Created: 6/1/1959

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Summary and


IT. Situation ut the Beginning of tile First Five fear Pinna

of Ccemuniat China and the


of the Tvo Economies at the Beginning of

Their Respective Five Year Plans


Consunscr Goods and Services


Distribution of the Labor Force and


III- Trends ln Production Purine Uie Two Five Year Plana .

in Other

IV. Economic

A. Learning Trom the

fi. Socialization Policies


of State

Z. Invrstoent in Relation tc Output

F- Agricultural Development Policy

C. labor Policy and Technology

Occupational Distribution of the Labor Force .

and fatior force During the Two Five


H. Foreign Economic Trade Policies During the Two Five


ill -


V. Prospects for Communist China in the Light ofDuring the Soviet First and Second




National Product, by Sector of Origin, of Commu-

nist2nd of the.

Five Xear Plans, Communist China and the USSR:

Production of Selected Consumer Goods

Five Year Plans, Communist China and the USSR:

Production of Selected Producer Goods und Performance


Five Year Plans, Coicraiir.1 China arid the USSR;

Population and Kor.agri cultural

Five Year Plans, Cocminist China and the USSR:

d Salary

Five Year Plans, Communist China and the USSR:

Production of Primarynd Steel

Five Year Plane, Coitmur-iut China and the USSR:

Allocations of Gross National product, by End Use, ln

Current Prices

6. rirst Five Year Plane, Communist China and the USSR:

Capital Investment, in Current Prices

9- Communist China and the USSR: Comparison of Investment

with Income Originating, by Economic Sector

- iv -


Summary and Conclusions

ommunist China embarkedear economic plan tn more or lees-open imitation of the Five Year Plans of the USSR. In JtB political structure and ideology, Cnmouulst Chinaarbon copy of the USSR. The broad objective of the Chinese First Five Year, aa well as of succeeding plans, was Identical with that of the Soviet First Five Year- naaely, rapid industrialisation with special eaphasis on heavy industry. These broad similaritiesoapnrlson of the performance under the First Five Year Plans of the two countries.


Over-oil output in China in therew at an average annual rate ofercents faat as, or possibly even faster than, output in the USSR. The growth of China's output was, however, much better balanced, for the reason lhat not only heavy industry but also light industry and agriculture expanded, whereas in the USSR agriculture declined seriously and light industry failed to expand. The Chinese economy accomplished thiautput, which was comparable to growth in the Soviet First Five Year Plan,elatively smaller Input of investment andreat deal lessand suffering on the part of the population, lhe general standard of living even of urban workers declined in the USSR during this period, but In China the standard of living of bothnngrlcultural population rose. On the whole, the Chinese performance under the First Five Year Plan was considerably smoother and more successful than that of the USSR.

This apparently superior performance by the Chinesedue in part to the nature of the problem confronting them at th* outset of their First Five Year Plan. To an Important degree, the lsoedlate task was one of effective recovery and restoration after long years of disruption due to civil war and involved reconstruction of damaged productive facilities already ln existence. The Soviet economyn the contrary, had already fully recovered from war and civil war in the preceding period of the "new economic plan"EP).

u:d this report represent the beel

Judgment of this Office as


The second and perhaps even more important explanation ofsuccess was tlioir advantage of being able to learn fromof the USSR and thereby to avoid some of themistakes. The assistance of ft large number of Sovietall aspects of economic activityey factor in thisvery fact that the Chinese were able toivend drawomprehensive Planearsfull political control over China, was possible becausehad painfully pioneered the concept and the machinery ofdirection of a rial Lsi were

to adopt the administrative structure of the industrial ministries, which wus not fully developed in the USSR until the Second Five Year- Fiscal and monetary policies were likewise borrowed in large part from the USSR, with such success that the Chinese had relatively insignificant price inflation during the period. The USSK suffered very rapid and disruptive inflation both during the First and during the Second Five Year Plan.

The most important lesson learned, however, was from thesocialization of Soviet agriculture. Taking care toall in peasant income, the Chinese were able to socializealmost painlessly and with only minor disruptions. Relying on the organization of Joint state-private enterprises, the Chineseproceeded to bring nearly all Industry and trade under Htst* control very rapidly while permitting greater use of the "capitalist" class in the process. The pace of socialization proceeded so rapidly that it more than made up for the much larger degree of state control over industry andat already existed in the USSR before the Soviet First Five Year Flan began.

Not only Chinese economic administrative machinery but alsoeconomic policieslose imitation of recent Soviet. Trade policy,at ofto export rawin exchange for capital goods not available domesticallyto avoid dependence on foreign sources of supply. Theof investment allocation, like that of the USSR, was to givepriority to heavy industry. The Chinese initially set outSoviet industrial technology almost without modification. close political and ideological ties between the two countriessubstantial Soviet economic and technological aid, thiswas to be expected and contributed substantially to thelaunching by the Chineseentrally planned

An additional factor of some significance was that imports ofand equipment and foreign credit, especially from the USSR, were considerably larger relative to total Investment in China than


In the USSR. Although Soviet creditsercentage of Chinesewere not as high as the percentage of Soviet imports supported by credits, the foreign trade of Communist Chira was more important to its economy, and with Its Initial level of production of investment goods China relied more heavily on imports, purticularly guaranteedfrom the USSR, to carry out its investment pragrum.

There were, however, certain differences io economic policies due to differences in economic resources in tho two countries and also due lo efforts aimed at avoiding pitfalls encountered by the USSR during Its First Five Year Plan. The USSRattern of agricultural investment designed to raise the productivity of the farm population through mechanisation of agriculture and to encourage wholesale migration of labor out of agriculture Throughout the first three Five Year Plans. Hot3 did the Soviet plannersigh priority to increasing agricultural production. During the Soviet First 7ive Year Plan the migration or the rural population to the cities was more rupid than tne ability of Industry to absorb and train the additional workers.

The Chinese Communists already had much larger manpower reooureM ln both the agricultural and thr nonagrJcultural population. With an ample labor force for the mechanization of industry, release orhas noteature of agricultural investor.', as it was in lh* USSR. Instead, the Chinese have directed investment into irrigation, water conservation, and, moat recently, fertilizer production with theobjective of raising output through more traditionalmeasures. The Chinese also kept the increase in the labor rorce in industry and other nonagr1cultural sectorsinimum. This factor, together with large-scale Investment, permittedincreases in productivity. The low standard of living, especially of diet, and the rapid increase ln the Chinese population led the Chinese to give concentrated attention to the problem of raisingoutput, and the Chinese have allocated Increasing priority to thisriority not given by tbe USSR until ita Fifth Five Year-

In addition to the divergence in agriculture, where thein resources between the two countries are substantial, by the end of the First Five Year Plan the Chinese showed other signs of independent initiative and originality. econd policy innovation, which appeared firstun Increasing emphasis on small-scale plants,ramatic departure from the Sovietof building large-scale, capital-intensive, labor-saving plants. Small-scale plants are entirely appropriate, however, for China'o cheap-labor resources and scarcity of capital- Coooinist China has


olsc adopted Lhe latest administrative development of the USSRdecentralisation. Tlie Cliinese ^eem, nowever, to be currying it much further, in fact, than tne USSR nas done, transferring large parts of industries lo local control.

