Communist China's economy since the ‘leap’

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  • Communist Chinas Economy Since the Leap It has never been easy to gain an understanding of

    the Chinese Communist economy because of the lack of reliable data. The difficulty has increased since 1960, when the flow of economic information was drastically curtailed. In fact, there was an almost complete black- out for about two years, in 196 I and 1962. Thus, in order to have an appraisal of the development of the Chinese Communist economy since the Great Leap, we have no choice except to squeeze as much information as we can from the available data, however scattered and incomplete it may be. In doing so, we naturally take the risk of trying to generalize without a fkm sta- tistical foundation.

    Why the Great leap Forward Failed As is well known, the Great Leap Forward was

    launched toward the end of 1957 to remedy a highly unfavorable economic situation: there had been virtu- ally no increase in the production of foodgrains in 1957 (by official estimates) ; urban unemployment and rural underemployment were considerable; Soviet economic aid (in the form of credits) came to an end. The Great Leap was, in the Chinese expression, an attempt to walk on two legs on a large scale in order to speed up economic development. By two legs was meant simultaneous development in industry and agriculture; in heavy and light industries; in centrally and locally managed enterprises; in large, medium and small enter- prises; in modern and native technologies; in centralized leadership and mass participation. Simultaneous devel- opment did not mean development at the same rate, however, for industry was still given priority over agri-

    (Continued from Page 9)

    alongside the call of the PKI Politburo (received by the pro-Peking New Zealand Communist Party and published by its organ), *l that Indonesian Communists should now be ready to lead a protracted armed strug- gle, integrated with the peasantry. Amidst new warn- ings by Suharto, early in March 1967, that remnants of the PKI were plotting once again to seize power, army units wiped out a contingent of Communist ele- merits operating along the border of East and Central Java, led by an aged and widely venerated soothsayer, Mbah (Grandfather) Suro. This operation suggested that, as in the past, the Party was making use of the nativistic cultural substratum in the heart of the Java- nese countryside .82 It also indicated once again the tactical flexibility of the now-underground PKI as it seeks to develop a new united front tactic. Whether this new front tactic will eventually have more success than its predecessors remains to be seen.

    -J. v.d. K.

    *lPeop&s Voice (Auckland), Nov. 16, 1966. *20n Sum, see Antma Daily News Bulletin, March 11, 1967.

    On earlier PKI exploitation of nativistic religious expectations in rural Java, see, e.g., Ruth T. McVey, The Rise of Indonesian Com- munism (Ithaca, NY.: Cornell University Press, 1965)~ pp. 176- 177, 180.

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    culture, heavy over light industries, large over medium and small enterprises, modern over native techniques, central over local enterprises.

    Simultaneous development was deemed feasible de- spite scarcity of capital. The scarce capital was to be used, as previously, primarily for the development of heavy industry; labor was to be the main input for other development. The development strategy was one of large-scale substitution of labor for capital, a massive utilization of the underutilized manpower.

    In terms of Chinese factor endowments, the strategy of the Great Leap seems quite defensible. But the Great Leap years also saw the downgrading of technical ex- pertise, as the Party cadres gained control of production in the name of mass participation and politics takes command, and pushed the campaign so ambitiously and fanatically that many basic technical constraints were neglected. As a result, there was a gross misuse and misallocation of resources. The fanatic adventure of building backyard furnaces that produced steel of little worth, the ill-designed irrigation programs that hindered the regular function of rivers and resulted in alkalinization of soil, and the large-scale application of untested farming techniques that wasted much of farm labor (such as deep ploughing and close planting) are all cases in point.

    As the statistical system, which saw so much im- provement under the State Statistical Bureau during lg52-1g57, virtually collapsed in the Great Leap, the official statistics of the outcome of the Great Leap are of little use. But the picture seems clear. In 1958 both industrial and agricultural output probably rose rather sharply. Industrial output probably continued to grow in 1959 but at a much slower rate. Agricultural output most probably suffered a sharp decline in 1959 despite official claims to the contrary. Few official statistics have been released regarding agricultural and industrial out- put after 1959, but it is no secret that the Chinese Com- munist economy went into a slump and, as a result, there was a fundamental shift in development strategy.

