COMPARISON OF THE FIRST FIVE YEAR PLANS OF COMMUNIST CHINA AND THE USSR

• Document Type: CREST
• Collection: General CIA Records
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• Document Release Date: July 1, 2013
• Sequence Number: 2
• Publication Date: June 1, 1959
• Content Type: REPORT

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CONFIDENTIAL
ECONOMIC INTELLIGENCE REPORT
N? 3
COMPARISON OF THE FIRST FIVE YEAR PLANS
OF COMMUNIST CHINA AND THE USSR
CIA/RR 59-20
June 1959
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
CONFIDENTIAL
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WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
0
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ECONOMIC INTELLIGENCE REPORT
COMPARISON OF THE FIRST FIVE YEAR PLANS
OF COMMUNIST CHINA AND 111h USSR
CIA/RR 59-20
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
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CONTENTS
Page
Summary and Conclusions 1
I. Introduction 5
II. Situation at the Beginning of the First Five Year Plans
of Communist China and the USSR 6
A. Historical Background 6
B. Structure of the Two Economies at the Beginning of
Their Respective Five Year Plans 7
C. Levels of Output 7
1. Consumer Goods and Services 7
2. Industrial Base 10
D.
Occupational Distribution of the Labor Force and
Productivity
10
III.
Trends in Production During the Two Five Year Plans .
14
A.
Agriculture
16
B.
Industry
16
C.
Trends in Other Sectors
19
IV.
Economic Policies
19
A.
Learning from the USSR
19
B.
Socialization Policies
20
C.
Consumption and Saving
22
D.
Allocations of State Investment
24
E.
Investment in Relation to Output
26
F.
Agricultural Development Policy
28
G.
Labor Policy and Technology
29
1. Occupational Distribution of the Labor Force
30
2. Productivity
31
3. Investment and Labor Force During the Two Five
Year Plans
31
H. Foreign Economic Trade Policies During the Two Five
Year Plans 34
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V. Prospects for Communist China in the Light of Soviet
Experience During the Soviet First and Second Five
Year Plans
Page
36
Tables
1. Gross National Product, by Sector of Origin, of Commu-
nist China, 1952 and 1957, and of the USSR, 1928 . . . . 8
2. First Five Year Plans, Communist China and the USSR:
9
Production of Selected Consumer Goods
3. First Five Year Plans, Communist China and the USSR:
Production of Selected Producer Goods and Performance
in Transportation 11
it. First Five Year Plans, Communist China and the USSR:
Population and Nonagricultural Labor Force . . . . . . ? 13
5. First Five Year Plans, Communist China and the USSR:
Wage and Salary Earners 15
6. First Five Year Plans, Communist China and the USSR:
Production of Primary Energy and Steel ..... . . ^ 18
7. First Five Year Plans, Communist China and the USSR:
Allocations of Gross National Product, by End Use, in
Current Prices 23
8. First Five Year Plans, Communist China and the USSR:
Capital Investment, in Current Prices 25
9. Communist China and the USSR: Comparison of Investment
with Income Originating, by Economic Sector 27
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10. First Five Year Plans, Communist China and the USSR:
Per Capita Production of Primary Energy for Selected
Segments of the Population
Page
32
11. First Five Year Plans, Communist China and the USSR:
Foreign Trade 35
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COMPARISON OF THE FIRST FIVE YEAR PLANS
OF COMMUNIST CHINA AND THE USSR*
Summary and Conclusions
In 1952, Communist China embarked on a 5-year economic plan in
more or less open imitation of the Five Year Plans of the USSR. In ?
its political structure and ideology, Communist China was a carbon
copy of the USSR. The broad objective of the Chinese First Five Year
Plan (1953-57), as well as of succeeding plans, was identical with
that of the Soviet First Five Year Plan (1928-32) -- namely, rapid
industrialization with special emphasis on heavy industry. These
broad similarities invite a comparison of the performance under the
First Five Year Plans of the two countries.
Over-all output in China in the period 1952-57 grew at an average
annual rate of about 7 percent -- as fast as, or possibly even faster
than, output in the USSR in 1928-32. The growth of China's output
was, however, much better balanced, for the reason that not only heavy
industry but also light industry and agriculture expanded, whereas in ?
the USSR agriculture declined seriously and light industry failed to
expand. The Chinese economy accomplished this growth in output, which
was comparable to growth in the Soviet First Five Year Plan, with a
relatively smaller input of investment and with a great deal less dis-
ruption and suffering on the part of the population. The general
standard of living even of urban workers declined in the USSR during
this period, but in China the standard of living of both the agricul-
tural and nonagricultural population rose. On the Whole, the Chinese
performance under the First Five Year Plan was considerably smoother
and more successful than that of the USSR.
This apparently superior performance by the Chinese was due in
part to the nature of the problem confronting them at the outset of
their First Five Year Plan. To an important degree, the immediate
task was one of effective recovery and restoration after long years
of disruption due to civil war and involved reconstruction of damaged
productive facilities already in existence. The Soviet economy in
1928, on the contrary, had already fully recovered from war and civil
war in the preceding period of the "new economic plan" (NEP).
* The estimates and conclusions in this report represent the best
judgment of this Office as of 1 February 1959.
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The second and perhaps even more important explanation of the
Chinese success was their advantage of being able to learn from the
experience of the USSR and thereby to avoid some of the grosser
Soviet mistakes. The assistance of a large number of Soviet advisers
in all aspects of economic activity was a key factor in this effort.
The very fact that the Chinese were able to initiate a Five Year Plan
in 1953 and draw up a comprehensive Plan in 1955, only 5 years after
acquiring full political control over China, was possible because the
USSR had painfully pioneered the concept and the machinery of central
planning and direction of a socialist economy. The Chinese were able
to adopt the administrative structure of the industrial ministries,
which was not fully developed in the USSR until the Second Five Year
Plan (1933-37). Fiscal and monetary policies were likewise borrowed
in large part from the USSR, with such success that the Chinese had
relatively insignificant price inflation during the period. The USSR
suffered very rapid and disruptive inflation both during the First and
during the Second Five Year Plan.
The most important lesson learned, howeVer, was from the catas-
trophic socialization of Soviet agriculture. Taking care to prevent
a fall in peasant income, the Chinese were able to socialize agricul-
ture almost painlessly and with only minor disruptions. Relying on
the organization of joint state-private enterprises, the Chinese Com-
munists proceeded to bring nearly all industry and trade under state
control very rapidly While permitting greater use of the "capitalist"
class in the process. The pace of socialization proceeded so rapidly
that it more than made up for the much larger degree of state control
over industry and commerce that already existed in the USSR before
the Soviet First Five Year Plan began.
Not only Chinese economic administrative machinery but also spe- -
cific economic policies were a close imitation of recent Soviet prac-
tice. Trade policy) like that of the USSR, was to export raw mate-
rials in exchange for capital goods not available domestically but
otherwise to avoid dependence on foreign sources of supply. The pat-
tern of investment allocation, like that of the USSR, was to give out-
standing priority to heavy industry. The Chinese initially set out to
borrow Soviet industrial technology almost without modification. Given
the close political and ideological ties between the two countries and
the substantial Soviet economic and technological aid, this initial
limitation was to be expected and contributed substantially to the suc-
cessful launching by the Chinese of a centrally planned socialist
economy.
An additional factor of some significance was that imports of ma-
chinery and equipment and foreign credit,- especially from the USSR;
were considerably larger relative to total- investment in China than
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in the USSR. Although Soviet credits as a percentage of Chinese im-
ports were not as high as the percentage of Soviet imports supported
by credits, the foreign trade of Communist China was more important
to its economy, and with its initial level of production of investment
goods China relied more heavily on imports, particularly guaranteed de-
liveries from the USSR, to carry out its investment program.
There were, however, certain differences in economic policies due
to differences in economic resources in the two countries and also
due to efforts aimed at avoiding pitfalls encountered by the USSR
during its First Five Year Plan. The USSR followed a pattern of
agricultural investment designed to raise the productivity of the
farm population through mechanization of agriculture and to encourage
wholesale migration of labor out of agriculture throughout the first
three Five Year Plans. Not until 1953 did the Soviet planners give
a high priority to increasing agricultural production. During the
Soviet First Five Year Plan the migration of the rural population to
the cities was more rapid than the ability of industry to absorb and
train the additional workers.
The Chinese Communists already had much larger manpower resources
in both the agricultural and the nonagricultural population. With an
ample labor force for the mechanization of industry, release of labor
has not been a feature of agricultural investment as it was in the USSR.
Instead, the Chinese have directed investment into irrigation, water
conservation, and, most recently, fertilizer production with the pri-
mary objective of raising output through more traditional labor-in-
tensive measures. The Chinese also kept the increase in the labor
force in industry and other nonagricultural sectors to a minimum.
This factor, together with large-scale investment, permitted substan-
tial increases in productivity. The low standard of living, especially
of diet) and the rapid increase in the Chinese population led the
Chinese to give concentrated attention to the problem of raising agri-
cultural output, and the Chinese have allocated increasing priority
to this purpose, a priority not given by the USSR until its Fifth
Five Year Plan (1951-55).
In addition to the divergence in agriculture, where the differ-
ences in resources between the two countries are substantial, by the
end of the First Five Year Plan the Chinese showed other signs of
independent initiative and originality. A second policy innovation,
which appeared first in 1957, was an increasing emphasis on small-
scale plants, representing a dramatic departure from the Soviet prac-
tice of building large-scale, capital-intensive, labor-saving plants.
Small-scale plants are entirely appropriate, however, for China's
cheap-labor resources and scarcity of capital. Communist China has
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also adopted the latest administrative development of the USSR --
decentralization. The Chinese seem, however, to be carrying it much
further, in fact, than the USSR has done, transferring large parts
of industries to local control.
The third policy innovation, which appeared in 1958, is the in-
troduction of communes combining agricultural, local handicraft,
and supply and marketing functions into one comprehensive economic
organization at the township level. The political and economic
ramifications of this new form of organization cannot be evaluated
at this time.