The third policy innovation, which appeareds theOf ccnsunct combining agricultural, local handicraft, and supply and aiirkffting functions intounprehenMve economic organization at the township level. The political and economic ramifications of ti.ii new form oi organization cannot be evaluated at this time.

This tendency of the Chinese to develop original approaches and policies of their own along with adopting and modifying the latest Soviet innovations makes forecasting Chinese future deve.iojraents on the basis of Soviot developments of two or throe decadeaazardous and uncertain business.

Growth la the total output during the Soviet Second Five Year Flan was much more rapid than during the First Five fear Plan. Some of the factors which brought this about, however, do not apply to China's Second Five Year Plan. Soviet agriculture rebounded from the drastic declines In output during the First Five Year Plan end7 Ibe increase in agricultural raw materialsapid increase In light industry. Ic heavy Industry the largefor expansion during the First Five Year Plan come into fullduring tho Second. The large numbers of Inexperienced worxers added during the First Five Year Plan iiad by tbe Second becomewell trained and efficient. Hiese lectors combined <x>uch more rapid growth In Sovieffceavy industry during the Second Five Year Plan than during theeara. In contruat, China's performance under the First Five Year Plan and Chinese plansor the Second would Indicate for theate of increase Tor agriculture only slightlythan ln tlie preceding periodrowth for industry no higher and probably somewhat lower than during the First Five Year Plan.

On the other hand, new developments in China, without precedent in either China or the USSR, have completely outdated the rate of economic development set in the proposals for tbe Second Five Year Flan. Ihe "leap forward" aovemer.t, operating through the mavsystem or organization, is aincc at mobilizing the vast rural Chinese labor force for an impressive program uf investment inand small-scale, local industry. Because thene innovations are well calculated lo lake advantage ofbundant manpower

and because natural resources for both industrial and agricultural development are adeqVi&te, China's rate of econoaic growth during the

Second Five Year Plan aay wry well equal or exceed the growth of

the USSR during its Second Five Year Plan.

The most important queution appears to be uoelnl and political rather than economic whether tho organization uf the population into communes will succeed. In any event. Communist Chins willtrong contrast to the long-term experience of the USSR, where Industry was developed at the expense of, and in spite of failures in, Soviet agriculture.

I. Introduction.

The initiation of the Chineso First .Five Year Plan2 had the appearanceestagiagrama that had been first acted out by the Soviet Communists over the. Bothwere Communist Party dictatorships with virtually identical Ideology. Each had the broad objective of maximizing the power of the ntate. As in the USSR, the Chinese proceeded to socialize the entire economy quickly and adopted the goal of rapidwith highest priority to heavy industry. The Chinese borrowed wholesale from the Soviet administrative organization and techniques of planning.

Along with the similarities, there were also radical differences between the two countries, primarily ln resource endowment andpoint or stage of development. The purpose of this report ls to compare the results under the First Five Year Plans in the twoto sec whether the interpretation of these results ln light of both the similarities and the differences between the countries sheds any light on China's prospects for the future.

Problems of methodologyomparison of this kind are many. International comparison at best is difficult, but an International comparison of two countriesifferent time periods presents an even more difficult problea. he problem ia further complicated by paucity of data available to supportomparison. Cnly -ecently have official data been available on many sectors of the Chinese economy anu, jartlcalarly in the early years of the Chlnooc Communist First Fivu Year Pjan, th* coverage and reliability of 'lom-munlaC ulatiatico, even when available, are inadequate. Official

statistics arc more complete for the First Five Year Plan of theand nany of the >fftatistics

arc confusing and in some areas clearly inconsistent with other Soviet iata.

In view of these limitations, this report attempts to concentrate on the types of conclusions that will hold in spite of wide margins of error in the data being used. When figures are given, they ure interpreted in ways that do notigh degree of accuracy to support the conclusions reached.

11 Situation at the lie ginning cf the First Five Year Plans of Cotr-nunist ChiTta and the USSR'.

A- iiistoric-il Background.

The economic situations that existed in the USSK and inChina before the period of each. First Five Year Plan mustin order to understand the economic trends that tookperiod of Russian participation in Worldnd theperiod that followed lastedears and was followed7-ycar period of gradual recovery before the Soviet FirstFlan was initiated. During this latter period, marked byeconomic policy" ocialization had proceeded to awnieh,, So percent of industry was socialized andoC aU retail sales, including the public cateringmade by state and cooperative trade. Only theremained to be socialized. At the beginning of theFive Year Plan, therefore, the process of recovery ofa period of war and civil war had already reached itsi.:i . :

The Chinese Communists gained control over the9 after the Sino-Japaaese war, World War II, and thecivil wara period that iasted forears In Manchuria and aboutears in the rest of China. In contrast to the situation in the USSR, the First Five Year Plan was initiatedears after the Communists had taken power. Tne process of recovery, therefore, had not ended, and it was not5he midpoint of the Chinese First Five Year Planthat socializationoint equivalent to that ol* the Soviet economy


ii. StructurehelconoTnloa at- the Beginning of Their Respect: vp Five _fear Plans.

At the beginning of its First Five Year Plan& the USSR had alreadyevel of industrialization that was not to be achieved by Communist China7 or later (see Table The contribution to total output of industry and construction8 for the USSR is estimated to have been aboutercent compared with theercent estimated for Communist China At the same time, Soviet agriculture8maller share of totalthan did the agricultural sector of the Chinese economyven allowing for significant differences in relative prices ofand communicationsigher degree of state control over native transportation, it is clear the USSRuch moretransportation system8 than did China at any timeits First Five Year Plan.

C. Levels of Output.

1. Consumer Ooods and Services.

Soviet per capita consumption8 was muchChina's per capita consumptions indicated byof consumer goods in* An average of theproduction estimates presented ir. Tableeighted byindicates that Soviet output of consumer goods. he

populationonlyercent of China'soviet

per capita consumption of the sample consumer goods8 was more than twice that of China

Urban housing space in Communist China2 was aboutsquare meters per Soviet urban housing8 was


in China This ratio is probably also representative ofin rural per capita housing. Reflecting the differences in the number of enployces in coiwr.mal services (see Tablend the populationer capita consumption of communal services

The much higher level of per capita consumption in the USSR at the beginning of its First Five Year Planigher level of savings andafety margin for mistakes.1

* ol_lows on p.* ollows on p. 9. for Serially numbered source references, see tbe* elow.

t Text continued on

Tuble ;

Gross Kr.ti cnai Product, by Sector of Origin, cf Communist2nd of the8

amunist China5/




of Origin




d fishing

and construction

transportation and

native transportation, and

business services

mac nt

services and house rent


CNP at factor cost


OMP at market prices *

based on sector distribution of outputSources used are budget data and labor forcedata given for the cost part In Production figures with value-added weights are then usedthe estimates given276 prices. Rental income has been revised to reflect data on

urban housing in the period.

based on hoeffding's estimate of net national product/ Depreciation by sector given

In aOuxCf used Sy Hoeffdingdded, y





: Mi?