    Chi-ming Hou

    Chi-ming Hou, professor of economics at Colgate University, holds a Ph.D. from Columbia Uni- versity and received his undergraduate training in Fu Jen University of Peiping. He is the author of Foreign Investment and Economic Development in China, 1840-1937 (Cambridge: Harvard Uni- versity Press, 1965).

    Communist Chinas Economy Since the Leap was read at the Conference on Controversies in American Society, held at Pennsylvania State University in November 1966. The paper is the outgrowth of research that Dr. Hou conducted while at the Center for Chinese Studies, University of California, Berkeley, during his tenure of a Brookings Research Professorship, 1965-1966.

    COMMUNIST lh&UIlS

  • A New Scale of Priority: Agriculture Comes First The Chinese Communist leaders must have been as

    confused as they were shocked by the deepening eco- nomic crisis. The Great Leap and the system of rural communes, introduced in the fall of 1958, were sup- posed to bring wonders-they were supposed to enable the country to be completely modernized both in indus- try and agriculture in no more than 15 to 20 years. But the agricultural performance after 1959 gave no support for such an optimistic outlook. While never admitting any blunders or mistakes in fundamental policy, the Chinese Communists quietly abandoned the basic tenets of the Great Leap and the communes as the economic crisis deepened in lgGo and 1961. Prob- ably out of the sheer necessity of survival, a new eco- nomic policy evolved. It called for a new scale of prior- ity of development: agriculture, light industry and heavy industry, in descending order. Industry was to serve agricultural development because it was recog- nized that modem inputs were essential for further agricultural improvement. Investment in industry was to be curtailed in order to concentrate on strengthening the agricultural front.

    The idea of regarding agriculture as the foundation, with industry taking the lead in economic development, was advanced in early 1960 in Li Fu-chuns report on the draft economic plans for lg6o.l It gained momen- tum in the autumn of the year when the harvest turned out to be very poor and a movement of all people to agriculture and foodgrain was brought to a peak throughout the country. In January 1961 the Eighth Plenum of the Eighth Central Committee of the Chinese Communist Party decided that the scale of basic con- struction should be appropriately reduced and light in- dustry developed in order to ease the severe shortage of consumers goods. In December 1961 a secret document (known as Seventy Articles of Industrial Policy) was reportedly issued to the cadres by the Party, requesting that unless special authority was given, all basic con- struction should be suspended, all those enterprises that had been operating regularly at a loss be shut down, and the practice of recruiting labor from rural areas be abandoned for at least three years.2

    Then on March 27, 1962, Premier Chou En-& set forth the 10 tasks for national economy, reaffirming the policy of readjustment (of the pace of development), consolidation (of existing plants), reinforcement (of the weak links), and improvement (of quality) .8 He called for further contraction of basic construction, the send- ing of urban inhabitants and workers to rural areas in order to strengthen the agricultural front, and the de- velopment of the economy in accordance with the new scale of priority-agriculture, light industry and heavy industry, in that order. Since the Ninth Plenum of the Eighth Central Committee investment reportedly has been allowed only in coal mining, timber, chemical fer- tilizer, agricultural machinery and transportation.

    lJen-min jib-pao (hereafter referred to as JMJP), Mar. 31, 1960. ZChoh-ming Li, ea., Industrial Development in Communist China

    (New York: Frederick A. Praeger, 1g64), p. 11. aJMJP, April 17,1g6a.

    Official statements in more recent years indicate that this new economic policy as formulated between 1960 and ig6z has probably continued to be the basic policy of development. At least, there is no evidence to suggest any new departure from this policy. Unfortunately, it is not possible to describe the new policy in quantitative terms such as saving-consumption ratio or the percent- age distribution of investment and output in various sec- tors of the economy.

