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Growth and Structural Changes in the Chinese Machine-building Industry, 1952–1966*

  • Chu-Yuan Cheng

Abstract

The machine-building industry is one of the newest branches of modern industry in China. Even as late as 1949, machinery accounted for only 2·7 per cent. of the nation's gross industrial output value. Since 1952, however, the industry has been given a high priority in development plans; in official statements, it is often referred to as “the basis for technological transformation of the national economy” and “the pillar of national defence.” By 1966 the relative share of machinery production in total gross industrial output value had increased to 12 per cent., making it one of the most dynamic branches of Chinese industry. A study of this industry not only serves as a gauge of China's potential economic and military strength but also illustrates the role of machine-building in the development of an under-developed economy.

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1 Evidence of the defence nature of the Second Ministry was once given in an authentic official document. On 16 July 1957, the Second Ministry of Machine-building Industry and the head office of the Chinese People's Bank issued a joint directive concerning a supplementary regulation for the settlement of credit accounts between the enterprises under the Second Ministry and the People's Bank. The directive disclosed that most of the enterprises under the supervision of the Second Ministry had refused to provide budgetary data to the People's Bank because of the security requirements of the defence industry. It also revealed that the bank had agreed to waive its right of inspection for secret products and would henceforth forbid its staff to inquire into the names of military products or the conditions and technology of production. Chin-jung fa-kuei hui-pien (Compendium of Laws and Regulations on Financial and Monetary Affairs) (Peking: Head Office of the Chinese People's Bank, 1958), pp. 1718.

2 1968 Year Book of Chinese Communism (Taipeh: Studies on Chinese Communism, 1968), p. 597.

3 Ta kung pao, 9 07 1965, p. 2.

4 The First Five Year Plan of the People's Republic of China (Peking: Foreign Languages Press, 1956), p. 40.

5 Wu, Chun-yang, “The Problems of Geographical Distribution of Our Country's Industrial Construction Projects,” Hsüeh-hsi (Study), No. 10 (2 10 1955).

6 State Statistical Bureau, Wo-kuo Kang-t'ieh, tien-li, mei-t'an, chi-hsieh, fang-chih, tsao-chih kung-yeh ti chin-hsi (The Present and Past of China's Iron and Steel, Electrical Power, Coal, Machinery, Textile and Paper Industries) (Peking: T'ung-chi ch'u-pan-she, 1958), p. 140. (Hereafter referred to as Present and Past.)

7 Sun, Ching-chih etal. (eds.), Tung-pei ti-ch'ü ching-chi ti-li (Economic Geography of North-east China) (Peking: K'o-hsueh ch'u-pan-she, 1959), p. 98.

8 Yang, Ching-wen, “Two Problems in Industrial Location,” Chi-hua ching-chi (Planned Economy) No. 8 (1957), p. 14.

9 The 30-year treaty of friendship, alliance, and mutual assistance between China and the Soviet Union, signed in Moscow in February 1950, explicitly assumed Japan to be the main threat to Sino-Soviet security.

10 CCP, “Proposal of the Second Five Year Plan,” in Eighth National Congress of the Communist Party of China (Peking: Foreign Languages Press, 1956).

11 According to the original plan, the Sanmen Gorge system when complete in 1961 would generate 1·1 million kW. of electricity, enough to supply the five major centres in Lolang, Chengchou, Taiyuan, Sian and Lanchou (Hua-pei ti-ch'ü ching-chi ti-li (Economic Geography of North China) (Peking: K'o-hsueh ch'u-pan-she, 1957), p. 183). This system, however, was only half complete when the Soviets withdrew their technicians in mid-1960.

12 Sun, Ching-chih, etal. (eds.), Hua-tung ti-ch'ü ching-chi ti-li, p. 84.

13 Chao, Erh-lu (Minister of the First Ministry of Machine-building Industry), “Machinery Industry in the Past Decade,” Chi-hsieh Kung-yeh chou-pao (CHKYCP), 26 09 1955, p. 1.

14 No over-all data were available. However, 50 per cent. of machinery output stemmed from Manchuria and east China alone. If the output in Hopeh, Kwangtung and Shantung is added, production in the coastal areas must have been around 70 per cent. of the total.

15 Sun, Ching-chih, etal. (eds.), Tung-pei ti-ch'ü ching-chi ti-li, p. 29.

16 Sun, Ching-chih etal. (eds.), Hua-tung ti-ch'u ching-chi ti-li, p. 231.

17 CHKYCP, No. 54 (01 1960), p. 3.

18 Chung-kuo hsin-wen (China News Service) (Peking), 30 12 1963, pp. 1112.

19 Nung-yeh chi-hsieh chi-shu (Agricultural Machinery Techniques) (Peking), No. 9 (13 09 1964).

20 Solomon, Fabricant, The Output of Manufacturing Industries, 1899–1937 (New York: National Bureau of Economic Research, 1940), p. 301.