I iii





3 9





5 tl

t ;


e; *

A decline in Chinese per capita consumption comparable to theclineSoviet per capita consumption12 wouldid serious social und political repercussions. Even ii per capita consumption could continue to increase at the relativelyttes achieved during the First Five Year Plan, it would takeears fur Communist China toonsumption level comparable to that Of the USSR

2- Industrial Base.

The USSR8ouch higher industrial base into its population than China? (see. The fuel output for the USSR in terms of standard fuel equivalentsillion standard units6 compared2 million for China Soviet energy output per capita wasimes that Of China at the beginning of their respective Five Year Plans. The Soviet steel output was moreimes that of Chinand Soviet per capita outpui of steel wiisines that of China. These relationships for steel output probably hold in genera] for

The total volume of freight turnover in ton-kilometers ln the USSRimes, and per capita freight turnoverimes, that of China. Passenger traffic for the USSRimes, and per capita trafficimes, that of China.

0. Occupational Distribution of the labor Force and Productivity.

The agricultural populationercentage of totalin Communist China2 was aboutercent, only slightly higher than the percentage ofercent in the USSR8 (see The nonagricultural population, however, in Chine was not concentrated to the same extent in the relatively organizedsectors. ercent of the total Chinesewas supported by employees In industry (excluding individualonstruction, transportation, and communications;ercent of the total Soviet population8 had been supported by employees in these sectors, which are directly associated vith the program of rapid industrialization.

The higher per capita consumption and per capita investment of the Soviet population8 have their counterparts in

ollows on. ** ollows oa* Text continued on.


First Five Year Plans, Coiraunist Coina and the USSR: Production of Selected Producer Goods and Performance in Transportation

of Annual

Percent of Annual "acre***



CHalU (kUcvnc-

film r>

Million Htrle ton"


capita (kllo^aiia)



I n


Million cubic twl-rs Per caplt*isten)

vboutund nctrlc uu

TncmsoAd units

Billloouplt* (tsn-

&al>rcoc> freight

Footnote* for Tealson p.












- i




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6 i/ hOT









First Fjve Year Plans, Ccmnunis- China and the USSR: PfjG-.iCXlcii or Selected Producer Goods and Performance in Transportation


C cretin lit Chl.-o













ton ent

h . . r.



o. JO/





C . Ji

& . |I

I IS jff






1 Pi

x:r produ: or. "

s follows: ilogramseat,

g; andg. The comparable figures for China in

re as follows: grain,g;6 kg; and cotton,

g. Per capita output of the Soviet farm population8 was

thereforethat of the Chinese farm population

Productivity of Soviet workers in the sectors associateddevelopment was, however,reat deal higher thanworkers (see Table on-kilometer, unit-kilometer output per employeeand communications6 units for the USSRcompared'* units for China. Employees in thesystem in the USSR were thereforeimesas those in China The total energyemployee in Industry, in construction, and in transportationin the USSR81 tons of standardis2 times the comparable figure lor China2individual handicraft workers are included, the amount ofworker in the 'JSSHimes that in China at thetheir respective First Five "Tear Plans. Steel output per

arginjor the USSR.

!ir. entis in Production During the Two Five Year l'Jans.

During ito First Five Year Plan, total gross national production or Communist China as estimated by sector origin6 prices (see) increased at an average annual rate of approximately

percent. AT. estimate by end use gives an average rate closer to

percent annually. The rate of growth for the Chinese Second Five Year Plan ie projected at approximately the same general rate of growth as for the First Five Year Plan. Jasny estimates that Soviet net notional productonstant prices increased87 at an average annual rateercent when estimated by sector originercent when estimated by end Mo estimate of the rate of growth for total Soviet output72 is available. It was almost certainly lower than the average rate of growth2ut, even allowing lor this, it is probable that the rate of increase for the Soviet First Five Year Plan was no greater and perhap3 somewhat less than that for Communist China during its First Five Year Plan.

P.bove. '* bove.

ollows on.bove.

Although the over-all rates of growth for the two economies are comparable for their First Five Year Plans, the Chinese First ?ive Year Plan progressed more smoothly and involved more efficient use of resources. This plan had many difficulties and some outright failures; but the Soviet plan was characterized by social and political dislocations of such magnitude that they seriously interfered with economic trends, whereas the changes introduced in China were not nearly so disastrous in terms of production.

A. Agriculture.

sivc of forestry, fishing, hunting, and subsidiary handicrafts, for Communist China and the USSR are given in the following tabulation:

Comaiunist China

3 5 6 ]qj ICO Ilk


9 0 1 2 3 Index US/ 98 87 80 B'j

Agricultural output in China, excluding forestry, fishing, and hunting, increased by about I'i percent inears2hereas thereecline ofercent in the USSR inearsnd output wasercent less2 than


For Communist China, industrial output is estimated to have increased at an average annual rate of nearlyercent during the First Five Year Plan period. This estimate, of course, is necessarily preliminary because research on trends in Chinese industry has just begun. The exact trends ia industrial output during the Soviet Five Year Flan are still the subject of some dispute. Jasny gives anfor all industry inubles which shows an average annual increase ofercent, jig/ substantially higher than an index of all industrial output as estimated by Nutteriving an average

annual increase6 rulilct of ndex of Soviet large-scale industrial output,ayroll weights, gives an average annual increase during the Soviet First Five Year Plan6/ This Increase can be compared with the present estimateate of increase for China's industry excluding output of individual handicrafts, of nearlyercent.pproaches the problem cf estimating trends in Industrial production in the USSH by using data on steel consumption, fueland electric power with the aid of correlation studiestrends in these components and trends in over-all industrial Output in non-Communist countries, where statistics on both arc more adequate than those available for Comniunist countries. The formula which he derives in this manner, when applied to data on available steel, fuel, and electric power, gives an index for the USSR which shows an average annual increase in industrial output of l6 percent-

5 percent.

