Petroleum Industry charged mainly with policy formulation. A similar ministerial-corporate structure also may be the next step in the thoroughgoing reorganization of the agricultural machinery industry that has been called for by State Planning Commission Chief Yü Ch'iu-li. Corporations had been set up in these and several other industries in 1964-65 but were later abolished after condemnation by radicals as capitalist "monopoly trusts.

Although details are sketchy, the corporate idea seems to have two rationales. As described in 1964-65, the corporations, and the enterprises under their control, were to be relatively free from interference by local political authorities; especially in matters of policy, they were to be accountable only to the central authorities in Peking. In addition, such enterprises would be "specialized" rather than "self-sufficient" (that is., integrated), thereby reducing redundancy in organization, personnel, and fixed assets. 52a

Another sign that pre-Cultural Revolution organizations are being reestablished is the reappearance of the 6 great regions into which China's 29 provinces had been grouped for planning purposes. While little has been disclosed about how this regional framework operated in the past, oblique references by Yü Ch'iu-li and Hua Kuofeng to a "regional economic system in each of the six major regions" suggests that they have been revived to facilitate long-term planning and to centralize responsibility.53

B. Enterprise Management

There are also some enterprises whose ideological and political work have been fainthearted and flabby, management chaotic, labor productivity low, quality of products inferior, losses great, costs high, and accidents numerous, inflicting serious losses on the state and the people. These enterprises must have their enterprise management rectified and their rules and systems tightened up."

In an attempt to hasten the restoration of economic stability, the new government has called for the abolition of factory revolutionary committees enterprise management bodies formed during the Cultural Revolution." These bodies-normally composed of representatives of old party cadres, young revolutionaries, and the PLAhave been a source of disruption in industrial management and planning over the past decade. Day-to-day control of operations is being returned to seasoned managers, each with sole responsibility for his component. Along with this elimination of management by committee is a concerted effort to restore those systems (such as financial and quality control, and adherence to materials consumption norms) needed for effective management.56 These measures, along with improved labor discipline, are intended to be the major sources of production gains during 1978-80.57

Of perhaps more far-reaching consequence are reports that Peking is studying managerial techniques in Yugoslavia and advanced in

$2 Current Scene vol. VI, No. 17, 1968, ibid., No. 22, 1968.

At the national farm mechanization conference in early 1977, Yi Ch'iu-li unveiled plans to reorganize the farm machinery industry, with "general large-scale" plants and "general small-scale" plants to be replaced by "large-scale specialized" production facilities. One of the experiences cited at the conference was how local authorities in Ch'ang-chou, by combining individual gearmaking equipment from seven tractor plants into one large plant and adopting more up-to-date techniques, were able to double the rate of production in 6 months. See FBIS, Jan. 31, 1978. E-14-E-16.

3FBIS, May 9, 1977, E-19; and Peking Review, No. 10, 1978, p. 19.

"Twenty Points," pp. 96-97.

See Hua Kuo-feng's speech in Peking Review, No. 10, 1978, pp. 31-32.

See the State Council circular reported in FBIS, Dec. 13, 1977, E-1, and for further details, the remarks of Yu Ch'iu-li in FBIS, May 9, 1977, E-21ff.

$7 See Hua's speech in Peking Review, No. 10, 1978, p. 22.

dustrial nations.58 The particular aspects of Yugoslavia's unique socialist system that most interest the Chinese are not yet clear; in any event, Belgrade has experienced many of the problems that Peking must face in order to balance centralizing and decentralizing forces. In Japan, visiting Chinese delegations are asking questions that span the entire spectrum of industrial practice-for example: How much iron ore under optimal conditions is required per unit of steel output? How are the skills of craftsmen nurtured? What scheme of wages and premiums best motivates workers?

C. Wages and Incentives

Egalitarianism will not work now, nor wiil it work in the future. "From each according to his ability, to each according to his work; he who does not work, neither shall he eat" is a socialist principle. At the present stage, it is basically compatible with the requirements of productivity development, and thus must be resolutely carried out. Equal distribution without regard to intensity of labor performed and to different degrees of ability and contribution will be detrimental to mobilization of the socialist initiative of the broad masses.59

Peking's success in bolstering economic growth during the remainder of the Fifth 5-Year Plan period will depend heavily on its ability to improve work incentives and boost labor productivity. When the present government took office in October 1976, it faced a disgruntled work force, which since 1974 had increasingly resorted to slowdowns, absenteeism, and strikes to protest eroding living standards and the inability of government to reach agreement on wage increases. One year later, with low morale and low productivity still serious problems, the new leadership announced pay increases for three-fifths of the urban labor force.60 Peking carefully emphasized that the wage increase was made possible by the improving economic situation, but everyone realized that the move was intended to buy time until a consensus could be built on more comprehensive measures to raise living standards.

