Report No. 4072-CHA FIECCp

China: Recent Economic Trendsand Policy Developments

March 31, 1983

East Asia and Pacific Regional Office

FOR OFFICIAL USE ONLY

Document of the World Bank

This document has a restricted distribution and may be used by recipientsonly in the performance of their official duties Its contents may not otherwisebe disclosed without World Bank authorization

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CURRENCY EQUIVALENTS

The Chinese currency is called Renminbi (RMB). It is denominatedin yuan (Y). Each yuan is subdivided:

1 yuan = 10 jiao = 100 fen

Exchange rates used in this report are as follows:

1979 $1.00 = Y 1.55

1980 $1.00 = Y 1.501981 $1.00 = Y 1.71

1982 $1.00 = Y 1.89

WEIGHTS AND MEASURES

Chinese statistics are usually in metric units; in addition,mu and jin are often used:

1 mu = 0.1647 acres = 0.0667 hectares (ha)1 jin = 0.5 kg

FISCAL YEAR

January 1 - December 31

TRANSLITERATION

The Pinyin system is used in this report.

FOR OFFICIAL USE ONLY

CHINA

COUNTRY ECONOMIC MEMORANDUM

Table of Contents

Page No.

SUMMARY AND CONCLUSIONS i-ix

1. INTRODUCTION ........................ . 1

A. Economic Setting .1.. . . . . . . . . . . . . . . . . . . IB. Overview of Reform, Adjustment and Stabilization. 3

2. MANAGEMENT OF GROWTH AND ADJUSTMENT . . . . . . . . . . . . . . 5

A. Planning and Management ... . . . . . . . . . . . . . . . 5B. Growth and Structure of the Economy . . . . . . . . . . . . 8C. Incomes and Employment ... . . . . . . . . . . . . . . . 11

Urban Incomes and Employment . . . . . . . . . . . . . . 12Rural Incomes . . . . . . . . . . . . . . . . . . . . . . 14

D. Investment . . . . . . . . . . . . . . . . . . . . . . . . 15Size and Composition of the Investment Program . . . . . 16Investment Process . . . . . . . . . . . . . . . . . . . 18

3. FINANCIAL AND BALANCE OF PAYMENTS MANAGEMENT . . . . . . . . . 20

A. Inflation and Prices . . . . . . . . . . . . . . . . . . . 20Inflation . . . . . . . . . . . . . . . . . . . . . . . . 20Price Structure . . . . . . . . . . . . . . . . . . . . . 22Price Reform .23

B. Fiscal Policy . . . . . . . . . . . . . . . . . . . . . . . 24Budgetary Deficits and their Impact . . . . . . . . . . . 24Trends in Expenditures .26Revenue Developments .26Fiscal Decentralization .29

C. Monetary Policy .30Money and Credit in Stabilization . . . . . . . . . . . . 30Interest Rates and Banking Reform . . . . . . . . . . . . 33

This report was prepared by Ian Porter, Bill Byrd and Gene Tidrick.Mr. Porter and Mr. Byrd visited China in March/April 1982 as members of anIMF Article IV consultation mission and the report is based largely on theinformation provided to the IMF mission. A draft of the report was discussedwith the Government in January 1983 by a mission led by Mr. Parvez Hasan andincluding Mr. Porter and Mr. Byrd, and was revised to take account of commentsreceived as well as developments since April 1982.

This document has a restricted distribution and may be used by recipients only in the performance oftheir official duties. Its contents may not otherwise be disclosed without World Bank authorization.

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Page No.

D. The Balance of Payments . . . . . . . . . . . . . . . . . . 34Exports and Imports . 35External Borrowing and Creditworthiness . . . . . . . . . 39Institutional and Policy Changes in the External Sector . 40

4. SECTORAL POLICIES AND REFORMS . . . . . . . . . . . . . . . . . 44

A. Agriculture . . . . . . . . . . . . . . . . . . . . . . . . 44Agricultural Growth and Adjustment . . . . . . . . . . . 44Production Responsibility Systems . . . . . . . . . . . . 48

B. Industry . . . . . . . . . . . . . . . . . . . . . . . . . 51Adjustment in Industry . . . . . . . . . . . . . . 52Institutional and Policy Changes . . . . . . . . . . . . 56

C. Energy . . 59Energy Consumption . . . . . . . . . . . . . . . . . . . 60Incentives for Energy Conservation, Substitutionand Production . . . . . . . . . . . . . . . . . . . . 61

Short- and Long-term Energy Planning . . . . . . . . . . 62D. Transport and Commerce .62

Transport . . . . . . . . . . . . . . . . . . . . . . . . 63Commercial Sales and Inventories . . . . . . . . . . . . 64Commercial Reforms .66

5. ECONOMIC PROSPECTS ... . . . . . . . . . . . . . . . . . . . 68

A. Constraints and Options ... . . . . . . . . . . . . . . . 68Human Resources ... . . . . . . . . . . . . . . . . . . 68Agriculture .... . . . . . . . . . . . . . . . . . . . 69Energy . . . . ... . . . . . . . . . . . . . . . . . . . 70Industry . . . . . . . . . . . . . . . . . . . . . . . . 72Infrastructure . . . . . . . . . . . . . . . . . . . . . 72Financial Resources ... . . . . . . . . . . . . . . . . 73

B. Macroeconomic Prospects ... . . . . . . . . . . . . . . . 73The Sixth Five Year Plan (1981-85) . . . . . . . . . . . 73Scenarios for the 1980s . . . . . . . . . . . . . . . . . 76

C. Prospects for Economic Reform . . . . . . . . . . . . . . . 80D. Concluding Remarks . . . . . . . . . . . . . . . . . . . . 83

TABLES IN TEXT

2.1 Agricultural and Industrial Growth, 1970-82 . . . . . . . . . 82.2 Growth of NMP at Current and Constant Prices, 1970-81 . . . 92.3 Structure of NMP at Current Prices, 1970-81 . . . . . . . . . 11

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2.4 Consumption and Ownership of Specific Commodities, 1977-81 122.5 Urban Incomes, 1978-81 . . . . . . . . . . . . . . . . . . . . 132.6 Survey of Rural Incomes, 1978-81 . . . . . . . . . . . . . . . 142.7 Gross Fixed Investment, 1977-82 . . . . . . . . . . . . . . . 162.8 State Capital Construction Investment, 1977-82 . . . . . . . . 17

3.1 Inflation, 1970-81 .213.2 Growth Rates of Sales and Incomes at Current Prices, 1979-81 . 223.3 Budget Deficits, 1977-82 . . . . . . . . . . . . . . . . . . . 253.4 Budgetary Expenditures and Subsidies, 1977-82 .273.5 Domestic Revenues, 1977-82 .283.6 Developments in Money and Credit, 1978-82 .323.7 Current Account, 1978-82 .353.8 Value, Price and Volume Indices of Exports and Imports,

1978-82 . . . . . . . . . . . . . . . . . . . . . . . . . . 363.9 Composition and Growth of Exports, 1978-81 . . . . . . . . . . 373.10 Composition of Imports, 1978-81 . . . . . . . . . . . . . . . 383.11 Direction of Trade, 1978-81 .39

4.1 Gross Agricultural Output, 1970-82 .454.2 Foodgrain Balance, 1977-81 . . . . . . . . . . . . . . . . . . 464.3 Use of Manufactured Inputs in Agriculture, 1977-81 . . . . . . 474.4 Industrial Growth: Percentage Change Per Year in

Gross Output, 1970-82 . . . . . . . . . . . . . . . . . . . 534.5 Growth of Manufactured Exports, 1978-81 .554.6 Imports of Machinery and Equipment, 1978-81 .564.7 Changes in Main Transportation Indicators, 1978-81 . . . . . . 63

5.1 Selected Sixth Five Year Plan Targets ... . . . . . . .. 745.2 State Capital Construction Investment by Sector . . .. . . . . 755.3 Effects of Low Growth and Moderate Energy Savings,1978-90 . 775.4 Effects of Moderate Growth and Moderate Energy Savings,

1978-90 .795.5 Effects of High Growth and High Energy Savings, 1978-90 . . . 80

ANNEXES

1. Restructuring of the Commissions and Ministries of the State Council2. Conversion of Macroeconomic Statistics

STATISTICAL APPENDIX

MAP

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SUMMARY AND CONCLUSIONS

1. The first World Bank report on China entitled "China: SocialistEconomic Development" was distributed to the Executive Directors in June 1981.The report was designed to be as comprehensive as possible and included ananalysis of China-s economic system, a review of development efforts over thepast three decades, a comparison of the economic situation and level ofdevelopment of China with those of other countries and an assessment ofChina's development prospects. This Country Economic Memorandum focussesprimarily on economic developments since 1978 and on the implications of thesedevelopments for China's future economic prospects.

