CHINA'S POST-MAO ECONOMIC FUTURE BY ROBERT F. DERNBERGER AND DAVID FASENFEST* CONTENTS Past performance and the economic problems of the mid-1970's- Disproportionate growth and the major economic problems of the The fixed parameters over the next decade--- An alternative forecast of China's economic evolution (1975–85). Agriculture. Industry. Consumption.. Foreign trade__ Emerging policy choices of the new leadership. Page 8 9 11 16 20 21 27 30 31 35 36 38 39 31 44 46 A unique feature of China's emergence as a major world power has been the continued dominance of a relatively small leadership group whose members had gained prominence in the Chinese Communist movement during the 1920's and 1930's. The resulting control over policy formulation and implementation over such a long period by this. relatively small group of leaders, their advancing age-most were born in the 19th century-and their failure to groom and share power with a younger generation of leaders, led many Western political analysists to contemplate and offer predictions on the outcome of the inevitable succession crises.' Actual developments in the mid-1970's dramatically set the stage for the succession crises with the death of the three most eminent leaders of the Chinese Communist Revolution-Mao Tsetung, Chu Teh, and Chou En-lai-in a single year. Events over the year and half between the death of Mao (September 1976) and the convening of the Fifth National People's Congress (February 1978) have been both dramatic and unexpected. The attempt of the radical left leaders, who had acquired positions of power during the Cultural Revolution in the mid-1960's, to seize complete control was quickly thwarted by the arrest of "the Gang of Four" and the widespread campaign to expose and remove their *Robert Dernberger is a professor of economics at the University of Michigan. David Fasenfest is a graduate student in economics at the University of Michigan. 1 See, for example, Richard Wich, "The Tenth Party Congress: The Power Structure and The Succession Question," China Quarterly, No. 58, April-June 1974, pp. 231-248. The "Gang of Four" is the designation given to the four major leaders of the radical left at the time of Mao's death: Yao Wen-yuan (Shanghai propagondist who gained prominence during the Cultural Revolution and became an editor of "Red Flag," the Party's official journal), Wang Hung-wen (also from Shanghai, leaped into prominence at the 10th Party Congress in 1973 and later became No. 2 in the Party heirarchy behind Hua Kuo-feng), Chiang Ching (Mao's wife, probably most militant of the Gang), and Chang Chunchiao (from Shanghai, Deputy Prime Minister to Chou En-lai, probably less partisan, but more politically potent than rest of gang). followers at all levels of the political system. The advocates of a more moderate or pragmatic approach to the Socialist transformation of China's economy and society, on the other hand, have now been rehabilitated and restored to power. The speeches made, the resolutions adopted, and the officials elected at the Fifth National People's Congress all symbolize the extent to which the moderate or pragmatic wing of the Party has emerged victorious in the present stage of the succession crises." The influence of the radical left in China, of course, is not eliminated by the arrest of the "Gang of Four", nor by the restoration of the moderates-pragmatists to high-level positions of power. The repeated campaigns of the radical left in the past to transform Chinese society according to the thoughts of Mao have obviously left their stamp on the values and behavior of a generation of Chinese. Moreover, although the extent of the vicory of the moderates-pragmatists is quite surprising, the real winner in the present stage of the succession crises is Hua Kuo-feng. Not only was Hua a relatively unkown only a few short years ago, he also cannot be readily identified as a member of the moderate-pragmatic leadership faction. His reputation as a provincial-level problem-solver in the agricultural sector and his loyalty to Mao undoubtedly led to his being selected as the Chairman of the national conference on the Ta-chai type advanced county campaign for the modernization of China's agriculture, held in the fall of 1975. Shortly thereafter, and before Mao's death, he was surprisingly elevated to the very apex of the political system, presumably to serve as a caretaker to supervise the succession crises which would follow Mao's imminate and anticipated death. Hua's sudden and unexpected appointment to this critical position of power may be partially explained by his lack of a national reputation, his lack of an independent power base, and his not being a well-known advocate for either of the groups who would be contending for power in the succession crises. The recent reaffirmation of his position as chairman of the party by the 11th National Congress of the Chinese Communist Party and as chairman of the Government by the Fifth National People's Congress is interpreted by some observers as a sign of the continued instability in the current alinements and balance of power within the leadership. On the other Although the terms used in this paragraph and throughout the remainder of the paper to identify the leadership groupings engaged in the "2-line struggle" for control of China's economic development policy are somewhat inprecise for the purpose of identifying particular individuals or economic policies, these terms are meaningful labels for the purpose of distinguishing between two major catagories of economic policies which have been advocated for the achievement of China's economic modernization. On the one hand, the moderate-pragmatic policies give greater priority to economic development as the short-run goal and as a prerequisite for achieving the socialist transformation of China. As a result, they place greater emphasis on the more traditional economic policies associated with efficiency, a rational division of labor, advanced technology and modern industry, and reliance on the skills of technicians and engineers. In other words, the advocates of these policies favor placing economics in command in the short-run and leaving the achievement of the goal of social transformation to the long run. Thus, the major constraint on the moderate-pragmatic policies is their short-run challenge to the ideological goals of Mao's socialist revolution. The radicals, on the other hand, using the Soviet experiences as an example, realize that the moderatepragmatic economic policies may well involve the creation and entrenchment