This tendency of the Chinese to develop original approaches and
policies of their own along with adopting and modifying the latest
Soviet innovations makes forecasting Chinese future developments on
the basis of Soviet developments of two or three decades ago a
hazardous and uncertain business.
Growth in the total output during the Soviet Second Five Year Plan
was much more rapid than during the First Five Year Plan. Some of the
factors which brought this about, however, do not apply to China's
Second Five Year Plan. Soviet agriculture rebounded from the drastic
declines in output during the First Five Year Plan and by 1937 was well
above 1928. The increase in agricultural raw materials permitted a
rapid increase in light industry. In heavy industry the large invest-
ment for expansion during the First Five Year Plan came into full pro-
duction during the Second. The large numbers of inexperienced workers
added during the First Five Year Plan had by the Second become reason-
ably well trained and efficient. These factors combined to produce
a much more rapid growth in Soviet heavy industry during the Second
Five Year Plan than during the preceding 5 years. In contrast, China's
performance under the First Five Year Plan and Chinese plans (as out-
lined in 1956 and 1957) for the Second would indicate for the latter
a rate of increase for agriculture only slightly higher than in the
preceding period and a growth for industry no higher and probably
somewhat lower than during the First Five Year Plan.
On the other hand, new developments in China, without precedent
in either China or the USSR, have completely outdated the rate of .
economic development set in the proposals for the Second Five Year
Plan. The "leap forward" movement, operating through the new com-
mune system or organization, is aimed at mobilizing the vast rural
Chinese labor force for an impressive program of investment in agri-
culture and small-scale, local industry. Because these innovations
are well calculated to take advantage of China's abundant manpower
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and because natural resources for both industrial and agricultural
development are adequate, China's rate of economic growth during the
Second Five Year Plan may very well equal or exceed the growth of
the USSR during its Second Five Year Plan.
The most important question appears to be social and political
rather than economic -- whether the organization of the population
into communes will succeed. In any event) Communist China will
present a strong contrast to the long-term experience of the USSR,
where industry was developed at the expense of, and in spite of
failures in) Soviet agriculture.
I. Introduction.
The initiation of the Chinese First Five Year Plan in 1952 had
the appearance of a restaging of a drama that had been first acted
out by the Soviet Communists over the period 1928-32. Both govern-
ments were Communist Party dictatorships with virtually identical
ideology. Each had the broad objective of maximizing the power of
the state. As in the USSR, the Chinese proceeded to socialize the
entire economy quickly and adopted the goal of rapid industrializa-
tion with highest priority to heavy industry. The Chinese borrowed
wholesale from the Soviet administrative organization and techniques.
of planning.
Along with the similarities, there were ?also radical differences
between the two countries, primarily in resource endowment and start-
ing point or stage of development. The purpose of this report is to
compare the results under the First Five Year Plans in the two coun-
tries to see whether the interpretation of these results in light.of
both the similarities and the differences between the countries sheds
any light on China's prospects for the future.
Problems of methodology in a comparison of this kind are many.
International comparison at best is difficult, but an international
comparison of two countries during different time periods presents
an even more difficult problem. The problem is further complicated
by paucity of data available to support such a comparison. Only
recently have official data been available on many sectors of the
Chinese economy and, particularly in the early years of the Chinese
Communist First Five Year Plan, the coverage and reliability of Com-
munist statistics, even when available, are inadequate. Official?
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statistics are more complete for the First Five Year Plan of the USSR,
but drastic price changes occurred and many of the official statistics
are confusing and in some areas clearly inconsistent with other Soviet
data.
In view of these limitations, this report attempts to concentrate
on the types of conclusions that will hold in spite of wide margins
of error in the data being used. When figures are given, they are
interpreted in ways that do not require a high degree of accuracy to
support the conclusions reached.
II. Situation at the Beginning of the First Five Year Plans
of Communist China and the USSR.
A. Historical Background.
The economic situations that existed in the USSR and in Com-
munist China before the period of each First Five Year Plan must be
compared in order to understand the economic trends that took place.
The period of Russian participation in World War I and the revolu-
tionary period that followed lasted for 8 years and was followed by
a 7-year period of gradual recovery before the Soviet First Five
Year Plan was initiated. During this latter period, marked by the
"new economic policy" (NEP), socialization had proceeded to a point
at which, by 1528, 80 percent of industry was socialized and nearly
80 percent of all retail sales, including the public catering system,
were made by state and cooperative trade. Only the agricultural
sector remained to be socialized. At the beginning of the Soviet
First Five Year Plan, therefore, the process of recovery of output
after a period of war and civil war had already reached its comple-
tion and socialization of industry and trade was well advanced.
The Chinese Communists gained control over the Chinese main-
land in 1949 after the Sino-Japanese war, World War II, and the en-
suing civil war -- a period that lasted for about 8 years in Manchuria
and about 12 years in the rest of China. In contrast to the situation
in the USSR, the First Five Year Flan was initiated only 3 years after
the Communists had taken power. The process of recovery, therefore,
had not ended, and it was not until 1955 -- the midpoint of the Chinese
First Five Year Plan -- that socialization reached a point equivalent
to that of the Soviet economy in 1928.
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B. Structure of the Two Economies at the Beginning of Their
Respective Five Year Plans.
At the beginning of its First Five Year Plan in 1928 the USSR
had already attained a level of industrialization that waa not to be
achieved by Communist China until 1957 or later (see Table 1*). The
contribution to total output of industry and construction in 1928 for
the USSR is estimated to have been about 27 percent compared with the
16 percent estimated for Communist China in 1952. At the same time,
Soviet agriculture in 1928 represented a smaller share of total out-
put than did the agricultural sector of the Chinese economy in 1952.
Even allowing for significant differences in relative prices of trans-
portation and communications and a higher degree of state control
over native transportation, it is clear the USSR had a much more de-
veloped transportation system in 1928 than did China at any time dur-
ing its First Five Year Plan.
C. Levels of Output.
1. Consumer Goods and Services.
Soviet per capita consumption in 1928 was much higher
than China's per capita consumption in 1952, as indicated by the ,
sample of consumer goods in Table 2.** An average of the consumer
goods production estimates presented in Table 2, weighted by Chinese
prices, indicates that Soviet output of consumer goods in 1928 was
probably more than 60 percent of China's production. As the Soviet
population in 1928 was only 26 percent Of China's in 1952, Soviet
per capita consumption of the sample consumer goods in 1928 was more
than twice that of China in 1952.
Urban housing space in Communist China in 1952 was about
4.1 square meters per capita. 1/*** Soviet urban housing in 1928 was
about 6.9 square meters per capita, 2/ or about 1.7 times higher than
in China in 1952. This ratio is probably also representative of dif-
ferences in rural per capita housing. Reflecting the differences in
the number of employees in communal services (see Table 5****) and the
population differences, per capita consumption of communal services
in the USSR was probably more than two times that of China.
The much higher level of per capita consumption in the
USSR at the beginning of its First Five Year Plan permitted a higher
level of savings and provided a safety margin for mistakes.t
Table 1 follows on p. 8.
Table 2 follows on p. 9.
P. 15) below.
Text continued on p. 10.
7.
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Table 1
Gross National Product, by Sector of Origin, of Communist China, 1952 and 1957,
and of the USSR, 1928
Sector of Origin
Communist China n/
USSR 12/
1952
1957
1928
Billion Yuan
at 1956 Prices
Percent
Billion Yuan
at 1956 Prices
Percent
Billion Rubles
at 1928 Prices Percent
Agriculture, forestry, and fishing
42.73
58.4
48.30
47.8
12.55
42.0
Industry and construction
11.34
15.5
24.35
24.1
7.98
26.7
Modern transportation and
communications
1.85
2.6
4.44
4.4
2.57
8.6
Trade, native transportation, and
miscellaneous business services
7.33
10.0
11.54
11.4
1.98
6.6
Government
4.18
5.7
4.40
4.3
2.38
7.9
Consumer services and house rent
5.72
7.8
8.12
8.0
2.44
8.2
Total GNP at factor cost
73.15
100.0
101.15
100.0
29.90
100.0
Indirect taxes
4.34
8.15
2.67
Total GNP at market prices
77.49
109.30
32.57
a. Estimates based on sector distribution of output in 1956. Sources used are budget data and labor force and
wage data Production figures with value-added weights are then used to 50X1
obtain the estimates given for 1952 and 1957 in 1956 prices. Rental income has been revised to reflect data on
urban housing in the period.
b. Estimates based on Hoeffding's estimate of net national product for 1928./1/ Depreciation by sector given
in source used by Hoeffding is added. ji
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Table 2
First Five Year Plans) Communist China and the USSR:
Production of Selected Consumer Goods
Consumer Goods
Unit
Cammndst China
USSR
1952
1957
Percent of
Animal Increase
1927-28
1932
Percent of
Annual Change
Grain
Million metric tons n/
Per capita (kilograms) f./
149 iv
259
163 a/
260
2
84.9 g s/
56o.8
80.7 EV
510.4
Meat
Million metric tons ii./
6.369W
8.487 Ily
6
3.94 .s/ 11
2.14 il
-14
Per capita (kilograms)
11.1
13.4
26
14
Vegetable oil
Thousand metric tons1/
983 li
1,450 1./
8
448 Se
490 Ey
2
Per capita (kilograms
1.71
2.29
2.99
3.10
Sugar
Thousand metric tons3/
451 ay
865 e
14
1,283 mJ
828 E/
-8
Per capita (kilograms)
0.8
1.