Background

2. Following a period of major institutional changes in the 1950s,which included land reform and the eventual establishment of communes inrural areas and the extension of public ownership to cover almost all of themodern sector, development efforts in China have been directed toward themajor objectives of industrialization and poverty reduction. Substantialprogress has been made: China now produces a far greater variety ofindustrial goods than most developing countries, and in terms of basiceducation, nutrition and health the Chinese population is much better offthan most of its counterparts in other developing countries. Despite theseachievements, however, China remains a very poor country with a GNP percapita of only $300 in 1981 /1 and about 200 million people or 20% of thepopulation with unacceptably low incomes. The economy is also inefficient:past growth has come mainly from massive mobilization of resources andfundamental institutional changes; relatively little attention has been paidto issues of efficiency. For a country that faces significant domesticresource constraints this is a particularly serious problem.

3. To address the underlying weaknesses and imbalances in the economyand ensure rapid growth and improvements in living standards, the Governmentinitiated a program of adjustment and reform in 1979. Structural adjustmentis aimed at speeding improvements in living standards. It has involvedreadjusting the relative shares of consumption and investment in nationalincome, some sectoral and subsectoral readjustments and an emphasis on foreigntrade. Economic reform is aimed at improving the overall efficiency of theeconomic system and involves: (a) restoring and improving the quality ofcentral planning and policy coordination; (b) devolving more decision-makingauthority to lower level units in the economic system; (c) establishing more

/1 Calculated according to the World Bank Atlas Methodology.

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direct links between incomes and the performance of economic units andindividuals; and (d) placing more reliance on market mechanisms and economicinstruments, less on administrative directives, to influence economicactivity. In 1981 problems of inflation and large budgetary and currentaccount deficits resulted in short-term stabilization temporarily receivingthe highest priority, but by 1982 the Government was again pushing aheadrapidly with adjustment and reform.

Economic Reform

4. Reforms in the system of economic management have now affected allsectors of the economy and institutions from the central government downto production teams and rural households. A major reorganization of thecentral government has strengthened the core planning and management agencies(especially the State Planning Commission and the State Economic Commission)and reduced the total number of commissions, ministries and agencies under theState Council from 98 to 52. A reorganization of departments and divisionswithin ministries and of provincial and local governments is underway.Economic management has also been decentralized: provincial and local planningcommissions and banks have been given more autonomy in investmentdecision-making and there has been an increased use of credit to financeinvestments; provincial and local governments have been granted greaterbudgetary flexibility and more incentives to expand revenues and/or economizeon expenditures; and the powers of ministries, new territorially based tradingcompanies and, in some cases, enterprises to engage directly in foreign tradehave been substantially increased.

5. Reforms of the economic system have been greatest in rural areas.The most important and fundamental change has been the introduction of varioustypes of "production responsibility system" which give lower level collectiveunits, groups and households more autonomy in production and investmentdecisions and link incomes directly with output. By the end of 1982, 92% ofproduction teams in China had implemented some form of productionresponsibility system; 78% of teams had implemented some form of householdresponsibility system, which involves retaining collective ownership of farmland and major equipment but contracting out plots of land to individualhouseholds. In many cases households can farm the land as they wish andretain whatever they produce beyond their obligations to the state (in theform of taxes and compulsory deliveries at fixed prices) and to the collective(for welfare and other expenses). These obligations now account on averagefor about one third of a household's production. In recent years there hasalso been an increase in the number and types of rural markets at whichhouseholds can freely trade commodities.

6. Economic reform has not proceeded as far or as fast in urban areas,but significant systemic changes have still taken place. Management of state

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enterprises has been affected by a number of changes and experiments aimed atimproving incentives, including the introduction of profit retention schemesand more flexible payment and employment practices. There has been experimen-tation with different types of state enterprise organization, a greatervariety of marketing channels, some price flexibility and adjustment of rela-tive prices, and greater autonomy for state enterprises in productiondecisions. The scope for collective and individual economic activities hasalso been enlarged.

7. Many economic reforms, especially those in rural areas, havealready had a positive impact on efficiency, while others will take longer tohave a significant effect. There are also some emerging issues with economicreform that the Government will need to address. In rural areas for examplethere is the issue of the potential conflict between enhanced economicincentives and equity in income distribution as well as preservation of someof the strengths of the commune system in terms of provision of basic needsand other services and mobilization of labor for construction and maintenanceof community infrastructure. In the state enterprise sector, many units stilldo not have to take full responsibility for their decisions (commercial unitsbuy whatever they produce and there is no risk of being closed down) and aretherefore still inclined to overinvest and overproduce. Substantialdecentralization of decision making without reforms in the pricing system hasalso caused lower level units to make some inappropriate investment andproduction decisions. More use is being made of the market, but informationand transport systems are still weak, markets are fragmented and competitionis limited. It has also been difficult to develop effective indirect fiscaland monetary policy instruments. During 1982 the Government reviewed suchissues and concluded that weaknesses and inconsistencies in reform should beovercome not by backtracking on reform but by carrying out more carefulstudies and experiments and speeding up the reform process.

Adjustment, Stabilization and Growth

8. During the past four years the Government has followed a strategy ofsetting relatively modest targets while pushing ahead with economic andadministrative measures that would contribute to adjustment and stabilizationas well as to economic growth. The various measures have included: majorincreases in agricultural procurement prices; strict controls on many otherprices; rationing and other administrative measures to improve efficiency ofresource use; changes in the amount and composition of state capitalconstruction; various fiscal measures designed to limit the budget deficit;increases in and a rationalization of interest rates; moderation of currencyand credit expansion; and the introduction of an internal settlement rate forforeign exchange transactions and other measures to encourage exports andeconomize on imports.

9. These economic and administrative measures have combined withsystemic changes to play an important role in the impressive performance of

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the Chinese economy in recent years. They have contributed to structuraladjustment by helping to reduce the share of investment in net materialproduct (NMP) from 36% in 1978 to 28% in 1981, by stimulating agriculturalproduction and by shifting the emphasis from heavy to light industry. Inseveral ways they have also been critical in restoring economic stability in1981 and 1982. First they helped to lower the rate of inflation (prices ofnonstaple foodstuffs and some other goods have been increasing quite rapidlybut the overall level of retail prices rose by only 2.4% in 1981 and anestimated 2% in 1982 compared with 6% in 1981). Second they helped to reducethe budget deficit (adjusted to eliminate financing items) from 7% of NMP in1979 and 5% in 1980 to less than 2% in 1981 and 1982. Finally they helpedto convert the $2.4 billion current account deficit of 1980 into a $2.0 bil-lion surplus in 1981 and an estimated $4.4 billion surplus in 1982. Through-out the period the various policy measures and reforms have also beenimportant in ensuring a satisfactory overall rate of economic growth: grossagricultural and industrial output at constant prices has grown by 6.9% peryear between 1978 and 1982 and NMP at constant prices by an estimated 5.3%.In the period 1978-81 net investment appears to have stagnated or evendeclined in real terms while material consumption grew in real terms by over8% p.a.

