A SURVEY OF CHINA'S MACHINE-BUILDING INDUSTRY

BY JACK CRAIG, JIM LEWEK, AND GORDON COLE

3. Steelfinishing

312

E. Construction, mining, and materials handling machinery

313

Chinese leaders have frequently claimed that the machine-building industry is the key to technological transformation of the national economy. Indeed, the industry forms the foundation of China's military and industrial development-encompassing a broad spectrum of manufacturing trades, ranging from production of ball bearings to ships, locomotives, power-generation equipment, and the like. As outlined in Chairman Hua's report to the Fifth National People's Congress of early 1978 China is launching an ambitious program to revitalize the economy through modernization of agriculture, industry, national defense, and science and technology. The stated goal is to create a modern industrial economy by the year 2000. Much of the burden of achieving this goal will fall on the machinebuilding industry.

This paper provides an overview of the machine-building industry in the People's Republic, its development since 1949, organization, production, technological capabilities and limitations, planned reforms, and pitfalls likely to be encountered. The paper also provides brief descriptions of the main subsectors of the industry, giving their strengths and weaknesses and probable future development.

What conclusions can be drawn from the paper? Briefly, the technical capability of the Chinese machine-building industry, although impressively advanced since 1949, is still far below levels typical of the industrial West. Moreover, the quality of output and the inherent technology of the equipment vary widely from sector to sector.

How is the machine building industry organized and controlled? Most production falls under the jurisdiction of the First Ministry of Machine Building. The industry itself is made up of three types of enterprises: (a) those controlled solely by the central government; (b) those receiving dual supervision from central and local authorities; (c) and those solely under the control of local authorities but acting in accordance with general guidelines laid down by the central government. Administrative control over machine building plants involves a complex sharing of responsibilities among ministries, central and local planning bodies, bureaus and departments, and industrial enterprises.

How productive has China's machine-building industry been? Estimates are subject to a wide margin of error. The gross-value

claims that have been published probably include military hardware as well as producer and consumer durables. Physical output data are available for only a few of the thousands of items produced by China's machine-building industry.

What is the technological capability of China's machine-building industry? The groundwork for the present technological capability was laid by the massive transfer of technology from the U.S.S. R. in the first decade of Communist rule. Products continue to reflect heavy influence of Soviet and East European design typical of the 1950's. Since the withdrawal of Soviet technical assistance, the Chinese have moved ahead from the Soviet base by the exploitation of Western technology through the import of complete plants and equipment, the culling of Western literature, the use of foreign technicians, and the training of Chinese abroad.

What problems have the Chinese recently had in running their machine-building factories? During much of the 1970's the industry suffered the fallout from the sever political factionalism that accompanied the struggle over the succession to Chairman Mao Tse-tung. Factionalism led to erosion of managerial authority, a slackening of factory discipline, massive slowdowns in production at many plants, and sometimes complete work stoppages. The net result of the chaos was poor quality, high costs, excessive consumption of raw materials, and high accident rates.

What broad industrial reforms can be anticipated that would improve performance of the machine-building industry? Vice Premier Teng Hsiao-ping outlined important changes in the "Twenty Points" issued prior to being purged in 1975. Many of his prescriptions for putting industry in general back on its feet have since become national policy, including a tightening of central control over the allocation of labor and raw materials, a new concern for profitability, increased quality standards, and stiffened managerial authority within the plant.

What pitfalls could hamper progress in the machine-building industry? The new emphasis on factory discipline could encounter severe resistance from a labor force accustomed to a leisurely work pace. Reforms cannot be accomplished all at once. For example, the plan to completely reorganize the farm machinery industry within 3 short years almost certainly will fail because of the lack of competent middle level managers and the underdeveloped transportation network. Moreover, China's ability to fully use, copy, or improve on large-scale purchases of advanced technology and equipment assigned to the machine-building industry is seriously limited, partly because of the 10-year gap in the training of high-level scientific researchers and engineers.

II. OVERVIEW OF THE MACHINE-BUILDING INDUSTRY

A. Stages of Development

When the Communists came to power in 1949, China's machinebuilding industry consisted of a few pockets of activity in Shantung, Shanghai, Peking, and Tientsin. These production centers were heavily damaged by the Sino-Japanese War and the civil war that followed.

Moreover, the Japanese-built industrial base in Manchuria was nearly destroyed by the Soviets who removed more than half of the equipment during their brief occupation in 1945. By 1953, most machinebuilding facilities in China had been restored, but their primary function was to repair existing equipment and build simple machines.

