1. Mu, Zuo “On the role of local planning and the relation between plans and markets,” Jingji yanjiu (EconomicResearch), No. 7 (1980), p. 33Google Scholar;

2. This is the case with Nicholas Lardy, “Economic planning in the People's Republic of China: central-provincial fiscal relations,” U.S. Congress Joint Economic Committee, China: A Reassessment of the Economy (Washington, D.C.: U.S. Government Printing Office, 1975), pp. 94–115Google Scholar; and many Chinese scholars as well. See Guoguang, Liu (ed.), Guomin jingji guanli tizhi gaige de ruogan lilun wenti (Some Theoretical Problems in the Reform of the National Economic Management System) (Beijing: Zhongguo Shehui Kexue Chubanshe, 1980), pp. 20–33Google Scholar;

3. See, e.g. Sigurdson, Jon, Rural Industrialization in China (Cambridge: Harvard University Press, 1977)CrossRefGoogle Scholar;

4. See Table 5 for the xian-level GVIO and Zhongguo tongji nianjian-1981 (China's Statistical Yearbook – 1981) (hereafter Tongji nianjian 1981) (Hong Kong, 1982), p. 208Google Scholar;

5. See Tongji nianjian 1981, p. 204, for distribution of industrial enterprises by scale.

6. Cf. Zhonghua renmin gongheguo guowuyuan gongbao (Bulletin of the State Council of the People's Republic of China) (hereafter Guowuyuan gongbao). No. 9 (10 07 1981), pp. 267, 276Google Scholar; and Zhongguo jingji nianjian (Almanac of China's Economy) (hereafter Jingji nianjian) (Beijing, 1982), p. V–43Google Scholar; For a western study on the national reform see Reynolds, Bruce L., “Reform in Chinese industrial management: an empirical report,” U.S. Congress Joint Economic Committee, China under the Four Modernizations, Part I (Washington, D.C.: U.S. Government Printing Office, 1982), pp. 119–37Google Scholar;

7. Nan fang ribao (Southern Daily), Guangzhou, 24 July 1980, pp. 1 and 4; Bing, Fan, “How to reform the xian-level economic management system,” Jingji guanli (Economic Management), No. 5 (15 05 1980), pp. 13–14Google Scholar; and Renmin ribao (People's Daily), 28 November 1978, p. 1.

8. Jingji nianjian (1982), p. V–43.

9. Bing, Fan, “How to reform the xian-level economic management system,” p. 13Google Scholar;

10. Ibid. pp. 13–14. For a more detailed description of the xian-level planning mechanism including the agricultural sector and urban-rural relations see my Local Level Planning in China, International Labour Office (World Employment Programme Research Series), Geneva, 11 1982Google Scholar;

11. Ibid.

12. Chuan, Zhu, “Ownership of collective economics in urban areas and related policies,” Jingji yanjiu, No. 2 (1980), pp. 6–8Google Scholar; In some localities the small collectives are also merged into the common financial pool of the street neighbourhood; see Chengzhen jiti jingji yanjiu (Studies on the Urban Collective Economy) (Beijing: Renmin Chubanshe, 1981), p. 243Google Scholar; The district collective differs from the bureau collective in that it is not advanced enough in terms of technical sophistication, scale of operation, and most importantly, profitability, to deserve classification according to the branch principle. See Xiangyan, Qi and Kehong, Peng, “What is meant by the change in Dandong's ninth cotton weaving factory,” Jingjiguanli, No. 8 (1980), pp. 18–22Google Scholar;

13. Jiti jingji yanjiu, pp. 78–79.

14. These problems summarize the diverse complaints frequently made in discussions of xian-level reform. See Bing, Fan, “How to reform the xian-level economic management system,” pp. 13–14Google Scholar; and Enterprises Management Bureau, State Economic Commission, Gongye jingying guanli jingyan xuanbian (Selection of Administrative Experience in Industrial Management) (hereafter Guanli Jingyan Xuanbian) (Beijing: Renmin Chubanshe, 1981), pp. 503–31Google Scholar;

15. For details see Guanli jingyan xuanbian, pp. 503–31, and other articles on xian reform as cited in this article.

16. Guanli jingyan xuanbi, p. 522.

17. Ibid. pp. 524–25.

18. Chengcheng Xian Economic Committee, Shaanxi province, “How Chengcheng xian has reformed its industrial management system,” Jingji guanli. No. 12 (1981), p. 38Google Scholar;

19. Ibid. and Guanli jingyan xuanbian, pp. 514, 523–24, and 529.

20. Guanli jingyan xuanbian, p. 507.

21. Yefang, Sun, Shehui zhuyi jingji de ruogan lilun wenti (Some Theoretical Problems of the Socialist Economy) (Beijing: Renmin Chubanshe, 1979), pp. 141 and 243–44Google Scholar; Qingsong, Lin, Liang, Mao, Quanshui, Lin, “A good book on the all-round reformation of the economic system,” Jingji yanjiu. No. 10 (1979), pp. 73–74Google Scholar; and Renmin ribao, 4 November 1980, p. 5.

