While continuing to pursue their policy of the "four modernizations," the Chinese leaders have been obliged to revise downward a whole series of objectives. Confronted with bottlenecks in transportation and energy, and with growing tensions in the countryside, they have found themselves forced to moderate their plans for investment in industry, as well as plansassociated with the projected investments-to import technology from the imperialist countries.
Overall, the program of readjustments adopted by the National People's Congress in June 1979 would reduce the planned expenditures on the "four modernizations" between now and 1985 from $600 billion to a figure between $280 billion and $360 billion, that is, by a little more than half. (Far Eastern Economic Review, October 5, 1979.)
The projected growth rates in some sectors of heavy industry have been sharply reduced. The goal of 60 million tons of steel annually has been abandoned. In 1979, coal and steel production remain virtually stagnant at the 1978 level. But production of industrial consumer goods has increased.
In 1978, Chinese imports totalled $10.3 billion (an increase of more than 50% over 1977), involving a modest deficit of $300 million in the balance of trade. A massive new increase in imports had been projected for 1979. The total was to rise to 15.5 billion, with the trade deficit reaching 3.5 billion. Prudently, the figure for total imports seems to have been cut to 13 billion, leaving virtually no trade deficit (according to the official Chinese sources; Western sources talk about a deficit of $1 billion to $1.5 billion).
All these figures are far removed from
Exports to the Workers States as Percentage of
Total Exports of Imperialist Countries
USSR and East Europe
Country
1977 1978 1979
2.1%
USA
2.6% 2.7%
3.4%
3.4%
Japan
3.3%
W. Germany
5.6% 5.4% 5.0%
4.4%
4.3%
France
3.8% 2.5%
2.5%
Britain
2.6% 5.1%
3.5% 4.3%
Italy Sweden
4.2%
5.0% 4.5% 12.3%
Austria
14.5% 13.7%
Spain
2.8% 2.7% 3.1%
*For some countries this also includes exports to North Korea and Vietnam. Source: Perspectives économiques de OCDE, No. 26, December 1979 Source: Perspectives economiques de OcDE, No. 20, December 19/9
the grandiose projects talked up in imperialist circles when the policy of the "four modernizations" was finally gotten underway. In the last analysis, only Japan managed to gain a significant additional market in People's China, something comparable to the West Germans' Ostgeschäft [East European business].
Moreover, Japan got these results by providing large amounts of credits. (A first installment totalled about $1.5 billion. It was for five projects involving improving the infrastructure and production of coal, to be repaid largely by deliveries of coal.) The interest on this loan was only 3%. Other proposals for credits are under discussion.
As regards the other imperialist coun tries, their exports to China remain very modest. They hardly make up for the stagnation or slight decline in the supplementary markets gained in the USSR and East Europe.
It is probable that all these adjustments are the result of the changes that the Deng Xiaoping/Hua Guofeng team was obliged to make by the beginning of 1979, in view of the growing imbalances in the Chinese economy as a whole.
The enormous gap between the living standard of a large section of the Chinese peasantry and the city dwellers, which widened further as a result of the modest rise in wages in 1977, had become an impediment to increasing agricultural production, and a cause of growing bitterness and discontent in the countryside. And increasing agricultural production was the basis of the whole "four modernizations" plan (the goal of 400 million tons of cereals by 1985 has already had to be abandoned).
The government, therefore, decided in
China* 1977 1978
0. 1% 0.6%
0.8% 3.5%
4.2%
2.8% 0.5%
0.8%
0.9%
0.5%
0.4% 0.2%
0.5% 0.3% 0.2%
0.6%
0.2%
0.5% 0.4%
0.7%
0.7%
0.6%
0.3%
0.5% 0.2%
0.5%
1.0%
March 1979 to increase the price it paid for agricultural products by 20%. This would have increased the income of peasants by about $4.2 billion. (These figures by themselves do not tell us much because money income per producer varies enormously among the People's Communes, going from 0.1 to 3 yuan a day.!)