5.2
Cotton cloth
Million meters
3,829 1/
5,050 2../
6
2,678
2,694 sy
Per capita (meters)
6.6
8.o
17.9
17.0
Rubber shoes
Million pairs
61.7 2/
136.0W -
17
36.3 se
64.7 Lo/
15
Per capita (pair)
0.11
0.22
0.24
0.41
Paper, machine-made
Thousand metric tons
372 /
906 a
19
284 e/
471 EY
13
Per capita (kilograms)
0.65
1.3
1.89
2.98
a. Chinese tonnage includes rice, wheat, potatoes, other grains, and legumes (excluding soybeans). Soviet tonnage includes rice, wheat, winter rye,
barley, oats, corn, sorghum, millet, buckwheat, and legumes (excluding soybeans). Potatoes are added at a ratio of 1 to 4. Rice is converted to its
hulled form at a ratio of 0.75 to 1.
b. The official figure for 1952 has been adjusted upward to compensate for the statistical understatement of acreage and production estimated to have
occurred in this year and other years from 1550 to 1953.
c- Y
8. 7/
e. 1928 may.
f. Based on the following populations: for China, 1 July 1952, 576 million, and 1 July 1957, 632 million 8/ -- and for the USSR, 1927-28, 150.0
million; 1 July 1928, 151.4 million; and 1 July 1932, 158.1 million. 2/
g. Including beef, veal, pork, and mutton (carcass weights including animal fats); excluding poultry and rabbits.
h. Estimated from factors for slaughter rates and carcass weight of various types of animals, with reported animal numbers. '
i. 12/
j. Total Soviet industrial production of vegetable oil (excluding minor amounts produced on collective farms). China's output excludes farm home
production.
k. W.
1. I..2/
m? -2/
n. Soviet granulated sugar (eauivalent to US raw sugar).
o. kV
1" 11/
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A decline in Chinese per capita consumption comparable to the serious
decline in Soviet per capita consumption in 1931 and 1932 would have
had serious social and political repercussions. Even if per capita
consumption could continue to increase at the relatively favorable
rates achieved during the First Five Year Plan, it would take 20 years
for Communist China to achieve a consumption level comparable to that
Of the USSR in 1928.
2. Industrial Base.
The USSR in 1928 had a much higher industrial base in re-
lation to its population than China in 1952 (see Table 3*). The fuel
output for the USSR in terms of standard fuel equivalents was 51.5
million standard units in 1928 compared with 60.2 million for China
in 1952. Soviet energy output per capita was therefore 3.3 times
that of China at the beginning of their respective Five Year Plans.
The Soviet steel output was more than 3 times that of China in 1952,
and Soviet per capita output of steel was 12 times that of China.
These relationships for steel output probably hold in general for
the relative outputs of the machine industries.
The total volume of freight turnover in ton-kilometers
in the USSR was 1.7 times, and per capita freight turnover was 6.4
times, that of China. PasSenger traffic for the USSR was 1.1 times,
and per capita traffic was 4.2 times, that of China.
D. Occupational Distribution of the Labor Force and Productivity.
The agricultural population as a percentage of total popula-
tion in Communist China in 1952 was about 81 percent, only slightly
higher than the percentage of 79 percent in the USSR in 1928 (see
Table 4**). The nonagricultural population, however, in China was
not concentrated to the same extent in the relatively organized eco-
nomic sectors. In 1952, only 3.4 percent of the total Chinese pop-
ulation was supported by employees in industry (excluding individual
handiCraft), construction, transportation, and communications; but
7.4 percent of the total Soviet population in 1928 had been supported
by employees in these sectors, which are directly associated with
the program of rapid industrialization:
The higher per capita consumption and per capita investment
of the Soviet population in 1928 have their counterparts in higher***
* Table 3 follows on p. 11.
** Table 4 follows on p. 13.
*** Text continued on p. 14.
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Table 3
First Five Year Plans) Communist China and the USSR:
Production of Selected Producer Goods and Performance in Transportation
Communist China
USSR
Percent of
Annual
Percent of
Annual
Producer Goods
Unit
-1952 --
1957
Increase
1927-28
1932
Increase
Electricity
Billion kilowatt-
hours
7.263/
19.343/
22
5.01 E/ 1/
13.544/
28
Per capita (kilowatt-
hours) 2/
12.6
30.6
33.1
85.6
Hydroelectric
Billion kilowatt-
hours
0.92/
4.4j/
37
o.4 s/ ii
0.8
19
Coal
Million metric tons
63.533/
124.18 A/
14
35.51 ji
64.36W
15
.
Per capita (kilograms)
110
196
237
407
Crude oil
Million metric tons
0.436 2/
1.455 LE/
27
11.472 I/
21.413 1/
16
Per capita (kilograms)
0.76
2.30
76.4
135.4
Crude steel
Million metric tone
1.3503/
5.235 1/
31
4.251 1/
5.927 j/
8
Per capita (kilograms)
2.34
8.28
28.34
37.49
Cement
Million metric tons
2.8603/
6.690 1/
19
1.850 1/
3.4811/
16
Per capita (kilograms)
4.97
10.6
12.3
22.0
Hauled lumber
Million cubic meters
10.023/
26.58 A/
22
36.0 2/ T/
99.4 II/
29
Per capita (cubic cen-
timeters)
1.7
4.2.
23.8
62.9
Sulfuric acid
Thousand metric tons
190 2/
6ii 2/
26
210.6 2/
552.1 2/
25
Per capita (kilograms)
0.33
0.97
1.40
3.49
Machine tools
Thousand units
13.7 2/
28.0 1/
15
2.0 12/
19.7 T/
71
Railroad freight
Billion ton-kilometers
60.2 2/
134.6 3/
17
88.2 //
169.3 3/
17
Per capita (ton-
kilometers)
104.5
213.0
588.0
1,070.8
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Table 3
First Five Year Plans, Communist China and the USSR:
Production of Selected Producer Goods and Performance in Transportation
(Continued)
Communist China
USSR
Producer Goods
Unit
1952
1957
Percent of
Annual
Increase
1927-28
1932
Percent of
Annual
Increase
Water freight
Inland (exclud-
ing junks)
Billion ton-kilometers
3.64 2/
15.1 I/
33
15.9 2/ Hi
? 26.1 2/
13
Per capita (ton-
kilometers)
6.32
23.9
105.0
165.1
Ocean
Billion ton-kilometers
5.0 p/
10.7 I/
16
9.12/Y
18.2 2/
19
Per capita (ton-
kilometers)
8.7
16.9
60.1
115.1
Highway freight
Billion ton-kilometers
0.6782/
3.79 I/
41
0.147 2/ 2/
1.07!!
64
Per capita (ton-
kilometers)
1.177
5.997
0.971
6.768
6. 1_/
C. 1928 only.
d. 112/
e. Based on the following populations: for China, 1 July 1952, 576 million, and 1 July 1957, 632 million 12/ -- and for the
USSR, 1927-28, 150.0 million; 1 July 1928, 151.14 million; and 1 July 1932, 158.1 million. 20/
f. 21/ a? I/ n. 22/ r. le
o. 30/
h. 21/ 1.2
7
/ p. I/ L t. 1i/
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Table 4
First Five Year Plana, Communist China and the USSR:
Population and Nonagricultural Labor Force pi
Million Persons
Communist China
USSR
1952
1957
1928
1932
Popula-
tion
Percent
Labor
Force
Popula-
tion
Percent
Labor
Force
Popula-
tion
Percent
Labor
Force
Popula-
tion
Percent
Labor
Force
?
Total agricultural
467.0
81.1
500.0
79.1
119.520
78.9
114.510
72.4
Private
,466.5
81.0
9:9607g
71:7
43.333
27.4
Kolkhoz
0.5
0.1
481.6
76.2
66.300
41.9
State
Negligible
Negligible2.950
1.9
4.877
3.1
Total nonagricultural
109
18.9 .
43.6
132
20.9
52.8
31.869
21.1
14.479
43.621
27.6
21.383
Including:
Workers and staff
45.4
7.9
15.1
72
11.4
24.0
18.876
12.5
8.576
39.242
24.8
19.217
Other
63.6
11.0
28.5
60
9.5
28.8
12.993
8.6
5.083
4.379
2.8
2.166
Total population
576
100.0
632100.0
1511122,
100.0
158.131
100.0
a. Midyear figures.
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productivity. Farm per capita production in the USSR in 1928 (see
Tables 2* and 4**) was as follows: grain, 710 kilograms (kg); meat,
33.0 kg; and cotton, 6.9 kg. The comparable figures for China in
1952 are as follows: grain, 319 kg; meat, 13.6 kg; and cotton,
2.8 kg. Per capita output of the Soviet farm population in 1928 was
therefore from 2.2 to 2.5 times that of the Chinese farm population
in 1952.
Productivity of Soviet workers in the sectors associated with
industrial development was, however, not a great deal higher than for
Chinese workers (see Table 5***). Counting 1 passenger-kilometer as
equivalent to 1 ton-kilometer, unit-kilometer output per employee in
transportation and communications was 93,786 units for the USSR in
1928 compared with 82,854 units for China. Employees in the transpor-
tation system in the USSR were therefore approximately 1.1 times as
productive as those in China in 1952. The total energy production
per employee in industry, in construction, and in transportation and
communications in the USSR in 1928 was 10.1 tons of standard fuel.
This is 1.2 times the comparable figure for China in 1952 of 8.1 tons.
If individual handicraft workers are included, the amount of energy
per worker in the USSR was 1.7 times that in China at the beginning
of their respective First Five Year Plans. Steel output per employee
in industry and construction was 1,143 kg for the USSR and 214 kg for
China, a margin of 5.3 to 1 for the USSR.
III. Trends in Production During the Two Five Year Plans.
During its First Five Year Plan, total gross national production
of Communist China as estimated by sector origin in 1956 prices (see
Table 1**.**) increased at an average annual rate of approximately
7 percent. An estimate by end use gives an average rate closer to
8 percent annually. The rate of growth for the Chinese Second Five
Year Plan is projected at approximately the same general. rate of
growth as for the First Five Year Plan. Jasny.estimates that Soviet
net national product in 1926-27 constant prices increased from 1928
through 1937 at an average annual rate of 8.8 percent when estimated
by sector origin and 8.0 percent when estimated by end use. Ei No
estimate.of the rate of growth for total Soviet output from 1927
through 1932 is available. It was almost certainly lower than the
average rate of growth from 1932 to 1937, but, even allowing for
this, it is probable that the rate of increase for the Soviet First
Five Year Plan was no greater and perhaps somewhat less than that
for Communist China during its First Five Year Plan.
