Technological and Industrial History of The People's Republic of China - Reform of The Industrial Economy in The 1980s

Reform of The Industrial Economy in The 1980s

The industrial sector employed only about 17 percent of the labor force in 1985 but, as a result of much higher labor productivity than the agricultural sector, accounted for over 46 percent of national income. Industrial units were very diverse in size and technological sophistication, ranging from tiny handicraft manufacturing enterprises to giant modern complexes producing such goods as steel, chemical fertilizer, and synthetic fibers.

The majority of the country's large industrial units were clustered in the major industrial centers in the northeast, the Beijing-Tianjin-Tangshan area, the Yangtze River Valley, and Shanghai. Small and medium-size units were found throughout the country, and a number of first-rank plants were located far from the leading cities. Ownership of industrial enterprises fell into three general categories: state ownership, urban collective ownership, and rural collective ownership. Industry was dominated by the state-owned sector, which included the largest, most technically advanced, and most important enterprises.

In 1985 state-owned enterprises produced 70 percent of national industrial output by value, held 75 percent of fixed industrial assets, and employed 46 percent of the industrial labor force (including rural industrial enterprises). Although all of these units were owned by "the state" in the abstract sense, operational control and effective ownership of specific enterprises were divided among the different levels of government. A few of the largest enterprises were under the direct authority of their respective ministries in the central government. Most major enterprises were owned by the province, autonomous region, or special municipality where they were located or were subject to shared control by the central ministry and the provincial-level government. Small and medium-size units usually were owned by city, prefecture, county, or town governments. Control of some enterprises was shared with higher administrative levels.

Workers in state-owned enterprises were paid regular wages according to an established pay scale, as well as bonuses that were supposed to be related to personal or enterprise performance or both. In addition, they received a number of important benefits, including free health care, subsidized housing, and subsidies for such work-related expenses as special clothing and commuting costs. The average income of industrial workers was considerably higher than that of most farmers and was much more stable.

Urban, collectively owned enterprises (owned by the workers) for the most part were small units equipped with relatively little machinery. Many of these units were engaged in handicraft production or other labor-intensive activities, such as manufacturing furniture or assembling simple electrical items. In the late 1970s and early 1980s, the government promoted them as a means of using surplus labor to increase supplies of consumer and export goods. By 1985 urban collective industrial enterprises employed over 17 million people, 20 percent of the total industrial labor force. These enterprises held only 13 percent of all industrial fixed assets but produced 19 percent of total industrial output value.

Rural, collectively owned industrial enterprises – commonly referred to as "township enterprises" – were the most rapidly growing portion of the industrial sector in the mid-1980s. The government regarded them as a means of expanding industrialization (without further taxing the overcrowded major urban centers), alleviating rural unemployment, and increasing supplies of industrial products in rural areas. Most of the township enterprises were operated by township and town governments, but a large number of very small units were operated by private cooperative organizations called "rural economic unions." In 1985 township enterprises employed 30 million workers, over a third of the total industrial labor force. The value of their fixed assets, however, was only 12 percent of the national total, and their output value came to less than 10 percent of the national total. Nonetheless, in 1985 their income grew by 44 percent over the 1984 levels. The most common products of township industries were building materials, agricultural machinery, textiles, and processed foods.