia, Centrally Planned" (China, Korea, Vietnam, and Mongolia). The figures derived in Table 2 are my own calculations for China based on the assumption that 93 percent of aggregate quantities in this region are accounted for by China alone.

Such projections never are intended as firm and confident predictions of the future, only as estimates of what is possible given the record to date. China might do much better than the projected performance, or it might do much worse. Much of what happens depends on the government's policy decisions and on its ability to put those decisions into effect. In economist

Table 2 Chinese Growth Projections through the Year 2000 (All dollar figures are in projected current U.S. dollars)

	1970	1980	1990	2000
GDP (billion $)	121	208	381	751
Population (million)	728	859	984	1,103
GDP/capita ($)	166	242	387	680
Calories/person/day	2,100	2,100	2,200	2,500
Investment level (billion $)	10	27	62	148
Trade volume (imports plus exports, billion $)	3	6	13	26

Source: Calculated from Wassily Leontief et at., The Future of the World Economy: A United Nations Study (New York: Oxford University Press, 1977), p. 91. The numerical results from which my calculations are made are based on Leontief's “scenario X,” which assumes that for the rest of the century for all developing countries, GDP will grow at 7.2 percent, population will grow at 2.3 percent, and GDP/capita will grow at 4.9 percent, and that by the year 2000 the income ratio of developed to developing countries will be 769/100. This scenario is associated with the goals of the International Development Strategy and the changes in the conditions of development envisaged in the Declaration on the Establishment of a New International Economic Order (Leontief, pp. 30-31).

Alexander Eckstein's analysis, public policy choices facing the Chinese leadership have revolved about two basic issues: the rate and character of economic growth; and the role of decentralized decision-making (including markets in allocating resources. To explore these issues further, Eckstein breaks them down into five sets of policy problems:

1. Role of material incentives in allocating resources
   1. Role of prices and wages (as opposed to physical output targets) as allocators
   2. Role of markets in allocating goods, services and factors, most particularly the role of commodity and labor markets in resource allocation
   3. Scope of private plots in agriculture
   4. What wage system should prevail in the economy;
2. Desired rate of investment (which is linked to the incentives problem because more investment requires more savings and less consumption);
3. Desired pattern of investment (which also is linked to the incentives problem because inflationary pressures would build up if incomes rose ahead of consumer goods supply);
4. Role of professionalism and technical know-how in the production process and in economic management (planners, economists and technocrats tend to favor a greater scope for the market mechanism, private plots and population control policies, and generally favor a less political approach to economic policy problems);
5. Population policies.⁵

Countless words have been written in the West about "the Chinese model" as author after author has endeavored to abstract from multitudes of Chinese statements some coherent "strategy" in force during each period of the People's Republic. Some of these reconstructions are quite scholarly, and for some purposes they are very useful. Thinking only in terms of such externally imposed concepts, however, carries the danger of yielding too coherent a picture, as if the leadership in Peking had consciously "rejected" one path to "choose" a logical alternative. In fact, the array of policies followed during any one period seems to emerge out of criticisms of the results obtained from policies of the immediately previous period. Some policy continuities are evident across periods, such as the commitment to total collectivization of grain production. Some swings back and forth are evident from period to period as with incentive systems applied to agricultural production, and with the permissible scope of rural free markets. And some evident trends have unfolded over time, such as the gradual replacement of the strictly Stalinist ideas adopted early in the First Five-Year Plan period (1953-57) with more distinctively "Maoist" or "Chinese" ideas. Leading values that have been substituted include: (1) a greater emphasis on the economic development of rural areas, in which communes, small industries, and a high priority for agriculture figure prominently; (2) a greater encouragement of decentralized development and planning carried out within a context of local self-reliance; (3) a more egalitarian outlook that seeks to reduce economic and social differentials throughout the society; (4) a greater emphasis on nonmaterial and collective work incentives; (5) a greater reliance on mass mobilization behind political themes; and (6) a strategy of economic development through radical experimentation, struggle and leaps rather than through gradual, orderly, familiar methods.⁶