is Chinese society of social values and behavior that are antagonistic to the objectives of achieving a true socialist society-so much so that this objective is not only postponed but eventually eliminated. Thus, they see the necessity of advocating simultaneous and complementary economic development and social transformation. As a result, their economic policies involve a much greater tradeoff between the objectives of economic development and social transformations than do those of the moderates. The major constraint on the radicals is the reality of Chinese society today: beset by economic problems and, without Mao, an economic, political, and military leadership that is disinclined-because of these economic problems-to accept or support them. The above policy differences are largely a matter of emphasis or degree, not contradictory alternatives. Nonetheless, the dynamics of political realities over the past three decades in China led to the situation in which these two groups became rivals and were the major contenders for power in the succession crises. hand, the evidence also suggests that he has not only survived the succession crises, but is emerging as a major new force in China's political leadership, representing a synthesis of the dialectic conflict between the two line struggle of radicalism and moderate-pragmatism in the formulation of China's economic policy over the past three decades Whatever is true of Hua's own position, the contents of the majority of articles in the Chinese press over the past year, the new appointments to high level positions in both the party and Government over that same period, the essence of the new constitutions of both the party and the Government, and a key passage from Hua's address to the Fifth National People's Congress all attest to the rather dramatic shift in the balance of power within the leadership in favor of the moderate-pragmatic faction, with their first order of business being China's economic development. According to Hua: In order to make China a modern, powerful socialist country by the end of the century, we must work and fight hard in the political, economic, cultural, military and diplomatic spheres, but in the final anaysis what is of importance is the rapid development of our socialist economy. In its details, however, Hua's speech to the Fifth National People's Congress does not indicate the moderate or pragmatic point of view has had a significant impact on the program he presents for achieving the rapid development of China's economy. It is, of course, necessary to recognize Hua's speech as fundamentally a policy statement with a major political objective; an appeal to the Chinese to rally behind the new leadership in their attempts to achieve the economic modernization of China. Furthermore, the specifics of the program adopted by the Fifth National People's Congress to achieve this goal, the long-run economic plan for 1976-1985, were presented by other speakers to the Congress and have not been published. We are told, however, that this plan is the same as the plan which had been drawn up in 1975, that is, before Mao's death, the arrest of the "Gang of Four", and the restoration to power of the moderate-pragmatic leadership. Nonetheless, the targets of the plan, apparently unrevised in light of developments in the 2 years since they were originally formulated, were formally presented to and adopted by the Congress. Thus, while neither Hua nor the new moderate-pragmatic leadership should be held responsible for the formulation of the economic program summarized in Hua's speech, the emphasis given the plan and its specific targets in the speech, its adoption by the Congress, and the whole discussion of China's economic problems and the policies for the solution of those problems presented by Hua does raise serious questions as to the extent to which the moderates-pragmatists are in control of China's future. For example, Hua's speech places much of the blame for China's current economic problems on the policies and interference of the "Gang of Four", rather than recognizing them as fundamental, longrun economic problems inherent in China's past economic development and current economic environment. These problems will not be solved merely by the arrest of the Gang of Four and the restoration of the moderate-pragmatists to power. Hua Kuo-feng, "Unite and Strive to Build a Modern, Powerful Socialist Country!" Report on the Work of the Government Delivered at the Fifth National People's Congress, Feb. 26, 1978, in "Peking Review," No. 10, Mar. 30, 1978, p. 18. Secondly, the summary targets for 1985 emphasized in Hua's speech resemble those used in the past to mobilize labor in a mass campaign to accomplish a great leap, rather than the rational projection of what is feasible in light of the constraints imposed by China's fundamentale economic problems. As mentioned above, these targets for 1985 were drawn up in 1975, but in light of the economic developments in 1976 and 1977, much of what was to be done in 10 years, is now to be accomplished in 7. For example, the target for grain output, 400 million tons, implies a rate of growth in grain output over the next 7 years of 4.8 percent a year and Hua claims that total agricultural output is to increase by between 4 and 5 percent a year. Not only have the Chinese been unable to obtain such rates of growth for any 3-year period in the past three decades, no other major grain producer in the world has been able to maintain rates of growth such as these over a continuous period of 7 years. For steel, the target is 60 million tons, but this implies the import, construction, and placing into production of a major new steel complex at the rate of about one a year for the next 7 years. In the next 7 years as a whole, the rate of industrial investment and production (more than the total of the entire past 28 years) imply a level of imports and industrial labor force such that the exports, transportation facilities, social overhead capital, energy, and middle-level technical personnel requirements would exceed any realistic assessment of Chinese capabilities.5 Quite simply, the targets of the plan reported by Hua are those which are derived from the long-run, idealistic goals, held forth by Mao and Chou En-lai over the past 10 years: the overtaking of the most advanced industrial countries by the end of the century. Or, more specifically, the hope to achieve and surpass the world's highest yields in major agricultural crops and the world's highest levels of output for major industrial products by the