POLITICAL CONFLICT AND INDUSTRIAL GROWTH IN CHINA: 1965-1977 BY ROBERT MICHAEL FIELD, KATHLEEN M. MCGLYNN, AND WILLIAM B. B. Regional structure ABNETT Page 240 242 242 244 246 III. The interplay of provincial politics and industrial growth, 1974-77-- V. The emerging shape of industrial policy in post-Mao China_ A. Industrial organization- B. Enterprise management. C. Wages and incentives. D. Science and technology- 248 251 252 253 254 259 260 261 262 263 264 APPENDIXES A. Provincial political stability methodology B. Monthly industrial output for selected provinces in recent years.. British Broadcasting Corp., Summary of World Foreign Broadcast Information Service, Daily Field, Robert Michael, Lardy, Nicholas R., and Emerson, John Philip, Provincial Industrial Output in the People's Republic of China: 194975, Foreign Economic Report No. 12, U.S. Department of Commerce, Washington, D.C., 1976. Gross value of industrial output. Jen-min jih-pao (People's Daily). U.S. Joint Publications Research Service. New China News Agency. Ta-kung pao (The Impartial) (Hong Kong). I. INTRODUCTION Today, when the Chinese are determined to build a strong, modern nation, the outlook for industrial performance is of concern not only to China specialists but also to policymakers, businessmen, and all who are interested in the lives and fortunes of the nearly 1 billion Chinese people. Since the rehabilitation of Teng Hsiao-p'ing, the Chinese have been quite open in discussing their past shortcomings and current problems, but they have not given us data in the form necessary for an assessment of industrial performance. Therefore, following the work that Field did with Lardy and Emerson,' we have gathered scattered statements about the growth of the gross value of industrial output (GVIO) for individual provinces in order to reconstruct the GVIO data for each of the 29 provinces and for the country as a whole. The pattern and rates of growth shown by the data are then analyzed in the light of the economic and political problems of the last decade. The GVIO data published or broadcast by the Chinese are difficult to use. First, the data are a mixture of estimates made before the end of the year, final figures, and subsequent revisions that are seldom explicitly identified; even data from a single source are sometimes inconsistent. Consider, for example, the following figures for Kwangtung: 3 Here, the revisions are small and appear to be reasonable, and the inconsistency between the annual increases and the growth for the 3 years as a whole is minor. Second, in the last year or two the Chinese have been careless in handling statistical data and, in particular, in translating them into English. The most frequent source of error has been in the translation of the character pei. For example, a Ta-kung pao English-language supplement dated September 15, 1977, reported that "[Shanghai's] total industrial output value is now more than 11 times what it was immediately after liberation," whereas it is clear from other statements that output was actually 19.3 times that of 1949. The original Chinese was probably shih to pei (which literally means "an increase of more than 10 times over" and by accepted usage "an increase of 10 to 20 times over" the value in the specified base period). Just as a twofold increase is three times, a tenfold increase is 11 times. Thus, the Chinese 1 Robert Michael Field, Nicholas R. Lardy, and John Philip Emerson, Provincial Industrial Output in the People's Republic of China; 1949-75, Foreign Economic Report No. 12, U.S. Department of Commerce, Washington, D.C., 1976. 2 Provincial GVIO series for the years 1965-77 are presented in table C-1. For sources and methodology, see CIA, "The Gross Value of Industrial Output in the People's Republic of China: 1965-77," June 1978. Throughout this article, the term "province" includes the five autonomous regions and the three directly administered municipalities. The original figures are cited in FBIS, Jan. 16, 1976, H1, and FBIS, Jan. 26, 1977, H2; the revised figures are in "Learn from Teaching," p. 67. FBIS, Dec. 8, 1977, E5. was incorrectly translated as "more than 11 times" (which means 11 to 12 times). In this case, the cause of the error could be deduced, but more frequently isolated figures that do not fit into the larger body of data cannot be explained. Even after the practical problems with the GVIO data are sorted out, certain theoretical shortcomings still remain. The basic problem stems from the Chinese use of the "factory reporting method" to measure the value of industrial output. This method introduces a substantial amount of double counting, which may affect the gross value of output in a number of ways. First, because the value of output reported by each enterprise includes the costs of purchased raw materials and semifinished inputs, changes in the organization of the industrial sector can either raise or lower the aggregate GVIO. For example, increased specialization of production tends to inflate GVIO (because more semifinished inputs are purchased and the degree of double accounting is increased), whereas mergers that combine enterprises in different stages of production into a single accounting unit tend to lower GVIO, as for example, in the iron and steel and coal industries. Second, the use of the factory reporting method can also distort the data over time. Consider, for example, the following indexes for 1976 (with 1965-100): Crude oil output_ Natural gas output.