P. 9, above.
P. 13, above.
Table 5 follows on p. 15.
P. 8, above.
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Table 5
First Five Year Plans, Communist China and the USSR:
Wage and Salary Earners
Thousand Persons
Communist China a/
USSR 12/
1952
Percent
1956 2/
Percent
1928
Percent 192
Percent
Total wage and salary earners
15,800
24,190.
10,252
22,075
Agriculture, forestry, and water
conservancy
239
610
2,007
3,998
Nonagricultural sector
15,561
100
23,580
?100
8,245
100
18,077
100
Industry
5,260
34
7,170
30
2,996
36
6,302
35
Construction
1,050
7
2,950
13
723
9
3,126
17
Transportation and communi-
cations
1,130
7
1,56o
7
1,365
17
2,446
14
Banking
305
2
377
2
95
1
128
1
Social, cultural, educational,
and health '
2,282
15
3,120
13
1,352
16
2,262
12
State administration
1,523
10 '
1,600
7
1,010
12
1,650
9
Commerce ji
3,970
25
6,707
28
587
7
1,926
11
Public utilities
41
Negligible
96
Negligible
117
2
237
1
?
Individual handicraft
4,550 2/
5,780 2/
1,000 f/
1,700 f/
a, year-end data. The figure for total wage and salary earners is based on source 3_/, agricultural, forestry, and water conservancy,
on 12/; nonagricultural sector, on L1.0/; and individual handicraft, on IS.
b. Annual averages. The classification used is that found in Socialist Construction in the USSR, Lf.L/ because it is believed to be
closer to that used for Communist China. The only change is that the state administration figures given /3/ .are believed to be more
comparable to the Chinese figures, and the residual is estimated to be cultural workers -- a figure which is added to the figures for
workers in education and health. The figures for industry in 1932 exclude 179,000 workers in cooperatives, LOS which have been sub-
tracted, and an estimated 100,000 cooperative workers have been excluded from the number of industrial workers in 1928.
c. It is believed that total wage and salary earners in 1957 were approximately equal to the 1956 total.
d. Chinese residual, perhaps including some native transportation workers.
e. Individual handicraft number for China based on figures for 1956 and increases in productivity./
f./ f. 4_6/
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Although the over-all rates of growth for the two economies are
comparable for their First Five Year Plans, the Chinese First Five
Year Plan progressed more smoothly and involved more efficient use
of resources. This plan had many difficulties and some outright
failures; but the Soviet plan was characterized by social and political
dislocations of such magnitude that they seriously interfered with.
economic trends, whereas the changes introduced in China were not
nearly so disastrous in terms of production.
A. Agriculture.
Trends in the gross value of agricultural production, exclu-
sive of forestry, fishing, hunting, and subsidiary handicrafts, for
Communist China and the USSR are given in the following tabulation:
Communist China
1952
1953
1954
1955
1956
1957
Index IV
100
101
99
105
110
ilk
USSR
1928
1929
1930
1931
1932
1933
Index 14.2./
100
102
98
87
80
85
Agricultural output in China, excluding forestry, fishing,
and hunting, increased by about 14 percent in the 5 years from 1952
to 1957, whereas there was a decline of 15 percent in the USSR in
the 5 years following 1928, and output was 20 percent less in 1932
than in 1928.
B. Industry.
For Communist China, industrial output is estimated to have
increased at an average annual rate of nearly 16 percent during the
First Five Year Plan period. This estimate, of course, is necessarily
preliminary because research on trends in Chinese industry has just
begun. The exact trends in industrial output during the Soviet Five
Year Plan are still the subject of some dispute. Jasny gives an in-
dex for all industry in constant 1926-27 rubles which shows an average
annual increase of 13 percent, 119/ substantially higher than an index .
of all industrial output as estimated by Nutter -- giving an average
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annual increase in 1928 rubles of about 9 percent. 52/ Hodgman's
index of Soviet large-scale industrial output, using 1934 payroll
weights, gives an average annual increase during the Soviet First
Five Year Plan of 13.6 percent. 51/ This increase can be compared
with the present estimate of a rate of increase for China's industry,
excluding output of individual handicrafts, of nearly 19 percent.
Seton 52/ approaches the problem of estimating trends in industrial
production in the USSR by using data on steel consumption, fuel con-
sumption, and electric power with the aid of correlation studies be-
tween trends in these components and trends in over-all industrial
output in non-Communist countries, where statistics on both are more
adequate than those available for Communist countries. The formula
which he derives in this manner, when applied to data on available
steel, fuel, and electric power, gives an index for the USSR which
shows an average annual increase in industrial output of 16 percent.
The same procedure used for Communist China would yield an estimate
of 17.5 percent.
Because much research remains to be done on the industrial
output of Communist China, because there are wide differences in
estimates of the rate of increase of Soviet industrial output, and
because there are inherent difficulties in the comparison of two
different economies at widely separated periods of time, no clear-
cut conclusions are possible as to comparative trends. It is clear
that industrial output in Communist China is characterized by in-
creases in output of light industry that are much higher in relation
to increases in heavy industry than those which occurred during the
Soviet First Five Year Plan. A glance at Table 2* shows that output
of light industry in Communist China increased significantly during
its First Five Year Plan, whereas output of the same industry failed
to increase significantly during the Soviet First Five Year Plan and
in many cases declined.
In comparing the development of heavy industry, trends dur-
ing the First Five Year Plan in the USSR showed somewhat higher in-
creases in the production of primary energy and significantly lower
increases in steel production, and probably correspondingly lower
increases in machinery output,. when compared with Communist China.
Table 6** compares the trends in primary energy and in steel output.
The much smaller rate of increase in steel output in the two plan
periods is not due to failure of the Soviet plan to invest in the
steel industry but to the fact that Chinese output in 1952 was below
capacity and in 1957 fully utilized, whereas the reverse took place
in the period of the Soviet First Five Year Plan. Steel capacity in
the USSR is estimated to have increased by 2.76 million tons in
* P. 9, above.
** Table 6 follows on p. 18.
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Table 6
First Five Year Plans, Communist China and the USSR:
Production of Primary Energy and Steel 2/
? Year Before First Last Year of First Last Year of Second
Five- Year Plan Five Year Plan Five Year Plan
(1952, China; (1957, China; (1962, China; Average Annual Increase
1927-28, USSR) 1932, USSR) 1937, USSR) Average Annual Increase During Second Five Year Plan
? ../ During First Five Year Plan (China Projected)
Production Million Metric Tons of Standard Fuel Equivalents 8/ (Percent) (Percent)
Primary energy
China 60.2 ? 120.3
USSR 51..5 96.6
Thousand Metric Tons
201.6
(296.o) 2/
170.4
Steel
China 1,350 5,235
USSR 4,251 5,927
12,000
(15,000) 2/
17,730 -
14.8
16.0
31.1
8.1
10.9
(19.7) St
12.0
18.0
(23.4) 2/
24.5
a. For sources of estimates of production, see Table 3, p. 11, above.
b. Standard units of fuels at 7,000 kilocalories per kilogram (k/cal/kg). Conversions used for Chinese production are as follows:
1 ton of coal to 0.9286 ton of standard fuel, 1 metric ton of petroleum to 1.43 tons of standard fuel, and 1 million kilowatt-
hours (kwh) of hydroelectric power to 0.658 ton of standard fuel. 'Conversions used for Soviet production are as follows: 1 metric
ton of coal to 0.9143 ton of standard fuel, 1 ton of peat to 0.4464 ton of standard fuel, 1 ton of petroleum to 1.43 tons of standard
fuel, and 1 million kwh to 0.658 ton of standard fuel. The term primary fuel as used excludes fuelwood and other fuels largely used
in household consumption. Peat production is included in the Soviet figures because it is an important source of industrial fuel.
c. Figures in parentheses represent "struggle" goals that are not yet embodied in specific planning.
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4 years, 23/ an average of 0.69 million tons a year, compared with
an increase for China of 2.23 million tons in 5 years,211/ an average
of 0.45 million tons a year. The Soviet investment effort in the
steel industry was therefore more than half again higher, but produc-
tion lagged badly. Much of the Soviet investment effort, therefore,
did not show up in production until the Soviet Second Five Year Plan,
when the average annual increase in steel output was three times
that for the First Five Year Plan.
C. Trends in Other Sectors.
Total ton-kilometers and passenger kilometers in the USSR
increased at an average annual rate of 20 percent. The comparable
figure for Communist China is 17 to 18 percent. Employment trends
in Table 5* can be used to compare other sectors of the economies.
Workers in construction in the USSR increased at an average annual
rate of about 44 percent compared with an average annual rate from
1952 through 1956 for China of about 30 percent. The number of
employees in communal services in the USSR increased at an average
annual rate of nearly 14 percent compared with an average annual
rate of about 8 percent for China. The number of state administra-
tive employees increased at an average annual rate of about 13 per-
cent in the USSR compared with a negligible increase for China.
IV. Economic Policies.
A. Learning from the USSR.
The Chinese Communists embarked on their First Five Year Plan
with the important advantage of being able to learn from Soviet ex-
perience. This Five Year Plan formally began in 1953 but proceeded
under annual targets in its first 2 years and was not actually drawn
up as a 5-year program until 1955. The fact that the Chinese were
able to initiate a comprehensive plan at all, however, only 5 years
after acquiring political control of China, was possible because the
USSR had painfully discovered and pioneered the concept and the ma- .
chinery of central planning and direction of a socialist economy.
The Chinese were able to adopt the industrial ministry ad-
ministrative structure which had been slowly developed by the USSR
throughout its First and Second Five Year Plans. In addition to
the anti-inflationary policies developed during the civil war in
China, the Chinese borrowed fiscal and monetary policies from the
USSR, with the result that there was relatively little price infla-
tion during the period 1952-57. In contrast, the USSR suffered a
2.5-fold price rise during its First Five Year Plan.
* P. 15, above.
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The application of Soviet experience was facilitated by the
assistance of a large number of Soviet advisers. The advisers were
important not only in the setting up of the administrative and plan-
ning machinery but also in almost every phase of development during
the First Five Year Plan.