1. SOVIET ASSISTANCE DURING THE 1950'S

The core of China's machine-building industry was formed through the massive material and technical assistance provided by the U.S.S.R. and East European countries that began in 1953. During the first 5-year-plan period (1953-57), out of the 166 major Soviet-aid projects in industry, nearly 100 were undertaken in the field of machine building. The U.S.S.R. supplied complete sets of equipment for plants making metallurgical and mining equipment, electric power machinery and equipment, transportation equipment, agricultural machinery, chemical industry equipment, and machine tools.

Many of the remaining projects supplied by the Soviets formed the basis of China's military machine-building industry. In this important category were plants to produce aircraft, naval vessels, electronic equipment, land armaments, and nuclear weapons. Additional agreements with the U.S.S.R. and East European countries in 1958-59, nearly doubled the number of modern industrial plants planned for the machine-building industry.

Orderly development of the machine-building industry became impossible after the Great Leap Forward was launched in 1958. This was an ill-conceived attempt to speed up industrial output by working men and machines at a furious pace. The policy of "walking on two legs"-based on the supposed existence of large unused quantity of labor and materials-encouraged the widespread construction of small, locally controlled, substandard plants. Decentralized planning and control of the small local plants, however, encouraged haphazard location and poor construction, shoddy production, and exaggerated output claims. A serious problem was that small plants diverted scarce raw materials from the modern industrial sector. With the collapse of the Great Leap, most of the local plants were either abandoned or shifted from manufacture of general industrial equipment to the production of agricultural machinery.

2. THE EARLY 1960's

The machine-building industry retrenched with the rest of the economy from 1961-63. Production dropped sharply, capacity stood idle, and the regime pared down investment programs to a narrow range of essential industries. A new emphasis was given to the production of agricultural machinery, equipment for chemical fertilizer plants, and machinery for the petroleum industry. High priority, moreover, was assigned to the military machine-building sector, particularly to electronics and those industries involved in the development of atomic energy, missiles, aircraft, and naval ships. By 1966 the general status of the machine-building industry had improved, production was well above the 1957 level. General improvement can be attributed to increasing imports of machinery and technology from Japan and Western Europe.

3. THE CULTURAL REVOLUTION YEARS

Considerable dislocation in the machine-building industry occurred during the political turbulence of the Cultural Revolution (1966-69). Imports of equipment from the non-Communist world declined and technical exchanges were terminated. Although some components of the military machine-building industry were prohibited by official decree from engaging in factional disputes, production programs in other areas of machine building suffered enormously. The emphasis on factory level research allowed individual plants to improve their basic product design but prevented the industry from progressing smoothly toward the next generation of machinery products.

In spite of the disruptions of the Cultural Revolution, China achieved substantial increases in machine-building capacity during the late 1960's. Under the general slogan of "war preparation" the PRC engaged in a wide-ranging campaign to construct hundredsand possibly thousands of small-, medium-, and large-scale industrial projects throughout its remote interior regions. For example, construction of a major truck manufacturing complex began in the mid1960's in a remote mountainous region northwest of Wuhan in Hupeh Province. This facility is reported to be the largest truck plant in China.

4. THE EARLY 1970's

The scope of the overall construction program was enormous and continued into the early 1970's, after the Cultural Revolution had wound down. As part of the total construction effort, some existing industrial facilities were moved from border and coastal areas and new industrial complexes were started in places less vulnerable to foreign attack. Additional production capacity was achieved by completing construction of many industrial projects originally started under Soviet sponsorship. Major expansion of numerous key industrial facilities added significantly to the country's total machine-building capacity.

Reestablishing orderly economic planning, together with the additions to production capacity during the 1960's led to substantial increases in output during 1969-71. Production of military-related equipment reached peak levels, and electronics emerged as a favored sector among military-industrial planners. The small plant program, which had gained new respectability during the Cultural Revolution, reached boom proportions, while the construction of modern plants gained increased momentum. Self-reliance had become the watchword in the machine-building industry, and new products of indigenous design began to emerge at a growing rate.

Evidence of a major debate between military and civilian planners over machine-building priorities surfaced in mid-1971. The "electronics versus steel" controversy, which signaled the debate, was quickly followed by the Lin Piao affair. Following the death of Lin, production of military armaments plummeted sharply from the peak levels of 1970-71. The marching orders for the industry during the fourth 5-year plan (1971-75) included increased support to agriculture and the basic industries such as mining, petroleum, chemicals, and electric power. Increased emphasis also was given to purchasing large quantities of Western equipment and manufacturing technology.