China's Four Modernizations

The New Technological Revolution

Richard Baum

• Publisher: Routledge
• Year: 2019
• eBook ISBN: 9780429727993
• Edition: 1
• Topic: Politics & International Relations
• Subtopic: Business Development
• Index: Politics & International Relations

With the death of Mao Tse-tung and the subsequent purge of the "Gang of Four, " China's new pragmatic leaders have embarked on a crash program of national development known as the Four Modernizations, This program is geared to the primary objective of turning China into a major world economic and military power by the year 2000. In this book, the outgrowth of a major international conference on China's post-Maoist development, ten distinguished analysts examine one of the core issues in China's current modernization drive: the acquisition and use of modern industrial science and technology. The authors address the politics of China's technological modernization, the institutional structure of technological research, the purchase of foreign technology, constraints on technological absorption, the growth potential of China's critical energy sector, and the modernization of China's military establishment. Supplemented with brief commentaries by leading academic, government, and private sector contributors, their chapters provide an in-depth look at the process, problems, and prospects of China's widely heralded technological revolution.

1
Introduction

Richard Baum

A Pierre Cardin fashion show opens in the shadow of Tien An Men Square; disco dancers gather at Peking's International Club; U.S. businessmen in Shanghai negotiate plans for a chain of modern tourist hotels and joint ventures in petroleum exploration; Chinese students openly discuss the virtues of Western-style democracy, Coca Cola, and Laurel and Hardy. Had Chairman Mao lived to see it, he might well have been moved to inquire, "Where am I?"

In the three years since Mao's death and the related purge of his radical ideological minions, the so-called Gang of Four, the winds of change have blown strongly across China. A new, pragmatic leadership headed by Mao's hand-picked successor, Hua Kuo-feng, and the twice-purged, twice born-again Vice Premier Teng Hsiao-p'ing, has embarked upon a bold, comprehensive program of long-term industrial, agricultural, military, and scientific/technological development. The goal of this program, termed the Four Modernizations, is to transform China into a "powerful, modern socialist country by the end of this century."¹

In order to accomplish this ambitious objective, the Hua/ Teng regime has jettisoned much of the revolutionary rhetoric and political dogma of the Maoist era and has substituted for it the highly pragmatic, instrumental ethos of "efficiency first." As Teng Hsiao-p'ing himself once put it, "it does not matter if the cat is white or black, so long as it catches mice."

To Mao and the Gang of Four, on the other hand, the color of the cat was always of prime significance. As one erstwhile member of the Gang reportedly said, "It is better to have a socialist train run late than a capitalist train run on time."

A statue of Mao at the Shenyang Metals Research Institute (September 1978).

Since 1977, the cat has perceptibly changed color and the Chinese train has begun making up lost time. In line with the pragmatic philosophy of the new leaders of the People's Republic of China (P.R.C.), a wave of major policy changes has been initiated, the cumulative result of which has been to effectively dismantle the radical egalitarian legacy of Mao's turbulent Great Proletarian Cultural Revolution (1966-1969). Where once, a short decade ago, youthful Red Guards roamed the streets of Peking and Shanghai denouncing and abusing scientists, technicians, and teachers as "stinking bourgeois intellectuals," today the Red Guards have been banished and the erstwhile "stinking intellectuals" have been placed in charge of China's modernization program.

In education, academic achievement is now being emphasized over such traditional Maoist criteria as class background and political behavior in the recruitment and promotion of high school and university students. Nationwide unified college entrance examinations have been reinstituted after a hiatus of more than a decade, with primary emphasis on mathematics, physics, chemistry, and foreign languages. Postgraduate education has been restored; thousands of Chinese research scientists and technical specialists are being sent abroad to study advanced Western techniques and methods.

In industry, the technical and managerial authority of experts has been reasserted vis-à-vis Red political cadres and ordinary workers, and scientific management (once eschewed as an insidious form of worker enslavement) has been introduced in an effort to improve the efficiency of industrial operations. In order to stimulate increased labor enthusiasm, productivity bonuses and technical innovation bonuses (once condemned as revisionist) have been restored throughout the industrial sector.

In agriculture, peasants are being permitted an expanded role for their private plots, and government price supports for grain purchased by the state have been raised by 20 to 50 percent, giving farmers a direct, visible incentive to produce more food.

Along with these attempts to stimulate labor productivity, the Hua/Teng regime has also sought to provide China's workers and peasants with a tangible stake in the performance of the national economy by expanding the production and distribution of a wide variety of consumer goods—from color television sets, radios, and cameras to soft drinks and fashionable clothing.

Finally, with the adoption of a new state constitution in 1977 and the subsequent political rehabilitation of tens of thousands of individuals previously suppressed as counterrevolutionaries and rightists, China has embarked on a process of political liberalization unprecedented in its modern history. Legal safeguards have been introduced to protect citizens from arbitrary arrest and harrassment; freedom of speech and assembly-albeit limited in scope—have been introduced through such vehicles as Hyde Park-style "democracy walls"; and the Chinese court system has been overhauled to provide at least a modicum of due process to those accused of committing crimes. Though China has not by any stretch of the imagination become a democracy in the Western sense (the ruling Communist party is still omnipotent and tolerates no organized opposition), the political climate in Peking is more relaxed and tolerant today than at any time since the founding of the People's Republic of China some thirty years ago.