10. The combination of structural adjustment, rapid overall economicgrowth and a low population growth rate (1.3% p.a. between 1978 and 1981) hasled to rapid increases in per capita incomes in recent years. In urban areas,general wage increases and higher bonuses have more than offset the increasein the cost of living index, and real per capita incomes increased by 4.8%p.a. between 1978 and 1981. The number of urban unemployed has been reduceddramatically and, with government encouragement, urban self-employment hasgrown rapidly. Even more impressive, however, has been the increase in ruralincomes. After a long period of stagnation, rural per capita incomesincreased in money terms by 16-18% p.a. between 1978 and 1981; the realincrease in incomes was 10-12% p.a. About 60% of this dramatic increase isdue to increased production and the remainder to shifts in the terms of tradein favor of rural producers. While areas and households that were alreadyrelatively well off may have benefited the most and income differentials at alocal level may have increased, many poor areas and households have apparentlyenjoyed substantial income improvements. During 1982 there were furtherincreases in real per capita incomes, with rural incomes continuing to growmore rapidly than urban incomes.

11. The high rate of investment in 1978 and the low returns to much ofthis investment made a cutback in the investment rate a priority for theadjustment program. But achieving such a cutback has proved to be a difficulttask. Decentralization of investment decision making and financial resourceswithout accompanying reforms in prices and enterprise responsibility hasresulted in a rapid expansion in investment financed from retained earnings orlocal resources. Some of this investment has gone to priority areas includinghousing but other investment appears to have been in projects that from anational perspective are of a relatively low priority. The central governmenthas found it difficult to control such investment, even through administrative

regulations. Meanwhile state budget investment has been constrained by theneed to restore fiscal stability. As a result most of the cutbacks ininvestment have had to be in large centrally financed projects and in 1981even the priority sectors of energy and transportation were affected. Some ofthese high priority projects were revived later in 1981 and during 1982, butappropriate planning techniques and incentive systems still need to bedeveloped that will ensure a more optimal level and composition of investment.

12. The introduction of "production responsibility systems" in ruralareas, the major improvement in the terms of trade for rural producers andreductions in the quantity of grain and other products farmers are obliged toprovide to the state at fixed prices have all contributed to a very strongperformance of agriculture. Gross agricultural output at constant pricesincreased by 6.0% p.a. between 1978 and 1982; however real value added inagriculture has not been growing as rapidly. There has been a substantialdiversification of the sector, with production of cash crops includingoilseeds, cotton and sugar expanding rapidly and large increases in livestockand sideline production (including brigade and team industry). Grain produc-tion has also done well, increasing by about 2.8% p.a. during 1978-82 as aresult of significant yield improvements (the area planted to grain hasactually fallen). However, domestic grain consumption appears to haveincreased more rapidly, and net imports of grain have risen to about 15million tons (4% of total domestic consumption). Emphasis is now being placedon providing the incentives (including price incentives) and other assistancethat will further stimulate agricultural production and ensure an appropriatebalance between grain and nongrain agriculture.

13. The industrial sector has also performed well in recent years: grossoutput at constant prices has increased by 7.2% p.a. during 1978-82 (heavyindustry by 3.3% p.a. and light industry by 11.8% p.a.). Both the overallgrowth rate and the pattern of industrial production have been affected bythe energy situation. Due to the stagnation of energy production andcontinued exports of energy products, domestic consumption of energy has grownby less than 2% p.a. during 1979-82, while NMP has risen by nearly 5% p.a.This has been possible largely because of the changing structure of industry:heavy industry consumes about four times as much energy per unit of output aslight industry and heavy industry grew very slowly in 1980 and actuallydeclined in 1981 before picking up again in 1982. The Government has beenstressing the importance of improved efficiency and energy savings withinsectors and has been pursuing energy conservation through rationing and otheradministrative measures as well as a few selected price and tax changes. Itis recognized that as economic reforms proceed further, the role of pricingin energy conservation will become more important.

14. The restoration of fiscal stability in 1981 and 1982 has beenachieved more through expenditure restraints than through revenue growth.Total domestic revenues have been increasing but at only half the rate ofgrowth of NMP, in part due to the introduction of profit retention schemes andthe shift in the composition of industrial output from heavy to light

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industry. Among expenditure items, spending on capital construction hasfallen in every year since 1978 while subsidies (mainly on daily livingnecessities) have increased dramatically from 6.6% of total expenditures in1978 to 26.0% in 1982. However, the issue of subsidies is more a pricing andincome distribution issue than a fiscal issue. Because of the Government'sconcern about open inflation, many of the increases in agricultural procure-ment prices have been financed by subsidies rather than being passed on tourban consumers, but without such subsidies the Government would probably havebeen obliged to permit larger wage increases and hence lower profitremittances (which are a major source of government revenue), leaving thefiscal situation largely unaffected.

15. The improvement in the balance of payments in 1981 and 1982 has beenmuch greater than anticipated. The performance of merchandise exports hasbeen very impressive with real growth averaging over 15% p.a. during 1978-82,mainly because of a rapid growth in manufactured exports which has beenencouraged by the decentralization of foreign trade and the introduction ofthe internal settlement rate. However, some of the growth appears to haveresulted from excessive competition among provinces and organizations and fromexports of basic consumer and producer goods that are in short supplydomestically. To address such problems the Government introduced variousexport quotas and export duties during 1982. The real growth rate of exportshas been declining steadily since 1978, reaching an estimated 8% in 1982.Export prices have also declined and the nominal value of exports in 1982increased by only 3%. Meanwhile the volume of imports declined in both 1981and 1982, due in part to the lagged effect of contract cancellations andsuspensions (which resulted in a 50% drop in the value of imports of completeplants and sets of equipment in 1982), but also to delays in delivery ofequipment already ordered and to problems in obtaining high technology goods.A substantial increase in imports is expected in 1983 and 1984 as Chinaendeavors to take advantage of its strong balance of payments position toimport more machinery and equipment and expand its investment program,especially in the priority sectors of energy and transport.

16. A major consequence of the Government's conservative trade andbalance of payments strategy has been a much reduced need for foreignborrowing. In 1930 and 1981 the Government cut back sharply on interbankborrowing and in 1981 and 1982 took advantage of the unexpectedly strongcurrent account position to repay commercial bank and other loans. In 1981China's debt service ratio was 7.8%, due in part to accelerated loan repay-ments. At the end of 1981 total reserves (excluding gold) were $5.0 billionor 3 months of 1981 f.o.b. imports; by the end of the third quarter of 1982they had increased to $9.4 billion.

Prospects

17. During the remainder of the 1980s the Government's efforts toimprove the living standards of the Chinese people should be helpedconsiderably by the continuation of a relatively low population growth rate;by opportunities to make greater and more efficient use of foreign technology

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and capital; and by the possibilities for improving efficiency througheconomic reform. Rapid and equitable economic development is constrainedby a number of factors, however, some of long-standing and others of morerecent origin. There are serious shortages of skilled manpower and currentenrollment in both universities and technical and vocational schools is onequarter of the average for other developing countries. The performance ofagriculture in recent years has been very good; but with no possibilities forexpanding the cultivated area and with cropping intensities and yields alreadyquite high, the growth rate for agriculture (excluding brigade and teamindustry) is unlikely to average more than 3-4% p.a. during the 1980s.Efforts also need to be made to ensure that all areas and regions participatein agricultural growth. Energy availability will continue to constrain indus-trial growth during the remainder of the decade, and there are capacityconstraints in the transport and commercial sectors. Large investments willbe required in energy and transport at a time when competing demands fromother sectors, especially housing, are very great, domestic revenues have notbeen growing rapidly and decentralization and reform have resulted in thecentral government having relatively little control over large parts of theinvestment program. To address some of these problems and maintain relativelyrapid growth and improvements in living standards, further reform andadjustment measures will be required including price reform and greater use offoreign imports and capital.