The pay hike probably has mollified workers to some extent and reduced absenteeism, but troublesome labor problems continue.61 The wage increase-amounting to 10 to 15 percent for the lowest paid workers and 10 percent overall-is probably regarded by many as token.

Given the magnitude of worker discontent, nothing short of a thorough wage reform, with revised pay scales and provisions for regular promotions and more pay for more work, is likely to halt industrial strife. This was specifically recognized in the "Twenty Points," which repudiated excessive egalitarianism in wage policy and cited the need to (a) build more dormitories for workers; (b) improve the operation of mess halls, nurseries, and medical services; (c) improve the organization of spare-time educational, cultural, and recreational activities; and (d) solve the problem of husbands and wives working in separate places for long periods. 62

Press commentary in recent months leaves no doubt that production bonuses and piece rates (abolished in the late 1960s amid Cultural Revolution condemnation of material incentives) will be readopted.63

The Washington Post, Apr. 3, 1978, p. A-14; “JMJP," Feb. 23, 1978, p. 5; and FBIS, Feb. 24, 1978, A11-A15. p. 108.

59 "Twenty Points,"

69 Peking Review, No. 49, 1977, p. 3.

See, for example, the report of work stoppages in Wuhan during January-February, 1977, in The Economist, Dec. 31, 1977, p. 15.

62 "Twenty Points," pp. 109–10.

83 See, for example, the series of articles in Kuang-ming jih-pao, Nov. 21, 1977, p. 3, reported in FBIS, Dec. 2, 1977, E13-E18.

Significantly, the favorable effect of bonuses and piece rates on labor productivity has been cited as a major argument for their revival. Approval of a reform package that meets most of the demands of urban workers is no guarantee that labor problems will not reemerge. Until growth in agriculture accelerates and problems in consumer goods production are ironed out, gains in consumption will remain small. Previous administrations also have assigned high priorities to both agriculture and light industry. Agricultural progress has been slow, however, and the commitment to expand production of consumer goods sometimes has been subordinated in a bureaucracy traditionally geared to expanding output of producer goods.

64

D. Science and Technology

Serious sabotage by the gang of four wrought havoc with China's science and education. Large numbers of universities, colleges, and scientific research institutes were disbanded . . . And basic scientific and theoretical research in particular has been virtually done away with. The quality of education has declined sharply . . . Various fields of work are keenly feeling the shortage of successors for scientific and technical endeavors. Science and education are lagging so far behind that they are seriously hindering the realization of the four modernizations.65 66

Characterizing science and technology as the "key" to its modernization efforts, Peking began early to repair the damage done to education and research by the Cultural Revolution. Meeting the human capital requirements of a modernization program would have been difficult under the best of circumstances; now, the "crisis" 67 in education and science is perhaps the major obstacle to the fulfillment of China's ambitious goals.

For the past 11⁄2 years, the new leadership has been deciding precisely what directions its science policy should take. Two major planning conferences were held in late 1977 and early 1978-one for natural sciences, the other for more general scientific and technical matters.68

69

These efforts culminated in the national science conference, held in March 1978. There, with much fanfare and a speech by Vice Premier Teng Hsiao-p'ing, a draft plan-"Outline Plan for the Development of Science and Technology, 1978-85"-was presented. The plan is broad in scope, covering everything from very basic considerations on education to foreign training for Chinese scientists and the general areas of research to be tackled during the next 8 years. Fang I in an earlier speech, had announced that the tentative plan was to concentrate research work "on a number of key problems in industry, agriculture, and national defense." 70 In his discussion of the outline plan at the recent conference, Fang elaborated on those key problems; he focused on eight areas of research, three of which apply directly to industry energy, materials, and computers. Touching in turn upon oil, coal, and electric power-all of which are priority concerns-Fang also brought up the need to explore new sources of energy, mentioning first the need to step up research on atomic energy. In materials

"Problems in light industry have been described as "acute"; see the article by the theoretical group of the Ministry of Light Industry in JMJP, Oct. 28, 1977, p. 2, reported in FBIS, Nov. 8, 1977, E15.

65 Vice Premier Fang I in a speech to the Chinese People's Political Consultative Conference, December 1977. See FBI8, Dec. 30, 1977, E-4.

Fang I is also a Politburo member, vice president of the Academy of Sciences, and minister in charge of the State Scientific and Technological Commission.

7 FBIS, Aug. 6, 1976, E-5.

FBIS, Mar. 29, 1978, E-10.
Ibid.

70 FBIS, Dec. 30, 1977, E-8.

27-427 O-79-19

research, he cited metallurgy, holding up the needs of the steel industry, in particular the beneficiation of hematite, as an item of top priority; Fang went on to bring up a number of nonferrous metals industries where research is needed to solve a number of technical problems. His discussion of research on computers simply noted the large number of areas where computers are valuable tools and declared Peking's intentions to build a “fair-sized" computer industry by 1985.

