From New Times (Moscow), No. 21, May 20, 1953

Industrial Development in China

G. Astafyev

This spring is a noteworthy one for the Chinese people. The spring of the first year of their first five-year plan, it marks the end of the period of rehabilitation and the beginning of wide-scale economic development on planned lines.

The Chinese people, led by their Communist Party, required only three years to carry out momentous democratic transformations, to repair the ravages caused to their national economy by twelve years of war, and radically to alter the economic situation in their country. These historic achievements were won at a time when the Chinese people were engaged in beating off external armed aggression and in crushing the fierce resistance of their class enemies at home.

In the little over three years since the foundation of their People’s Republic, they have carried out agrarian reform, fully restored their agriculture, industry and transport and put an end to inflation. For the first time in China’s history, its budget has been balanced and the living standards of the people are steadily rising. Could better evidence be required of the virility and progressive character of the people’s democratic system?

The enemies of the Chinese people were sure that, while the latter may have vanquished the reaction politically, they would not be able to cope with economic dislocation and would have to go hat in hand to the imperialists. To them, the victory of the Chinese people on the economic front is surprising and incomprehensible. Yet the Chinese Communists, armed with a knowledge of the laws of social development, had pointed out several years ago that, with the united efforts of the people, consolidation of the people’s democratic regime, and cooperation with the Soviet Union and the other countries of the camp of socialism and democracy, a fundamental improvement in the country’s economic situation could be brought about in a short time.

Speaking in June 1950 at the third plenary meeting of the Central Committee of the Chinese Communist Party, Mao Tse-tung said: “Three conditions are required for the financial and economic situation to take a fundamental turn for the better. These are: 1) completion of agrarian reform; 2) proper readjustment of existing industry and commerce; 3) large-scale economies and reduction in expenditure by government organizations.... This will take about three years or a little longer.”

Thanks to the united efforts of the Chinese people, led by the Communist Party, this fundamental turn for the better has been brought about in considerably less than three years. The conditions specified by Mao Tse-tung have been attained.

Completion of Agrarian Reform

Politically and economically, agrarian reform is the most important of the democratic reforms in the present stage. It has already been carried out in an area with a population of 450 million, and only remains to be introduced in a few national-minority regions.

The agrarian reform has done away with the landlord class, the principal support of feudal reaction and foreign imperialism. The land, agricultural implements and houses of the landlords have been turned over without compensation to the poor peasants and agricultural labourers. By August 1952 the peasants had received some 47 million hectares of arable land confiscated from the landlords. In addition, they were relieved of paying extortionate rents amounting to an equivalent of 30 million tons of cereal a year.

The Chinese countryside has changed beyond recognition. The peasants are no longer subject to the ruthless exploitation of bloodsucking landlords. Most of the poor peasants and farm labourers, who formerly constituted 70 per cent of the peasant population, have now risen to the status of middle peasants. The agrarian reform, carried out under the supervision of the working class and its Communist Party, has substantially improved the conditions of the great mass of the peasants and has further strengthened the alliance between the working class and the peasantry, the foundation of the people’s democratic system in China. Thus has been built the political basis on which it is now possible to pass to broad-scale economic development.

In carrying out the agrarian reform, the rural workers of China, the peasants, had to smash the fierce resistance of numerous class enemies. But, led by the working class and its Communist Party, they have successfully coped with all difficulties and the agrarian reform is now consummated.

The reform has given a powerful stimulus to the broad development, on strictly voluntary lines, of agricultural mutual aid teams and producers’ cooperatives. In 1952, over 65 per cent of the peasant families in the old liberated areas (in Northeast China – 80 per cent), and about 25 per cent in the new liberated areas were working together in mutual aid teams. From these groups springs a higher form of agricultural cooperation – peasant producers’ cooperatives, of which there were four thousand at the close of 1952.

Another new phenomenon in Chinese agriculture is the establishment of more than two thousand state-owned farms employing up-to-date machinery and the most advanced agricultural methods, and serving as educational centres in scientific farming for the surrounding peasantry. The first experimental machine and tractor stations are also being set up.

Agrarian reform released the productive forces of Chinese agriculture from the shackles of semi-feudal relations of production and created the conditions for its rapid rehabilitation and development. Witness the steady increase in agricultural output: in 1952, compared with 1949, 40 per cent more foodstuffs were produced, 200 per cent more cotton, etc.

The process of agricultural rehabilitation in China is now completed. Nine per cent more food, and over 55 per cent more cotton, were grown in 1952 than in the prewar peak year. The country is no longer under the necessity of importing many of the agricultural raw materials it imported before, and is already itself in a position to export not only tea and silk (which it did formerly), but also foodstuffs. There is no overestimating this achievement in a country where in the past hunger was the cruel lot of millions of people.