18. In recognition of these problems and issues the Government's SixthFive Year Plan (published in December 1982 but covering the period January1981 - December 1985) emphasizes continuation of the program of "adjustment,reform, consolidation and improvement of the national economy." The period1981-85 is essentially viewed as an interim period during which importantreadjustments and reforms of the economy will occur. These will lay thefoundation for more rapid economic development during subsequent plan periods.Modest targets are set for production and income growth (the target growthrates for gross agricultural and industrial output and for NMP are 4%), con-sumption is expected to grow faster than investment, prices will be keptbasically stable, the budget deficit will be kept low and a significantexpansion in foreign trade is forecast, with imports growing more rapidly thanexports. In all sectors of the economy the priority will be on policy andinstitutional measures to improve efficiency rather than on maximization ofoutput, but the Government expects that most of the production targets of theSixth Plan will be surpassed, as they have been in the first two years of theplan.

19. Whatever the exact rate of production and income growth, China'stemporary situation of current account surpluses is expected to changequickly to one of moderate current account deficits and its requirements forforeign capital to finance its development and modernization programs areexpected to increase greatly during the remainder of the 1980s. However theactual size of the current account deficits and the magnitude of foreignborrowing requirements are very sensitive to assumptions about economictrends and policy developments. Moreover even a slight acceleration of

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economic growth without stgnificant improvements in efficiency, especiallyenergy efficiency, could result in large current account deficits and debtmanagement difficulties by the end of the 1980s. In these circumstances theGovernment will need to remain cautious in its import and foreign borrowingstrategy. Imports of capital and intermediate goods are expected to expandrapidly. By the late 1980s, some imports of energy also appear to benecessary before new production capacity is established. But the overall rateof import expansion and the overall rate of economic growth are cruciallydependent on a continued good performance of manufactured exports and on therate at which efficiency can be improved. The Government will need to monitordevelopments in these areas closely and adjust its import and foreignborrowing strategy accordingly. A relatively high rate of economic growth(6-7% p.a. during the remainder of the 1980s) will probably only be feasibleif major improvements in energy efficiency continue to be achieved.

20. The need for efficiency improvements highlights the importance ofeconomic reform and the Goverrment's decision that reform implementation willbe speeded up during the next three years. Rural reforms are to be broadenedand strengthened, with production responsibility systems extended to newspheres of activity, new types of organization including joint venturesbetween rural and urban units encouraged and the administrative functions ofcommunes separated from their economic functions. In state owned industryschemes for replacing profit remittances with taxes will be greatly expanded,the system of industrial administration will be revamped and streamlined andgreater efforts will be made to close down inefficient enterprises. Reform ofthe commercial system will receive special attention during the next threeyears and the development of collective and individual commerce, particularlyin rural areas, will be promoted. In the area of investment planning theGovernment is emphasizing more effective implementation of existing adminis-trative regulations, but improving the structure and efficiency of investmentwill be a long and difficult process, dependent very much on progress on otheraspects of reform. Of particular importance are measures to introduce formaleconomic analysis (including use of shadow prices) into investment decisionsand to decentralize decision making not just to administrative units but alsoto producing units which can be made more economically and financiallyresponsible for their decisions through appropriate pricing and incentiveschemes. Price reform itself is critical. The Government recognizes thisbut, in view of the complexities and magnitude of the changes that will berequired, has decided that it will not be possible to implement comprehensiveprice reform until after 1985. However, appropriate upward or downwardadjustments in the most distorted prices can and will be made, and the pricesof many minor commodities will be allowed to fluctuate according to marketconditions. These will be important steps forward in what is likely to be agradual process of reform that will need to take account of the scope for"unfreezing" of prices and how state determined prices should relate both todomestic costs and to world prices.

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21. The 1980s is a difficult period of transition for China. But duringthe past four years the Government's programs of adjustment, reform andstabilization have achieved very significant results. In fact, in terms ofproduction and growth, efficiency improvements and stability (as measured bybudgetary and current account deficits) the achievements have been greaterthan expected. Nonetheless China is still a very poor country and itsinvestment and modernization requirements are enormous. To help meet theseneeds and ensure continued rapid growth and improvements in living standards,it is important that the Government continue with its program of structuraladjustment (including an expansion in foreign trade and borrowing), and withits program of economic reform, that will help improve the overall efficiencyof the Chinese economy. Continued effective implementation of these programsshould help ensure a reasonable rate of growth during the remainder of the1980s while setting the stage for more rapid growth and development in the199 Os.

1. INTRODUCTION

1.01 The first World Bank economic mission to China visited the countrybetween October and December 1980. The mission's findings were presentedin a report entitled "China: Socialist Economic Development" (Report No.3391-CHA), which was distributed to the Executive Directors in June 1981.The report was designed to be as comprehensive as possible and to compare theeconomic situation and level of development of China with those of othercountries. The report included an analysis of China's economic system anddevelopment prospects and has provided a basis for planning the World Bank'sfuture activities in China.

1.02 This country economic memorandum focusses mainly on recent develop-ments in the Chinese economy. It reviews the progress and impact of theGovernment's programs of reform, adjustment and stabilization between 1979 and1982, and assesses the implications of recent internal and external develop-ments for China's future economic prospects. The remainder of this chapterprovides a brief summary of the Chinese economic system and its achievementsand problems; It also provides an overview of progress in implementing pro-grams of reform, adjustment and stabilization. The second chapter reviewsdevelopments in the planning and management system and macro-economic trends,particularly in consumption and investment. The third chapter discussesfinancial and balance of payments developments, while the fourth provides asummary of the impact of the various programs on the key sectors of agricul-ture, industry, energy, transport and commerce. The final chapter draws thediscussion of macro and sectoral trends together and reviews the Sixth Planand some of the medium term prospects and issues that are facing the Chineseeconomy.

A. Economic Setting

1.03 China's economic system reflects in large measure the major institu-tional changes that took place in the 1950s, including land reform and theeventual establishment of communes in rural areas and the extension of publicownership to cover almost all of the modern sector. But the system hasevolved since then and is continuing to change as a result of the Government'sprogram of economic reform. Basic policy in China is determined by theCommunist Party while the state (or the administrative organs of government)manage the economy. Despite recent reforms, the economic management system isstill quite hierarchical and subject to administrative controls, with commandsconstantly flowing downwards and information upwards between levels (thecenter, the provinces, the municipalities or prefectures, the counties ordistricts and lower level administrative units). But the extent of centralcontrol has varied almost continuously since the 1950s and remains the subjectof much debate.

1.04 The rural economy consists in the main of people's communes, /1about 53,000 of them, each with about 3,500 households. The commune itself

/1 State farms only account for about 5% of the cultivated area.

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is a multi-level management system, with each household being part of ateam, each team part of a brigade and each brigade part of a commune. Thedivision of responsibility for economic and social activities among theselevels varies with the locality and is now undergoing major change. Buteverywhere land remains collectively owned.

1.05 Enterprises owned by the state make up much of the rest of theeconomy. Traditionally such organizations have enjoyed little independence,but this is gradually being changed as a result of recent reforms. Workersare allocated to these organizations by central and local labor bureaus, andthey receive both prescribed wages and bonuses. In addition, urban collec-tives employ about one-f ith of the urban labor force, and the self-employedare a small but rapidly growing part of the Chinese economic system.

1.06 During the past three decades, development efforts in China havebeen directed toward the major objectives of industrialization and povertyreduction. Substantial progress has been made. Between 1952 and 1979,gross industrial output grew at an annual average rate of 11% (13% in heavyindustry and 9% in light industry). China now produces a far greatervariety of industrial goods than most developing countries and is much lessdependent on imported equipment and materials. Almost the entire range ofmodern industries have been set up, and special efforts have been made tospread manufacturing into poorer regions and into rural areas.

1.07 China's record in terms of poverty reduction has also beenimpressive. Due to the rapid growth of savings and investment, per capitaconsumption in real terms grew by only 1.9% per year between 1957 and 1979,compared with a real GNP per capita growth rate of 2.5-3.0%. But substantialprogress has been made in meeting the basic needs of the population, partic-ularly basic education, nutrition and health. There is almost universalprimary school enrollment, adult literacy is now well ahead of the averagefor low-income countries, and life expectancy has risen to 68 years. Despitethese achievements, however, China remains a very poor country. In 1981 GNPper capita was only $300,/1 and about 200 million people, or 20% of thepopulation, still have unacceptably low incomes./2

1.08 Morever, the Chinese economy remains inefficient. Past growth hascome mainly from massive mobilization of resources and fundamental

/1 Annex 2 provides information on the assumptions made by the World Bankin converting Chinese data from the system of material production to theUN system of national accounts. Conversion of GNP to US dollars isbased on the World Bank Atlas methodology.