3ecause much research remains -to be done on the industrial output of Communist China, because there are wide differences ir. estimates cf the rate of increase of Soviet industrial output, and because there are inherent difficulties in the comparison of two different economies at widely separated periods of time, no clear-cut conclusions arc possible as to comparative trends. It is clear that industrial output ln Comniunist China is characterized byin output of light industry that are much higher in relation to increases in heavy industry than those which occurred during the Soviet First Five Year Plan. lance at Tablehows that output of light industry In Ccoonun;.sz China increased significantly during its First Five Vt.ur, whereas output of the same industry failed to increase significantly during tic Soviet First Five Year Plan and in Kiany cases declined.

In comparing the development of heavy industry, trendsthe First Five Year Plan in the USSB showed sonevhat higherin the production of primary energy and significantly lower increases in steel production, and probably correspondingly lower increases in machinery output, when compared with Communist China. Tablecompares the trends in primary energy and in steel output. The much smaller rate of increase in steel output in the two plan periods is not due to failure of the Soviet plan to invest in the steel industry but to the fact that Chinese output2 was below capacity and7 fully utilized, whereas the reverse took place in the period of the Soviet First Five Year Plan. Steel capacity in the USSR is estimated to have increased6 million tons in


** ollows on

- 17

C i ti.

Table 6

First Five Year Plans, Coanunlflt China and the USSB: Production of Primary Pnergy and Steel a/

Tearof 5ecood

Jive Tearrlar.


ussa) xa*l


ofhh^Ubu V

Tnojiettd >Vtric Tone

7 JO

Flrot Fl*-




rnelew "li (CMru Projected)


swot el <JT,bove.

s" ft-isCC Rlloc-alortes per .liomr CofirvrsioGe wed fcr Chineseaa follows;

1 Mr or coal6 ton or atasdardf petroleu:j unai, tlil

r-3trotjdroeleetric pc-eror standard IMI* n* ased foe Soviet orodartloouiows: 1or coal Wtor. of ataadardor otoer* of .tartard

illion XvSMof standard fuel. Thei jBedOther rweis

issjsssjssssaJaa. : iroa-cttti; is laeluted ln trefif-res beea-^ae lt it lnporiMt Kf af tmuatrial fuel. I, Plnjessot ire not yet enaodled lr. specific

- ia -

ft years,an average9 allllonear, compered vith an Increase for China3 Billion tonsears, $a/ an average ofaiilllonear. The Soviet Investment effort in the steel industry war. therefore more than half again higher, butlagged bndly. Much of the Soviet investment effort, therefore, did not show up in production untlJ the Soviet Second Five Year Plan, when the average annual Increase in steel output was throe times that for the First Five tmx Plan.

C. Trends ln Other Sectors.

Total ton-klloaeters and passenger kilometers in the t'SSP Increased at an average annual rale ofercent, "'tic comparable figure for Communist China lsoercent. Employment trends in Tablean be used to compare other sectors of the economieo. Workers in construction in the USSB Increased at an average annual rate of about Uk percent compared with an average annual rate26 for Chine of aboutercent. The number of employees in communal services In the USSH Increased at un averuge annual rate of nearly iU percent compared with an average annual rate ofercent for China. The number of stateemployees Increased at an average annual rate ofn the USSR comparedegligible Increase for China.

TV. Economic lVilcicr..

A. Learning froa the USSR.

. The Chinese Communists emburked on their First Five Year Plan with tlie important advantage of being able to leurn from Soviet Thia Five Year Plan for-naUy began3 but proceeded under annual targets in itsears and was not actually drawn upear programV The fact that the Chinese were able toomprehensive plan at all, however,ears after acquiring political control of China, was possible because the USSR had painfully discovered am! pioneered the concept and the cj>-chlnery of central planning and directionocialist economy.

Tho Chinese were able to adopt the industrial ministry od-mlnistratlve structure whichn slowly developed by the USSH throughout its First and Second Five Year Plans. In addition to the anti-inflationary policies developed during the civil war ln China, the Chinese borrowed flsca] nrd monetary policies from the USSR, with the result that there was relatively little price inlla-tion during the. In contrast, the USSRold price rise during its First Five fear Plan.



The application of Soviet experience waa facilitated by the assistancearge number of Soviet advisers. The advisers were Important not only in the setting up of the administrative andmachinery but also in almost every phase of development during the First Five Year Flan.

Not only Chinese economic administrative machinery but also specific economic policieslose Imitation of recent Soviet practice. This was broadly true of foreign trade, investment, and technology policies. It va3 less true in agricultural development and labor allocation policies. Perhaps even more important than the imitation of the USSR was the avoidance of some of the gross errors of the Soviet First Five Year Plan. This was especially true in the collectivization of agriculture, which the Chinese carried outserious disruption. In the socialization of industry and in the time scheduling of investment, the Chinese also avoided Sovietand achieved better results. These policies are discussed in more detail bc":ow.

By the end of the First Five Year Plan the Chinese had begun toood deal less imitative. Independent Initiative andappeared in policies for tne development of both agriculture and industry and in the administrative organization of the economy.

D. Socialization Policies.

Chinese Comir.unl st policies for socialization followedestablished by the USSR during its First Five Year::. i'hirrir.

rapidly than in the USSR. egligible percentage of the Chinese farm population In moperafivea or state farmsore thanercent of the Chinese farm population were organized in producer cooperatives In the USSR the percentageittle lessercent3 and more thanercenthe same relative trend also exists in industry except for thein China on joint state-private enterprises as the mainfor socialization of indusxry. Of total output8 in the USSR, aboutercent was contributed by state and cooperative industry, and2 the percentage had risen5 percent. In Chinatate and cooperative industry including handicrafts contributedercent of total output, and Joint state-privatecontributedercent. Private industrialstill contributed JiO percent of output. tate and cooperative industry and handicrafts in China contributedercent of total output, joint state-private enterprisesercent, andindustry and handicraftsercent. During the Chinese First Five Year Plan, therefore, socialization proceeded so rapidly


that it more than dude up for the lesser degree of state control over the economy at. tho beginning of the plan when compared with the Soviet economy.

The success of agricultural socialization In China iu in sharp contract with the failure of the same program ln the USSR. Chinese livestock production and supplementary farm production were affected by the socialization of agriculture, but cot to the point of wholesale liquidation of livestock and not to the point of control by the bayonet. umber of factors were involved In the much more skillful Chinese Comtunlet reorganization of agriculture. First, the lower average productivity of the Chinese farm population gavefarmuch lower potential for resisting state control than ln the USSR. In addition,ew years had passed since the land redistribution program, and private ownership of the redistributed land had not yet been establishedoint at which resistance could be made to still further changes In the system of organization. Moreover, the timing of,agricultural socialisation in China wan more propitious for the Communist leaders than in the USSR. Ir. China, agriculture wus stilleriod of recovery, and the relatively poor agricultural crop yearsccurred in the early years of the First Five Year Plan before socialization was carried out. In the USSR, on the other hand, agricultural output hail already reached Its period of recovery before the First Five Year Plan, and socialization took place during the same years when weather conditions were less favorable. The final factor was the nature of the reorganization taken. In the USSR, collectivization was accompanied by the program for mechanization, requiringchanges ir. the system of agricultural production ac well as in the economic institutions of the countryside, ln China, on the other hand, collectivization took placeeriod when the emphasis on increasing agricultural output was still in the traditionalof increases In Irrigation and in improvements in application of fertilizer and other labor-intensive methods of cultivation.

