region]." It is not yet clear what kind of administrative structure the regions will have, or how free they will be to plan and manage their respective economies, or even whether they will accelerate or retard the flow of resources from the more developed to the less developed areas.

In any case, the gestation period for investment in relatively undeveloped regions seems to have been much longer than the Chinese had hoped. By 1985 the investment in the Southwest probably will have begun to pay off, but the regional distribution of production is not likely to have changed significantly. The data in table 3 show how slow and difficult the process has been.

TABLE 3. DISTRIBUTION OF CHINESE INDUSTRIAL PRODUCTION, BY REGION, 1957, 1965, 1970, AND 1977

Sources: 1957: Field, Lardy, and Emerson, 1976, p. 20. 1965, 1970, 1975, and 1977: Table C-2.

III. THE INTERPLAY OF PROVINCIAL POLITICS AND INDUSTRIAL GROWTH, 1974-77

The Wuhan Iron and Steel Company was directly affected by the "gang of four."... They ruthlessly persecuted the cadres and masses and sabotaged revolution and production. In the three years of 1974-1976 they caused the Wuhan Iron and Steel Company to lose one and one-half year's output.

98

Under the leadership of the Kiangsi tractor plant... the masses... have overcome all difficulties and, in a week, completely resumed production, ending eight months of production stoppage caused by the "gang of four." b

Due to the interference and sabotage by the "gang of four," the [Kiangsi Tractor] plant produced some 10,000 tractors less for the state in the past three years."

the "gang of four" struck its nose into the Hangchow silk-printing and dyeing plant... The result was a split among the cadres, workers, and staff members, forcing the plant several times to suspend its production or operate at half capacity and inflicting great losses on the party and state.9d

The close relationship between political stability and economic performance is especially striking in China's industrial sector. During periods of relative political stability such as 1970-73, the growth of Chinese industrial output has been impressive. However, the rate of growth has fallen off dramatically in times of political infighting, such as during the struggle for succession (1974-77).10 China specialists have hypothesized that the existence of factionalism-a manifestation of political instability-during periods of intense political conflict leads to the mobilization of workers who participate in disruptive activities to discredit their faction's opponents.10 The more disruptive the

FBIS, Jan. 12, 1978, H5.

b FBIS, Nov. 8, 1976, G4. c FBIS, Dec. 2, 1976, G6.

d FBIS, Nov. 18, 1976, G1.

10 The period 1974-77 gave rise to 3 major political campaigns: The campaign to criticize Lin Piao and Confucius (late 1973-74), the campaign to criticize Teng Hsiao-p'ing (1976), and the campaign to criticize the "gang of four" (October 1976 to date).

10. For example: Field, Lardy & Emerson, pp. 16-17; and Carl Riskin, "China's Economy: At the Cross Roads Yet Again?" Contemporary China vol. 1, No. 3, pp. 2-3.

factional conflict, the more serious the damage to industrial production. This section examines in detail the nature of the relationship between political conflict and industrial growth in the 19 provinces for which GVIO data were available for each of the years 1974-77."

First, GVIO trends for the years 1965-77 were calculated for the 19 provinces, in most cases using the years 1965-66 and 1970–73 (which were relatively stable both politically and economically) to establish the trend. For a number of provinces, different combinations of years were chosen in order to include the most stable years.12 Once the trends were tailored to each province, the GVIO growth rates for the years of political turmoil (1974 and 1976) were compared with the trend growth rates and each province assigned a score ranging from -6 for a decline in GVIO in both years to +6 for growth greater than trend in both years. Next, the provinces were ranked according to their relative political stability during the period 1974-77 and assigned scores ranging from -6 for unstable, politically factionalized provinces to +6 for politically stable provinces.13

Finally, the two scores were plotted with the political stability index on the horizontal axis and the GVIO growth rate index on the vertical axis. Figure 1 presents the results, placing the provinces in their approximate order. We found a strong correlation between political stability and industrial growth in the 19 provinces examined," corroborating the hypothesis that factional infighting leads to declines in industrial production. Correlation does not prove causality; transportation problems in neighboring provinces or national decisions on the allocation of resources certainly can have an impact on provincial growth rates. As the following quadrant-by-quadrant analysis shows, however, no explanation of provincial economic performance is complete without a careful consideration of political factors.