/2 The poorest fifth of the population had an average annual per capitaincome of about Y 70 in 1979 which would purchase only about 300 kg ofunmilled rice (equivalent to about 2,100 calories per day) even ifnothing were spent on other commodities.

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institutional changes; until recently relatively little attention has beenpaid to improvement of systems and technologies. The state economy isinefficient in terms of converting inputs into outputs, matching supply withdemand and choosing appropriate investment projects; supply bottlenecksfrequently occur and there are large inventories of often poor qualitygoods. The commune economy appears, at least in principle, to be a muchmore efficient system, but it too has sometimes used inputs inefficientlyand failed to produce the most appropriate outputs. Such inefficiencies andproblems in both the state and the collective economies appear to havestemmed mainly from inefficient planning and management; from the lack ofobjective methods for making choices between different activities andtechniques; from the failure to use instruments such as prices as incentivesto improve efficiency; and from the country's isolation from technologicaland other developments in the rest of the world.

1.09 In view of the widespread poverty remaining in China and thegenerally low standard of living, the Government is seeking a rapid improve-ment in living standards. Factors favoring this goal include, most impor-tantly, the low population growth rate. But China faces serious shortagesof resources. The scarcity of good agricultural land is a centuries oldproblem, but the total arable area, as well as the amount of land per worker,may now be declining and the cropping index and yields are already highrelative to other developing countries. China is faced with a serious energyconstraint: domestic primary energy production actually declined in 1980and 1981 and only slow growth can be expected for the remainder of the 1980s.Insufficient infrastructural development in key sectors like transport alsoconstrains growth. The labor force continues to expand and substantialunderemployment remains in rural areas. On the other hand there are seriousshortages of skilled high-level and technical manpower. China could easesome of its domestic resource constraints by opening up its economy more tointernational trade and by making more use of external borrowing. But toachieve a rapid growth of production and an increase in living standardsChina must improve the efficiency with which it uses both domestic andexternal resources (the present low level of efficiency indicates the pos-sible gains from such improvements).

B. Overview of Reform, Adjustment and Stabilization

1.10 In China, the period since 1977 has been characterized by muchdebate concerning development strategies and the strengths and weaknesses ofthe Chinese economic system. Initially the Government's major concerns wereto overcome the disruptions and setbacks caused by the Cultural Revolution(1966-76) and resume a rapid growth path. Emphasis was placed on themodernization of agriculture, industry, national defense, and science andtechnology; an ambitious investment program was prepared and a comprehensiveten-year economic development plan announced. But by 1979, it was apparentthat underlying weaknesses in the economy would make the investment programand the plan unsustainable. Thus, the Government initiated a program of"adjustment, reform, consolidation and improvement of the national economy".

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1.11 Economic reform is designed to improve the functioning of theeconomic system and thereby the overall efficiency of the Chinese economy.Its major objectives have been to: (a) restore and improve the quality ofcentral planning and policy coordination; (b) devolve more decision-makingauthority to lower level units in the economic system; (c) link incomes andrewards more directly with the work and effort of economic units; and (d)rely more on market mechanisms and on economic instruments and less onadministrative directives to influence economic developments. Economicreforms first got under way in 1979, but most of their effects were notapparent until after 1980. The government's planning and management systemsand the management of state enterprises and collectives have all beenaffected.

1.12 Accompanying economic reform has been a major program of structuraladjustment designed to speed improvements in living standards, particularlyin rural areas. The key feature of this program has been a readjustment inthe relative shares of investment and consumption and of different productivesectors in national income. In view of the already relatively high share ofinvestment in national income and the low returns to some of this investment,the Government decided in 1979 to raise the share of consumption and reducethe share of investment in aggregate demand, by cutting capital construction,raising agricultural prices and increasing money wages. The associatedneed for substantial sectoral and subsectoral readjustments of productionand investment was recognized, with more emphasis being placed on agricultureand light industry at the expense of heavy industry. There has also been acontinued emphasis on foreign trade.

1.13 Managing the reform and adjustment programs has proved to be adifficult task. In 1979, there was a large budget deficit, a significantdeficit in the balance of payments, a sharp increase in the amount ofcurrency in circulation and upward pressure on prices. The Government tooksome corrective measures in 1980, including a reduction in capital construc-tion expenditures financed by the state budget, but these proved insufficientto restore stability. In 1980 the budget and balance of payments deficitsremained large and open inflation increased. At the end of 1980 there was areview of the economic situation and in 1981 the Government instituted a morerestrictive stabilization program. At its core were sharp cuts in investment,a restoration of budgetary balance and a moderation of currency and creditexpansion. The stabilization program proved to be even more effective thanplanned: there was a large swing in the current account, a cut in theabsolute level of investment and a reduction in the rate of open inflation aswell as a sharp reduction in the overall rate of economic growth. In 1982investment expanded again and the economy resumed a path of more rapid growth.

1.14 Thus the period since 1979 has been characterized by a series ofgovernment programs designed to improve efficiency and raise living stand-ards while maintaining domestic stability. The management of these variousprograms, the conflicts and complementarities between programs and their macroand micro effects are the subject of this memorandum.

2. MANAGEMENT OF GROWTH AND ADJUSTMENT

A. Planning and Management

2.01 In recent years the Government has been endeavoring simultaneouslyto readjust the structure of the economy and to improve the overall effi-ciency of resource use. Many policy changes and reforms of the system havebeen introduced with potentially wide-ranging effects. Managing this overallprocess and ensuring that programs and measures are complementary and notconflicting has proved to be a difficult task, particularly for a countrywith a still relatively weak central planning and management system. Infact it is well recognized in China that readjustment and efficiency im-provements require not only reforms in the management of the collective andstate enterprise sectors and more use of the market but also a restorationand strengthening of central planning and policy coordination.

2.02 In an effort to improve the quality, speed and coordination ofcentral decisionmaking, a major reorganization of the central government wasinitiated in early 1982. This has resulted in a reduction in the number ofvice premiers from thirteen to two and in the number of Commissions, Minis-tries and agencies under the State Council from 98 to 52./l The staff ofthe State Council' and Ministries and Commissions is also being cut by 30%from 49,000 to 32,000. Particular emphasis has been placed on strengtheningand improving the core planning and management agencies: the State PlanningCommission is being strengthened, and the State Economic Commission has beenreorganized (to include the State Capital Construction Commission and severalother commissions) and its functions and powers augmented. The StatePlanning Commission remains responsible for longer term planning while theState Economic Commission is responsible for helping prepare and implementshorter term economic plans. A reorganization of departments and divisionswithin ministries and of provincial and local governments is under way.

2.03 Other measures to improve the quality of central planning areaccompanying this administrative reorganization. Planning methodologies arebeing improved; more emphasis is being placed on economic criteria in makingplanning and investment decisions; and the statistical system is beingstrengthened, with sample surveys supplementing the Government-s previousdependence on comprehensive administrative reporting. The promulgation of adetailed and comprehensive Sixth Five-Year Plan in December 1982 demonstratesthe progress that China's planning system has made since the mid 1970s.

/1 Details on the restructuring of Commissions and Ministries are containedin Annex 1.

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2.04 The Government has recognized, however, that improvements incentral planning and policy coordination on their own are unlikely to ensurethe efficiency improvements China requires. Accordingly a set of reformshas been introduced designed to improve the management and efficiency oflower-level administrative and economic units by giving them moreresponsibility and autonomy, by linking incomes and rewards more directlywith output and productivity, and by relying less on administrative measuresand more on the market and on indirect economic instruments to influencetheir activities.