In adopting the Joint state-private enterprise as the main initial form for socialization of industry, the Chinese Communistsorm of organization that permitted greater use of thetalent of the "capitalist" class while firnly cementing state control over Industry. The cooperative form of organisation was used In relation to the large manpower potential of the Individual handicrafts sector, and this too permitted the absorption of the private sectorinimum effect on production.

Changes occurred8 in Chinese economic orgo-'ilr.utlon thatarked departure from the Soviet pattern of socialization.

Inampaign for establishing communes reached sweeping proportions. Theorm of organization based on large ureas usually centered on market towns, is aimed at combining agricultural industrial, and trading activities in one inclusive organization with workers organized in labor brigades. The goals are said tc be greater division of labor and fuller use of women in the labor force, witheating places and nurseries relieving them of household duties, In industry, greater stress had been laid on local industry, and this emphasis continued in the organization of the new communes. Themechanism has been changed to permit greater incentives for local government to expand production for local needs.

and Saving.

in the last year of China's First Five Year Plan did total investment command ashare of output as in the As shown innvestmentoviet economy con-stitutecercent of CMP in current pricesJ', and aboutercent These figures can be compared with estimates for Communist China of uboute-ccnt2 and nearlyercent During the Soviet Second Five Year Plan the proportion for defense expenditures increased unti1 they commanded tho aumc proportion of output as China's2 when it was engaged in the Korean War.

Estimates of CUP in current prices do not, however, tell the whole story. Price changes for China were relatively gradual,rastic change ia the system of taxes occurred in the USSR during Us First Five Year Flan vith the introduction of large turnover taxes on consumer goods. Data do not permit ao estimate of Soviet CNP, by end use,28 prices, but the nature of the trends inand consumption that occurred can hardly be questioned.

IV .

in contrast, investment increased while permitting significantin consumption.

tate and cooperative investment in theercent of total GNP. tate and cooperativenot including inventories, in6 prices was equivalent to moreercent of total CNP In Communist China the figures for state investmentercentnd state investment6 in comparable prices wastoercent of total CNP

* ollows on



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I) 1 L


Investment during the Soviet First Five Year Plan,starteduch higher proportion of output for iur the period thai

Five Year Plan. This rise in Soviet investment toes place in spiteecline in agricultural outputerious decline in Tn the USSH, average annual wages for workers and staff? werepercentut (based on an index in constant prices of state and cooperativeetail prices were 2U$ percent This rapid inflationecline inpower of nearlyercent. The decline in real farmwas probably even more. Communal services, however, increased significantly. Rising investment ir. Coroiunist China, on the other hand, was not accompaniedimilar decline in consumption. prices rose byoercent, and real wages for workers and staff increased byercent,2eal farm ineonje increased much more slowly, but. the trend in" no way resembled the trend in farm income during the Soviet First Five Year Plan.

D. Allocations of State Investment.

Investment policies during the Chinese First Five Year Plan were much the same as those during the Soviet First Five fear Plan.resents the relative shares Of state investment for each sector during eucii of the two First Five Year Plans. The figures for state investment are not comparable, because the Chinese figuresonly expenditures for Increasing fixed assets and the Soviet figures include miscellaneous expenditures by economic departments other than expenditures for working capital. Hough adjustments are made in the Chinese figures by including estimated major repairs and

ii::- :

and related budget expenditures for agriculture. These adjustments ure subjectide margin of error, but they serve for purposes of the comparison.

As shown inhe two investment plans emphasized heavy industry and transportation. The proportions of Investment

'Ihe Chinese allocation to heavy industry, however, was even greater than in the Soviet First Five Year Plan, and the Chinese allocation to agriculture is lower than in the Soviet pattern of investment. Somewhat nore of agricultural investment in the Chinese First Five Year Plan was planned to be financed by the agricultural sectorthe budget, but the main difference in investment policy was the nature of the agricultural Investment undertaken (see below).

ollows on


R. Investment in Relation to Qutr-ut

'Die Impact of state investment on the economy can be roughly measured by coopering the size of the Investment foror the USSRor Chinagainst the income originating in the sector6 in the USSR and2 in China. Tableresents this comparison.

hows that the Soviet state mobilization ofin relation to the output at the start of the first Five Year Finnimes the state mobilization of resources forduring the Chinese First rive Year Plan. Since it isthat the total output in the two economies increased .at urate.ore successful use of resources for investment for China than for the USSR. For Ccemsunist China the higher percentage of Investment fcr heavy industry and the smaller sector contribution of heavy industry and construction combined to furnish nearly asatio of investmenteavy Industry and construction for China as for the USSR. The poorer Soviet showing is mainly due to the trends in agriculture and light industry. When allowance is made for nonstate agricultural investment, as shown ln Tablehe ratio of Soviet investment to output3oearly times the comparable ratio for China3 to 1. Asoutpjl in the USSR declined byercent, the railure of the Soviet agricultural program is obvious. The small increase in production of light Industry in the USSR, ln spiteigher ratio of investment to output, reflects the impact of declines inoutput on light industry, and China's output of agricultural raw materials expanded significantly.

Transportation and communications received comparable amounts of Investment and Increased at comparable rates during the two Five Year Plans. Although Soviet investment in trade, communal services, government, and other nonagrlcultural sectors was twice the ratio of investment to output, income originating in coanunal services and government undoubtedly increased rweh faster than in China, as large increases in labor force in these sectors occurred in the USSRwith vrry small Increases in China.

In comparing the more favorable increases in Chinesennd industrial production as the result of investment, much of the difference Is dueomparison limited to the time periods of tho respective First Five Year Plans.he USSR wns aboutercent higher than8higher than The average rate of Increase in industrial

ollows on


fixed assets was aboutercent lower in the Soviet Second Five Year Plan than in the First Five Year Plan, but the rate of increase inOutput was perhaps one-fifth higher in the Second Five Year Plan than in the First. Tlie Soviet economy, therefore, didignificant portion of investment during the First Five Year Plan unitl the period3 Investment during the Chinese First Five Year Plan probably showed more immediate gains in output, and output during the Chinese Second Five Year Plan is therefore not likely toimilar upsurge from greaterof investment undertaken during the First Five Year Plan.

