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China GENERAL NATURE OF THE ECONOMY
Throughout most of the nineteenth and twentieth centuries, as
during much of earlier Chinese history, the economy was barely able
to meet the basic needs of the country's huge population--the
largest in the world
(see Population
, ch. 2). In normal years the
economy produced just about the amount of food required to meet the
minimum nutritional requirements of the populace. In times of
drought, flood, warfare, or civil disorder, there was not enough
food, and before 1949 such conditions often led to starvation on a
vast scale. Under the government of the People's Republic, food
shortages were countered by redistributing supplies within China
and by importing grain from abroad, which successfully averted
famine except in the catastrophic years of 1959, 1960, and 1961.
Despite formidable constraints and disruptions, the Chinese
economy was never stagnant. Production grew substantially between
1800 and 1949 and increased fairly rapidly after 1949. Before the
1980s, however, production gains were largely matched by population
growth, so that productive capacity was unable to outdistance
essential consumption needs significantly, particularly in
agriculture. Grain output in 1979 was about twice as large as in
1952, but so was the population. As a result, little surplus was
produced even in good years. Further, few resources could be spared
for investment in capital goods, such as machinery, factories,
mines, railroads, and other productive assets. The relatively small
size of the capital stock caused productivity per worker to remain
low, which in turn perpetuated the economy's inability to generate
a substantial surplus
(see
fig. 7).
China's socialist system, with state ownership of most industry
and central control over planning and the financial system, has
enabled the government to mobilize whatever surplus was available
and greatly increase the proportion of the national economic output
devoted to investment. Western analysts estimated that investment
accounted for about 25 percent of GNP in the 30 years after 1949,
a rate surpassed by few other countries. Because of the
comparatively low level of GNP, however, even this high rate of
investment secured only a small amount of resources relative to the
size of the country and the population. In 1978, for instance, only
16 percent of the GNP of the United States went into gross
investment, but this amounted to US$345.6 billion, whereas the
approximately 25 percent of China's GNP that was invested came to
about the equivalent of US$111 billion and had to serve a
population 4.5 times the size of that in the United States. The
limited resources available for investment prevented China from
rapidly producing or importing advanced equipment. Technological
development proceeded gradually, and outdated equipment continued
to be used as long as possible. Consequently, many different levels
of technology were in use simultaneously
(see Historical Development of Science and Technology Policy
, ch. 9). Most
industries included some plants that were comparable to modern
Western facilities, often based on imported equipment and designs.
Equipment produced by Chinese factories was generally some years
behind standard Western designs. Agriculture received a smaller
share of state investment than industry and remained at a much
lower average level of technology and productivity. Despite a
significant increase in the availability of tractors, trucks,
electric pumps, and mechanical threshers, most agricultural
activities were still performed by people or animals
(see Agricultural Policies
, ch. 6).
Although the central administration coordinated the economy and
redistributed resources among regions when necessary, in practice
most economic activity was very decentralized, and there was
relatively little flow of goods and services between areas
(see Internal Trade and Distribution
, ch. 8). About 75 percent of the
grain grown in China, for instance, was consumed by the families
that produced it. One of the most important sources of growth in
the economy was the improved ability to exploit the comparative
advantages of each locality by expanding transportation capacity.
The communications and transportation sectors were growing and
improving but still could not carry the volume of traffic required
by a modern economy because of the scarcity of investment funds and
advanced technology
(see Transportation;
Telecommunications, ch.
8).
Because of limited interaction among regions, the great variety
of geographic zones in China, and the broad spectrum of
technologies in use, areas differed widely in economic activities,
organizational forms, and prosperity
(see Physical Environment
, ch.
2). Within any given city, enterprises ranged from tiny,
collectively owned handicraft units, barely earning subsistencelevel incomes for their members, to modern state-owned factories,
whose workers received steady wages plus free medical care,
bonuses, and an assortment of other benefits. The agricultural
sector was diverse, accommodating well-equipped, "specialized
households" that supplied scarce products and services to local
markets; wealthy suburban villages specializing in the production
of vegetables, pork, poultry, and eggs to sell in free markets in
the nearby cities; fishing villages on the seacoast; herding groups
on the grasslands of Nei Monggol Autonomous Region (Inner
Mongolia); and poor, struggling grain-producing villages in the
arid mountains of Shaanxi and Gansu provinces. The economy had
progressed in major ways since 1949, but after four decades experts
in China and abroad agreed that it had a great distance yet to go.
Data as of July 1987
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