22. Guanli jingyan xuanbian, p. 506.

23. See “The Incentive Mechanism,” infra.

24. Cf. Lian, Meng, “Points on improving management for depreciation funds of fixed assets,” Jingji yanjiu. No. 5 (1982), p. 33Google Scholar; and Jingji nianjian (1981), p. 127. See also Shangging, Sun, “Explorations on technical innovation,” Jingji yanjiu, No. 2 (1982), p. 30Google Scholar; and Renmin ribao, 15 October 1979.

25. Yuanchen, Dai, “Problems on renewal of capital assets,” Jingji yanjiu, No. 10 (1982), p. 67Google Scholar;

26. Cf. Jingji nianjian (1981), pp. 11–130 and VI–152–3; and Yuwen, Gui, “Digest of experimental units of rural economic restructuring in three counties of Guanghan, Qionglai and Xindu of Sichuan province,” Jingji guanli, No. 4 (15 04 1981), pp. 66, 70Google Scholar;

27. The xian-level industries are small in scale with diverse production and cost structures not conducive to centralized control by the provinces. Besides, the XEC enjoys a sellers' market position as I shall discuss later.

28. Cf. Guowuyuan gongbao. No. 14 (20 11 1980), p. 422Google Scholar; and Jingji nianjian (1981), p. 11–121.

29. Three major enterprises used 31·5% of their gross retention together with depreciation funds to finance 127 key innovation projects in 1979; see Guowuyuan gongbao, No. 14 (20 11 1980), p. 421Google Scholar; If we assume that their investible retention is the same as the national average given in Table 4, then the portion left amounts to only 3·02%, scarcely enough to finance trial production. Cf. Jingji nianjian (1981), p. 11–121.

30. Jiti jingji yanjiu, p. 283; Shuren, Li, Yinzhu, Huang, “Urgent problems in the development of collectively-owned industries in urban areas,” Jingji yanjiu, No. 9 (1979), p. 31Google Scholar; and Jingji nianjian (1981), p. II–137 and 1V–156.

31. Jiti jingji yanjiu, pp. 283–84.

32. Junru, Liang, “The system of profit distribution for the large collectives must be reformed,” Jingji guanli. No. 1 (1980), p. 50Google Scholar;

33. Guowuyuan gongbao, No. 16 (1 12 1980), p. 510Google Scholar;

34. Jiti jingji yanjiu, p. 262.

35. The total retention of 45% represents the balance left after deducting the 52% “standard” profit tax and minor local levies. The figures of 45 to 55% retained thereof by the local authorities represent the range within which virtually all the representative cases cited in Jiti jingji yanyiu fall. In 1981 appeals were made to the local authorities to raise the collectives' share up to 50 to 70%; see Jingji nianjian (1982), p. V–43.

36. The state budget revenue for 1981 amounts to a total of 95,620 million yuan consisting of 34,720 million yuan from profit remissions and 60,900 million yuan from various taxes; see Jingji nianjian (1982), p. V–319.

37. See, e.g. Guanli jingyan xuanbian, pp. 519–20.

38. Ibid. p. 507.

39. For 1981 see Jingji nianjian (1982), p. V–43; for 1980 see Guowuyuan gongbao. No. 14 (5 09 1981), p. 424Google Scholar;

40. Ibid.

41. See, e.g. Genjin, Wang and Rongji, Zhu, “Where the commune and brigade industries are leading to,” Jingji guanli, No. 3 (1979), p. 21Google Scholar;

42. Crop acreage as a control target seems to have been abolished in many areas in recent years, at least up to 1981. Cf. Jingji nianjian (1981), p. IV–12 and (1982), p. V–14; see also Renmin ribao, 2 November 1979, p. 2. This has obviously led to accelerated expansion in the acreage of lucrative cash crops, notably tobacco leaves. See Suinian, Liu, “Planned economy: a prerequisite to the realization of the Four Modernizations,” Jingji yanjiu. No. 9 (1982), p. 4Google Scholar; Guowuyuan gongbao, No. 12 (15 08 1982), pp. 542–43Google Scholar; and Wen, Lu, “Regional advantages in agriculture and their proportions in the overall situation,” Jingji yanjiu, No. 9 (1982), p. 8Google Scholar;