Another important factor in the more favorable results of the Chinese First Five Year Plan has already been noted above. Communist China's agriculture and industry had not reached potentials that had been built up in the pre-Cdmmunist period, and the period of recovery and restoration extended well into the period of the First Five Year

The most important factor, however, was that much of Soviet investment, particularly ln agriculture, was offset by severe social and economic disorganization, and Such social and economicdid not occur in any comparable degree in Communist Chinaits First Five Year Plan. In addition to the social and political dislocations involved, Soviet Investment in agriculture was largely aimed at changing the nature of tho techniques of agriculturaland releasing farm manpower for industry.

F. Agricultural Development Policy.

A radical difference tn the nature of the Chinese and v.:. v.

that were Quite different fron, those ir: the Soviet prograit. Asindicated, Soviet farm per rapita than twice

thai Of ;;

living was correspondingly lower and excess manpower in China'sparticularly in the off-season, was correspondingly higher. Weather conditionsreater potential for increasingby irrigation and other measures to take advantage of China's greater resources of water. Tlie Chinese program for agriculture depended largely on exploiting the greater manpower potential aad the greater potential for irrigation to increase output. The Soviet program aimed instead at raising farm productivity throughto permit transfers of farm labor Into the nonagricultural

In China, half of total state investment ln agricultural capital construction was spent on large-scale water conservancyand anotherercent on small-scale local irrigation projects.



Theac expenditures were therefore nearlyercent of ail state agricultural expenditures including dike repairs and miscellaneous

development expenditures. Thia portion of investment wasi V ' u : v: .

traditions ll-establishedes, i

methods of agricultural production. In contrast, onlyercent of

Soviet agricultural Investment was spent on irrigation and land rec-

" :tiY . . 1

toercent Cf the total sown area, and even this area was probably not mechanized by Soviet standards. In China the number of tractors in tractor stations7 Is givon6 standard unitsorsepower (hp). This is equal6 hpembers cf the farm population In contrast,2 about half Of the total sown area in the USSR was mechanized. Nearly One-third of state agricultural investment during the Soviet First Five Year Plan was directed to additional farm equipment and machinery. Frcn-9y81 hp) were supplied to the agricultural sectors, vailable tractors were equivalentM3 hpembers of the farm population, more thanimes the negligible amount of horsepower per capita in the Chinese farm population. Large numbers of motor vehicles were also supplied as against virtually no emphasis on such types of equipment in Communist China. Soviet agricultural investment was therefore directed toward raising the productivity of farm labor and not necessarily directed toward raising agricultural yields. In practice, however, this increase in agricultural machinery wasffsetoss of draft animals for farm production.

o. when the pace of Socialization of agriculture ir. China was increased greatly, some increases were made in theallocation of investment funds for agriculture. were further increased, with the main emphasis still placed on irrigation and other labor-intensive methods of increasing agricul-

: -jot r . U, Increas-

ing agricultural output

G. Labor Policy and Technology.

At the beginning of the Soviet First Five Year Plan, theof labor wai> smaller ir: relation to land and capital than in China, and average productivity was much higher, and yet the Soviet First Five Year Plan was characterizedarge-scale shift in the labor force from the agricultural to the nonagricult^ral sectors. In Communist China, however,arger supply of labor, official


the citieain latumesult of a, consciousnot to repeat the cistakes of the Soviet First Five Year Plan.

1. Occupational Distr-Iiut'on of the Labor Force.

An analysis of the figures lnundamentalccupational distribution of the labor force between the Soviet and the Chineseive Year Plans.9 percent of the Soviet population vaa supportedercent by industry, Including Individual handicraft,and transportation and communications;3 percent by trade, government, and other scrvlceo. 5 percent of the Soviet population vus supported by industry, construction, andand communicationsn average percentage change of rcoreear. The percentage of the population indeclinedercent9 percent" percent. The percentage supported by trade, government, and otherercent in the period of the First Five Year Plan. In Ccocunist China, however, the population supported by industry,and transportation ana communications increasedercent2ercentn average annuul Increase of about Oakear. An the percentage of the population in trude, government, and services remained about the same, thefor the agricultural population declinedimllur amount, or an average annual changeear. Moreover, the ratio cf dependents to workers and stuff ln the USSR decreaseder employee toer eaployee, whereas the ratio in China la givenependents per eaployee6 and probably was about the same ratio

In absolute figures the Soviet agricultural population declined at an average annual rato of moreercent, whereas the Chinese agricultural population increased by moreear. Disregarding the number of nonwagc workers in the private sector that were converted into workers und staff, workers and stuff during tlie Soviet First Five Year Plan increased at an average annual rate ofercent compared with an increaseercent for the Chinese First Five Year Han. The contrast in the ir.rrcases In labor force in the sectors directly associated with industrialization is even more striking. During the Soviet First Five Year Plan, workers and staff In Industry (excluding individual handicraft, construction, and transportation and communications) increased at an average annual rate of aboutercent, compared with an average annual Increase in labor force in these sectors in the Chinese First Five Year Planittle louiiercent.



2. Productivity.

The Chinese First Five Year Plan van aore successful than the Soviet Plan in increasing productivity. Per capita output in Chinese agriculture increased slightly, hyecline ofear for Soviet agricultural output- Hodgmanstimated the productivity of workers of large-scale industry2 a*ercent The productivity of workers tn large-scale industry during the Chinese Five Year Planat an average annual rate of more thanercent. Part of this difference In trends is due to the fact, already referred to, that the first part of the Chinese Five Year Plan waseriod of recovery, and part ls due to the much higher per capita output already achieved by the Soviet economy before the Five'Year Plan. After allowing for these factors, it ls still likely that ln the Soviet Five Year Plan period the crisis In the countryside and other pressures caused greater additions to the nonagrlcullural labor force than could be efficiently utilized. As Hodgaan points out, however, these transfers of untrained .workersotential forproductivity during the Second Five Year Plan as these workers acquired the necessary skills.

3. Tnw'atmi*nt and kfuor Force Curing th'? Two Five Yoar Plans.

With regard to nonagricultural investmentiscussed above, Soviet Investment in relation to output ls shown in Tableoimes that of China. At the same time, workers und staff in the CSSR increased aore than twice as fast as in Communist China. One indication of the extent to which workers are furnished withand equipment in production is the primary energy available. Primary energy ls of course made available for household consumption and for the agricultural sector, but production of primary energy in relation tc labor force can be used asrough Indicator of changes in the technology of production. * presents this coapurisor..