Not only Chinese economic administrative machinery but also
specific economic policies were a close imitation of recent Soviet
practice. This was broadly true of foreign trade, investment, and
technology policies. It was less true in agricultural development
and labor allocation policies. Perhaps even more important than the
imitation of the USSR was the avoidance of some of the gross errors
of the Soviet First Five Year Plan. This was especially true in the
collectivization of agriculture, which the Chinese carried out with-
out serious disruption. In the socialization of industry and in the
time scheduling of investment, the Chinese also avoided Soviet mis-
takes and achieved better results. These policies are discussed in
more detail below.
By the end of the First Five Year Plan the Chinese had begun
to be a good deal less Imitative. Independent initiative and origi-
nality appeared in policies for the development of both agriculture
and industry and in the administrative organization of the economy.
B. Socialization Policies.
Chinese Communist policies for socialization followed closely
those established by the USSR during its First Five Year Plan.
Socialization of agriculture in Communist China proceeded even more
rapidly than in the USSR. From a negligible percentage of the
Chinese farm population in cooperatives or state farms in 1952, more
than 96 percent of the Chinese farm population were organized in
producer cooperatives by 1957. In the USSR the percentage was a
little less than 5 percent in 1928 and more than 60 percent in 1932.
The same relative trend also exists in industry except for the em-
phasis in China on joint state-private enterprises as the main ve-
hicles for socialization of industry. Of total output in 1928 in
the USSR, about 90 percent was contributed by state and cooperative
industry, and by 1932 the percentage had risen to 99.5 percent. In
China in 1952, state and cooperative industry including handicrafts
contributed 56 percent of total output, and joint state-private en-
terprises contributed another 4 percent. Private industrial enter-
prises still contributed 40 percent of output. By 1957, state and
cooperative industry and handicrafts in China contributed 72 percent
of total output, joint state-private enterprises 27 percent, and pri-
vate industry and handicrafts about 1 percent. During the Chinese
First Five Year Plan, therefore, socialization proceeded so rapidly
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that it more than made up for the lesser degree of state control over
the economy at the beginning of the plan when compared with the Soviet
economy.
The success of agricultural socialization in China is in
sharp contrast with the failure of the same program in the USSR.
Chinese livestock production and supplementary farm production were
affected by the socialization of agriculture, but not to the point
of wholesale liquidation of livestock and not to the point of control
by the bayonet. A nuMber of factors were involved in the much more
skillful Chinese Communist reorganization of agriculture. First, the
lower average productivity of the Chinese farm population gave indi-
vidual farm households a much lower potential for resisting state
control than in the USSR. In addition, only a few years had passed
since the land redistribution program, and private ownership of the
redistributed land had not yet been established to a point at which
resistance could be made to still further changes in the system of
organization. Moreover) the timing of agricultural socialization in
China was more propitious for the Communist leaders than in the USSR.
In China, agriculture was still in a period of recovery, and the
relatively poor agricultural crop years of 1953 and 1954 occurred in
the early years of the First Five Year Plan before socialization was
carried out. In the USSR, on the other hand, agricultural output
had already reached its period of recovery before the First Five
Year Plan, and socialization took place during the same years when
weather conditions were less favorable. The final factor was the
nature of the reorganization taken. In the USSR, collectivization
was accompanied by the program for mechanization, requiring tremen-
dous changes in the system of agricultural production as well as in
the economic institutions of the countryside. In China, on the other
hand, collectivization took place in a period when the emphasis on
increasing agricultural output was still in the traditional frame-
work of increases in irrigation and in improvements in application
of fertilizer and other labor-intensive methods of cultivation.
In adopting the joint state-private enterprise as the main
initial form for socialization of industry, the Chinese Communists
chose a form of organization that permitted greater use of the mana-
gerial talent of the "capitalist" class while firmly cementing state
control over industry. The cooperative form of organization was
used in relation to the large manpower potential of the individual
handicrafts sector, and this too permitted the absorption of the
private sector with a minimum effect on production.
Changes occurred in 1958 in Chinese economic organization
that show a marked departure from the Soviet pattern of socialization.
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In agriculture a campaign for establishing communes reached sweeping
proportions. The commune, a form of organization based on large areas
usually centered on market towns, is aimed at combining agricultural,
industrial, and trading activities in one inclusive organization with
workers organized in labor brigades. The goals are said to be greater
division of labor and fuller use of women in the labor force, with col-
lective eating places and nurseries relieving them of household duties.
In industry, greater stress had been laid on local industry, and this
emphasis continued in the organization of the new communes. The plan-
ning mechanism has been changed to permit greater incentives for local
government to expand production for local needs.
C. Consumption and Saving.
Only in the last year of China's First Five Year Plan did
total investment command as large a share of output as in the USSR
in 1928. As shown in Table 7,* investment in the Soviet economy con-
stituted 21 percent of GNP in current prices in 1928, nearly 27 per-
cent in 1934, and about 19 percent in 1937. These figures can be
compared with estimates for Communist China of about 15 percent in
1952 and nearly 20 percent in 1957. During the Soviet Second Five
Year Plan the proportion for defense expenditures increased until
they commanded the same proportion of output as China's military ex-
penditures in 1952 when it was engaged in the Korean War.
Estimates of GNP in current prices do not, however, tell the
whole story. Price changes for China were relatively gradual, whereas
a drastic change in the system of taxes occurred in the USSR during
its First Five Year Plan with the introduction of large turnover taxes
on consumer goods. Data do not permit an estimate of Soviet GNP, by
end use, in 1932 in 1928 prices, but the nature of the trends in in-
vestment and consumption that occurred can hardly be questioned.
Investment increased sharply while consumption declined. In China,
in contrast, investment increased while permitting significant in-
creases in consumption.
In 1928, state and cooperative investment in the USSR com-
prised 12.5 percent of total GNP. By 1932, state and cooperative in-
vestment, not including inventories, in estimated 1928 prices was
equivalent to more than 42 percent of total GNP in 1928. 22/ In
Communist China the figures for state investment are 5.5 percent in
1952, and state investment in 1956 in comparable prices was equiva-
lent to 24 percent of total GNP in 1952.
* Table 7 follows on p. 23.
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Table 7
First Five Year Plans, Communist China and the USSR:
Allocations of Gross National Product, by End Use, in Current Prices
Communist China e/
USSR 1-1
1952
1957
19282/
19341/
19372/
Billion
Yuan Percent
Billion
Yuan Percent
Billion
Rubles
Percent
Billion
Rubles
Percent
Billion
Rubles
Percent
Consumption of households
50.77
74.8
79.92
69.8
22.60
69.4
88.7
62.5
183.5
62.9
Communal services
1.39
2.0
2.86
2.5
1.60
4.9
8.6
6.1
27.4
9.4
Government administration,
including security forces
2.16
3.2
2.81
2.5
0.82
2.5
2.0
1.4
7.4
2.5
Defense
4.37
6.4
5.51
4.8
0.76
2.3
5.0
3.5
17.5
6.0
Gross investment
10.09
14.9
22.84
20.0
6.79
20.8
37.7
26.5
56.1
19.2
Net foreign investment '
-0.92
-1.3
+0.51
+0.4
o
o
o
o
o
o
Gross national product
67.86
loom
114.45
100.0
32.57
100.0
142.1
100.0
291.8
100.0
2?/
b. Totals are derived from unrounded data and may not agree with the sum of their rounded components.
di ig
c.
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Investment during the Soviet First Five Year Plan, there-
fore, started from a much higher proportion of output for investment
and rose more rapidly during the period than during the Chinese First
Five Year Plan. This rise in Soviet investment took place in spite
of a decline in agricultural output and a serious decline in consump-
tion. In the USSR, average annual wages for workers and staff in
1932 were 203 percent of 1928, but (based on an index in constant
prices of state and cooperative trade) a0../ retail prices were 249
percent of 1928. This rapid inflation indicates a decline in pur-
chasing power of nearly 20 percent. The decline in real farm in-
come was probably even more. Communal services, however, increased
significantly. Rising investment in Communist China, on the other
hand, was not accompanied by a similar decline in consumption. Re-
tail prices rose by 11 to 12 percent, and real wages for workers
and staff increased by about 25 percent, from 1952 to 1957. _?.1/
Real farm income increased much more slowly, but the trend in no
way resembled the trend in farm income during the Soviet First Five
Year Plan.
D. Allocations of State Investment.
Investment policies during the Chinese First Five Year Plan
were much the same as those during the Soviet First Five Year Plan.
Table 8* presents the relative shares of state investment for each
sector during each of the two First Five Year Plans. The figures for
state investment are not comparable, because the Chinese figures in-
clude only expenditures for increasing fixed assets and the Soviet
figures include miscellaneous expenditures by economic departments
other than expenditures for working capital. Rough adjustments are
made in the Chinese figures by including estimated major repairs and
expenditures for geological surveying and prospecting under industry
and related budget expenditures for agriculture. These adjustments
are subject to a wide margin of error, but they serve for purposes
of the comparison.
As shown in Table 8,* the two investment plans emphasized
heavy industry and transportation. The proportions of investment
for light industry and communications are somewhat lower in China.
The Chinese allocation to heavy industry, however, was even greater
than in the Soviet First Five Year Plan, and the Chinese allocation
to agriculture is lower than in the Soviet pattern of investment.
Somewhat more of agricultural investment in the Chinese First Five
Year Plan was planned to be financed by the agricultural sector out-
side the budget, but the main difference in investment policy was
the nature of the agricultural investment undertaken (see below).
* Table 8 follows on p. 25.
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Table 8
First Five Year Plans, Communist China'and the USSR:
Capital Investment, in Current Prices
'
Communist China
' First Five Year Plan (1953-57)
USSR .
