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China The Period of Readjustment, 1979-81
The first few years of the reform program were designated the
"period of readjustment," during which key imbalances in the
economy were to be corrected and a foundation was to be laid for a
well-planned modernization drive. The schedule of Hua Guofeng's
ten-year plan was discarded, although many of its elements were
retained. The major goals of the readjustment process were to
expand exports rapidly; overcome key deficiencies in
transportation, communications, coal, iron, steel, building
materials, and electric power; and redress the imbalance between
light and heavy industry by increasing the growth rate of light
industry and reducing investment in heavy industry. Agricultural
production was stimulated in 1979 by an increase of over 22 percent
in the procurement prices paid for farm products.
The central policies of the reform program were introduced
experimentally during the readjustment period. The most successful
reform policy, the contract responsibility system of production in
agriculture, was suggested by the government in 1979 as a way for
poor rural units in mountainous or arid areas to increase their
incomes. The responsibility system allowed individual farm families
to work a piece of land for profit in return for delivering a set
amount of produce to the collective at a given price. This
arrangement created strong incentives for farmers to reduce
production costs and increase productivity. Soon after its
introduction the responsibility system was adopted by numerous farm
units in all sorts of areas.
Agricultural production was also stimulated by official
encouragement to establish free farmers' markets in urban areas, as
well as in the countryside, and by allowing some families to
operate as "specialized households," devoting their efforts to
producing a scarce commodity or service on a profit-making basis
(see Post-Mao Policies
, ch. 6).
In industry, the main policy innovations increased the autonomy
of enterprise managers, reduced emphasis on planned quotas, allowed
enterprises to produce goods outside the plan for sale on the
market, and permitted enterprises to experiment with the use of
bonuses to reward higher productivity. The government also tested
a fundamental change in financial procedures with a limited number
of state-owned units: rather than remitting all of their profits to
the state, as was normally done, these enterprises were allowed to
pay a tax on their profits and retain the balance for reinvestment
and distribution to workers as bonuses.
The government also actively encouraged the establishment of
collectively owned and operated industrial and service enterprises
as a means of soaking up some of the unemployment among young
people and at the same time helping to increase supplies of light
industrial products. Individual enterprise--true capitalism--also
was allowed, after having virtually disappeared during the Cultural
Revolution, and independent cobblers, tailors, tinkers, and vendors
once again became common sights in the cities. Foreign-trade
procedures were greatly eased, allowing individual enterprises and
administrative departments outside the Ministry of Foreign Trade
(which became the Ministry of Foreign Economic Relations and Trade
in 1984) to engage in direct negotiations with foreign firms. A
wide range of cooperation, trading, and credit arrangements with
foreign firms were legalized so that China could enter the
mainstream of international trade
(see Foreign Trade
, ch. 8).
Data as of July 1987
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