Although per capita outputrimary fuels increased more rapidly in the USSR than ln China, output per member of th"ural labor force in the L'SSP increased aboutercent as rapidly ac in China, and output of fuel per employee ln Industry and transportationhe primary usersactually declined wherr-as Chinese output per employee in these sectors increased raploiy. an increasing amount of petroleum output in tho USSR was used for the growing number of tractors in the agricultural nector, the decline in actual fuel available per employee mu:it have been greater than shown In

bove. ** Tableollows on


First Five Year Plans, Communist China and the USSR: Per Capita Production of Primary Energy for Selected Segements

ol* the Population

China; hina;f Standard Fuel

capita output


e nonagrlcultural labor force

worker in large-scale industry and transportation and comir.'Jiti cations


The same general trends in the technical level ofproduction and in other nonagrlcultural sectors can be shown In figures on fixed assets, although the data for China are far from satisfactory. Industrial fixed assets ln the USSR in3 rubies at replacement value increased at an average annual rate of aboutut, as workers in large-scale industryat an average annual rate of aboutercent and workers in construction increased at an average annual rate Ot aboutpercent, there could have beer, little change in the amount of machinery and equipment per employee, andmall decline. Ia China,fixed assets In current prices, probably at replacement valuencreased27 at an average unnual rate or aboutercent. As employees in Industryncreased at an unnual rate ofercent and construction workersate


ittle lent)ercent, significant increases probably toon place In the amount uf machinery and equipment per employee. In agriculture, on the other hand, the rural population ln the USSRand large increases took place in available machinery for agricultural production, ln China, no such shift took place.

It is therefore an Ironic fact that In the USftt, where labor was in shorter supply, the energy und the machinery andavailable per the sectors directly associated with industrializationargo-scale industry, construction, andactually declined. In Communist China, on the other hand, where the labor supply was nuch greater, the energy available, and probably the machinery and equipment available for these sectors, increased significantly during the First Five Year Plan. On the other hand, in both energy and machinery and equipment available for the agricultural labor force, the trends uere reversed, so the USSRon the mechanization of agriculture und China concentrated on an agricultural program that stressed labor-intenolve methods for increasing agricultural production. One is tempted to conclude that the Chinese Communists have proceeded to avoid the worst mistakes of the Soviet First Five Year Plan, but alsoanner that was not calculated to take full advantage of China's more ample labor supply. The crucial question here Isifferent programy which greater labor-Intensive aethods would be used in largo-scale Industry and greater distribution of investment and of energy to other sectors, such as agriculture and tradeould havereater return in terms of over-all increases in output than the policies adopted. Certainly the problems of organization aad management In view of the limited supply of technical and managerial talent in China would moketep more difficult than in ^he USSR and light offset thefor the Chinese Communist planners, particularly becauserogram wouldeparture from the Soviet model on which the First Five Yiar Plan was based. Inreuter shift of labor Into Industry, construction, and modern transportation would create further inflationary pressures, involving Increased problems in the control over consumer goods and requiring still greaterIn control over the distribution of agricultural output.

At Uie present time the Chinese Communists uro puttingemphasis on small-scale production at the local level. This marked departure from the Soviet model used in the First Five Year Planreater diversification of investment and greaterin the labor force In relation to available energy andand equipment. It is claimed that this policy could not have been applied earlier, becauseimited amount of skilled manpowerack of the necessary Industrial base to produce the equipment The concentration on larger, capital-intensiveprojects may have used aor* efficiently the technical old


furnished by the USSB and may have simplified theofandor Import, nevertheless, it is possible, ir not probable, that greater emphasis on small-rcole industrialcould well have been adopted earlier in Communist planning Instead of being delayed until the period of the Chinese Second Five Year Plan.

H. Foreign Economic Trade Folicies firing the Two Five Year Plans.

Foreign trade was not as important to the Soviet economy os itto China. oviet imports and exports were equivalent toercent of Soviet CKP in current prices (see. hina's Imports and exports, were equivalent to aboutercent of China's CNP, und7 theyercent of China's CNP Inprices. Imports were also much more important for China'sprogram than for the USSH. Daring China's First Five Year Plan, laports of machinery equipment, excluding militaryere equal to aboutercent of total state- Investment (see Tablesand laports of machinery and equipment for the USSH8? constituteercent of total state andinvestment.

Tn view of the emphasis that is often placed on Soviet credits as an aid to Chinese economic development. It ic interesting to note that, aside froa invisible exports and gold shipments, the surplus of Soviet Imports above exports82 was equal toercent of total imports. During China's First Five Year Plan the surplus of imports above exports was equal toercent of total Imports forear- Soviot indebtedness abroad Is reported to haveaximum ofmillion rublesqualines the average annual exports, orercent of Soviet CNP Chinese Indebtedness to the USSBaximumillion yuan by the endg/ or about the same as the overage annual exports ercent of its CNP The USSR therefore received aore In the way of credits in relation to its foreign trade during it* First Five Year Flan and the period preceding It than CcmmunJtt China received during its First Five Year Plan and the periodlt. Aid constituted,ower proportion of totalhe USSR than in China. Two-thirds of Chinese credits, however, were ln support of militarydevoted to strengthening the Chinese aiiitary establishment, and Soviet indebtcineps wna muchargely channeled to the Soviet program of industrialization.

P. jy, above. ollows on



First Five Year Flans, Communist China and the USSB: Foreign Trade

Cottwunlst China

Yuan Percent Million Rubles Percent

products {includingproceosed products)

Mining and industrial products

Total exports Imports

Machinery equipment and ferrous metal


Of which, military supplles

Essential raw materials Consumer goods

Total importa



on 30


N.A- c/

The pattern bf foreign trade was similar for the tvo countries, as shown inith its emphasis on exports of agricultural goods and raw materials and or. Imports of machinery and equipment for investmentinimum of consumer goods, but the Soviet pattern of trade rcllects its relatively higher industrial base. Industrialare somewhat higher, and imports of essential raw materials for industrial production are significantly higher, for the USSR than for China. One-firth or China's icports were- for the cililaryimports that could otherwise have been available ror investment or consumption.

Prc-apec's for Communis: China in the Id gat of Soviet Experience JXtri.-iji the .'Xivlet Firstlejo.'id Fiv^'1-iti.v.

The Soviet experience during the First and Second Five Year Plans serves to call attention to certain trends and problems facing Chinese Communist planners ln pursuing similar economic objectives. An analysis of the prospects for Communist China will be made in terms of two sets of assumptions, one of which is contrary to fact, 'lhe firstwould be that Communist China continued as ln its First Five Year Plan to model its policies and planning on tie Soviet experience with only minor modifications. This is essentially tlie framework set forth in the proposals Tor the Second Five Year Plan announced at the Eighth Party Congress ln October The second assumption is that far-reaching changes in policies aod planning are made which depart from the Soviet model. This second assumption represents what is actually taking place8 ln connection with the "leap forward" movement and the establishment of communes.

The policies ln the two Second FJve Year Plansablished in the USSH and as initially proposed in Chinaontinuation of the policies established during the First Five Year Flans. The same similarities and differences appear. Socialization ofin the USSHontinuation and consolldatloi. of the pattern of collectivization during the First Five Year Flan. Socialization had beer, ccnpleted ln industry and trade, and the Second Five Year Plan was also aof eonsolldatior of already-established state control.eriod ot consolidation wasie first announcements for the Chinese Second Five Year Plas, with tne end of all payments to the private Industrialists ard traders forar.en over by joint state-private enterpriser to take place'-lrc luring the Second Five Year Plau.