    This new economic policy represents a sharp reversal of the development policy adopted prior to the Great Leap. In 1952~1957, Communist China followed very closely the Soviet pattern of investment policy; nearly half of total public capital investment was for industry, 15 per cent for transportation and communications. Only 13 per cent was for agriculture, while the re- maining 23 per cent was for all other sectors. About 85 per cent of total capital investment in industry was allocated to heavy industry. Even in 1958-1959, when simultaneous development on all fronts was emphasized, a larger share than ever before (65 per cent) of state investment was for industry, whereas only g per cent went for agriculture. Total investment in light indus- try doubled in 1958 over 1957, but investment in heavy industry increased even faster.s

    Four Transformations Effort to Modernize Agriculture

    There is no doubt that the Chinese Communists have been serious in implementing the new economic policy. There have been concentrated efforts to aid agriculture, especially in what is called four transformations in agriculture, namely, mechanization, electrification, irri- gation and chemical fertilizers. It is reported that in I 964 more than 70 per cent of the 1,800 hsien (coun- ties) had tractor stations; the number of tractors in 1964 was five times as many as in ig57.s In rural areas, total consumption of electric power (much of it used for irrigation purposes) increased by 22 times from 195 7 to 1964. Irrigation facilities in terms of horse- power increased twelvefold. In 1965, nearly gg million mou (mou: roughly 1/S acre) of farm land were irri- gated by mechanized pumps, a twofold increase over ig61.I As compared with 1957, chemical fertilizers supplied by the state more than trebled in 1g64.8

    Other efforts to aid agriculture included the use of more insecticides; there was a reported increase of 64 per cent in 1964 over 1963, and an increase of 47 per cent in 1965 over 1964.~ Attention has also been paid to the use of improved seeding; by 1965 there were special farms to grow improved seeds in almost every Jzsien.O Efforts have also been made to supply agricul-

    It is too early to tell whether this policy may have been dected by the current Proletarian Cultural Revolution.

    SIC, C. Yeh., Soviet and Communist Chinese Irw!u.strializdion Strategies, RAND, May 1965.

    eJMJP, Orr 20, 1964. 7Far East- Economic Review Year Book, 1966, p. 1~; JMJP,

    Oct. ae, ig6i. eJMJP, Dec. 31,1g6& report by Chou En&i. sTsu-ho, No. ah 1966, p. 33. lOIbid.

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  • tural tools (some semim echanized); it is reported that in 1965, a billion small and medium agricultural tools and machines were produced for the rural areas; steel used to manufacture these products totaled one million metric tons. All these statistics may be grossly exag- gerated and have to be used with caution, but they do seem to suggest the emphasis which the Chinese govern- ment has given to agriculture. It may also be noted that in introducing and carrying out the aid-to-agricul- ture measures, special attention has reportedly been paid to the special needs of different localities in order to avoid the uniformity and extremism so characteristic of the Great Leap years.

    Per Capita Foodgrain Production Continues to Decline

    Despite these modernization eff arts, which admittedly are still in the initial stage, the shocking fact is that the level of production of foodgrains achieved in 1957 (that is, 185 million metric tons) was not surpassed until 1964, according to official reports.12 The reported figure for 1965 is 200 million metric tons,la but Western ob- servers in Hong Kong suggest that foodgrain production in 1965 and 1966 was less than in 1964 because of ad- verse weather conditions, the 1964 level being about the same as in 1957. Very little information is available on the output of other agricultural products. Official reports singled out only cotton, tobacco and sugar cane, together with foodgrains, for comparison between 1964 and ig57-the production of all these items in 1964 surpassed the 1957 level. Most probably the level of subsidiary production has increased as compared with 1957, though the precise extent of the increase is not known. If it is true that the current level of foodgrain production is only at the 1957 level, the level of pro- duction must have been very low indeed in 1960 and 1961, inasmuch as there has been a reported increase every year since 1962.~~

    All these figures should of course be read in relation to population data. Chou En-lai has reported an annual population growth rate of 2 per cent for ig60-1g621 and nearly 2.5 per cent for 1963 and 1g64.1a Chou at- tributed the changes in growth rate to changing eco- nomic conditions. Another official report put the pres- ent rate of population increase at 1.8-2.0 per cent. If these figures reflect the real situation, the per capita output of foodgrains has obviously declined.

    Agricultural Crisis Affects Industrial Output The low level of agricultural output must also mean

    a low level of industrial output. For an economy such as the Chinese, agricultural development is essential to any sustained industrial growth. The primary function of agriculture is to feed the people and the labor force;

    Wommunist China Digest, JPRS, 35070, April 18,ig66, p. 41. ZJMJP, Dec. 31,1g64. Whina News Summary No. 117, April ~8, $966, p. I. Iden-min Shou-tse, 1964, p. 6. IEJMJP, Dec. 26, 1963. Wited in Rei-Ching yen-chiu, Vol. 7, No. 7 (July 31, 1964) p.