With the progress of agriculture and the rise in peasant living standards, commodity exchange between town and country is broadly increasing, the market for industrial manufactured goods is expanding, and industry is being supplied with ever larger quantities of agricultural raw materials. Bigger farm output means bigger government revenue. All this has created favourable conditions for the comprehensive development of agriculture, which continues to remain the principal branch of China’s economy.

Role of the State-Owned Sector

After the victory of the people’s revolution in China, the big industrial plants, commercial houses, banks, and means of transport and communication belonging to bureaucratic capital, to the Four Families, passed into the possession of the people. Since then, the Communist Party and the Central People’s Government have done their utmost to expand the state-owned sector and to consolidate its leading position in the country’s economy.

As a result, the state-owned sector has in these three years become the predominating factor in industry, transport, banking, foreign trade and wholesale domestic trade, in 1952 it already accounted for over 60 per cent of the national industrial output (exclusive of the handicraft industries), and for 80 per cent of total heavy industry output.

The state, that is the people, owns all the railways, upwards of 60 per cent of the marine and inland waterway tonnage, and the greater part of the motor transport facilities. All the Chinese banks are under government management. The People’s Bank of China, in which 90 per cent of the deposits and loan operations are concentrated, is the bank of issue and controls currency and credit. Foreign trade is entirely controlled and regulated by the government, nine tenths of the export and import operations being handled by government agencies. The government likewise conducts all domestic wholesale operations in major commodities – cereal, cotton, cotton yarn and cloth, capital goods and export goods. In 1952, government and cooperative organizations were already handling 30 per cent of the retail trade.

The increasing weight and influence of the state-owned sector in the national economy enables the people’s government to an ever larger extent to regulate production and prices, and to direct the activities of the private-capital sector and the small-commodity sector in the interests of the people.

The state-owned sector has played an important part in the rehabilitation of agriculture and the promotion of its further progress. Thanks to the system of stable, government- fixed prices and government wholesale purchases, and to the expansion of trade between town and country, the regulating and stimulating role of the state-owned sector in the entire national economy will increase as time goes on. This will contribute to the further progress of agriculture, to the raising of the peasants’ living standards and to the further strengthening of the alliance between the working class and the peasantry.

As to the rehabilitation and development of industry, transport and trade, the expansion of the state-owned sector has created the conditions for the achievement in a brief space of time of progress unwitnessed in the history of the country.

Economic Achievements

At the time of China’s liberation from Kuomintang misrule, its industrial output was only 50 per cent of prewar. The decline was 80 per cent in iron and steel, over 50 per cent in coal, and 25 per cent in textiles.

In 1952, output of nearly all factory-produced goods had already reached the highest levels ever attained in the past, and in many cases was well above them. The following figures are illustrative of the speed of China’s industrial recovery:

In the period 1950-52 gross industrial output more than doubled in value. The leading heavy industries increased their output ten- or elevenfold and greatly exceeded all previous peaks. Production increased considerably in all the extracting industries, especially fuel. There was a rapid increase in the production of building materials. Output of items of general consumption was also well above 1949.

Extremely important and significant is the steady acceleration in the rate of increase of production. In 1952, output increases in major items ranged from 18 to 78 per cent.

In the old China industry was of a semi-colonial character and was incapable of satisfying the country’s needs. In many branches production did not cover all processes from raw material to finished product and there was a lack of balance between the various branches. This induced the people’s government already in the process of rehabilitation to launch on the reconstruction of existing industries and on the building of new ones.

Old plants have been thoroughly remodelled, and at the same time new and more perfected plants have been built and gradually brought into operation. The lack of balance between the various branches of industry and the uneven geographical distribution of industry are being eliminated step by step. The iron and steel, machine-building, oil and other formerly backward industries are being rapidly developed. The coal industry is being reconstructed with the help of modern machinery and more advanced methods. Thanks to the greater stress laid on the development of the heavy industries, the ratio between the output of means of production and output of means of consumption has changed materially: in 1952, output of means of production constituted 43.8 per cent of total output, as against 32.5 per cent in 1949.

The Anshan iron and steel works, the biggest in China, may serve as an illustration of what is being done in the reconstruction of industry. Under the Japanese, they produced about 1,300,000 tons of steel per annum. Almost completely destroyed by the Kuomintangites, the works were rebuilt with the help of Soviet experts. Every phase of production was reconstructed in the process, and it was decided to operate largely on locally procurable iron ore. Not only were the works rebuilt in a very short time; their output was increased and the quality of their products improved. In 1952 output was more than 640 per cent greater than in 1949.