Last Quarter of First Five Year Plan (1926-32) 2/
Actual Capital
Construction
(Million Yuan)
All State
Investment
Capital
Construction
(Percent)
Percent of
All State
Investment
Capital Investment
Million Rubles
Percent
Industry
27,3802/
33,1202/
56.1
56.3
24,789
49.1
Heavy industry
214,3102/
29,150 C./
49.8
49.5
21,292
42.2
Light industry
3,0702/
3,970 2/
6.3
6.7
3,497
6.9
Transportation, post
and teleco=nications
9,195 I"
9,195
18.9
15.6
9,498
18.6
Agriculture, forestry,
and water conservancy
3,7812/
8,1002/
7.8
13.8
9,887
19.2
Water conservancy
2,370 h/
1,000
Urban public utilities
1,334 1/
1,334
2.7
2.3
I,850 if/
3.7
Culture, education,
and health
14,0592/
4,059
8.3
6.9
2,250
4.5
Other 1/
3,028 .
3,028
6.2
5.1
2,428
4.8
Total j/
48 777
p6,836
100.0
100.0
90,932
100.0
Of which
Urban housing
4,260W
4,260
8.7
7.2
4,049
8.o
a' ?2/
c. Major repairs and general geological surveying and prospecting are included. under industry, with the latter the same pro-
portion of supplementary budget 'expenditures for capital construction as In the First Five Year Plan. Thirty percent of major repairs
are estimated for light industry on the basis of the ratio for total fixed assets. .6.2/ All geological and prospecting expenditures
are probably for heavy Industry.
d. 1///
The USSR includes Urban electric power stations, laid, are probably excluded from the Chinese figures.
Residual of the Chinese investment In composed of the categories of Trade, Ranking, and Stockpiling and of Other Items.
Totals are derived from unrounded data and may not agree with the sum of their rounded components.
7a/
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E. Investment in Relation to Output.
The impact of state investment on the economy can be roughly
measured by comparing the size of the investment for the 4 years --
1929-32 for the USSR and 1953-56 for China -- against the income
originating in the sector in 1928 in the USSR and in 1952 in China.
Table 9* presents this comparison.
Table 9 shows that the Soviet state mobilization of re-
sources in relation to the output at the start of the First Five
Year Plan was 2.5 times the state mobilization of resources for in-
vestment during the Chinese First Five Year Plan. Since it is prob-
able that the total output in the two economies increased.at a com-
parable rate, Table 9 indicates a more successful use of resources
for investment for China than for the USSR. For Communist China the
higher percentage of investment for heavy industry and the smaller
sector contribution of heavy industry and construction combined to
furnish-nearly as high a ratio of investment in heavy industry and
construction for China as for the USSR. The poorer Soviet showing
is mainly due to the trends in agriculture and light industry. When
allowance is made for nonstate agricultural investment, as shown in
Table 9) the ratio of Soviet investment to output in 1928 is 1.3 to 1,
nearly 4 times the comparable ratio for China of 0.33 to 1. As agri-
cultural output in the USSR declined by 20 percent, the failure of
the Soviet agricultural program is obvious. The small increase in
production of light industry in the USSR, in spite of a higher ratio
of investment to output, reflects the impact of declines in agricul-
tural output on light industry, and China's output of agricultural
raw materials expanded significantly.
Transportation and communications received comparable amounts
of investment and increased at comparable rates during the two Five
Year Plans. Although Soviet investment in trade, communal services,
government) and other nonagricultural sectors was twice the ratio of
investment to output, income originating in communal services and
government undoubtedly increased much faster than in China, as large
increases in labor force in these sectors occurred in the USSR com-
pared with very small increases in China.
In comparing the more favorable increases in Chinese agri-
cultural and industrial production as the result of investment, much
of the difference is due to a comparison limited to the time periods
of the respective First Five Year Plans. In 1937, agricultural out-
put in the USSR was about 20 percent higher than in 1928 and 50 per-
cent higher than in 1932. The average rate of increase in industrial
* Table 9 follows on p. 27.
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Table 9
.Communist China and the USSR: Comparison of Investment
with Income Originating, by Economic Sector
Communist China
Billion Yuan
USSR
Billion Rubles
State Investment
State Investment
Income Originating
for 1953-56 in
Ratio of Investment
Income Originating
for 1929-32 in
Ratio of Investment
Economic Sector
in 1956 Prices 9./
1956 Prices 12/
to Income Originating
in 1928 Prices 9/
1928 Prices 1./
to Income Originating
Heavy industry and
construction
4.90
20.32
4.15 to 1
3.70
16.35
4.42 to 1
Light industry 1/
3.69
2.77
0.75 to 1
2.68
2.68
1.00 to 1
Traniportation and
communications
1.85
6.8o
3.68 to 1
2.37
9.38
3.65 to 1
Agriculturye
45.30
6.11
0.13 to 1
13.37
10.10
0.76 to 1
All other e
17.41
6.07
0.35 to 1
7.58
5.43
0.72 to 1
Total
71.15
1.2.07
0.58 to 1
29.90
41.94
1.47 to 1
Allowance for non-
state investment
Agricultural
8.87h/
7.30 g/
Nonagricultural
2.37
Negligible Et/
Total, including
nonstate invest-
ment 51.31 0.73 to 1 51.24 1.71 to 1
a. For sources, see Table 1, p. 8, above.
b. Year-by-year figures deflated by investment cost index. 71/
C. Income originating as shown in Table 1, p. 8, above, with adjustments in sectors. The sector on industry and construction is allocated as follows:
based on Soviet national income figures, zy income originating in small-scale industry is estimated as 1.6 billion rubles and construction as 1.7 bil-
lion rubles. On the basis of profits figures given by Hoeffding, 111 approximate labor force allocations to heavy industry, and depreciation allocated
in accordance with total fixed assets, income originating in heavy industry is estimated at 2.0 billion rubles, leaving light industry as the residual.
d. From figures given in source DJ converted to constant 1928 prices by the index given 72/ for industrial investment and for over-all investment,
with the same index used for all state investment other than industrial investment.
e. Small-scale industry is included under the item "ail other."
f. Including farm consumer services and house rent.
g. Hoeffding estimates that state investment vas 16 percent of total agricultural investment in 1928. Private agricultural investment was
probably negligible by 1932. A simple average of the twO percentages is used as an approximation of nonstate agricultural investment during the
period. Nonagricultural nonstate investment is estimated as negligible in 1928.
h. Based on investment as estimated. 7?/
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fixed assets was about 20 percent lower in the Soviet Second Five Year
Plan than in the First Five Year Plan, but the rate of increase in in-
dustrial output was perhaps one-fifth higher in the Second Five Year
Plan than in the First. The Soviet economy, therefore, did not bene-
fit from a significant portion of investment during the First Five
Year Plan unitl the period from 1933 through 1937. Investment during
the Chinese First Five Year Plan probably showed more immediate gains
in output, and output during the Chinese Second Five Year Plan is
therefore not likely to show a similar upsurge from greater utili-
zation of investment undertaken during the First Five Year Plan.
Another important factor in the more favorable results of the
Chinese First Five Year Plan has already been noted above. Communist
China's agriculture and industry had not reached potentials that had
been built up in the pre-Communist period, and the period of recovery
and restoration extended well into the period of the First Five Year
Plan.
The most important factor, however, was that much of Soviet
investment, particularly in agriculture, was offset by severe social
and economic disorganization, and such social and economic disorgani-
zation did not occur in any comparable degree in Communist China dur-
ing its First Five Year Plan. In addition to the social and political
dislocations involved, Soviet investment in agriculture was largely
aimed at changing the nature of the techniques of agricultural produc-
tion and releasing farm manpower for industry.
F. Agricultural Development Policy.
A radical difference in the nature of the Chinese and Soviet
economies resulted in Chinese development policies for agriculture
that were quite different from those in the Soviet program. As has
been indicated, Soviet farm per capita output was more than twice
that of the Chinese farm population, and the Chinese standard of
living was correspondingly lower and excess manpower in China's ag-
riculture, particularly in the off-season, was correspondingly higher.
Weather conditions provided a greater potential for increasing out-
put by irrigation and other measures to take advantage of China's
greater resources of water. The Chinese program for agriculture
depended largely on exploiting the greater manpower potential and
the greater potential for irrigation to increase output. The Soviet
program aimed instead at raising farm productivity through mechaniza-
tion to permit transfers of farm labor into the nonagricultural sec-
tors. .
In China, half of total state investment in agricultural
capital construction was spent on large-scale water conservancy pro-
jects, and another 12 percent on small-scale local irrigation projects.
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These expenditures were therefore nearly 30 percent of all state
agricultural expenditures including dike repairs and miscellaneous
development expenditures. This portion of investment was therefore
directed at improving and developing agricultural production along
traditional and well-established lines, stressing labor-intensive
methods of agricultural production. In contrast, only 10 percent of
Soviet agricultural investment was spent on irrigation and land rec-
lamation. 11/
In China the agricultural area "mechanized" in 1957 is said
to be 2.7 percent of the total sown area, and even this area was
probably not mechanized by Soviet standards. In China the number of
tractors in tractor stations in 1957 is given as 12,036 standard
units -- 180,500 horsepower (hp). This is equal to 0.36 hp per 1,000
members of the farm population in 1957. In contrast, by 1932 about
half of the total sown area in the USSR was mechanized. Nearly one-
third of state agricultural investment during the Soviet First Five
Year Plan was directed to additional farm equipment and machinery.
From October 1929 through 1932, 144,458 tractors (2,278,161 hp) were
supplied to the agricultural sectors. By 1932, available tractors
were equivalent to 19.43 hp per 1,000 members of the farm population,
more than 50 times the negligible amount of horsepower per capita in
the Chinese farm population. Large numbers of motor vehicles were
also supplied as against virtuslly no emphasis on such types of
equipment in Communist China. Soviet agricultural investment was
therefore directed toward raising the productivity of farm labor and
not necessarily directed toward raising agricultural yields. In
practice, however, this increase in agricultural machinery was largely
offset by a loss of draft animals for farm production.
In 1956, when the pace of socialization of agriculture in
China was increased greatly, some increases were made in the percent-
age allocation of investment funds for agriculture. In 1958, alloca-
tions were further increased, with the main emphasis still placed on
irrigation and other labor-intensive methods of increasing agricul-
tural production. The USSR did not give similar emphasis to increas-
ing agricultural output until 1953.