2.05 Management of state enterprises has been affected by a number ofchanges and experiments aimed at improving incentives, including theintroduction of profit retention schemes and more flexible payment andemployment practices. There has been extensive experimentation withdifferent types of state enterprise organization, the variety of channelsthrough which goods can be marketed has been expanded, some flexibility inprices has beeni introduced, and state enterprises have been given morecontrol over what they produce. At the same time the Government hasendeavored to improve the efficiency of state enterprises through indirectmeasures such as providing loan instead of grant finance and introducingcharges on their fixed assets and circulating capital.

2.06 Major changes in the organization and management of the collectivesector have taken place. In rural areas more responsibility has been givento lower-level collective units and to households; incomes and rewards havebeen more directly linked to the work and efforts of groups and households;and new types of rural organizations are being encouraged. There has alsobeen an expansion in the number and types of rural markets at which house-holds can freely trade commodities. Meanwhile in urban areas the scope forcollective and individual economic activities has been enlarged.

2.07 Of particular importance for central-local government relationshas been the decentralization of fiscal and foreign trade management: arevenue and expenditure sharing system between provinces and the centralgovernment was introduced in 1980, and provincial branches of foreign tradecorporations, local trading companies and in some cases enterprises can nowexport and import without having to seek approval from the centralgovernment.

2.08 The Government has recognized that when an economic system reliesless on administrative decisions and commands and more on economic instru-ments, the legal rights and obligations of economic agents need to be betterdefined. In the last three years major additions have been made to the bodyof China's laws and regulations - additions aimed at strengthening thesocialist legal system domestically as well as facilitating foreign invest-ment. The political, administrative and judicial structure and organizationof Chinese society and the rights and responsibilities of individuals havebeen spelled out legally; laws on domestic economic contracts have beenenacted; and laws and regulations concerning joint ventures, income taxes,

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exchange controls and the development of offshore petroleum reserves haveall been introduced. In December 1982 the National Peoples Congress adopteda new constitution as well as endorsing the Sixth Five-Year Plan.

2.09 The array of reforms that lhave been introduced in recent yearstestifies to the Government's determination to improve planning and manage-ment at the local, enterprise and collective as well as at the centrallevels. It is likely to be some time, however, before the effects of manyof these changes on the overall efficiency of the Chinese economy areapparent, and indeed the effectiveness of many reforms is dependent onreforms taking place elsewhere in the economy. Reforms appear to have beenmost effective in the area of incentives - most economic units nowoperate under financial reward systems of one sort or another, and peasants-and workers- incomes are dependent in part on individual or work unitperformance. Distortions in the price system have, however, led to someinequities in rewards.

2.10 The reforms have also involved a substantial decentralization ofdecisionmaking. But again the absence of major price reform has sometimesresulted in inappropriate investment and production decisions by lower-levelunits. In addition, in the state enterprise sector some units apparentlystill do not have to take full responsibility for their decisions - statetrading corporations tend to buy whatever the units produce and for mostunits the risk of financial penalties or being closed down as a result ofbad management or performance is negligible. In these circumstances thereis a built-in tendency for enterprises to overinvest and overproduce. Insome cases, it also appears that administrative decentralization has meantthat powers supposedly put in the hands of enterprises have actually accruedto local governments. To offset some of these tendencies the centralgovernment has been obliged from time to time to resort to administrativeinterventions and restrictions.

2.11 More use is now being made of the market in determining resourceallocation, but information and transport systems are still weak and marketstend to be small and fragmented along territorial lines. Competition isoften limited; markets have in some cases been subject to price and traderestrictions. More generally the Government has found it difficult todevelop effective indirect fiscal and monetary policy instruments to replaceor at least supplement the tight microeconomic supervision inherent incommand planning.

2.12 Some of the difficulties with economic reform are an inevitablepart of any effort at transformation from one kind of economic system toanother, while others stem from inconsistencies in some of the reformmeasures. These difficulties were analyzed during 1982 as part of anoverall review of economic reforms. The Government has now decided toincrease the pace of economic reform, but each new measure will be precededby careful study and, wherever possible, by some initial experiments./l

/1 Future reforms are discussed in more detail in paras. 5.26-5.34.

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B. Growth and Structure of the Economy

2.13 Some reforms, particularly those in rural areas, have contributedgreatly to the readjustment and overall growth of the economy. But othershave made the process more difficult. For example, greater autonomy andfinancial resources for lower level units has made it more difficult toreduce and redirect the investment program. Nonetheless significantadjustments in the structure of the economy have taken place. Except in1981 a high overall rate of economic growth has also been maintained. Some ofthe structural and growth developments reflect a continued recovery of theeconomy from the Cultural Revolution period, but adjustment and stabilizationpolicies as well as system reforms have had an important role to play.

2.14 An outstanding feature of recent economic developments has beenthe high rate of agricultural and industrial growth (see Table 2.1). Grossagricultural output at constant prices has increased by 6.0% per year between1978 and 1982, much above the growth rate in the first half of the 1970s.Industry by contrast has been able to maintain a high overall growth ratethroughout the 1970s and early 1980s, but in recent years there has been amajor shift in the structure of industry with light industry growing muchfaster than heavy industry between 1979 and 1981. The strong performance ofboth agriculture and industry is reflected in the high overall rate ofeconomic growth. In fact it was only in 1981 that the growth rate of netmaterial product (NMP) at constant prices fell below the average growth ratein the early 1970s when the requirements of stabilization took precedence overeconomic growth and adjustment (Table 2.2). In 1982 however the pace ofdevelopment speeded up again and the constant price NMP growth rate isestimated to have been about 6%.

Table 2.1: AGRICULTURAL AND INDUSTRIAL GROWTH, 1970-82(% change in gross output value at constant prices)

1970-77 1978 1979 1980 1981 1982(prelim)

Agriculture 3.4 9.0 8.6 2.7 5.7 7.0Industry 8.7 13.5 8.5 8.7 4.1 7.4

Heavy 9.3 15.6 7.7 1.4 -4.7 9.3Light 7.8 10.8 9.6 18.4 14.1 5.6

Total Agricultureplus Industry 7.3 12.3 8.5 7.2 4.5 7.3

Source: Statistical Appendix, Table 2.5.

Table 2.2: GROWTH OF NMP AT CURRENT AND CONSTANT PRICES, 1970-81(% per annum)

1970-77 1978 1979 1980 1981

Agriculture: current prices 3.1 8.6 23.8 11.2 11.5constant prices /a 2.3 7.5 7.8 2.0 5.2

Industry: current prices 6.4 18.3 9.1 10.5 1.2constant prices /a 6.9 17.3 8.7 8.7 1.2

Other material sectors:/bcurrent prices 3.7 13.5 - 7.6 1.4 6.2constant prices 4.9 9.4 0.1 1.8 4.0

Investment: current prices 4.3 30.6 6.8 0.3 -6.4constant prices 4.8 30.0 6.3 -1.4 -6.4

Consumption: current prices 4.7 7.6 14.3 14.6 8.8constant prices 4.6 5.6 7.8 9.3 4.8

Total NMP: current prices 4.6 13.8 11.3 9.5 6.0constant prices 4.8 12.4 7.0 5.2 3.0

/a In view of the difficulties in deflating NMP data, not much should beread into the differences between these growth rates and the grossoutput growth rates in Table 2.1. Growth rates are single deflated inkeeping with present S.S.B. practice.

/b Including construction, transport and commerce.

Source: Statistical Appendix, Tables 2.3, 2.4 and 2.5, and Annex 2,Tables 1-4.