11 The provinces are Anhwei, Chekiang, Heilungkiang, Hopeh, Hunan, Kansu, Kiangsu, Kirin, Kwangsi. Kwangtung, Kweichow, Peking, Shanghai, Shantung, Shensi, Szechwan, Tibet, Tsinghai, and Yunnan. Data on monthly industrial output for 15 of these and 7 other provinces are presented in app. B, and annual GVIO series for all 29 provinces are presented in app. C.

12 The provinces for which different years were used to calculate the trend are Chekiang (1965, and 197073), Hopch (1965, and 1970-73), Kiangsu (1965, 1969-71, and 1973), Kirin (1965-66, and 1970-72), Kansu (1965, and 1970-73), Kweichow (1965-66, and 1973), Shantung (1965, and 1970-72), Shensi (1965-66, 1970-71, and 1973), Szechwan (1965, and 1971-73), and Tibet (1965, and 1971-73).

13 The methodology is described in app. A, below.

14 The Spearman rank correlation coefficient is .695 (which is statistically significant at the .001 level), and the Kendall rank correlation coefficient is .532 (which is also statistically significant at the .001 level). For the formulas, see Sidney Siegel, Nonparametric Statistics for the Behavioral Sciences, New York, 1956, pp. 202-223.

27-427 - 79 18

A. Politically Unstable Provinces With Declines or Slow Growth

The provinces in quadrant III can be classified into two general categories: (a) those governed by politically moderate First (or ranking) Party Secretaries (Chekiang, Kweichow, Szechwan, and Yunnan); and (b) those led by political radicals (Anhwei, Kansu, Kirin, and Shanghai). Of the provinces in the latter category, Shanghai is regarded by both Chinese and Western analysts as having been the base of radical power in China. According to the present Third Secretary, P'eng Ch'ung, the radicals (who had been in power in Shanghai since the Cultural Revolution) made a mess of industrial production during the 1970's. P'eng recently claimed that Shanghai's GVIO declined from an impressive 14.8 percent growth rate in 1970 to a mere 2 percent rate in 1976 because of the radicals' factionalism and inept management.15

FBIS, Dec. 8, 1977, E-7. According to a recent traveler who was briefed by officials in Peking, Shanghai's GVIO grew only 1.2 percent in 1976.

Another radical-led province, Kirin, encountered similar problems. GVIO actually declined during the 1974 campaign to criticize Lin Piao and Confucius and slowed significantly during the 1976 campaign to criticize Teng Hsiao-p'ing. The present First Party Secretary, Wang En-mao, who replaced PLA commissar Wang Huai-hsiang in March 1977, acknowledged Kirin's slow development in 1976 and went on to say that it had also been slow in 1977 because of the continued "interference and sabotage"-codewords for fractional disorders-of followers of the "gang of four."16 Although details are not available, other reports suggest that the worker unrest mentioned by Wang En-mao was most serious in the troubled Ch'ang-ch'ün Railway Subbureau 17 and may have occurred in isolated factories in other areas.

In contrast to Kirin, the two remaining radical-led provinces in quadrant III Anhwei 17 and Kansu, were less damaged industrially by political conflict. Although Anhwei experienced some serious problems in the strategically important Huainan coal mine in 1974, it registered solid overall industrial growth in 1976-a fact highly publicized by the Anhwei radical leadership at the time.18 No reports or indications of serious industrial unrest could be detected in the Anhwei media until the late winter and early spring 1977 when a provincial radio broadcast alluded to serious problems along the province's railways and to difficulties in meeting first quarter production targets."

19

The sudden appearance of these problems in early 1977 coincides with the Hua administration's insistence that the intensity of the campaign to criticize the "gang of four" be stepped up in those provinces such as Anhwei-that had been guilty of foot-dragging. In fact, Sung P'ei-chang (who was Anhwei's First Secretary at the time) was criticized after his purge in June 1977 for trying to "put a lid" on the progress of the campaign. This strongly suggests that Sung attempted to stave off pressure from Peking by sacrificing some local radicals, This move caused morale problems and considerable confusion, which in turn may explain the decline in GVIO during the first quarter. In any event. the unrest of the winter-spring period was followed by a period of growth, which lasted until Sung's purge in June and his replacement by Wan Li, the former Minister of Railways and a close associate of Teng Hsiao-p'ing.20 After Wan's transfer to Anhwei, provincial GVIO fell off sharply for several months, indicating that Wan-a noted disciplinarian-probably ordered local leadership changes, which in turn led to disruptive activities at the lower levels. As of late December 1977, production still had not returned to the level of June.