Thus the policies followed by the Hua Kuo-feng/Yeh Chien-ying/Teng Hsiao-p'ing triumverate after 1977 in some ways might resemble the policies of an earlier period - perhaps the "agriculture first strategy" of the early 1960s, or perhaps the more "balanced growth strategy" of the early 1970s. But in other ways they must respond to unique problems of the late 1970s and early 1980s such as longstanding workers' demands for industrial wages to be raised and the need to accommodate expanding foreign trade with the important value of "self-reliance."⁷

Guide to the Documents in Part One

The "two lines" or "two roads" concept has become nearly universal in Chinese theoretical articles. The correct line, said to be derived from Mao Tse-tung's thought, usually is a fairly coherent set of general policies in effect in China at the time. The other line, of "capitalist road," is said to govern contemporary thinking in the Soviet Union, and it often appears to be more of a catchall for various arguments antagonistic to the correct, proletarian revolutionary path. In Selection 1 the two lines concept is applied broadly to economic policy.

A separate theoretical problem — the relationship between politics and economics — is presented in Selection 2. Subtle differences of phrasing are pregnant with meaning in this debate. The position attributed here to Trotsky justifies building up an advanced industrial economy as rapidly as possible to realize the precondition for having genuinely socialist politics; by this measure China has always lagged behind the Soviet Union. In 1977-78, the opposite deviation has been attributed to the notorious "gang of four" (see Selection 34), who are charged with arguing that politics dominates economics in order to justify their opposition to China's rapid economic modernization. Chairman Mao's correct line, it is argued, lies between Trotsky and the gang of four.⁸

Selections 3 through 7 illustrate attacks on China's most prestigious economist in the early 1960s, Sun Yeh-fang. During the Cultural Revolution Sun's work was cited as symbolic of "capitalist road" economic policies. These selections are elaborations of some of the points from Selection 1.

Selections 8 and 9 are merely two examples of hundreds of articles over the last generation that urge people to conserve fuel and materials, to find uses for waste products, and to improve manufacturing efficiency through technical innovation. The object is to inculcate frugality as a national virtue and thereby to diminish material and financial shortages that stand as obstacles to economic growth.

Selection 10 shows just how politicized statistical work had become by the end of the Cultural Revolution. Sometimes, apparently, when one side in a policy debate saw the weight of statistical evidence shifting in favor of the other side, they would attack their opponents as players of revisionist "number games." This article is a defense against this type of attack.

The refutation in Selection 11 is of the widely held argument that there exists a necessary tradeoff between staple grain crops, on the one hand, and "economic crops" (such as cotton, vegetables, and pigs) that bring in cash, on the other. Both categories of crop can be increased simultaneously, say the authors, if a strong brigade leadership group makes the problem a priority and analyzes it properly.

election 12, which was published one year after Chairman Mao's death, outlines the successor regime's overall approach to economic strategy. Chairman Hua's continuing, incomplete efforts to consolidate his new government's authority at the time are evident in the approving quotation of Chairman Mao's commitment to insuring that "both revolution and production would forge ahead simultaneously."

Notes

1. Extracts from a directive of the Central Committee of the Chinese Communist Party dated June 1, 1943, and originally published anonymously (Chieh-fang jih-pao [ Liberation Daily], June 4, 1943). This text is attributed to Mao in the current edition of the Selected Works. The translation quoted here is from Stuart R. Schram, The Political Thought of Mao Tsetung, revised and enlarged edition (Ne...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Dedication
• Contents
• PREFACE
• INTRODUCTION A Case for "Public Policy" Approaches to China's Finance and Trade
• PART ONE General Economic Line
• PART TWO Planning and Markets
• PART THREE Money, Banking, and Investment
• SOURCES
• ABOUT THE EDITOR