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China Recovery from War, 1949-52
In 1949 China's economy was suffering from the debilitating
effects of decades of warfare. Many mines and factories had been
damaged or destroyed. At the end of the war with Japan in 1945,
Soviet troops had dismantled about half the machinery in the major
industrial areas of the northeast and shipped it to the Soviet
Union. Transportation, communication, and power systems had been
destroyed or had deteriorated because of lack of maintenance.
Agriculture was disrupted, and food production was some 30 percent
below its pre-war peak level. Further, economic ills were
compounded by one of the most virulent inflations in world history.
The chief goal of the government for the 1949-52 period was
simply to restore the economy to normal working order. The
administration moved quickly to repair transportation and
communication links and revive the flow of economic activity. The
banking system was nationalized and centralized under the People's
Bank of China. To bring inflation under control by 1951, the
government unified the monetary system, tightened credit,
restricted government budgets at all levels and put them under
central control, and guaranteed the value of the currency. Commerce
was stimulated and partially regulated by the establishment of
state trading companies (commercial departments), which competed
with private traders in purchasing goods from producers and selling
them to consumers or enterprises. Transformation of ownership in
industry proceeded slowly. About a third of the country's
enterprises had been under state control while the Guomindang
government was in power (1927-49), as was much of the modernized
transportation sector. The Chinese Communist Party immediately made
these units state-owned enterprises upon taking power in 1949. The
remaining privately owned enterprises were gradually brought under
government control, but 17 percent of industrial units were still
completely outside the state system in 1952.
In agriculture a major change in landownership was carried out.
Under a nationwide land reform program, titles to about 45 percent
of the arable land were redistributed from landlords and more
prosperous farmers to the 60 to 70 percent of farm families that
previously owned little or no land. Once land reform was completed
in an area, farmers were encouraged to cooperate in some phases of
production through the formation of small "mutual aid teams" of six
or seven households each. Thirty-nine percent of all farm
households belonged to mutual aid teams in 1952. By 1952 price
stability had been established, commerce had been restored, and
industry and agriculture had regained their previous peak levels of
production. The period of recovery had achieved its goals
(see Rural Society
, ch. 3;
Agricultural Policies
, ch. 6).
Data as of July 1987
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