The Four Modernizations

China's current modernization drive is centered around the Ten-Year Plan (1976-1985) belatedly promulgated by Hua Kuo-feng in February 1978 (and therefore sometimes called the Eight-Year Plan). This economic plan originally called for the construction of 120 large-scale industrial projects, including 10 major iron and steel complexes, 9 nonferrous metals facilities, 8 large-scale coal combines, 10 new oil and natural gas fields, 30 major hydropower stations, 6 new trunk railways, and 5 key harbors. Major sectoral targets of the Ten-Year Plan included a projected doubling of steel production to 60 million tons per year, a 125 percent increase in gross industrial output, and a 50 percent increase in annual food production.²

Putting aside for the moment the question of the technical feasibility of these targets, it has been observed that in order to meet the original objectives of the plan, China's GNP growth would have to average almost 8.5 percent per year over the life of the plan—a rate almost 50 percent higher than the average growth rate of the previous twenty-five years. Similarly, in order to achieve the projected grain production target of 400 million tons annually by 1985, output would have to increase around 4.3 percent annually—almost twice the growth rate of the previous decade. And to attain the regime's projected target of 60 million tons of steel, the growth rate of the previous half decade would have to be almost doubled.³

In part because these original targets appeared excessively ambitious and in part because they stressed too heavily large-scale capital investments in a few key sectors of heavy industry (at the expense of augmented investment in the chronically sluggish agricultural sector as well as in the critical, growth-inducing sector of light industry), the initial programmatic objectives outlined by Hua Kuo-feng in February 1978 were substantially readjusted and scaled down a year later. Thus, in the spring of 1979 the projected 1985 target for steel production was lowered by almost 50 percent to a more modest 45 million tons and the projected industrial growth rate was reduced from more than 10 percent annually to a more manageable 8 percent. At the same time, it was announced that industrial investment would be cut from 54.7 percent of the state capital investment budget to 46.8 percent, while agricultural investments would correspondingly rise from 10.7 percent to 14 percent.⁴

Such intersectoral readjustments notwithstanding, however, the Four Modernizations campaign continues to represent an unprecedented commitment to the wholesale upgrading of China's economic and technological capabilities. Assuming that no major new political traumas occur over the next few years, the attainment of the P.R.C.'s ambitious developmental objectives will depend largely upon two closely related factors: the ability of the Chinese economy to generate the requisite amounts of investment capital, and the rapid acquisition and effective absorption of a wide variety of advanced productive technologies.

China's leaders have estimated that their modernization program will require capital investments totaling at least $600 billion between 1978 and 1985. This figure is roughly equal to the P.R.C.'s total industrial investments over the entire twenty-eight years of its prior existence, from 1949 to 1977.⁵

Where is this investment capital to come from? And how will it be allocated? One major source lies in the rapid expansion of export-oriented light industries, including textiles, clothing, and handicrafts. With their relatively low capital requirements, short gestation period, and high foreign exchange earnings potential, these industries are being counted on to generate quick profits for reinvestment in longer-term heavy industrial construction. Tourism is another industry being counted on to provide substantial foreign exchange earnings, as is the export of moderate amounts of China's abundant energy resources-principally coal and crude oil. Indeed, the strategy of using energy exports to finance technology acquisition from abroad is the essence of an eight-year, $20 billion trade agreement signed between China and Japan in 1978.

In the short run, then, the generation of investment capital to underwrite the Four Modernizations will depend largely upon China's ability to earn foreign exchange. It is for this reason that, in the course of China's economic readjustment of 1979, highest priority was placed on the rapid expansion of light industrial capacity (including the attraction of foreign capital through compensatory trade and joint stock ownership schemes), while the originally projected plans for new heavy industrial construction were temporarily scaled down until the light industrial investment pump could be sufficiently primed. In the meantime, heavy industrial expansion will occur primarily through renovating existing plants and equipment, rather than through the construction of expensive new facilities.⁶

In the long run, however, the P.R.C.'s goal of becoming a modern, socialist country by the year 2000 clearly depends on expanded economic production made possible by the acquisition of modern high technology. This technology will, it is hoped, facilitate the exploration and development of China's vast energy resources; upgrade China's iron, steel, and machine-building industries; mechanize, fertilize, and irrigate China's 500,000 rural villages; and modernize China's antiquated infrastructure of transportation and communications.