G. Labor Policy and Technology.
At the beginning of the Soviet First Five Year Plan, the sup-
ply of labor was smaller in relation to land and capital than in
China, and average productivity was much hi-gher, and yet the Soviet
First Five Year Plan was characterized by a large-scale shift in
the labor force from the agricultural to the nonagricultural sectors.
In Communist China, however, with a larger supply of labor, official
policy was directed toward holding the migration of peasants into
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the cities to a minimum -- probably a result of a conscious determina-
tion not to repeat the mistakes of the Soviet First Five Year Plan.
1. Occupational Distribution of the Labor Force.
An analysis of the figures in Tables 4* and 5** illus-
trates a fundamental difference in occupational distribution of the
labor force between the Soviet and the Chinese First Five Year Plans.
In 1928, 78.9 percent of the Soviet population was supported by agri-
culture; 8.8 percent by industry, including individual handicraft, con-
struction, and transportation and communications; and 12.3 percent by
trade, government) and other services. By 1932) 17.5 percent of the
Soviet population was supported by industry, construction) and trans-
portation and communications -- an average percentage change of more
than 2 percent a year. The percentage of the population in agricul-
ture dedlined by 6.5 percent -- from 78.9 percent to 72.4 percent.
The percentage supported by trade, government, and other services de-
clined by 2.2 percent in the period of the First Five Year Plan. In
Communist China) however, the population supported by industry, con-
struction, and transportation and communications increased from 5.7
percent in 1952 to 7.5 percent in 1957 -- an average annual increase
of about 0.4 percent a year. As the percentage of the population in
trade, government, and services remained about the same, the percent-
age for the agricultural population declined by a similar amount, or
an average annual change of 0.4 percent a year. Moreover, the ratio
of dependents to workers and staff in the USSR decreased from 1.2 per
employee to about 1.0 per employee, whereas the ratio in China is
given as 2 dependents per employee in 1956 and probably was about the
same ratio in 1952.
In absolute figures the Soviet agricultural population
declined at an average annual rate of more than 1 percent, whereas
the Chinese agricultural population increased by more than 1 percent
a year. Disregarding the number of nonwage workers in the private
sector that were converted into workers and staff, workers and staff
during the Soviet First Five Year Plan increased at an average annual
rate of 11 percent compared with an increase of 5 percent for the
Chinese First Five Year Plan. The contrast in the increases in labor
force in the sectors directly associated with industrialization is
even more striking. During the Soviet First Five Year Plan, workers
and staff in industry (excluding individual handicraft, construction,
and transportation and communications) increased at an average annual
rate of about 22 percent) compared with an average annual increase in
labor force in these sectors in the Chinese First Five Year Plan of a
little less than 6 percent.
* P. 13, above.
** P. 15, above.
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2. Productivity.
The Chinese First Five Year Plan was more successful than
the Soviet Plan in increasing productivity. Per capita output in
Chinese agriculture increased slightly, by about 1 percent a year com-
pared with a decline of about 4 percent a year for Soviet agricultural
output. Hodgman :V estimated the productivity of workers of large-
scale industry in 1932 as 92 percent of 1928. The productivity of
workers in large-scale industry during the Chinese Five Year Plan in-
creased at an average annual rate of more than 10 percent. Part of
this difference in trends is due to the fact, already referred to,
that the first part of the Chinese Five Year Plan was still a period
of recovery, and part is due to the much higher per capita output
already achieved by the Soviet economy before the Five Year Plan.
After allowing for these factors, it is still likely that in the
Soviet Five Year Plan period the crisis in the countryside and other
pressures caused greater additions to the nonagricultural labor force
than could be efficiently utilized. As Hodgman points out, however,
these transfers of untrained .workers provided a potential for in-
creasing produetivity during the Second Five Year Plan as these
workers acquired the necessary skills.
3. Investment and Labor Force During the Two Five Year Plans.
With regard to nonagricultural investment as discussed
above, Soviet investment in relation to output is shown in Table 9*
to be 1.5 times that of China. At the same time, workers and staff
in the USSR increased more than twice as fast as in Communist China.
One indication of the extent to which workers are furnished with ma-
chinery and equipment in production is the primary energy available.
Primary energy is of course made available for household consumption
and for the agricultural sector, but production of primary energy in
relation to labor force can be used as a rough indicator of Changes
in the technology of production. Table 10** presents this comparison.
Although per capita output of primary fuels increased
more rapidly in the USSR than in China, output per member of the .
nonagricultural labor force in the USSR increased about 6o percent
as rapidly as in China, and output of fuel per employee in industry
and transportation -- the primary users -- actually declined whereas
Chinese output per employee in these sectors increased rapidly. Be-
cause an increasing amount of petroleum output in the USSR was used
for the growing number of tractors in the agricultural sector, the
decline in actual fuel available per employee must have been greater
than shown in Table 10.
* P. 27, above.
** Table 10 follows on p. 32.
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Table 10
First Five Year Plans, Communist China and the USSR:
Per Capita Production of Primary Energy for Selected Segements
of the Population
Production
Per capita output
1952, China; 1957, China;
1926, USSR 1932, USSR Average
Annual Change
Kilograms of Standard Fuel (Percent)
China
105
190
12.6
USSR
343
611
15.5
Per member of the
nonagricultural
labor force
China
1,381
2,278
10.5
USSR
3,558
4,517
6.2
Per worker in large-
scale industry and
transportation and
communications
China
9,423
13,780
7.9
USSR
11)812
11,041
-1.7
The same general trends in the technical level of indus-
trial production and in other nonagricultural sectors -can be shown
in figures on fixed assets, although the data for China are far from
satisfactory. Industrial fixed assets in the USSR in million 1933
rubles at replacement value increased at an average annual rate of
about 25 percent, 15/ but, as workers in large-scale industry in-
creased at an average annual rate of about 20 percent and workers in
construction increased at an average annual rate of about 44 percent,
there could have been little change in the amount of machinery and
equipment per employee, and probably a small decline. In China) in-
dustrial fixed assets in current prices) probably at replacement value
after 1949, increased from 1952 to 1957 at an average annual rate of
about 20 percent. As employees in industry in 1952-57 increased at
an annual rate of about 6 percent and construction workers at a rate
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of a little less than 25 percent, significant increases probably took
place in the amount of machinery and equipment per employee. In
agriculture, on the other hand, the rural population in the USSR de-
clined) and large increases took place in available machinery for
agricultural production: In China, no such shift took place.
It is therefore an ironic fact that in the USSR, where
labor was in shorter supply, the energy and the machinery and equip-
ment available per worker.in the sectors directly associated with
industrialization -- large-scale industry, construction, and trans-
portation -- actually declined. In Communist China, on the other
hand, where the labor supply was much greater, the energy available,
and probably the machinery and equipment available for these sectors,
increased significantly during the First Five Year Plan. On the other
hand, in both energy and machinery and equipment available for the
agricultural labor force, the trends were reversed, as the USSR con-
centrated on the mechanization of agriculture and China concentrated
on an agricultural program that stressed labor-intensive methods for
increasing agricultural production. One is tempted to conclude that
the Chinese Communists have proceeded to avoid the worst mistakes of
the Soviet First Five Year Plan, but also in a manner that was not
calculated to take full advantage of China's more ample labor supply.
The crucial question here is whether a different program -- by which
greater labor-intensive methods would be used in large-scale industry
and greater distribution of investment and of energy to other sectors,
such as agriculture and trade -- would have had a greater return in
terms of over-all increases in output than the policies adopted.
Certainly the problems of organization and management in view of the
limited supply of technical and managerial talent in China would make
such a step more difficult than in the USSR and might offset the ad-
vantage for the Chinese Communist planners, particularly because such
a program would involve a departure from the Soviet model on which
the First Five Year Plan was based. In addition, a greater shift of
labor into industry, construction, and modern transportation would
create further inflationary pressures, involving increased problems
in the control over consumer goods and 'requiring still greater in-
creases in control over the distribution of agricultural output.
At the present time the Chinese Communists are putting in-
creased emphasis on small-scale production at the local level. This
marked departure from the Soviet model used in the First Five Year
Plan involves a greater diversification of investment and greater in-
creases in the labor force in relation to available energy and ma-
chinery and equipment. It is claimed that this policy could not have
been applied earlier, because of a limited amount of skilled manpower
and a lack of the necessary industrial base to produce the equipment
involved. !02/ The concentration on larger, capital-intensive con-
struction projects may have used more efficiently the technical aid
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furnished by the USSR and may have simplified the procurement of ma-
chinery and equipment for import. Nevertheless, it is possible, if
not probable, that greater emphasis on small-scale industrial produc-
tion could well have been adopted earlier in Communist planning instead
of being delayed until the period of the Chinese Second Five Year Plan.
H. Foreign Economic Trade Policies During the Two Five Year Plans.
Foreign trade was not as important to the Soviet economy as it
was to China. In 1928, Soviet imports and exports were equivalent to
about 5 percent of Soviet GNP in current prices (see Table 7*). In
1952, China's imports and exports were equivalent to about 10 percent
of China's GNP, and in 1957 they were 9 percent of China's GNP in cur-
rent prices. Imports were also much more important for China's in-
vestment program than for the USSR. During China's First Five Year
Plan, imports of machinery equipment, excluding military imports, were
equal to about 17 percent of total state investment (see Tables 8**
and 11***). Imports of machinery and equipment for the USSR from
1928 through 1932 constitute about 5 percent of total state and co-
operative investment.
