ECONOMIC - THEORY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-00809A000700140165-2
• Release Decision: RIPPUB
• Original Classification: R
• Document Page Count: 6
• Document Creation Date: December 22, 2016
• Document Release Date: August 8, 2011
• Sequence Number: 165
• Publication Date: October 21, 1953
• Content Type: REPORT

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CLASSIFICATION RiiSTIt1CTrD
CENTRAL EINTELLIGENIUOR CE AGENCY
INFORMATION FROM
FOREIGN DOCUMENTS OR RADIO BROADCASTS
COUNTRY China
SUBJECT Economic - Theory
HOW
PUBLISHED Monograph
WHERE
PUBLISHED Peiping
DATE
PUBLISHED Jun 1950
LANGUAGE Chinese
.1 11 T1 1 1.
REPORT
CD NO.
DATE OF
SUPPLEMENT TO
REPORT NO.
SOURCE Ch -chi Hsueh Chia -hue, published by San-lien Shu-tien,
ffhis report, taken from the Ching-chi Rsueh Chian
(Lectures on Economics), a monograph written by Ti Chao-pai,
gives definitions and explanations of certain economic
principles to be followed In putting the economy of the New
Democracy into effect. Included are the characteristics of
commodities, money, enterp.ises, ca ital, expanded production,
profits, prices, loans, and credit.
Characteristics of Commodities Found in the Chinese Society
There are at least three types of commodities existing in the Chinese
society at present:
1. Capitalist commodities- A major part of this type is imported from
foreign capitalist nations; a minor part is produced by domestic capitalist
factories. From the national viewpoint, there are great differences between
foreign capitalist production and domestic capitalist production, inasmuch
as the former continuously relies on its superiority to oppres, the latter.
From the viewpoint of the nature of their rrodaction, however, they are both
the same.
2. Commodities produced in a simple commercial economy: This type,
which occupies an important. position in our over-all economy, is produced
locally in our villages and small cities and includes processed agricultural
products as well as tools manufactured from raw uterials procured locally..
In the simple type of society, the independent i.,rmers produce their crops
for their own benefit; the tenant farmers share their crops with their land-
lord and the surplus is marketed for public consu:iption. Thus, this type of
commodities is neither socialistic nor capitalistic.
3. Commodities produced under the New Democracy: This type differs
from the other two in that the commodities are produced to serve as an
instrument in building the economy of the New Democracy, to accelerate the
production and distribution processes, and to develop the productive capacity
of the society.
CLASSIFICATION
NAVY Nsi Re
AIR FBI
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The New Democracy represents the transition from a semicoloniej. and
semifeudal society to a socialistic society; thus, the nature of the
commodities produced under this system cannot be considered socialistic.
Goods produced during the early stages of the New Democracy must vary in
number and in nature. Because the people themselves direct the production,
it is necessary to permit the existence of small commercial and capitalist
methods. Under the capitalist society, the people are dictated by the laws
of the movement of goods; under the New Democratic society, the people
control the movement of goods. This, then, is the most significant basic
change of the society which permits goods produced under the New Democracy
to remain free from many of the contradictions which existed in the
capitalist society.
Characteristics of Money in the Chinese Society
In the Chinese society money serves as a measure of value, standard
of value, medium of exchange, storehouse fmethod of saving, and for pay-
ment of value.
In the cities, money has retained all the characteristics of the
capitalistic society. For example, the city inhabitants worship money;
capitalists exploit the workers for money; laborers disregard their health
to work for money; and the small entrepreneurs waste their time and effort
in hopeless dreams of money. Furthermore, money is aimlessly issued,
circulated, paid, and collected.
The financial standard in the villages is measured in terms of "the
amount of grain," not in "the amount of money " Therefore, the dispute
between the tenant farmers and the landlords lies in the amount of rent,
not in the amount cf wages. In 1941, inflation appeared in the villages,
disrupting the functions of money, which became more and more unstable.