The rate oftate investmentto to nlawed down Ir -ach of the Second rive Yecr rise periods. In sachtateduring the Second Five Year Plan was to te about double tha1;



ol the FirstPlan, ln the USSR, however, tho average annual level of state investment ir. constant prices during the Firstcir Plan was more thanimes the level of Investmento. The average annual Investment in constant prices during the Second Five Year Plan was only about one-third higher than the level of state investment in the proposals for tho Chinese Second Five Year Plan7 level of state investment had been cut By aboutercent compared withnd the proportion of totalfor investment was expected tc be about the same for the Second FivePlan as ln the last few years of the First Vive Year Plan.

allocation of investment in the Soviet Second Five Year Plan was in general the same as in the First, with industry allocatedore, and agriculture somewhat less, than in the First Five Year Plan. The Chinese proposals increased the allocation to agriculture and continued the emphasis on Industry, with slightly more emphasis on light Industry. omparison of the two patterns oi'shows them to be even more similar than in the two First Five Year Plans. The Soviet Second Five Year Plan continued to stressof agriculture and increases In farm productivity while the Chinese program still stressed irrigation, fertilizer, and labor-in-sive modes of production.

The rate of increase in workers and staff in the nonagricultural sectors was slowed during tbe Soviet Second Five Year Plan, dropping fromear tcear. Workers inandear compared withercent during the Soviet. First Five Year Plan. The proposals for the Chinese Second Five Year Plan calledate of Increase in workers and staff which was about tbe aamv asercent for the First Five Year Plan. Product loivof primary energy during the Soviet Second Five Year Plan increased at an average annual ratend steel Increasea at an average annual rate ofith probably correspandiitg increases in machinery output, the amount of machinery and equipment and productive facilities per worker was improved enormously compared with the Soviet First Five Year Plan. Although little change probably took place in industrial fixed assets per worker in industry and construction during the Soviet First Five Year Flan, fixed assets per worker ln industry were almost two-thirds higher7 than "Ihe Chinese Second Five Year Plan asproposed the same genera] rate of increase in fixed assets per worker that occurred duringirst Five Year Plan, and it^Sustrlalas clearly expected to continue the eephaiis on large-scale and capital-intensive projects.

Tht' Soviet Second Five Ycur Flan vaa on ull counts successful. Agricultural Output, which? "asercent ofevel, had risen5 to3 level andn unusually good yearwas aboutercent higher than3 and half again as high as The rate of increase in over-all industrial Output during the Second Five Year Plan was substantially higher than during the First Five Year Plan. More important was the balance achievedlight and heavy Industry. The rate of increase io production of consumer goods was about three-fourths as fast us that of over-all industrial production.

The proposals for the Chinese Second Five Year Flanrogram giving greater emphasis to agriculture, and if this program hud actually been put into effect, agricultural Output could have been expected to Increaseignificantly higher rate than during the First Five Year Plan. The rate of increase could not have been expected to he as high as during the Soviet Second Five Year Plan, because in this period Soviet agriculture recovered from the large declines experienced1 The targets established for industry and the projected levels cf light industry output that would follow from the increases to be expected in agricultural outputthat the rate of increase in industrial output during theSecond Five Year Plan was expected to be no higher than during the Chinese First. Five Year Plan, and probably somewhat lower. An acceleration Of industrial growth OS in the Soviet Second Five Year Plan could not reasonably be expected if the same planning framework had continued. In the first place, increases In industrial output3n China represented ir. part results of the period of recoveryu period which had already occurred in the USSR before its First Five Year Plan. In the second place, industrial output had increased more nearly ln proportion to Increases in industrial iuverjl-ocr.t luring the Chinese First Five Y un, whereas luring the Soviel First Five Year flan industrial Investment had proceeded faster thun the extent to which the new facilities were utilized for production. As the large numbers of Industrial workers which were added during the First Five Year Plan gained new skills and the added capacity was more fully utilized, the Soviet Second Five Year Plan reflectedgains in industrial production.

Actually the developments8 show that the period of the Chinese Second Five Year Plan marks drastic departures from the Soviet model and from ihe framework of policies and planning for the Chinese First Five Year Plan. Agricultural developmentall-out emphasis relying in the main on mass mobilization of farm labor and mass propagation of new agriculture techniques. Continuing development of large-scale projects wa3 to be carried out as planned, but, in addition, resources were devoted to local industry

- 33

and to small-scale industrial projects. This emphasis on labor-intensive industrial produetioueliberate effort to utilize China's manpover resources more efficiently. The scale of effort and the targets now established areew departure that it is not possible to predict the outcome except to say that such aisonceived to meet actual economic conditions in China than the close imitation of the Soviet model which was the basis of planning for the-

Mot only have economic development programs for agriculturechanged radicallytilize China's hit;emore fully, but also socialization of agriculture hasby organization of most of China's population into rulalong the

lines already established, communes have been set up that are to cut across economic sectors, combining agricultural, industrial andactivitiesingle organization locality. Thechanges involved are so sweeping that it is Impossible to evaluate them fully at this time. Neither the trends under the Chl-


Second rive Year Plans can be used as guide lines for projecting trends during the Chinese Second Five Year Flan. All that can be said is that China's manpower resources and its natural resources, if fully mobilized, will :terai I. rapid industrial developmentat leastime relatively rapid agricultural development- If the new developments can be consolidated and Communist controls along such ambitious lines succeed, the rate of increase in output will be


The "leap forward" program, however, is having the effect ofthe Chinese economyabor-surplus economy to one in which labor will be in short supplyery brief period of time. Tne gains achieved cannot be considered typical of trends in output thereafter, bul th'. new may achieve .1 ikt.Lrough Ln the relation of population to food supply aad relatively quick, gains in industrial output during the early years of the Second Five Year Plan. The social and political reactions torganization ofare the critical factors io the success or failure of the These are even more difficult to predict. Oaly the passage of time will enable us to detennine their effect on the economy.


Evaluations, followingassification entry and designatedave the following significance:

Source of


- Documentary

Confirmed by other sources



Probably true



Possibly true


y reliab Le



usually reliable

Pi' :bably false


Cannot be Judged


be judged

"Documentary" refers to original documents of foreignand organisations; copies or translations of such documentst^ff officer; or Information extracted from such documentstaff officer, all of which nay carry the field evaluation

Evaluations not otherwise designated are those uppcaiing on the cited document; those designated "RR" are by the autnor of this No "RH" evaluation is giver, wnen the author agrees with the evaluation on the cited document.

All sources used in this report are UNCLASSIFIEDrcRR 3.

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1- 9-

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Original document.

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