In view of the emphasis that is often placed on Soviet credits
as an aid to Chinese economic development, it is interesting to note
that, aside from invisible exports and gold shipments, the surplus of
Soviet imports above exports from 1928 to 1932 was equal to 12 percent
of total Imports. During China's First Five Year Plan the surplus of
imports above exports was equal to about 7 percent of total imports
for the 5-year period 1953-57. Soviet indebtedness abroad is reported
to have reached a maximum of 1.4 million rubles in 1931, LI equal to
1.7 times the average annual exports for 1928-32, or about 4 percent
of Soviet GNP in 1928. Chinese indebtedness to the USSR reached a
maximum of 4.7 billion yuan by the end of 1955, 82/ or about the same
as the average annual exports for 1953-57 -- about 7 percent of its
GNP in 1952. The USSR therefore received more in the way of credits
in relation to its foreign trade during its First Five Year Plan and
the period preceding it than Communist China received during its First
Five Year Plan and the period preceding it. Aid constituted, however,
a lower proportion of total output in the USSR than in China. Two-
thirds of Chinese credits, however, were in support of military im-
ports devoted to strengthening the Chinese military establishment,
and Soviet indebtedness was much more largely channeled to the Soviet
program of industrialization.
**
***
P. 23, above.
P. 25, above.
Table 11 follows on p. 35.
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Table 11
First Five Year Plans, Communist China and the USSR: Foreign Trade
Communist China El/
(1953-57)
USSR 12/
(1928-32)
Exports
Agricultural products
(including agricul-
tural processed
products)
Mining and industrial
products
Million Yuan
Percent
Million RUbles
Percent
18,120
5,260
77.5
22.5
3,042
1,108
73.0
27.0
Total exports
23,380
100.0
14,150
100.0
Imports
Machinery equipment
and ferrous metal
products
15,140
60
2,544.1
54
Of which, military
supplies
5,050
20
N.A. 2/
Essential raw materials
7,570
30
1,719.3
37
Consumer goods
2,520
10
438.1
9
Total imports
25,230
100
4,701.5
100
a. 83/
c. Probably small.
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The pattern of foreign trade was similar for the two countries,
as shown in Table 11, with its emphasis on exports of agricultural
goods and raw materials and on imports of machinery and equipment for
investment with a minimum of consumer goods, but the Soviet pattern of
trade reflects its relatively higher industrial base. Industrial ex-
ports are somewhat higher, and imports of essential raw materials for
industrial production are significantly higher, for the USSR than for
China. One-fifth of China's imports were for the military establish-
ment, imports that could otherwise have been available for investment
or consumption.
V. Prospects for Communist China in the Light of Soviet Experience
During the Soviet First and Second Five Year Plans
The Soviet experience during the First and Second Five Year Plans
serves to call attention to certain trends and problems facing Chinese
Communist planners in pursuing similar economic objectives. An analysis
of the prospects for Communist China will be made in terms of two sets
of assumptions, one of which is contrary to fact. The first assump-
tion would be that Communist China continued as in its First Five Year
Plan to model its policies and planning on the Soviet experience with
only minor modifications. This is essentially the framework set forth
in the proposals for the Second Five Year Plan announced at the Eighth
Party Congress in October of 1956. The second assumption is that far-
reaching changes in policies and planning are made which depart from
the Soviet model. This second assumption represents what is actually
taking place in 1958 in connection with the "leap forward" movement
and the establishment of communes.
The policies in the two Second Five Year Plans as established in
the USSR and as initially proposed in China represent a continuation
of the policies established during the First Five Year,Plans. The
same similaritieS and differences appear. Socialization of agricul-
ture in the USSR was a continuation and consolidation of the pattern
of collectivization during the First Five Year Plan. Socialization had
been completed in industry and trade, and the Second Five Year Plan was
also a period of consolidation of already-established state control.
Such a period of consolidation was implicit in the first announcements
for the Chinese Second Five Year Plan, with the end of all payments to
the private industrialists and traders for assets taken over by joint
state-private enterprises to take place some time during the Second
Five Year Plan.
The rate of increase in state investment was to be slowed down in
each of the Second Five Year Plan periods. In each case, state in-
vestment during the Second Five Year Plan was to be about double that
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of the First Five Year Plan. In the USSR, however, the average
annual level of state investment in constant prices during the First
Five Year Plan was more than three times the level of investment in
1928. The average annual investment in constant prices during the
Second Five Year Plan was only about one-third higher than the level
of state investment in 1932. In the proposals for the Chinese Second
Five Year Plan the 1957 level of state investment had been cut by
about 15 percent compared with 1956, and the proportion of total out-
put for investment was expected to be about the same for the Second
Five Year Plan as in the last few years of the First Five Year Plan.
The allocation of investment in the Soviet Second Five Year Plan
was in general the same as in the First, with industry allocated some-
what more, and agriculture somewhat less, than in the First Five Year
Plan. The Chinese proposals increased the allocation to agriculture
and continued the emphasis on industry, with slightly more emphasis on
light industry. As a result, a comparison of the two patterns of al-
location shows them to be even more similar than in the two First Five
Year Plans: The Soviet Second Five Year Plan continued to stress mech-
anization of agriculture and increases in farm productivity while the
Chinese program still stressed irrigation, fertilizer, and labor-in-
sive modes of production.
The rate of increase in workers and staff in the nonagricultural
sectors was slowed during the Soviet Second Five Year Plan, dropping
from 11 percent a year to about 4 percent a year. Workers in indus-
try and construction increased by 2.6 percent a year compared with
26 percent during the Soviet First Five Year Plan. The proposals for
the Chinese Second Five Year Plan called for a rate of increase in
workers and staff which was about the same as the 5 percent for the
First Five Year Plan. Production of primary energy during the Soviet
Second Five Year Plan increased at an average annual rate of 12 per-
cent, and steel increased at an average annual rate of nearly 25 per-
cent; with probably corresponding increases in machinery output, the
amount of machinery and equipment and productive facilities per worker
was improved enormously compared with the Soviet First Five Year Plan.
Although little change probably took place in industrial fixed assets
per worker in industry and construction during the Soviet First Five
Year Plan, fixed assets per worker in industry Were almost two-thirds
higher in 1937 than in 1932. The Chinese Second Five Year Plan as out-
lined proposed the same general rate of increase in fixed assets per
worker that occurred during the First Five Year Plan, and industrial
investment was clearly expected to continue the emphasis on large-scale
and capital-intensive projects.
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The Soviet Second Five Year Plan was on all counts successful.
Agricultural output, which in 1932 was 80 percent of the 1928 level,
had risen by 1935 to the 1928 level and in 1937 -- an unusually good
year -- was about 20 percent higher than in 1928 and half again as ,
high as in 1932. The rate of increase in over-all industrial output
during the Second Five Year Plan was substantially higher than during
the First Five Year Plan. More important was the balance achieved be-
tween light and heavy industry. The rate of increase in production
of consumer goods was about three-fourths as fast as that of over-all
industrial production.
The proposals for the Chinese Second Five Year Plan outlined a
program giving greater emphasis to agriculture, and if this program
had actually been put into effect, agricultural output could have
been expected to increase by a significantly higher rate than during
the First Five Year Plan. The rate of increase could not have been
expected to he as high as during the Soviet Second Five Year Plan,
because in this period Soviet agriculture recovered from the large
declines experienced from 1931 to 1933. The targets established for
industry and the projected levels of light industry output that would
follow from the increases to be expected in agricultural output in-
dicate that the rate of increase in industrial output during the Chi-
nese Second Five Year Plan was expected to be no higher than during
the Chinese First Five Year Plan, and probably somewhat lower. An
acceleration of industrial growth as in the Soviet Second Five Year
Plan could not reasonably be expected if the same planning framework
had continued. In the first place, increases in industrial output in
1953 and 1954 in China represented in part results of the period of
recovery -- a period which had already occurred in the USSR before .
its First Five Year Plan. In the second place, industrial output had
increased more nearly in proportion to increases in industrial invest-
ment during the Chinese First Five Year Plan, whereas during the Soviet
First Five Year Plan industrial investment had proceeded faster than
the extent to which the new facilities were utilized for production.
As the large numbers of industrial workers which were added during the
First Five Year Plan gained new skills and the added capacity was more
fully utilized, the Soviet Second Five Year Plan reflected correspond-
ing gains in industrial production.
Actually the developments in 1958 show that the period of the
Chinese Second Five Year Plan marks drastic departures from the
Soviet model and from the framework of policies and planning for
the Chinese First Five Year Plan. Agricultural development re-
ceived all-out emphasis relying in the main on mass mobilization
of farm labor and mass propagation of new agriculture techniques.
Continuing development of large-scale projects was to be carried out
as planned, but, in addition, resources were devoted to local industry
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and to small-scale industrial projects. This emphasis on labor-
intensive industrial production was a deliberate effort to utilize
China's manpower resources more efficiently. The scale of effort
and the targets now established are such a new departure that it is
not possible to predict the outcome except to say that such a pro-
gram is better conceived to meet actual economic conditions in China
than the close imitation of the Soviet model which was the basis of
planning for the period 1953-57.
Not only have economic development programs for agriculture and
industry changed radically upward to utilize China's hige labor
supply more fully, but also socialization of agriculture has been
supplanted by organization of most of China's population into com-
munes. Instead of consolidating agricultural collectives along the
lines already established, communes have been set up that are to cut
across economic sectors, combining agricultural, industrial and com-
mercial activities in a single organization locality. The institu-
tional changes involved are so sweeping that it is impossible to
evaluate them fully at this time.. Neither the trends under the Chi-
nese First Five Year Plan nor the trends under the Soviet First and
Second Five Year Plans can be used as guide lines for projecting
trends during the Chinese Second Five Year Plan. All that can be
said is that China's manpower resources and its natural resources,
if fully mobilized, will permit rapid industrial development and at
least for a time relatively rapid agricultural development. If the
new developments can be consolidated and Communist controls along
such ambitious lines succeed, the rate of increase in output will be
much higher than that originally projected for the Second Five Year
Plan.
The "leap forward" program, however, is having the effect of trans-
forming the Chinese economy from a labor-surplus economy to one in
which labor will be in short supply in a very brief period of time.
The gains achieved cannot be considered typical of trends in output
thereafter, but the new developments may achieve a breakthrough in
the relation of population to food supply and relatively quick gains
in industrial output during the early years of the Second Five Year
Plan. The social and political reactions to the organization of com-
munes are the critical factors in the success or failure of the move-
ment. These are even more difficult to predict. Only the passage of
time will enable us to determine their effect on the economy.
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