Consequently, production and circulation became more and more confused,
resulting in the complete collapse of the monetary functions. In this type
of simple commercial society, the medium of exchange function is the primary
one; the functions of storage and cvsyment become secondary. Therefore,
new financial institutions have not yet been developed in the villages.
Because of this, the position of the villages is relatively weaker than
that of the cities.
Under the New Democracy, the fundamental functions of money are not
to weaken, but to develop, the productive capacity of the society and to
carry out the aims of socialism.
Characteristics-of-Enterprises in the Chinese Society
Semifeudal and imperialistic exploitation must be abolished under the
New Democracy, so that the productive capacity can be raised and an inde-
pendent national economy established.. To to away with feudal exploitation,
the farmers, not the landlords, must control the land; to do away with
imperialistic exploitation, special rights of the imperialists in China
must be abolished. After these two forms of exploitation are abolished,
the production of goods under the New Democracy may be assumed by the
V. I
following groups:
1. State enterprises: State enterprises include the basic mining
industry, the national defense industry, the banks, transportation and
communication enterprises, etc., all of which will be under state control.
They can lead our present economy along the path to a socialist economy.
Since the means of production are controlled by the state, the workers
of these industries will not be exploited.
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2. Cooperative enterprises: Cooperative enterprises are organized
by the various small enterpreneurs under a cooperative management. Each
entrepreneur is to retain his own means of production, and each is to
contribute his time and effort to the operation of the cooperative. This
system is free from feudal and capitalistic fleecing.
3. Small independent producers: These small producers are now en-
gaged in agricultural and industrial fields. They are devoting their
labor to production and employing their own means of production; there-
fore, they are free from the fleecing of the privileged groups. They
have fallen behind, however, in the techniques of production since they
are operating on a small scale and are now finding that they cannot
compete with the productivity of the state, the cooperative, and the
capitalist enterprises. The only alternative open to these small producers
in the future is to turn to cooperative enterprise.
4. Capitalist enterprises: Not only will capitalist enterprises
be allowed to exist under the New Democracy, but they will he permitted
to develop because the obstacles present in feudalism and imperialism
will have been removed. Under this new system, their profits will be
reasonably controlled and laborers will be given a relatively higher
real wage. These enterprises will be directed toward the development of
light industries. The capitalis` enterprises will no longer be allowed
to maintain a dominating positior. in our economy, nor will they be
permitted to fleece the Laborers ruthless:y through legal and administra-
tive means.
Of the four production methods, on;.y the last retains the surplus
value feature. The capitalist enterprise can be eliminated only when
the productive capacity of society is greatly increased and when state
and cooperative enterprises are placed in an absolutely favorable
position.
Characteristics of Capital Accumulation-and EE-tended Production Under the
New Democracy -J -- -
Under the economic, system of the New Democracy, the accumu;htion of
wealth and expanded production, the feremc.st economic problems of the
people, are not identical. The wealth of high officials and capitalists
should be taken over and put to use as capital. in public enterprises.
The sources or types of such capital are immaterial, provided it is used
properly in the interest of national constriction.
Actually, the source of capital for the new economic construction
will be found in the pooling of all capital in the present society and
in the earmarking of this capital to appropriate uses. After the
elimination of feudalistic and imperiraistic exploitation within the
nation, capitalistic development will be expanded accordingly. In the
meantime, state enterprises, cooperative enterprises, and other produc-
tive units will also be expended. Types of capital for expanded pro-
duction are as follows--
1. Expanded production of state enterprises= There is an element
of socialism in this type of enterprise production. Here, reward for
exploitation of surplus value will be entirely eliminated. In this type
of enterprise, workers will have reached the primary stage where the theory
"to each according to his ability and worth" is applied. _There is a degree
of difference, however, between this type of enterprise Zat present, and
that in a socialistic state: (a) This type must rely on the exchange of
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products among the various types of enterprises before going into expanded
production. (b) Under the New Democratic economic structure, it is only
a directing factor, and is not yet able to become a determining factor
in production.
