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China Planning
Until the 1980s the economy was directed and coordinated by
means of economic plans that were formulated at all levels of
administration. The reform program significantly reduced the role
of central planning by encouraging off-plan production by stateowned units and by promoting the growth of collective and
individual enterprises that did not fall under the planning system.
The government also endeavored to replace direct plan control with
indirect guidance of the economy through economic levers, such as
taxes and investment support. Despite these changes, overall
direction of the economy was still carried out by the central plan,
as was allocation of key goods, such as steel and energy.
When China's planning apparatus was first established in the
early 1950s, it was patterned after the highly centralized Soviet
system. That system basically depended on a central planning
bureaucracy that calculated and balanced quantities of major goods
demanded and supplied. This approach was substantially modified
during the
Great Leap Forward
(1958-60; see Glossary), when
economic management was extensively decentralized. During the 1960s
and 1970s, the degree of centralization in the planning system
fluctuated with the political currents, waxing in times of
pragmatic growth and waning under the influence of the Cultural
Revolution and the Gang of Four.
At the national level, planning began in the highest bodies of
the central government. National economic goals and priorities were
determined by the party's Central Committee, the State Council, and
the National People's Congress. These decisions were then
communicated to the ministries, commissions, and other agencies
under the State Council to be put into effect through national
economic plans.
The State Planning Commission worked with the State Economic
Commission, State Statistical Bureau, the former State Capital
Construction Commission, People's Bank of China, the economic
ministries, and other organs subordinate to the State Council to
formulate national plans of varying duration and import. Long-range
plans as protracted as ten and twelve years also were announced at
various times. These essentially were statements of future goals
and the intended general direction of the economy, and they had
little direct effect on economic activity. As of late 1987 the most
recent such long-range plan was the draft plan for 1976-85,
presented by Hua Guofeng in February 1978.
The primary form of medium-range plan was the five-year plan,
another feature adopted from the Soviet system. The purpose of the
five-year plan was to guide and integrate the annual plans to
achieve balanced growth and progress toward national goals. In
practice, this role was only fulfilled by the First Five-Year Plan
(1953-57), which served effectively as a blueprint for
industrialization. The second (1958-62), third (1966-70), fourth
(1971-75), and fifth (1976-80) five-year plans were all interrupted
by political upheavals and had little influence. The Sixth
Five-Year Plan (1981-85) was drawn up during the planning period
and was more a reflection of the results of the reform program than
a guide for reform. The Seventh Five-Year Plan (1986-90) was
intended to direct the course of the reforms through the second
half of the 1980s, but by mid-1987 its future was already clouded
by political struggle.
A second form of medium-range planning appeared in the
readjustment and recovery periods of 1949-52, 1963-65, and 1979-81,
each of which followed a period of chaos--the civil war, the Great
Leap Forward, and the Gang of Four, respectively. In these
instances, normal long- and medium-range planning was suspended
while basic imbalances in the economy were targeted and corrected.
In each case, objectives were more limited and clearly defined than
in the five-year plans and were fairly successfully achieved.
The activities of economic units were controlled by annual
plans. Formulation of the plans began in the autumn preceding the
year being planned, so that agricultural output for the current
year could be taken into account. The foundation of an annual plan
was a "material balance table." At the national level, the first
step in the preparation of a material balance table was to
estimate--for each province, autonomous region, special
municipality, and enterprise under direct central control--the
demand and supply for each centrally controlled good. Transfers of
goods between provincial-level units were planned so as to bring
quantities supplied and demanded into balance. As a last resort, a
serious overall deficit in a good could be made up by imports.
The initial targets were sent to the provincial-level
administrations and the centrally controlled enterprises. The
provincial-level counterparts of the state economic commissions and
ministries broke the targets down for allocation among their
subordinate counties, districts, cities, and enterprises under
direct provincial-level control. Counties further distributed their
assigned quantities among their subordinate towns, townships, and
county-owned enterprises, and cities divided their targets into
objectives for the enterprises under their jurisdiction. Finally,
towns assigned goals to the state-owned enterprises they
controlled. Agricultural targets were distributed by townships
among their villages and ultimately were reduced to the quantities
that villages contracted for with individual farm households.
At each level, individual units received their target input
allocations and output quantities. Managers, engineers, and
accountants compared the targets with their own projections, and if
they concluded that the planned output quotas exceeded their
capabilities, they consulted with representatives of the
administrative body superior to them. Each administrative level
adjusted its targets on the basis of discussions with subordinate
units and sent the revised figures back up the planning ladder. The
commissions and ministries evaluated the revised sums, repeated the
material balance table procedure, and used the results as the final
plan, which the State Council then officially approved.
Annual plans formulated at the provincial level provided the
quantities for centrally controlled goods and established targets
for goods that were not included in the national plan but were
important to the province, autonomous region, or special
municipality. These figures went through the same process of
disaggregation, review, discussion, and reaggregation as the
centrally planned targets and eventually became part of the
provincial-level unit's annual plan. Many goods that were not
included at the provincial level were similarly added to county and
city plans.
The final stage of the planning process occurred in the
individual producing units. Having received their output quotas and
the figures for their allocations of capital, labor, and other
supplies, enterprises generally organized their production
schedules into ten-day, one-month, three-month, and six-month
plans.
The Chinese planning system has encountered the same problems
of inflexibility and inadequate responsiveness that have emerged in
other centrally planned economies. The basic difficulty has been
that it is impossible for planners to foresee all the needs of the
economy and to specify adequately the characteristics of planned
inputs and products. Beginning in 1979 and 1980, the first reforms
were introduced on an experimental basis. Nearly all of these
policies increased the autonomy and decision-making power of the
various economic units and reduced the direct role of central
planning. By the mid-1980s planning still was the government's main
mechanism for guiding the economy and correcting imbalances, but
its ability to predict and control the behavior of the economy had
been greatly reduced.
Data as of July 1987
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