On November 1, 1979, to compensate for these additional state expenses, the prices of a series of consumer goods were raised considerably for the first time since the establishment of the People's Republic of China. These increases were 33% for meat and fish and 32% for eggs, while the increases for poultry and milk varied from region to region. These price increases should bring the state an additional 5 billion yuan, or $3.2 billion in income. The $1 billion more that is needed to cover the extra payments to the peasants would come from increasing export prices (the price of exported oil is going from $21.8 to $24 a barrel), as well as from higher prices in restaurants, in stores for foreigners (up by more than 100%), and for such things as consumer durables.
In order to partially neutralize the effects of these higher prices on the real income of workers, a sort of cost-of-living bonus of 5 yuan was introduced for each wage earner. Moreover, a new wage in. crease has been promised (but not yet decided on).
In fact, social inequality has increased. A correspondent writing in the November 5, 1979, issue of Neue Zürcher Zeitung has estimated that a family of four persons with an income of 100 yuan a month is capable of saving 20 to 30 yuan out of that. The Chinese press mentions big increases in bank savings. The foreign experts get 500 yuan a month. The supply of consumer durables is clearly increasing, and these aurabies 1s crearty mcreasing, and mese are destined for those who get high wages.
However a great many blue- and whitecollar workers earn less than 80 yuan a month (the minimum wage is 30 yuan). A savings account is out of the question for them. They are threatened with a drop in their living standard, especially if they have a number of children. Meat rationing has been abolished. But eggs are more strictly rationed than before.
Another indication of the increasing social inequality is the growth of the black market, especially in Guangzhou (Canton)-which is influenced by Hong Kong —but also in Shanghai. This is accompanied by the opening of stores where foreign products can be bought (especially tapes and tape recorders from Hong Kong) for foreign currency but not for yuan (Far Eastern Economic Review, December 14, 1979).
The scourge of unemployment especially among youth is a second source of tension, along with the low living standards in the countryside. This is being accentuated by the return of about half the 12 million young people deported to the countryside at the end of the "cultural revolution." A semiofficial source has estimated the number of urban unemployed at 10 million. The government is boasting that in 1979 it created 450,000 more jobs in Shanghai, 320,000 in Peking, and 240,000 in Tianjin. But these figures include a large number of additional recruits to the army. Since technologically advanced industry employs a relatively small labor force, there was an additional reason to redirect budget allocations and investment to light industry, agriculture, and the services and to prevent a concentration of financial resources in modern and heavy industry.
The establishment of neighborhood craft
Peking in 1979, providing jobs for about 120,000 youth as tailors, street sellers, and workers in all sort of repair shops. These repair shops lost their licences during the "cultural revolution" and have now been relicensed.
Two other "unorthodox" outlets have been envisaged as ways of absorbing the surplus workforce. The government plans on renting out Chinese laborers to capitalist enterprises engaged in public works in the Mideast, specifically Italian and South Korean companies. Moreover, "free zones" have been created for the formation of mixed companies (half Chinese, half foreign), for example in Chum-Town which is near Hong Kong.
Four to five hundred projects financed by Hong Kong capital have already gotten underway, as well as some projects financed by Japanese and overseas Chinese capital. However, in general, the plants involved are of modest size.
On the other hand, it is necessary to take into account that essential goods and services (in particular, rents) are much cheaper in the People's Republic of China than in Hong Kong.
To get an idea of how low Chinese wages are, it is sufficient to note that in these than the average in the People's Republic, but they still are less than half what a skilled worker earns in Hong Kong. (Econ omist, December 29, 1979.)
The impression that a full-blown NEP is being envisaged is strengthened by the sharper and sharper criticism in the Chinese press of the People's Communes. According to the issue of the Economist cited above, in Sichuan province, where 10% of the population of the People's Republic lives,? the Communes are being transformed into purely administrative unite. Production teams of thirty to fifty families are being made the basis of work organization, even when this involves going beyond the boundaries of the Communes. These teams are supposed to be pretty close to the producers cooperatives functioning in capitalist Europe.
The general impression that prevails, moreover, is that within the system of People's Communes, production will increasingly rely on the work teams. (The People's Communes are based on a threetier system of organization-the team, which includes a few families; the brigade, which corresponds roughly to the village; and the People's Commune itself, which comprises several villages.)
Notes
1. At the official rate, 1 yuan equals US$0.64.