2. Expanded production of capit.ali.stic enterprises: Expanded pro-
duction, under the New Democratic system, may cause capitalistic production
to occupy only a secondary position which may further cause an alteration
in the original principle and, at the seine time, cause the adoption of a
new set of' principles. These are: (a) Surplus value exploitation must
be reduced proportionately. Thus, theoretically, this expanded production
must advance at a less rapid pace than the old capitalistic expanded
production. (h) Under the New Democracy, the purchasing power of society
cannot be determined solely by the variable amount of capital set aside
for expanded production. it must be determined in combination with
salary earned by workers in other type: of enterprises. (c) The future
of expanded production will be affected and controlled by the production
plan of the entire society; therefore, it cannot expand blindly and
selfishly. (d) For these three reasons, capitalistic production with-
in a New Democratic society cannot lead to large-scale economic crises.
Naturally, individual cases of conflict netweec production and consump-
tion cannot be avoided.
3. Expanded production of ccvperativc: enterprises: Expanded
production of cooperative ente.rpri~e; will c: more rapid than that of
the small independent producer=:. Consider, for exa:np'_e, that ten small
producers have organized into a cooperative enterprise, while another
ten producers continue to produce inde.handeet_ly. Both are alike in
men, capital, and manpower, but when it comes to producing, the former
is of much greater value than Inc: latter. The reasons for this are,
(a) Since the capital. of a cooperative enterprise is concentrated,
modern machines can be p:rchased Since the capital of the independent
producers 1 divided among ten units. row machines are not within
reach and thus the ability to produce is not is great as that of the
cooperative. (b) Cooperative enterprises using new-type machines can
put into practice the dlvisi^n of _ab,?r, thus raising production
standards. With production On ndirih.Lal basis, however, no
division of labor can be mtde. (c) A ,.:-operative enterprise can buy
raw material in large quanti-.icss and then soli by lots. This lowers
the cost involved in the buying and ce l inO process.
Within a cooperative enterprise, since the workers exercise
the production power, excess cost, may be etiminated. There is a great
difference between this and ralitaiiatir ent.?.rprice.. However, pro-
duction power still rests wiin the :niividuai. The eegree of expanded
production depends not. only :n the va:.ui cf the previous production but
also on the wishes of t.h iadividu cs within th, enterprise, Tt is also
affected by the amount. of h?-?n:._ wjri:c receive from profits, by in-
creases in salaries, an.1 ether iact,cr_ "-his is an important difference
from the expanded production of a s:ats e-n?-rprse.
Exrander. p:c,f .ctinn s;:al'. :r1!1 c:ondsnt producers, Small inde-
pendent producer? :nest_ cont..rib r. to exrrn,ted production This has
become very difficult bscc.:ie ;ma l._ ir:deperdent producers own only simple
production equipment and operate under various handicaps. Therefore,
they have only been able to engage in simple production. Expansion is
limited by the factor of [manpower. Once the independent producer starts
to employ workers, he must begin to explctt other people. Then, he can
only perform supervisory duties and will. not have time to participate in
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productive work. Thus, this becomes a kind ref capitalist enterprise. 'There
are not many in this category. Because of continuous competition among
large enterprises, a majority of the small producers are eliminated. They
have only one alternative, to join a cooperative enterprise.
Capitalistic enterprise led by state enterprise and small producers
led by cooperative enterprise are ways to achieve an expanded production
of the New Democratic society. When the production of state enterprise
and cooperative enterprise develops to the point where they can become
determining factors, the troducttor_ power of these two types of enterprises
can supply the basic needs of society.
Characteristics of Profits and Prices in the Chinese Society
1. Prcf,ts under the New Democracy: The amount of profit in a capitalist
society is determined by the amount c: eurpius value, and the average profit
rate is determined by the operation of the market. The capitalist class here-
after cannot exploit labor whenever i': desires, nor can it do so through
manipulations of the market. It must act, in conformity .ith the national.
economic plan and social _egislett.on. Generally speaking, the average profit
rate is lower than. that of capitalist countries, but profits are more secure
because there is no danger of an immediate economic crisis and because pro-
duction and consumption are properly coordinated. Since the capitalist
enterprises in China are free from imperialistic and feudalistic oppression
under the Nev Democracy. they wi- to much better off than before.