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2.15 The rapid increase in agricultural and industrial production hasbeen accompanied by and in the case of agriculture was encouraged by majorshifts in relative prices. Although information on prices is limited, it isclear that agricultural procurement prices have risen much more rapidly thaneither industrial prices or retail prices in recent years (see para. 3.05).The comparison of current and constant price NMP growth rates shows theeffects of such price changes. Agricultural growth at current prices was muchabove its growth rate at constant prices; industrial growth was almost thesame at current and at constant prices; and the growth rate of other sectorswas lower at current than at constant prices due to the profits of thecommerciat sector being squeezed. It should also be noted that the constantprice growth rates do not take account of the fact that input prices have beenrising less rapidly than output prices for agriculture, while the reverse hasbeen true for industry./l Taking these price changes into account wouldreduce the estimated real growth rate of agriculture between 1978 and 1981from about 5.0% to about 3.5% per year and increase the estimated averageannual industrial growth rate in real terms from 6.1% to over 8%.

2.16 In the period since 1978 changes have taken place in the structureof expenditures as well as the structure of production, with the share ofconsumption in NMP rising from 65% to 71% in 1981 before declining slightlyin 1982 (Table 2.3). 1978 was however an exceptional year; in 1977 and formost of the early 1970s the share of consumption in NMP was between 68 and70%. The recent shift from investment to consumption is also due in part tochanges in relative prices because prices of investment goods appear to havebeen rising less rapidly than consumption goods prices. Nonetheless since1978 consumption in real terms has been growing more rapidly than investment;in 1981 investment actually fell in both current and constant prices, whileconsumption continued to grow. There has also been a major change in thestructure of investment, with nonproductive investment (mainly housing)growing much more rapidly than productive investment./2

/1 This is because agricultural and industrial growth rates are onlysingle-deflated in keeping with present State Statistical Bureau (SSB)practice. Annex 2 provides further information on the effects ofrelative price changes.

/2 The composition of investment is discussed in more detail in paras.2.26-2.29.

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Table 2.3: STRUCTURE OF NMP AT CURRENT PRICES 1970-81

1970 1977 1978 1979 1980 1981

Production (net output)Agriculture 41 37 35.4 39.3 40.0 42.0Industry 40 45 46.8 45.9 46.3 44.2Other 19 18 17.8 14.8 13.7 13.8

Total (NMP) 100 100 100.0 100.0 100.0 100.0

ExpenditureInvestment 32.1 31.5 36.1 34.7 31.8 28.0Productive 23.4 23.3 25.6 22.6 18.1 14.0Nonproductive 8.7 8.2 10.5 12.1 13.7 14.0

Consumption 68.0 68.2 64.5 66.2 69.3 71.2Foreign material trade -0.1 +0.3 -0.6 -0.9 -1.1 +0.8balance

Total (NMP) 100.0 100.0 100.0 100.0 100.0 100.0

Source: Statistical Appendix, Tables 2.3, 2.4 and 3.1.

C. Incomes and Employment

2.17 In recent years government policies on consumption and employmenthave been aimed not only at ensuring a more rapid improvement in livingstandards, but also at reducing urban unemployment and narrowing the differ-entials between urban and rural incomes. Substantial progress has been madein all these areas. Due to the combination of a high overall rate ofeconomic growth, the low population growth rate and the shift from invest-ment to consumption, a more rapid growth in per capita consumption than inthe early 1970s has been possible. At current prices material consumptionper capita increased by over 12% p.a. between 1978 and 1981 and stood at Y280 in 1981; including nonmaterial services would increase per capitaconsumption to Y 320. When account is taken of estimated price increases,the real level of material consumption per capita increased by more than6% p.a. between 1978 and 1981, much above the average 1.3% p.a. recordedbetween 1957 and 1977, and there have been significant increases inconsumption and ownership of key commodities (Table 2.4).

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Table 2.4: CONSUMPTION AND OWNERSHIP OF SPECIFIC COMMODITIES, 1977-81

1977 1978 1979 1980 1981

Annual Per Capita ConsumptionGrain, milled basis (kg) /a 192 196 207 214 219Pork (kg) 7.0 7.7 9.7 11.2 11.1Sugar (kg) 2.8 3.3 3.6 3.8 4.1Cotton cloth (meters) 7.7 8.0 9.0 10.3 10.6

Ownership of Consumer Durables(per 100 persons)Radios n.a. 7.8 9.4 12.1 14.9Bicycles n.a. 7.7 8.6 9.7 11.2Watches n.a. 8.5 10.4 12.9 15.7

/a This is trade grain i.e. milled rice and millet plus other grains onan original weight basis.

Source: State Statistical Bureau.

2.18 In recent years personal incomes appear to have been growing evenmore rapidly than average material consumption. This reflects in part adecline in the share of government consumption in total consumption. Butprivate financial savings (excluding cash) have also increased rapidly fromY 2.7 billion in 1978 to Y 13.2 billion in 1981 and have become moreimportant at the margin (though the government budget and the retention ofprofits and other funds by enterprises still account for the bulk of totalnational savings). In 1980 and 1981, private financial savings amounted toabout 3.5% of NMP compared with less than 1% in 1978. High marginal savingsrates may partly reflect shortages of consumer goods (see para. 3.03), butto a much greater extent are probably the result of interest rate changesand other banking reforms which have made savings more attractive.

Urban Incomes and Employment

2.19 Average nominal wages (including bonuses) in urban areas haveincreased substantially in recent years, reaching Y 772 per worker in 1981(Table 2.5). The increase in wages has resulted mainly from the threegeneral increases in wage rates introduced by the Government in 1978, 1979and 1980, but it also reflects the impact of higher bonuses as a result ofindustrial reform./l In 1981, however, the stabilization program resulted inno general increase in wage rates and efforts were made to link both wagesand bonuses much more closely to efficiency criteria. As a result average

/1 Industrial reform is described in detail in paras. 4.25-4.31.

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wages rose by only 1.3%. Participation rates increased, however, andaverage per capita incomes in urban areas (excluding nonwage incomes) roseby 2.6% in 1981, about as fast as the cost of living index. Overall realper capita incomes in urban areas increased by about 4.8% p.a. between 1978and 1981. Wages remained under relatively tight control in 1982 but therewere increases for certain groups of workers and staff. Participation ratesalso appear to have risen again and consequently some further increase inurban per capita incomes should have taken place.

Table 2.5: URBAN INCOMES, 1978-81 /a

Average annualgrowth 1978-81 (%)

Annual level (Y) Money Real1978 1979 1980 1981 terms terms

Average wage 614 668 762 772 7.9 3.8Participation rate (%) 55.0 55.1 55.8 56.5Per capita income 338 368 425 436 8.9 4.8

/a Excluding nonwage incomes.

Source: Statistical Appendix, Table 1.6, and information onparticipation rates.

2.20 In recent years substantial progress has been made in addressingthe problem of open urban unemployment. At the end of the CulturalRevolution, many young people who had been obliged to work in rural areasreturned to their homes in cities and towns and swelled the ranks of thoselooking for jobs in urban areas. As a result about 20 million people or 15%of the urban population were either unemployed or only in temporaryemployment. This number has now been substantially reduced: at the end of1981, urban unemployment had fallen to 3 million, of whom 2 million wererecent college and school graduates and 1 million had been waiting for jobssince before 1980. In 1981, the state arranged for the employment of 8.2million people, of whom 5.3 million had previously been unemployed and therest were either demobilized soldiers, recent graduates of secondary schoolsand colleges or people from rural.areas. 5.2 million were given jobs instate enterprises, mainly in urban areas, 2.7 million found employment inurban collectives, and the rest were allowed to work as individual laborersin cities and towns.

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2.21 The Government acknowledges that not all of the additional employ-ment has been in very productive activities (labor productivity in stateindustrial enterprises actually fell by 1.8% in 1981). Since all additionsto the labor force cannot be productively employed in state enterprises, thegrowth of urban collective and self-employment has been actively encouraged.The number of workers in individual enterprises in all sectors rose from320,000 in 1979 to 810,000 in 1980 and 1.1 million in 1981, when they stillaccounted for only 2% of total urban employment.

