Economic History of The People's Republic of China - National Goals

National Goals

By 1987, under the stimulus of the reform program, the Chinese economy had made major strides toward achieving modernization and improved living standards. The potential for further improvements in efficiency and productivity was greatly increased by the revival of the education system, the opening of the economy to broader trade and cooperation with other countries, the expanded use of the market to enliven commerce and production, and the increased decision-making power of individual economic units.

The country's most important resource was its labor force, the largest in the world. The rapid expansion and improvement of the education system that began in the late 1970s was creating larger numbers of workers who were skilled and well educated, as well as the first substantial numbers of advanced-degree holders to staff the nation's universities and research institutes. In addition, the decentralization of management encouraged the participation in planning and decision making of growing numbers of local and enterprise-level managers, planners, administrators, and scientists. It also trained future economic leaders for higher administrative responsibilities.

In terms of material resources, China was adequately endowed to meet the needs of modernization in all but a few materials. Under the new policy of encouraging cooperation and joint ventures with foreign firms, advanced technology was more widely used to exploit China's large deposits of iron ore and other important minerals, along with the country's vast coal and petroleum reserves and its enormous hydroelectric potential - the largest in the world. Much of the investment in expanding the transportation network in the 1980s was aimed at improving access to previously remote mineral and energy resources for both domestic needs and foreign trade.

The most stringent resource constraint was the limited amount of arable land, which actually declined in the 1980s as cropland was appropriated for new rural housing and urban expansion. Between 1978 and 1985, the total area sown to crops declined by over 4 percent. The loss of farmland, however, was more than compensated for by improved productivity of the land that remained under cultivation. Farmers expanded the irrigated area, increased fertilizer application, acquired improved crop varieties, and made better use of comparative advantage in determining which crops to grow, resulting in an average rate of growth in the value of crop production of better than 5 percent a year over the same 7-year period. Although agricultural growth rates had begun to fall off in the mid-1980s, the incentives of the responsibility system and greater access to international technical advances suggested that the farm sector could continue to meet the needs of the growing economy in the foreseeable future.

The industrial sector, while much less advanced than those of the developed countries, was nonetheless a solid base for modernization. Industrial enterprises were dispersed throughout the country and included units capable of producing all major kinds of machinery, equipment, chemicals, building materials, and light industrial goods. Chinese enterprises could make most of the products required for modernization, and the growing pool of industrial technicians and managers was increasingly capable of effectively integrating advanced foreign technology into Chinese production processes. Key industries were being technologically strengthened by the purchase of advanced foreign equipment and the adoption of modern management techniques. Despite promising potential, formidable obstacles still impeded the drive for modernization. Physical restraints included a renewed increase in birth rates and population growth rates as the number of women of child-bearing age began to rise in 1986 and 1987. Some crucial resources - especially educated personnel and modern equipment - still were in very short supply because of the sheer size of the economy. In the realm of policy, the administration faced the daunting problem of trying to integrate market measures - for efficiency - with government planning and control, the source of stability. In 1987 both kinds of mechanisms exerted extensive influence with the result that market efficiency was hindered by government intervention and government plans were undermined by off-plan activities. Finally, the most serious concern of government leaders was the possibility of future political upheavals. While nearly all Chinese people enjoyed better living conditions as a result of the progress achieved by the reform program, the new policies also had given rise to new social problems and political tensions. Increasing crime and corruption, greater emphasis on the profit motive, widening income disparities, and inflation aroused resistance in many conservative quarters and resulted in the political struggle that caused Hu Yaobang to be forced from his position as Chinese Communist Party general secretary in early 1987. By mid-1987 it was not clear what the outcome of the struggle would be or how it would affect the future course of economic reform (see Economic reform in the People's Republic of China).