-. Crude oil processing capacity.. 770 920 570 520 The difference between the growth of crude oil processing capacity and crude oil output is easily explained by crude oil exports and the growing use of crude oil as a fuel. The GVIO index, however, is hard to understand. According to Chinese statistical practice, the GVIO of the petroleum industry should be the value of the crude oil sold plus the value of the refined products sold plus the value of all other sales. Thus, it would seem that the GVIO index should have been much higher than 520. Despite these practical and theoretical difficulties, the reconstructed GVIO data show the same pattern of growth as a value-added index based on physical output data for 42 commodities produced by 11 branches of industry (see table 1). Moreover, the GVIO data offer several distinct advantages over the value-added index. First, there is a large body of reasonably consistent GVIO data for 1976-77, while the few physical output estimates that are available need to be revised and brought up to date in the light of recently released but still fragmentary information. Second, the GVIO data allow an examination of the geographic pattern of growth. And finally, when used in conjunction with statements on the share of the plan fulfilled at various times during the year, the data make possible an examination of the pattern of growth within the year. For these reasons, the quantitative judgments in this article are based on the provincial GVIO data and the national figures derived from them. For a detailed description of the factory reporting method, see Robert Michael Field, Nicholas R. Lardy, and John Philip Emerson, A Reconstruction of the Gross Value of Industrial Output by Province in the People's Republic of China: 1949-75, Foreign Economic Report No. 7, U.S. Department of Commerce, Washington, D.C., 1975. JMJP, Aug. 14, 1977. Section II provides a brief survey of China's industrial performance since the Cultural Revolution and outlines the regional development policies followed by the Chinese since the 1950's. Section III examines the interplay of political conflict and industrial performance in 19 provinces during the mid-1970's to test a commonly suggested hypothesis that declines in industrial production are closely linked to political instability. Section IV compares the relative impact of political turbulence on industrial performance during the two periods of greatest instability since 1949; namely, the Cultural Revolution (1966-69) and the struggle for succession (1974-77). Finally, in section V the steps taken by the post-Mao leadership to spur economic modernization after a decade of political and economic instability are outlined, with emphasis on the Hua administration's current strategy for industrial development. Statistical data and methods of political analysis are printed in the appendixes. II. INDUSTRIAL PERFORMANCE A. Growth Rates Estimates of industrial production for the years 1965-77 are presented in table 1. By 1965, industry had recovered from the collapse that followed the Leap Forward (1958-60), and most major commodities were being produced at earlier peak levels. However, the Third 5-Year Plan period (1966-70) was soon interrupted by the turmoil of the Cultural Revolution. Work stoppages, shortages of raw materials, and disruptions of transportation forced industrial production below the 1966 level in both 1967 and 1968. No accurate measure of the decline in production can be made from available data, but it probably was on the order of 15 percent in 1967. Production remained at low levels at least through the first half of 1968, and then began to recover rapidly. By 1969, it exceeded the pre-Cultural Revolution peak of 1966, and in 1970 went on to grow by more than 20 percent. The average annual rate of growth for the Third FiveYear Plan as a whole was 11.7 percent. TABLE 1.-INDUSTRIAL PRODUCTION IN THE PEOPLE'S REPUBLIC OF CHINA, 1965-77 Sources: Gross value: CIA, "The Gross Value of Industrial Output in the People's Republic of China: 1965–77,"' June 1978. Value added: CIA, "China: Economic Indicators," October 1977. The derivation of the index is described in Robert Michael Field, "Industrial Production in the People's Republic of China: 1949-74," in Congress of the United States, Joint Economic Committee, China: A Reassessment of the Economy, Washington, D.C., 1975, pp. 160-174. |