The Shihtsingshan iron and steel works, near Peking, have also been reconstructed and adapted to the advanced methods practised in the Soviet Union. Blast furnace productivity has been increased fourfold. The 1952 pig iron target, four and a half times as great as that of 1950, was topped by 24 per cent. Total output at the Shihtsingshan works was 5.3 times as great, and at the Taiyuan iron and steel works 2.7 times as great as at the time of the Japanese occupation.

Big strides are also being made in machine-building. Northeast China, the country’s principal industrial area, is now producing mining machinery, machine tools and power equipment. China used to import all its machinery from abroad; now it has itself begun to manufacture turning, milling, planing and vertical boring lathes, presses, air compressors, electric motors, pneumatic picks, engines, diesel engines, etc. China-made lathes and machines are already to be seen in many factories.

New machine-building plants are being built. A heavy engineering works now in its third year of construction in Taiyuan, capital of Shansi province, is making such rapid progress thanks to the devoted efforts of its builders that they expect to finish it in four years instead of the scheduled five.

China’s textile industry formerly depended entirely on imports for its machinery. But for two years now complete sets of spinning and weaving machines are being produced at plants which were formerly repair shops. There are six such reconstructed plants, as well as one new plant, turning out machines for China’s new textile mills. Spinning and weaving mills built in the past three years in Chengchou in Honan province, Siengyang in Shensi province, Hantan in Hopeh province, and Wuhan in Hupeh province are equipped with machines made in China. A distinctive feature of these new mills is that they are situated in interior cotton-growing areas, it being the endeavour of the people’s government to relocate industry on more rational lines, to erect production facilities in proximity to sources of raw material and areas of consumption.

As we see, the process of industrial reconstruction already began in the period of rehabilitation, new and modern plants being built with a view to putting an end to the semi-colonial character of China’s industry and the lack of balance in the development and location of production facilities. This process is most marked in Northeast China, the country’s principal industrial area. Here new construction began much earlier and has been on a larger scale than in other parts of China. Capital construction in 1952 was more than three times as great as in 1950, rehabilitation constituting only 30 per cent of the total. It was here, too, that the results of the effort were first felt: by the end of 1952, the rate of industrial output in Northeast China was 3.3 times as great as in 1949, while total output was well above the peak reached under the Japanese, when the mills and factories were working at top speed turning out war supplies.

Big strides have also been made in transport. The transport system inherited by People’s China was completely wrecked. In 1947 only 6,884 kilometres of railway were in operation. Most of the highroads had likewise fallen into complete disrepair. In 1950-51 the length of operating railway line was raised to 23,785 kilometres. Since 1949, 32,438 kilometres of highroad have been repaired, 1,100 kilometres newly laid, and total length of highroad has been raised to 112,000 kilometres.

Rehabilitation of the railways was already completed in 1950, after which People’s China began to overhaul its whole railway system and to build new lines. Reconstruction of track, new rolling stock and introduction of advanced operation methods have increased the railway carrying capacity considerably. In 1952, China’s railways carried 131 million tons of freight, or 61 per cent more than before the war. Two new lines – from Chungking to Chengtu and from Tienshui to Lanchow, a total of 865 kilometres – the construction of which was begun in 1951, were completed ahead of schedule. This has made it possible to start work earlier than originally projected on the extension of these lines– from Tienshui to Chengtu and from Lanchow to Sinkiang. A line from Fengtai to Shacheng in Hopeh province is also under construction.

The importance of the rehabilitation of the railway system and the rapid building of new lines in a country as vast as China can scarcely be exaggerated. Its far-flung areas are being brought together in one system. Growth of trade intimately depends upon extension of the railways, which constitute the arterial system of the national economy.

Rehabilitation and development of agriculture, industry and transport have created the conditions for a broad expansion of trade. In 1952, total turnover of government, cooperative and private industrial and commercial enterprises increased by two fifths. Compared with the previous year, the government trading system alone sold 41.4 per cent more cotton cloth, 47.5 per cent more paper, 55.1 per cent more sugar, 103.4 per cent more butter, etc.

Particularly significant is the enormous increase of trade with the rural districts. In Northeast China, peasant purchases of manufactured goods increased tenfold in the three years, while government purchases of agricultural produce increased 3.7 fold.

China has greatly enlarged its foreign trade. In 1951 it was twice as great as in the previous year and reached the prewar peak. For the first time in many years China had a favourable balance of trade. The increase continued in 1952, mainly due to further expansion of commercial intercourse with the Soviet Union and the People’s Democracies, who in that year accounted for 72 per cent of China’s total foreign trade, compared with 26 per cent in 1950.

These facts and figures show that by the end of 1952 the Chinese people had also achieved, ahead of schedule, the second condition specified by Mao Tse-tung, namely, proper readjustment of existing industry and commerce.

The Budget and What It Indicates

The Chinese people have been equally successful in achieving the third condition, one of the major requisites for a transition to broad economic development – large-scale economies and reduction in expenditure by government organizations.