    51. ITFar Ea.&m Economic Review Year Book 1966, p. 126.

    12

    imports of food in any large quantity simply cannot be supported by available foreign exchange. It also pro- vides raw materials for industry and foreign exchange to import capital goods. In the pre-1957 years agricul- ture supplied 80 per cent of the raw materials needed by the light industries; 80 per cent of the daily necessities of the people; and 75 per cent of total ex- port~.~~ Thus, when there were good harvests in 1952 and 1955, the nonagricultural sector and the general economy experienced greater growth rates in 1953 and 1956. On the other hand, the economy suffered slower growth rates in 1955 and 1957 following poor harvests in 1954 and 1956. Statistically, for the period 1952 to 1957 agricultural output was significantly correlated with industrial output and with the net value added by all nonagricultural sectors when a one-year lag is allowed.

    The agricultural crisis since 1959 has imposed addi- tional burdens on the economy in that China had to use a considerable amount of the already limited foreign exchange (due to decline of exports) to import food. The proportion of foodstuffs (processed and unproc- essed) in total imports, which was never more than 2.5 per cent in 1955-60, increased to 33, 39, and 36 per cent in 1961, 1962 and 1963 respectively. (The total value of imports of foodstuffs reached U.S. $330 million in 1963, while the value of total imports in that year was U.S. $907 million). The total annual value of exports, which amounted to U.S. $1.6-1.8 billion in 1g58-1960 now dropped to the level of around U.S. $1.2 billion in ig6i-ig63.B

    Statistics of industrial production are extremely con- fusing since the Great Leap. It has been officially re- ported that: (I) the gross value of industrial output increased by 66.2 per cent in 1958 and 39.3 per cent in 1959; (2) the gross value of industrial output in- creased by 18.4 per cent in 1g60;20 (3) output of light industry in 1962 surpassed the level achieved in 1957;~ (4) the gross value of total industrial output increased by 15 per cent in 1964 and was well above the 1957 leve1;22 (5) the gross value of total industrial output in 1965 was expected to be I I per cent higher than in ig64.2a

    But the reliability of all these statistics is open to serious question. For instance, it is almost inconceivable that the output of light industry in 1962 could surpass the 1 g5 7 level when agricultural output in 1961 and 1962 was well below the 1957 level. In 1961 and 1962 there must also have been considerable substitution of food crops for industrial crops. For example, it has been reported that for cotton production, there was a 50 per cent increase in 1963 over 1962 and the 1964 level was 37 per cent higher than that of 1963. Yet the 1964 level

    Whi-hua Ching-chi, No. IO, 1957, editorial, p. I. InAlexander Eckstein, Communist Chinas Economic Growth and

    Foreign Trade (New York: McGraw-Hill, 1g66), Chapter 4, =OJMJP, Jan 21, 1961. zlTa-Rung-Pao, Oct. 4,1g64. z*JMJP, Dec. 31, 1964 report by Chou Emlei. 28Ibid.

    coNIIK[JNIsTAFF~

  • is reported to have only surpassed the 1957 level.2* Thus there is little question that the quantity of raw materials which the agricultural sector could supply to light industry in 1962 was substantially below the 1957 level. This shortage of raw materials was not compen- sated for by imports, for much of foreign exchange was used to import food and other commodities; very little was used to import raw materials needed for light industry.

    Withdrawal of Soviet Technical Aid Affects Crisis

    In evaluating the official industrial statistics one has to take into account not only agricultural output but also the withdrawal of Soviet technical aid in mid-1960. Some 1,390 Soviet experts were called back, 257 items of scientific and technical cooperation were discontin- ued, and Soviet supply of equipment and parts was greatly reduced. 26 This certainly caused heavy losses and dislocation in industry, although the exact extent of the damage cannot be ascertained.