43. The “new five-small industries” refer to cotton-spinning, knitting, cigarette-making, wine-making and sugar-refining; see Fan, Yan, “The important task of present economic work is to clear up left-deviationist thinking,” Jingji guanli, No. 1 (1981), p. 20Google Scholar;

44. Jingji nianjian (1981), p. II–121.

45. Guowuyuan gongbao, No. 11 (10 08 1981), p. 340Google Scholar;

46. Ibid. No. 14(20 November 1980), p. 421.

47. The two percentage figures refer to two different annual amounts of bonus outlay. The first is 0·7162 million yuan (Table 4) drawn from over-fulfilled profits. The second is 1·1145 million yuan comprising the first amount plus 0·3982 million yuan drawn as “integrated bonuses” (zhonghe jiang) from the wage funds. The outlay on integrated bonuses can be derived from Bureau for the Reform of the Economic System, Guangdong Provincial Government, “Why Qingyuan xian industries could achieve high efficiency,” Jingji guanli, No. 7 (1982), pp. 26–27Google Scholar in which the average per-worker award is given as 6 yuan per month; and the total number of recipients 5,531 (calculated by dividing the total annual outlay of 0·7162 million yuan on over-fulfilment bonus by its per-worker award of 10·79 yuan per month). The annual total of wage base is not known, but the cited per-worker award of 6 yuan per month may be assumed as 10% of the regular wage cf. Jingji nianjian (1981), p. II–121). This gives an annual average wage of 720 yuan; or a total wage bill of 720 yuan X 6,065 = 4·3668 million yuan (where 6,065 is total employment per Table 3).

48. See, e.g. Jingji nianjian (1981), p. II–83.

49. Ibid. p. II–121.

50. Guowuyuan gongbao, No. 14 (20 11 1980), p. 424Google Scholar;

51. Jingji nianjian (1981), p. II–121.

52. Ibid.

53. Guowuyuan gongbao, No. 14 (20 11 1980), p. 424Google Scholar;

54. Ibid. No. 24 (20 December 1981), p. 758; and No. 1 (5 March 1982), p. 29.

55. Investigation and Research Department of the State Economic Commission, “Eighty examples of the system of economic responsibility in industrial production,” Jingji guanli, No. 10 (1981), pp. 19–20Google Scholar;

56. Ibid. p. 19.

57. Ibid.

58. This is an estimate made by assuming that the primary share of the enterprises β, is equal to 0·5. But even if we set β at the lower end, say 0·1, the combined retention ratio will still be as high as 82%.

59. This 65% share is considerably lower than the 90% share for Qingyuan, but Jiangmen has an additional share β, which is similar to α Yb in the first general formula.

60. The yuan values for Jiangmen are given (in 10,000 yuan) in the same source as note 55 as follows: Yb_t–₁ = 1,162, Ye_t–₁ = 1,487, Yb_t = 1,644. For Ye_t we assume it as equal to 1,644 x 1·10 = 1,808. The assumption of 10% may have understated the potential for overfulfilling the profit targets in view of the evidence given in Table 6. The estimated retention ratio of 18·75% is greater than the figure of 11·67% shown in Table 4, because the former is gross of loan repayment.

61. Realized profits in Qingyuan amount to a total of 544 (in 10,000 yuan) in 1980, also before repaying the loans taken; see Guanli jingyan xuanbian, p. 504. Assuming the planned profit target to be 544 × 1·10 = 598 (this is in line with the practice mentioned in the same source cited under note 55), a 10% overfulfilment will result in a retention ratio of 8·2 or 8·94%; if the retention parameter β is set at 0·5 or 0 ·9 respectively.

62. See supra, note 55.

63. For a good example see Shulin, Wang, “Reform measures beneficial to economic readjustment should be actively implemented,” Jingji guanli, No. 7 (1981), p. 29Google Scholar; and notes on Qianxi xian in Table 4.

64. Jingji nianjian (1981), p. II–98.

65. Jiti jingji yanjiu, pp. 251–52; and Renmin ribao, 6 December 1981, p. 5.

66. Guowuyuan gongbao. No. 9 (10 07 1981), p. 276Google Scholar; Guanli jingyan xuanbian, p. 519.

67. Ibid.

68. Ibid. No. 6 (30 May 1981), p. 179.

69. Ibid. No. 24 (20 December 1981), p. 758.

70. Ibid. No. 9 (10 July 1981), p. 263–66; see also No. 27 (10 February 1982), p. 883–84.