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China Index

The shifts in economic policy typical of the People's Republic since 1949 have strongly affected industrial production (see _____________, ch. 5). In the recovery period from 1949 to 1952, industrial output more than doubled as plants were repaired and employment rose. The First Five-Year Plan (1953-57) concentrated on constructing plants and equipment for heavy industry, much of it with Soviet assistance. The machinery, iron and steel, and mining industries all built their foundations in this period. The increases in productive capacity resulted in a second doubling of output.

The Great Leap Forward (1958-60, see Glossary) saw production surge by 45 percent in 1958 as new plants went into operation, facilities operated beyond capacity, and great numbers of small local plants were established. But the overambitious plan to revamp China's economy soon encountered problems of misallocation and overextension of resources. The demands of the Great Leap left the work force physically exhausted. As the overburdened economy began to collapse, growth fell to 22 percent in 1959 and 4 percent in 1960. Output dropped precipitously in 1961 because of the earlier withdrawal of Soviet technicians, misallocation of resources, and a serious food shortage (see The 1950s , ch. 6). In 1962, with the restoration of planning and coordination, production began to recover. Industrial priorities were transferred from production of industrial goods to agricultural inputs and consumer goods. By 1965 most sectors of industry had regained their 1957 production levels.

In the early stages of the Cultural Revolution (1966-76, see Glossary), production declined when civil disturbances disrupted factories and transport in the big industrial cities. In 1967 output fell, and it remained below the 1966 level in 1968. After order was restored, production recovered in 1969 and grew by 18 percent in 1970. With resumption of growth and the beginning of the Fourth Five-Year Plan (1971-75), output grew by over 10 percent in 1971 and 1972, and by 13 percent in 1973. A wide-ranging program of investment in plants and equipment, including foreign imports, raised industrial capacity. Throughout the 1970s thousands of new, small-scale plants added significantly to levels of production, especially in coal, chemical fertilizer, cement, and electricity, although there were some setbacks. In the mid-1970s the influence of the Gang of Four (see Glossary) and disruption by the succession struggle again reduced industrial output. Political activities in factories and uncertainty by managers and planners caused growth to fall to 4.4 percent in 1974. Growth recovered to 10.3 percent in 1975 but fell to zero in 1976 in the uncertainty surrounding the deaths of Mao Zedong and Zhou Enlai, the second fall of Deng Xiaoping, and the destruction caused by the Tangshan earthquake (see End of the Era of Mao Zedong , ch. 1).

In 1977 and 1978 the Four Modernizations effort (see Glossary) began in earnest. Growth reached 14 percent in 1977 when political stability was restored and plants resumed full operation. The high growth rate in 1977 and 1978 caused a serious overheating of the economy, however. At the end of 1978, the leadership introduced a comprehensive economic reform. In 1979 the economy entered a period of readjustment, emphasizing a slower, more rational rate of growth. Policy stressed development of light industry and gave priority to the textile and consumer industries in supplying raw and unfinished materials, power, fuel, and finances. Capital investment in light industry increased from 5.4 percent in 1978 to about 8 percent in 1980. Between 1978 and 1981 the proportion of light industry in gross industrial output value increased by about 9 percent. The rate of capital construction decreased, and the government initiated a major drive to correct imbalances in the economy by gearing production to consumer needs and improving efficiency.

In 1983 the government took measures to economize on fuel, energy, raw materials, and working capital. The policy experimentally granted enterprises more autonomy. It introduced new types of contracts permitting limited competition among enterprises serving the same markets. The government began to allow market forces to determine production. At the Third Plenum of the Twelfth Central Committee of the Chinese Communist Party (CCP), in October 1984, the party officially reiterated its commitment to reform of the urban economy, signalling a high priority for industrial modernization.

The Seventh Five-Year Plan (1986-90) called for greater responsiveness to consumer demand, increased efficiency, and a further assimilation of modern technology. The plan sought to accelerate development of the energy and raw-materials industries and control growth of manufacturing industries, making the two sectors develop more proportionately. Development of the transportation and communications sectors received high priority, and plans called for expanding the building industry. The leadership hoped to speed development of tertiary industry, such as restaurants and small shops, to meet consumer needs.

Data as of July 1987

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