    It is of course true that certain industrial production (such as mining, steel, and a host of producers goods) does not directly depend upon agricultural products. It is conceivable that there was a substantial increase in such production even during the worst years for agri- culture. But in view of the policy of entrenchment of basic construction and heavy industry, it is doubtful that the increase in capital goods was so large as to effect a large increase in total industrial output. There is no information on inventories of such important items as coal, iron ore and steel which are so basic to invest- ment. (Actually there is considerable difference in the Western estimates of the post-1957 production of, say, steel.) It is possible that there was a great deal of pro- duction of capital goods which were not put into any use but were simply piled up.

    Given the lack of reliable data, it may perhaps be ventured that total industrial output registered some increase in 1959, and then began to go downward in 1960 as the agricultural crisis deepened. The bottom was probably reached in 1961 or 1962; thereafter, a recov- ery has been under way. It is interesting to note that there are virtually no official industrial output data for I g6 1-1962, whereas some output information is avail- able for some industrial commodities for years since 1963 (although the figures given are largely in terms of percentage increases).

    If no firm judgment can be made regarding the mag- nitude of total industrial output, it is safe to say that important progress has been made on certain industrial production, especially of chemical fertilizers, petroleum and electricity. Probably a better quality and a greater variety have also been achieved for industrial goods in general because of increase in labor supply and the declining capacity to import manufactured products.

    2%~-kung-pao, March 23, 1964, editorial; JMJP, Dec. 31, 1964, report by Chou En-lai.

    *aJMJP, Dec. 4, 1963.

    Is Third Five Year Plan Foredoomed?

    Now the third Five Year Plan has been announced to begin in 1966, after a period when there was really not any five-year plan. The second Five Year Plan, which was supposed to cover 1958-1962, was revised in such a way that it was probably no more than several annual plans. It is even questionable that there has really been any meaningful annual plan since the Great Leap. Very little is known about the third Five Year Plan; it is necessarily risky to speculate on the economic pros- pects in the next few years. Yet the available evidence strongly suggests that the growth rate under the third Five Year Plan would almost certainly be a great deal less than what was achieved during the frst Five Year Plan period (i.e., 1952-1957). According to Communist estimates for 1952-1957, national income grew at an average annual growth rate of g per cent and the gross value of industrial production at 18 per cent. According to Liu and Yehs estimates for the same period, however, the net domestic product (in 1952 prices) grew at an annual average rate of 6 per cent and net value added by factories, mining and utilities at lg.5 per centz8 Thus the economic performance during the first Five Year Plan period was truly impressive. Certainly na- tional income outgrew population by a large margin- the latter increased at an annual average of 2.3 per cent, according to official data.

    Some important economic factors which will confront the Communist leaders in the third Five Year Plan period will be quite unfavorable as compared with ig52- 1957. For one thing, Soviet economic aid (loans and technical assistance), which figured so importantly in 1952-1957 will almost certainly not be forthcoming. Nor does it seem probable that Communist China can expect any large-scale economic aid from other coun- tries in the near future.

    Agricultural Setback Reflects Inherent Difficulties

    But the most unfavorable factor lies in the agricul- tural sector. Available evidence suggests that the agri- cultural setback following the Great Leap was much more than a temporary slump brought about by tem- porary adverse factors. It reflects, rather, some funda- mental difficulties inherent in Chinese agriculture; to remedy these difficulties would require a substantial reallocation of investment funds, which would slow down industrial and economic growth.

    There is no question that a few temporary adverse factors contributed severely to the agricultural crisis. These factors included a planning error, bad weather, he Great Leap, and the communes. Basing their de- cision on the reports of fantastically high yields in 1958, the Communist authorities cut down the sown acreage in 1959, believing in plant less and reap more. When these reports turned out to be false, the leaders hurried

    26Ta-Chung Liu and Rung-Chia Yeh, The Economy of the Chi- nese Mainland National Income and Economic Development 1933- 1959 (Princeton: Princeton University Press, 1965).

    13

  • to reverse their policy, but the damage was already done to the summer harvests of 1959.

    Unprecedented bad weather has been blamed by the Chinese Communists for the poor harvests in ig5g-lg61. And there is much truth in this. The area affected by flood or drought reached 39 per cent of total cultivated land in 1959 and 54 per cent in 1960 and 1961, accord- ing to official estimates. Obviously statistics of this sort have to be used cautiously, for they do not indicate the intensity of damage to the area affected. They may also be deliberately exaggerated in order to minimize policy errors. But other evidence, such as reports of Chinese refugees and Western tourists, leaves no doubt that ad- verse weather conditions were a very important factor contributing to the decline of agricultural output in igsg-1961.