At the time of the liberation the finances of the areas which had been under Kuomintang rule were in a state of complete chaos. The measures taken by the People’s Government to centralize finances and to regulate revenue and expenditure made it possible already in 1950 to balance the budget, halt inflation and stabilize commodity prices. Other financial measures resulted in the establishment of a single and sound currency for the whole country. This made possible the systematic reduction of prices, the first steps in this direction being taken in 1951 and 1952.

The fact that in 1950, the year after the establishment of people’s democratic government, revenue and expenditure were balanced and the budget deficit eliminated, for the first time in the country’s history, speaks eloquently of the healthy progress made by the national economy of the Chinese People’s Republic. This is also clearly reflected in the steady growth of the budget.

Taking 1950 as 100, national revenue rose to 204.6 in 1951, and to 271.6 in 1952; expenditure correspondingly rose to 174.8 and 239.7. In 1952, revenue considerably exceeded expenditure (by 26,060,000 million yuan), the carryover to 1953 amounting to 30,000,000 million yuan.

Both the revenue and expenditure sides of the national budget reveal profound changes in the structure of China’s economy. Profits of state-owned enterprises and taxes paid by state-owned and cooperative enterprises accounted for 34.1 per cent of the total revenue in 1950, and 56.3 per cent in 1952; proceeds from the agricultural tax declined in the same period from 29.6 per cent of total revenue to 17.1 per cent, while taxation of private enterprises yielded 32.9 per cent and 24.1 per cent of total revenue respectively. An analysis of national expenditure reveals a progressive increase of allocations for economic development and social and cultural services. In 1952, the former were 4.2 times as large, and the latter nearly three times as large as in 1950; expenditure for defence and for the civil service increased in the same period by only 50 per cent.

The financial achievements of the people’s government are not only due to the rehabilitation and progress of industry and agriculture. They are also due to the effort of the whole people to ensure strictest economy of government funds and to secure accumulations over and above the plan. A campaign in this direction was initiated by the workers of Northeast China in 1951. In this region alone it resulted in 1952 in additional accumulations equivalent in value to 11.5 million tons of cereal. In that year four of the six big administrative areas achieved additional accumulations amounting to upwards of 22,000,000 million yuan, which Chinese economists estimate would be sufficient to build 25,000 kilometres of railway line.

The rehabilitation and development of all branches of the economy is accompanied by a steady improvement in the living standards of all sections of the people – workers, peasants, intellectuals and petty bourgeois.

Reference has already been made to the growing prosperity of the Chinese peasant, now that the agrarian reform has emancipated him from semi-feudal exploitation and ruin. In the three years of existence of people’s government, the living standards of the working class have also risen considerably. The number of persons employed in production is steadily increasing, and now totals 15 million, 10,200,000 of whom are members of trade unions. Their rights are protected by law, which enforces normal working conditions and proper pay. Social insurance has already been established for a considerable section of the workers. Average wages and salaries were much higher in 1952 than in 1949, the increases ranging from 60 to 120 per cent. The improved conditions of the Chinese people are reflected not only in the steady increase of their purchasing power, but also in the falling death rate and the rising birth rate, as well as in the extraordinary eagerness displayed by workers and peasants to increase their knowledge and improve their qualification.

Planning Further Progress

The Chinese owe these achievements to the people’s democratic system and to the guidance of the Communist Party, which is leading the country along the sure road to economic prosperity.

An invaluable factor in Chinese economic progress is mutual assistance and close cooperation with the Soviet Union and the People’s Democracies. Chu Teh, Vice-Chairman of the Central People’s Government Council, said in an article entitled “The Great Friendship of the Peoples of the Camp of Democracy and Socialism”: “The greater bulk of Chinese imports from the Soviet Union consists of machinery and industrial equipment. The prices of this machinery and industrial equipment are 20-30 per cent lower than those prevailing in the British or American market. In addition to machinery and industrial equipment, the Soviet Union generously supplies China with the most advanced scientific and technical assistance.”

The historic achievements of the Chinese People’s Republic cannot but rejoice the hearts of millions throughout the world. To the labouring masses of Asia, what the Chinese people have achieved and what they are striving for is a beacon that brings a light of hope into the darkness of their misery. Even people who can by no means be regarded as friends of China are forced to acknowledge its achievements in building a new life.

In successfully completing the economic rehabilitation of their country, the great Chinese people have scored an outstanding peaceful victory, won in spite of the efforts of internal and external enemies to frustrate the building of the new China. This victory has laid the foundation for another big advance of the Chinese People’s Republic, an advance to the new and higher phase of extensive planned economic development. This is the purpose of the first five-year plan which is to be submitted for the approval of the All-China People’s Congress.

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