Most of the industrial disruptions in Kansu reportedly occurred along the province's rail system, which is under the jurisdiction of the Lanchow Railway Bureau. Reports released after the purge of First Party Secretary Hsien Heng-han, who was accused among other things of "covering up" the turmoil within the Lanchow Bureau,2

14 FBIS, Jan. 10, 1978, L-1-L-15.

17 FBIS, Jan. 10, 1978, L-9-L-11; and FBIS, Aug. 24, 1977, L-1-L-2.

17 For a detailed analysis of politics in Anhwei Province during the mid-1970's, see William B. Abnett, "Anhwei Province, 1949-78," in Edwin A. Winckler, ed., Provincial Handbook of China, Standard, forthcoming.

18 FBIS, Jan. 4, 1977, G-3.

FBIS, Apr. 12, 1977, G-1-G-2.

20 FBIS, July 29, 1977, G-3-G-4; and FBIS, Jan. 24, 1978, G-1-G-5.

21 FBIS, July 12, 1977, M-1-M-3.

revealed that the Bureau was practically paralyzed in 1975 and 1976 and that central work teams had been sent there several times in an attempt to rectify the troubled situation.22 The absence of reports in the provincial media concerning factory unrest suggest that these Lanchow Railway Bureau disorders were the primary source of the virtual stagnation of Kansu's GVIO in 1976.

The four other provinces in quadrant III which were led by moderate First Party Secretaries, represent four of the most seriously factionalized and politically unstable provinces in China. These provinces share the dubious distinction of having been cited officially by Peking as members of a group of seven provinces whose industrial output was most seriously damaged by the "gang of four." 23 Chekiang Province, for instance, was the subject of central directives several times during the mid-1970's. The "Chekiang problem" became so serious. that PLA troops were ordered to solve it in 1975. Details in recent radio broadcasts-including approximate dates-reveal that factory unrest and factional disputes in Chekiang during 1974-76 correspond closely with the erratic changes in GVIO over the same period.24

Another greatly factionalized province was Kweichow, whose industrial production was so disrupted that GVIO fell by 13 percent in 1974 and, following an increase of 44 percent in 1975, dropped 12 percent in 1976. The monthly GVIO peak reached during the relatively stable year of 1975 was not regained until April 1977, after several months of floundering that followed the purge of the "gang of four." Ma Li's transfer from Hopeh to become Kweichow's First Party Secretary in March undoubtedly had a great deal to do with the sudden upsurge of Kweichow's GVIO shortly thereafter, as incompetent radicals were probably ousted from positions of responsibility. But this new growth was shortlived and the new provincial leadership failed to stabilize industrial production.

At the time of his transfer to Kweichow, Ma Li convened a fourlevel (provincial, prefectural, county, and district) [hsiang] cadre conference which emphasized production and suggested that Kweichow's new leadership would at last be able to overcome past problems and make decisive recoveries. In July 1977, however, a second fourlevel cadre conference was convened, during which problems such as "sabotage," theft, and the like were discussed.25 These problems, which were encountered during the months of April to July, are reflected in Kweichow's erratic GVIO pattern during the same period. Apparently, the problems discussed at the second conference persisted until October, when the province's industrial production began to grow steadily.

Kweichow's neighbor, Yunnan, was more seriously disrupted in 1976 than in 1974 and did not begin to recover from the turmoil until the summer of 1977-several months after the replacement of First Party Secretary Chia Ch'i-yün by the politically moderate former leader of Kwangsi, An P'ing-sheng. Chia Ch'i-yün was probably replaced because of his inability to control the rival factional

22 FBIS, July 11, 1977, M-1-M-4.

23 FBIS, Jan. 3, 1977, E-18. The other three provinces were Fukien, Honan, and Kiangsi, none of which are analyzed in this section.

4 FBIS, Nov. 29, 1976, G-6-G-8; Issues and Studies, vol. XIII, No. 6, 1976, pp. 602-605.

25 FBIS, Mar. 8, 1977, J-1—J-5; and FBIS, July 31, 1977, J-1—J-8.