    The Great Leap programs resulted in gross misuse and misallocation of rural labor, and a serious labor shortage for farming occurred as a consequence. Dur- ing lg58-1g6o there was an enormous amount of migra- tion from the countryside to the urban areas, partly to meet the rising demand for industrial labor and partly to escape the newly organized communes. The agricul- tural labor force remained virtually the same from I gj 7 to 1960. But only a little over half of this labor force was used in farming in 1959, because of the Great Leap programs such as water conservation, backyard steel furnaces, etc.l Even that half was not efficiently used, for much labor was wasted especially in deep plough- +g. Anna Louise Strong reported that in some areas ploughing went down as much as six feet!

    But it did not take long before the Communist leaders recognized all this folly. In the fall of 1960 some 20 million persons were reallocated from other lines of work to farming. 28 It was decided that at least 70 per cent of the agricultural labor force was to be used for regular farming; the percentage might go to 80 during the busy seasons. The total agricultural labor force began to increase from 1960 on, partly due to natural increase and partly due to forced migration from urban areas.

    Disruptive Effects of the Commune Experiment The rural communes which were initiated in the

    spring of 1958 may be held partly responsible for the agricultural setback because of their disruptive effects on incentive and management. While the actual organ- ization and operation of rural communes remain to be studied, broadly speaking, for the period from the spring of 1958 to February 1959, the rural communes were organized in such a way that there was much egalitarianism in income distribution and a high degree of concentration in management. All means of production (land, draft animals, farm implements, etc.) were, at least in theory, put under communal ownership. Included were the self-retained land and house sites that had been previously privately owned. The commune was divided into a number of production brigades, which in turn were divided into a number of

    Hung-chi, No. 6, March 16, 1960, article by Tan Chen-lin. ~~Hun&zi, No. 5, March I, 1961, article by Ma Wen-jui.

    production teams. The production brigades were the basic units organizing and directing production. They were also the basic accounting units, but their profits or losses were to be pooled together at the commune level under a unified system. This implied that all the production brigades, rich or poor, would be treated alike for income distribution purposes. Furthermore, the payment system for the commune members was a combination of wages and free supply of food. That is, all members of the commune were entitled to a certain amount of food, free of charge, regardless of how much they participated in production.

    Commune System Retreats to Pre-1957 Setup

    A basic retreat in the rural commune system took place in February 1959. The so-called three-level ownership was established, according to which the production teams were in a large measure the basic decision-making producing units. Under this system, the production brigade became the accounting and dis- tribution unit-members of different production bri- gades would not have the same level of income and consumption if they differed in production resources and productivity. The payment system was still one of combining wages and free supply, but the free supply part was to be reduced in time. (In 1959, it was to be about 30 per cent of total distributable income.) The wage part was now determined by a method which had been employed in the period of the cooperatives. Self- retained land began to be restored to commune mem- bers probably in the fall or winter of 1959.

    The rural communes underwent another drastic re- .treat in November 1961 when the production team became the basic unit of ownership and accounting. Apparently there has been no basic change since then.

    Thus, in the few years from 1958 to the end of 1961 the rural commune system underwent drastic changes or retreats. Roughly from April 1958 to February 1959, the communes were organized on a very radical basis. From early 1959 to November 1961, the commune sys- tem became essentially the same as the advanced agricultural producers cooperatives which prevailed in 1956-57. Since the end of 1961, the commune system has further retreated to the system of elementary or lower-stage agricultural producers cooperatives that prevailed before 1956.

    Our brief discussion of the Great Leap and the rural communes should make it clear that these two factors cannot justifiably be blamed for all the agricultural trouble. Certainly, there are firm grounds to argue that both the Great Leap and the communes had their share in contributing to the failure in agriculture from 1959 to 1961 or 1962. But in the absence of any con- crete evidence, it is hard to believe that the Great Leap, which ended by late 1960, and the radical phase of the commune system, which came to an end in early 1959, could have such a lasting adverse influence as to affect the foodgrain production in 1964 or 1966.