The profit rate of the state int-ererises is lower than that of the
capitalist en:.ertrie-e.. But because the lehorere are aware of the fart, that.
the state owns the means of rr-?duc son a._d that they themselves are the
owners, they will put more effor :n.:, prrduction. Consequently, the
raising of the productive c=_pac:cy are. the cp=_eding up of capital circulation
make IT, possible for the state to get mcre profit than the
capita_-_st ectcorprlas- . Fur?hera r,, the yrcfits of the state enterprises be-
long to the laborers, net the. _ap:ts._iets. These profits are used to expand
production and to deve;.or the veri^u ecct enterprises.
2.. Prices under the i:ew r~m?-cr_-y The price standard under the New
Democracy is determined by the products ^:y of the varioue production methods.
During the initi.al ;tape, a majority of the commodity seed- of the society
are supplied by captts14_stic r.nterprise_ and small entrepreneurs. The
present state and cooperative enterptises fear that they cannot supply the
majority of goods during the initial stage of the New Demccraey. However,
the state. enr.-grice_ are m^r ^r c_: ... eve 'ha-, the rrc vale enterprises
the cooperative enterprises are nor,. r?rcr.uc-iv- than the Individual enter-
prises- Therefore, the cost of pres.- ::ti.n c. state enterprises is lower
than that of private enterprisc and h,,. c_... ,of pr::-ion of cooperative
enterprises -_ lower thar. that :f _?_.vid to ceote.rprL-e. After the
expansion and development of no -'sits and cooperative enterprise.. the
control of market prices wii' be ehif.=d from the ceecteliets and enteepreneurs
to the state and pooperte ive "..:_rrrl_ AT the t:ec when the pri'c-e of
goods produced by th e.apira:_... ._.. and, the ewa;_ entrepreneurs
inevitsh,-y fall. be ow tt'irfon;y d'. '. rn r,i,re ,hen wis'. be join the
cooperative and stage
CCharacteristtce of moans andCred t in: hcCChinese Society.
The three types of loan funds existing is the Chinese society are
imperialistic lean funds, various private and pubic loan funds of the
domestic banks, and feudalistic usurious funds
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The primary aim of imperialistic loans was political and therefore,
by and large, did not help our economic production. The funds for public
and private loans by the domestic banks were derived either from the
fleecing of the masses by the Chinese bureaucrats, militarists, and
compradors, or from the exploitation of the feudal landlords. Through
the feudalistic usurious funds, small farmers and tenant farmers were
cruelly fleeced. Moreover, small entrepreneurs in the cities had to
resort even to money brokers and usurers whose interest rates were
several times higher than those of the banks.
In building our national economy under the New Democracy, foreign
loans may still be necessary. However, they are acceptable only when
they are offered on the basis of equality and mutual benefit, and if
they do not endanger our sovereignty. These loans should be used to
develop production and to accelerate trade.
Capital loan funds of domestic banks must be used for the develop-
ment of legitimate business. Under the New Democracy, since the bureau-
crats, militarists, landlords, and compradors have been deprived of the
sources for obtaining capital to exploit the people, the people's standard
of living has improved, the national economy has expanded, and wages are
raised. As a result, circulating capital is being funneled into the
banks and made available to the various industries. The trend and the
amount of investment will be guided by the economic plan of the New
Democracy; therefore, the important banks must be controlled by the state.
Under the New Democracy, interest is still a part of surplus value
which still belongs to the lenders. Since banks are controlled by the
state, credit and profits do not flow into private bands, but are used
for economic construction. Only when the landlord class is eliminated
and the various industries prosperously developed will usury be abolished;
and only when usury is eliminated can circulating capital be channeled
into the credit institutions (the banks).
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