21 Richard, Moorsteen, Prices and Production of Machinery in the Soviet Union 1928–1958 (Cambridge, Mass.: Harvard University Press, 1962), p. 68.

22 Chi-hsieh kung-yeh (Machine Industry) (Peking), No. 15 (1958), pp. 59.

23 Alexander, Gerschenkron, A Dollar Index of Soviet Machinery Output, 1927–28 to 1937 (Santa Monica: Rand Corporation, 1951), p. 4; C. M., Li, Economic Development of Communist China (Berkeley and Los Angeles: University of California Press, 1959), pp. 3638; and Chao, Kang, The Rate and Pattern of Industrial Growth in Communist China (Ann Arbor: University of Michigan Press, 1965), p. 13.

24 , Chao, Rate and Pattern of Industrial Growth in Communist China, p. 96.

25 This index is not provided by official statistics but is constructed by the author based on information of output value for the First Ministry of Machine-building Industry and the Ministry of Electrical Machinery Industry.

26 Norman M., Kaplan and Richard H., Moorsteen, “An Index of Soviet Industry Output,” American Economic Review, 06 1960, pp. 307308.

27 Norman M., Kaplan, “Capital Formation and Allocation,” in Abram, Bergson (ed.), Soviet Economic Growth and Perspectives (Evanston: Row, Peterson, 1953), p. 73.

28 For the concept of backward and forward linkage effects, see Albert Hirschman, The Strategy of Economic Development (New Haven: Yale University Press, 1966), Chapter 6.

29 Wu, Yuan-li, The Steel Industry in Communist China (New York: Praeger, 1965), p. 179.

30 The coefficient of correlation is based on output index of machine-building industry in Table VII and index of labour productivity for all industry calculated by Field (Robert Michael Field “Labor Productivity in Industry,” in Eckstein, Liu and , Galenson (eds.), Economic Trends in Communist China (Chicago: Alding, 1968), p. 647).

31 New China News Agency (NCNA) (Peking), 10 April 1960, and Chung-kuo hsin-wen, 26 04 1964, p. 5.

32 The correlation coefficient between machinery output and agricultural output during 1957–65 is only 0·18. This is in contrast to the case in the Soviet Union, where machinery output and agricultural output show a correlation coefficient of 0·66 for the 1952–58 period.

33 The First Five-Year Plan, p. 16.

34 This figure is derived from statistics in Present and Past (p. 116), which gave total investment for the civilian sector of the machine-building industry as 3·41 billion yuan. The difference between this and 6·93 billion yuan is assumed to be investment in the defence sector.

35 Ko, Chih-ta, Kuo-tu shih-ch'i ti Chung-kuo yü-suan (China's Budget During the Transition Period) (Ts'ai-cheng ch'u-pan-she, Peking: 1957), p. 133.

36 According to P'eng Teh-huai, by September 1956, the PLA was reduced by 2·7 million men. Hsin-hua pan-yueh-k'an (New China Fortnightly) (Peking), No. 20 (1956), p. 69.

37 Wu, Chi-fang, “Peiping's Nuclear Test and its Military Industry,” Chinese Communist Affairs (Taipei), 02 1965, pp. 1516.

38 NCNA: Chinchou, 13 01 1966.

39 Wu, Chi-fang, in Chinese Communist Affairs, 02 1965.

40 K'o-hsueh t'ung-pao (Bulletin of the Chinese Academy of Sciences)) (Peking), No. 10 (1965), p. 875.

41 The purchasing power parity rate is derived from price data for machinery and equipment given by an official Chinese source. The prices of Soviet machinery f.o.b. the Sino-Soviet border, if converted into yuan according to the official trade rouble rate, are 55·7 per cent. higher than the official trade rouble rate effective before 1960. Based on this evidence, a new ratio of 1·518 roubles to the yuan or one rouble=0·66 yuan is derived.

42 Alexander, Eckstein, Communist China's Economic Growth and Foreign Trade (New York: McGraw-Hill, 1966), pp. 106107.

43 Supplement to Vneshnyaga Torgovaya (Foreign Trade) (Moscow: Foreign Trade Publishing House, 1956–66).

* This article is based on my recent study of the machine-building industry of Communist China, supported by the Committee on the Economy of China of the Social Science Research Council and the Center for Chinese Studies at the University of Michigan. I am deeply indebted to Professor Alexander Eckstein for his constant encouragement and detailed comments on the drafts of this study. I should like also to thank Professors Walter Galenson and Kang Chao for their comments on part of the early draft of this study.

Growth and Structural Changes in the Chinese Machine-building Industry, 1952–1966*

  • Chu-Yuan Cheng

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