end of the century. This is an acceptable and meaningful long-run goal. It is not, however, the basis for operational and realistic short-run plans for the allocation of resources in the search of a pragmatic solution to China's immediate economic problems. The pragmatic solution of these problems requires the Chinese leadership to make hard choices among the alternative allocations of investment for the achievement of alternative objectives. Over the past year, the many nationwide conferences that have been held and discussions in the Chinese press clearly reveal the nature of these choices the new leadership faces in choosing tradeoffs among the various sectors of the economy: consumption versus investment, the military versus civilian sector, agriculture versus industry, heavy industry versus light industry, exports versus domestic consumption, domestic education and research versus imported technology and expertise, et cetera. There are, of course, many alternative choices which must be made within each of these individual sectors as well. Yet, rather than recognize the importance of these choices for China's future economic development and the extent to which some of these choices have already been made, Hua's speech promises something for everyone: higher standards of living (in normal years, 90 percent This argument is supported by the findings in several papers in this volume. See, especially, Nai-ruenn Chen, "Self-Reliance versus Learning from Abroad: China's Path to Economic Modernization"; William Clark, "Electric Power Industry"; Jon Segurdson, “Urban-Rural Relationships: Technology and Manpower Policies"; and Hedija Kravalis, "China Export Potential". of the peasants are to receive an increase in income), the modernization of the military, a record-setting pace of agriculture development, an exceptional rate of growth in foreign trade with no mention of borrowing from abroad (there is also no mention of self-sufficiency), an educational and training program which will allow China to overtake the best scientific and technological standards in the west, and so on. These programs are said by Hua to be necessary in order to turn the plan into reality. This is true, but the task of the new moderatepragmatic leadership is the need to formulate operational economic programs and plans for the long-run achievement of economic modernization for China which are based on the reality of the economic constraints of China's economy, not derived from Mao's slogan that this economic modernization was to be achieved by the end of the century. Our purpose in this introductory paper is to present an alternative assessment to that contained in Hua's speech: an alternative to his assessment of the fundamental economic problem's faced by the new leadership, an alternative to his projection of the feasible course of China's economic development over the next decade, and an alternative analysis of the economic consequences of the policy choices the new leadership has made concerning the various objectives of economic modernization Hua presents. This alternative discussion of these problems should provide the reader with a meaningful overview of China's contemporary economic evolution and the necessary frame of reference for interpreting and integrating the arguments presented in the individual papers in the following sections of this volume and for evaluating the detailed collection of revised estimates for economic activity in China over the past 28 years to be published in volume II.' Although this paper attempts to provide such a framework for interpreting and evaluating the other papers, it is important to note that no attempt has been made to have the individual authors of the other papers adopt any particular framework of analysis, point of view, or conclusion. For example, the emphasis in this paper is on the long-run trends and relationships in China's economic development and the analysis leads us to conclusions which can be interpreted as • Much of the discussion in this paper relies to a great extent on a much more detailed analysis of China's fundamental economic problems, projection of China's economic development over the 1980's, and the choices among the various investment and policy options the new leadership would face written by Robert F. Dernberger and published shortly after Mao's death. See Robert F. Dernberger, "China's Economic Future," Allen S. Whiting and Robert F. Dernberger, "China's Future" (New York: McGraw Hill, 1977). 1 The remaining papers in part I are also presented to provide a framework for interpreting and integrating the arguments and empirical evidence found in the other papers presented in the following sections of volume I and those in volume II. Whereas this paper emphasizes long-run economic relationships and trends in China's economic development, the following two papers raise many of the same problems discussed in this paper, but analyze them from a somewhat different point of view. Nicholas Lardy, in his paper on "The Economic Options of Hua Kuo-feng," emphasizes economic developments over the past few years and the possible developments in the immediate or near future, that is, the next few years. William Whitson's paper on "Politics and China's Economy" emphasizes the political forces or considerations which have influenced economic policies and developments since Mao's death and which will have an important role in determining those policies and developments in the immediate or near future. The remaining four papers in part I cover a variety of topics, each of which contributes to a better understanding and interpretations of what follows in volume I and volume II. Alexander Eckstein summarizes the Chinese economic development objectives, strategies, and accomplishments over the past 25 years in their search for economic modernization in "The Chinese Development Model." How Soviet specialists have interpreted and evaluated Chinese economic development policies and performance is surveyed by Leo Orleans in "Soviet Perceptions of China's Economic Development". The extent to which a very significant dependence on foreign technology and trade will be a necessary consequence of the Chinese desire to rapidly achieve economic modernization by the end of this century is indicated in Nai-ruenn Chen's "Self Reliance versus Learning from Abroad: China's Path to Economic Modernization." Finally, a summary review of economic developments and policies during the mid-1970's is presented in Arthur Ashbrook's "China: A Shift of Economic Gears in the Mid-1970's." 27-427 O - 79 - 3 |