If technology acquisition is the key to the ultimate success of China's modernization program, it is apparent that foreign trade will play an increasingly important role in that program. It is thus hardly accidental that a prominent feature of the current Ten-Year Plan is the P.R.C.'s wholesale reentry into the mainstream of the world market. Where once the Gang of Four eschewed foreign economic entanglements as a betrayal of the Maoist ethos of self-reliance, Teng Hsiao-p'ing and Hua Kuofeng now advocate the acquisition of "necessary foreign techniques and equipment" in the interest of "hastening China's socialist construction."⁷ Indeed, China's post-Maoist leaders have turned rapidly outward to import everything from computers and steel mills to Coca Cola and Pierre Cardin fashions.

Recent estimates project that upwards of 10 percent of China's total investment budget for 1978-1985—roughly $60 to $70 billion—will be spent on the purchase of foreign technology, plant, and equipment. In 1978 alone, China and foreign technology suppliers concluded (or initialed) contracts for more than $10 billion in product sales and whole plant imports. Although some of these contracts were briefly frozen by the P.R.C, during the early stages of the spring 1979 economic retrenchment, there is no indication that Peking's overall plan for accelerated technology acquisition has been scrapped or even substantially cut back; it has only been temporarily delayed in the interest of securing more favorable financial terms and credit arrangements.⁸

At the second session of China's Fifth National People's Congress, held in June 1979, Premier Hua Kuo-feng reaffirmed the broad goals of the Four Modernizations and personally approved the revised priorities and targets announced previously. In his opening speech at the Congress, he acknowledged that there were "still quite a few difficulties and many problems waiting to be solved." Among these, he singled out for special attention shortcomings in several key economic sectors:

The development of China's agriculture, light, textile, coal, petroleum and power industries, and transport and communications services still lagged behind what was required, the Premier said. There was imbalance in many respects within and among industrial departments. In capital construction, far too many projects were being undertaken all at the same time, and there were obvious shortcomings in the management of the economy and enterprises.⁹

Despite such shortcomings, however, Hua confidently predicted that China would "be able to expand its agriculture, light and heavy industries, and various other branches of industry in a harmonious way and maintain a rational proportion between accumulation and consumption."¹⁰

Additionally, the premier reaffirmed that, during the current three-year readjustment period and in the future, China would "continue implementing the set policy of actively importing up-to-date technologies and making use of foreign funds." And, finally, he indicated that, in order to finance costly foreign technology purchases, China would "adopt various reasonable practices now being used internationally to absorb foreign funds."¹¹

In the following chapters, the technological component of China's Four Modernizations campaign is examined from a variety of perspectives and with respect to a variety of specific problem foci. In Chapter 2, Chu-yüan Cheng presents a general economic assessment of the recent performance and current growth prospects of Chinese industry. After examining the major policy objectives of the Four Modernizations, he analyzes recent developments in certain key industrial sectors: iron and steel, petroleum, coal, electric power, and agricultural machinery. Based on this analysis, he concludes that many of the specific industrial objectives embodied in the original Ten-Year Plan were unrealistic insofar as they underestimated the costs, tradeoffs, technical constraints, and time lags involved in generating new industrial capacity.

Detailing some of the recent problems encountered by P.R.C, policy makers in such areas as industrial planning, enterprise management, organizational structure, and work incentives, Cheng relates these problems to the broader issues of capital formation and investment, absorptive capacity, and overall industrial efficiency.

Finally, Cheng analyzes in depth some of the various readjustments made in the Four Modernizations program in the first half of 1979. He observes that the recent scaling down of Chinese capital investments in heavy industrial construction will inevitably result in slower overall economic growth rates than originally envisioned (a point officially conceded by P.R.C. leaders at the National People's Congress in June 1979). Nevertheless, he views such readjustments as being rational over the long run, since they will ostensibly lead to better overall balance in the economy.

Three supplementary commentaries are appended to Chapter 2. K. C. Yeh first discusses some of the economic ramifications of China's modernization program, after which Thomas Wiens analyzes the problems and prospects of agricultural mechanization in the P.R.C. Finally, William Clarke assesses China's steel industry from the perspective of technological development.

In Chapter 3, we turn from a general assessment of Chinese industrial performance and capabilities to a more detailed examination of some of the primary institutional and behavioral constraints on technolo...

Table of contents

• Cover
• Half Title
• Title
• Copyright
• Dedication
• Contents
• List of Tables and Figures
• List of Abbreviations
• Preface
• The Contributors
• 1. Introduction
• 2. The Modernization of Chinese Industry
• Commentaries on Agricultural and Industrial Modernization
• 3. Recent Policy Trends in Industrial Science and Technology
• 4. A Note on Recent Policy Changes
• Commentary on Science and Technology Policy
• 5. The Institutional Structure for Industrial Research and Development in China
• Commentary on the Institutional Structure for R & D
• 6. China's Program of Technology Acquisition
• Commentary on Technology Acquisition
• 7. The Absorption and Assimilation of Acquired Technology
• Commentary on Technological Absorption and Assimilation
• 8. China's Energy Technology
• Commentaries on China's Energy Development
• 9. The Modernization of National Defense
• Commentary on National Defense Modernization
• 10. Conclusion: The Four Modernizations Reconsidered
• List of Workshop Participants
• Index