The new leadership is keenly aware of the importance of scientifictechnical work to China's modernization and views most post-CulturalRevolution reforms in education and research as impediments to progress. More traditional institutions, they believe, will better serve China's current needs. Despite added spending on science and technology, shortages of research personnel and educators will persist for some time. The recognition that this is so is reflected in the careful attention to the needs of agriculture, industry, and national defense over the next 8 years and the concentration of scientific resources on a limited number of projects with a reasonable possibility of quick payoffs.

E. Investment

The state plans to build or complete 120 large-scale projects, including 10 iron and steel complexes, 9 nonferrous metal complexes, 3 coal mines, 10 oil and gas fields, 30 power stations, 6 new trunk railways, and 5 key harbors. The completion of these projects added to the existing industrial foundation will provide China with 14 fairly strong and fairly rationally located industrial bases.71

In his February 1978, report to the National People's Congress, Hua Kuo-feng described the massive investment program that will be required to fulfill the new 10-year economic plan. He said that as much will have to be budgeted for capital construction during 1978-85 as was spent during the previous 28 years.72

Little more is known of Peking's industrial investment plans; yet priorities clearly are being centered on attaining a better balance and a substantially higher level of modernization in the industrial sector. To assist in achieving these goals, China's leaders now envisage a substantial role for imported industrial equipment and technology. The important contribution expected of foreign trade can be seen in statements by top Chinese leaders, in articles in the official press, and in the recent Sino-Japanese long-term trade agreement.

APPENDIX A. PROVINCIAL POLITICAL STABILITY METHODOLOGY

The methodology described in this appendix was used to compile the provincial political stability index that is presented in Section III, above. Although only 19 provinces were analyzed in Section III, all 29 of China's provinces are ranked here. The rank was based on four political criteria.

First, the provincial CCP leadership (all Party secretaries from first through deputy and all standing committee members) of each provincial CCP committee was rated using as measures of political stability such criteria as length of time in office; occurrence of purges, demotions, and transfers; and reports of official and unofficial criticism.

Second, each ranking Party secretary was assigned to one of six categories based on his disposition following the purge of the "gang of four." The categories (listed in ascending order of probable negative impact on provincial stability) are: (1) retention in place, (2) promotion in place; (3) transfer but no demotion; (4) transfer and promotion; (5) transfer and demotion; and (6) purge. After each ranking secretary was categorized, political reports and the provincial media were

71 Hua Kuo-feng, "Report on the Work of the Government," Peking Review, No. 10, 1978, pp. 22-23. 72 Ibid., p. 19.

perused for statements that charged the ranking secretary reuospectively with fomenting political factionalism and disorder during the mid-1970's. If the charges were consistent with our analysis of political developments in the province concerned, then the province was given a negative score.

Third, each province that had been the subject of a Central Directive-which is an authoritative, internal communication of the Party Central Committee that details Peking's concern with a particular problem or event-was given a negative score if the Central Directive dealt with a problem that affected the political stability of the province or a major portion of the province.

Fourth, each province was scored according to the relative degree of political stability at its local levels. The analysis of the localities is crucial for any index of provincial political stability during the mid-1970s not only because the local levels were the sites of unrest among factory and railroad workers but also because they were the areas where political factionalism was most likely to have had a serious impact on the industrial production. The scores were based on an analysis of the Chinese national, provincial, and local media; of the relevant sections of the forthcoming Provincial Handbook of China," and of reporting on Chinese internal politics released by such sources as the Hong Kong press, Agence France Presse and Reuters.

After each province's scores in the four categories were tallied, the 29 provinces were then ranked in descending order of political stability. Although the ranking of the provinces reflects subjective judgments, the fact that each province has been scored systematically in four areas prevents the methodology from being arbitrary. To facilitate comparison of our ranking with the rankings for two earlier periods prepared by Frederick C. Teiwes," we have also classified the 29 provinces according to his four "stability categories." The categories are: I (highly stable), II (basically stable), III (variable), and IV (unstable). Our rankings are presented in Table A-1 and compared with those of Teiwes.

1 Frederick C. Teiwes, "Provincial Politics in China: Themes and Variations," in John M. H. Lindbeck, ed., China: Management of a Revolutionary Society, Seattle, 1977, p. 152.

* Frederick C. Teiwes, Provincial Leadership in China: The Cultural Revolution and Its Aftermath, Ithaca, N.Y. 1974, p. 131. These provinces were not analyzed in sec. III because GVIO data were not available for each of the years 1974-77

"Edwin A. Winckler, ed., Provincial Handbook of China, Standford, forthcoming. This paper has greatly benefitted from many lengthy and rewarding discussions with the editor and many of the chapter writers. 74 "Provincial Politics in China: Themes and Variations," in John M. H. Lindbeck, ed., China: Manage ment of a Revolutionary Society, Seattle, 1971, pp. 150-153; Provincial Leadership in China: The Cultural Revolution and its Aftermath Ithaca, N.Y., 1974, pp. 130–136.