    14 COMMUNIST AFFAIRS

  • Basic Changes Needed to Vitalize Chinese Agriculture

    The fact that the level of foodgrain output in 1964 and in later years remains about the same as in 1957 is something which requires an entirely different ex- planation. Chinese agriculture has long suffered stag- nation in the sense that after the slacks in production are taken up, no significant growth may be expected unless there is fundamental change in technology and production function. It is possible that by 1957 or 1958, whatever slacks there were in agriculture were already largely taken up, and the production possibility curve was already pushed outward nearly as far as possible.

    The Communist strategy of developing agriculture before 1957 was one of agricultural reorganization (from land redistribution, mutual-aid teams, elemen- tary cooperatives to advanced cooperatives). This stra- tegy achieved its purpose in the utilization of labor; there was no technological revolution in agriculture. According to official data, the output of 16 crops which accounted for 93 to 95 per cent of the total crop acreage increased by 18 per cent from 1952 to 1957 (at an aver- age annual growth rate of 3.4 per cent). This increase of output was brought about partly by an increase of sown area (at an average annual rate of 1.7 per cent) and partly by an increase in unit yield (at an average annual rate of 1.8 per cent).?O The increase in sown area was due primarily to an increase in multiple crop- ping; increase in cultivated area played only a minor role. Irrigation, intensive farming and the use of im- proved seeds were probably the most important con- tributing factors to increase of unit yield. The irrigated area increased 63 per cent from 1952 to 1957. The use of chemical fertilizers, tractors and other modern inputs was only nominal. (There was also a shortage of tradi- tional fertilizers and draft animals after 1955.)

    Thus the conclusion is inescapable that whatever in- crease there was in foodgrain production in 1952-1957 was brought about primarily by the intensive use of labor. Land reclamation, multiple cropping and the extension of irrigated area were all basically products of labor. The agricultural labor force increased IO per cent from I 952 to 1957, but it is always the Commu-

    Walculated from official data given in Y. C. Yin, Agricultural Reorganization and Crop Production in Mainland China, lgsz- 957.p a paper read at the Inaugural Meeting of Asian Studies on the Pacific Coast, June 16-18, 1966, San Francisco State College, San Francisco, California.

    nists claim that agricultural collectivization will result in better use of labor through division of labor or econ- omies of scale as the operating unit becomes larger.

    If our above analysis of the sources of agricultural growth in lg52-1g57 is correct, the implications are fair- ly obvious. After all, the ancient law of diminishing re- turns is still something we have to reckon with. The fact that the current level of foodgrain production is about the same as in 1957 strongly suggests that the marginal productivity of farm labor has probably ap- proached zero. Unless some new agricultural technol- ogy and inputs are introduced, such as large use of chemical fertilizers, large-scale development of irriga- tion and control of flood and drought, the current low level of agricultural production will probably continue. It is interesting to note that some Communist cadres have expressed the opinion that agricultural output may have been pushed to the ceiling under existing condi- tions. The notion that given existing technology, there is a ceiling to agricultural production was already voiced some 30 years ago by J. L. Buck, author of the invaluable Lund Utilization in China, published in 1937. In this context, it becomes quite understandable why the Chinese Communists have recently placed so much emphasis on the four transformations in agri- culture, as noted earlier.

    But it is very costly to introduce modern inputs on any large scale, especially if one considers the need to expand related facilities such as transportation, educa- tion, etc. The heart of the problem is not, however, simply that agricultural development requires indus- trial development. The fact is that sustained rapid industrial development is not possible within the frame- work of a stagnant agricultural sector. It is precisely because of this reliance of industrial growth on agricul- tural growth that the Chinese economy finds itself in a difficult circle. The dwindling agricultural surplus (as implied in agricultural output and population data), together with the lack of foreign assistance, can hardly support a rapid industrial growth. Yet there is an in- creasing reliance upon industry for new sources of agricultural inputs. Thus, the task of economic develp- ment under the third Five Year Plan will undoubtedly be much more difficult than under the first Five Year Plan. Little wonder that the Communist authorities now talk about economic modernization not in terms of 15 or 20 years, as they used to, but in terms of scores of years.-C.M.H.

    V 1 JANUARY-FEBRUARY 15