Rural Incomes

2.22 Rural incomes in both money and real terms have increased greatlyin recent years, much more rapidly than urban incomes. A sample survey of18,500 households in 568 counties of 28 provinces suggests that average percapita rural incomes in current prices increased by 19% p.a. in both 1979and 1980 and by a further 17% in 1981 (Table 2.6). When account is takenof estimated price increases, the average increase in real per capitaincomes in rural areas between 1978 and 1981 was 10-12% p.a. Rural incomegrowth estimates based on consumption and savings changes and ruralproduction and terms of trade changes also suggest that real per capitaincome growth rates have been 10-12% p.a./l About 60%° of this very largeincrease is a result of greater rural production and the remainder is due toimprovements in relative prices. The income survey also reveals the sub-stantial change in the composition of rural incomes due mainly to reform ofthe rural collective system: between 1979 and 1981, income from collectivesources grew very slowly and almost all the income gains came from othersources. Data on agricultural production and incomes from the Ministry ofAgriculture and the State Statistical Bureau suggest that further majorincreases in rural incomes took place in 1982 and that rural incomes havecontinued to grow more rapidly than urban incomes.

Table 2.6: SURVEY OF RURAL INCOMES, 1978-81

Level of income (Y) Average annual growth1978 1979 1980 1981 1978-81 (%)

Money terms Real terms

Per capita total 134 160 191 223 18.5 10-12Of which

Collective 89 102 108 116 9.2 n.a.Others 45 58 83 107 33.5 n.a.

Source: State Statistical Bureau, Survey of Rural Incomes andAnnex 2, Table 7.

/1 Annex 2, Table 7 provides further information on this issue.

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2.23 Because substantial regional inequalities have persisted in Chinadue in part to differences in agro-climatic conditions and the availabilityof agricultural land, a key question is how well the recent increases inrural incomes have been distributed. Many teams and households in ruralareas have done even better than the average: households located close tocities or towns, those that specialize in cash crops and those that alreadymarket a lot of their output (and therefore benefit immediately from higheragricultural procurement prices) appear to have done particularly well.Most of these households are already relatively well off. But some of thepoorer households have apparently also enjoyed higher incomes in recentyears. Ministry of Agriculture data /1 suggest that recent policies havebeen most effective in raising collective income in the North China Plainand in the south eastern coastal mountains and least effective in theYunnan-Guizhou plateau and in the dry northwest.

2.24 From the data available it cannot be determined whetherinequalities within communes, brigades and production teams may have begunto increase in recent years. Previously inequalities within teams andbrigades were quite low relative to regional inequalities. The reduction inthe size of the economic accounting unit (to the work group or household)and the increased emphasis on linking incomes to output is likely to haveincreased income differentials at the local level. However, any such trendscould be counteracted, for instance by introducing a progressive income taxor a land tax, without reversing the direction and intent of economicreform.

D. Investment

2.25 In 1978, the rate of investment was very high - 36% of NMP, equiva-lent to a gross investment to GDP ratio of 34%, compared with an average of21% in other low-income countries and 25% in middle-income countries. Theinvestment program was also inefficient: the amount of investment used toincrease stocks was high in relation to GDP and the overall efficiency ofinvestment was relatively low and getting worse (the incremental capital-output ratio had risen from 3.0 in the 1950s to 5.5 in the 1970s). Theseinefficiencies resulted from such factors as shortages of necessary materialsand supplies, transport constraints and wastage, as well as from inappro-priate and inefficient procedures for selecting and implementing investmentprojects. In these circumstances, and given the emphasis on raising livingstandards, the Government decided in 1979 to cut back the size of theinvestment program in relation to national income (which if appropriately

/1 Survey Nongyebu Renmin Gongshe Guanliju reprinted in Xinhua Yuebao,February 1980.

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carried out would on its own improve the overall efficiency of investment)and to introduce measures aimed at improving investment decision making andimplementation.

Size and Composition of the Investment Program

2.26 Since 1978 the Government has been able to reduce both the overallrate of investment and the share of inventory investment in total investment,but the process has proved to be difficult. After a large increase in 1978,gross fixed investment at current prices increased by 7% in 1979 and 8% in1980, before falling by about 4% in 1981 when the stabilization program wasimplemented. This fall in investment was due entirely to a 21% cutback instate capital construction investment. Despite its determination to controlthe overall level of investment, the Government has found it very difficultto influence other investment, which consists of investment in renewing andtransforming industrial enterprises (most of which is now financed fromretained earnings and bank loans), urban and rural collective investment andindividual investment. This category has been growing much faster than statecapital construction in recent years (Table 2.7)./I

Table 2.7: GROSS FIXED INVESTMENT, 1977-82(Current prices)

Average Annualgrowth rate (%)

Amount of investment (Y billion) 1977- 1977-1977 1978 1979 1980 1981 1982/a 81 82

Gross fixed investment 75.6 92.2 98.4 106.2 102.3 n.a. 7.9 n.a.State capital construc-tion investment 36.4 48.0 50.0 53.9 42.8 52.5 4.1 7.6

Other investment 39.2 44.2 48.4 52.3 59.5 n.a. 11.0 n.a.

/a Estimate.

Source: Statistical Appendix Table 2.7 and Annex 2, Table 8.

/1 State capital construction investment includes all fixed investment innew projects, including expansion of existing enterprises when com-pletely new facilities (buildings and equipment) are required. Invest-ment in renewing and tranforming enterprises includes fixed investmentto rehabilitate existing enterprises. It is often difficult in practiceto draw a line between the two.

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2.27 There have, however, been problems in controlling even state capitalconstruction investment. This is partly because fiscal and state enterprisereforms (see paras. 3.18 and 3.19) have left enterprises and local governmentswith increased financial resources, which they can use for capital construc-tion investment (see Table 2.8). But there has also been resistance to reduc-ing state budget capital construction, in part because of the costs of aban-doning projects already under way. In 1981, the Government continued to facedifficulties in controlling the amount of locally financed capital construc-tion. Most of the cutbacks were therefore in large, centrally financedprojects: 151 large and medium-sized projects were cancelled or suspended andthe number of large and medium-sized projects under construction at the end ofthe year was 893, 213 less than at the end of 1980. The investment cutbacksaffected all sectors including the priority sectors of energy, transportationand agriculture. The share of nonproductive investment has continued toexpand greatly due to increases in housing investment, a priority in view ofthe Government s desire to raise living standards and years of neglect of thissector. In 1982 capital construction investment rebounded and almost reached

Table 2.8: STATE CAPITAL CONSTRUCTION INVESTMENT, 1977-82(% share)

1977 1978 1979 1980 1981 1982/a

Total 100 100 100 100 100 100

By SectorEnergy 21 24 22 21 21 n.a.Other heavy industry 32 27 23 20 21 n.a.Light industry 7 6 6 9 10 n.a.Agriculture 12 12 13 10 7 n.a.Transport/Communications 15 15 13 12 9 n.a.Other 13 16 23 28 32 n.a.

By Type of InvestmentProductive 83 83 73 66 59 57Housing 7 8 15 20 26 26Other nonproductive 10 9 12 14 15 17

By Source of FinanceState budget 81 83 79/b 52 49 37Local government and

enterprise funds 19 17 21 30 33 34Domestic bank loans - - - 8 10 } 29Foreign loans - - - 10 8 }

/a Estimate.W This figure probably includes some capital construction financed

from domestic and foreign loans, amounting to about 4% out of the 79%.

Source: Statistical Appendix Tables 2.6 and 2.7.

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its 1980 level. The share of the state budget, however, has further declinedand that of domestic and foreign bank loans (many of which are subject to aconsiderable degree of control by central authorities) has risen sharply.

2.28 It is difficult to assess the effects of the 1981 cutbacks ininvestment. For such a relatively short period it would not be meaningfulto analyze changes in incremental capital-output ratios, and the informationnecessary for making a more micro assessment is not available. Overallinvestment efficiency should have been improved by the emphasis placed oncancelling or suspending projects that had not been properly prepared or forwhich the necessary supplies and materials were not available. But othermeasures may have reduced efficiency. For example, priority was placed oncompleting projects that were already under construction rather than onstarting new projects. This helped to increase the availability of fixedassets in relation to total state capital construction expenditures, but itwould only have improved efficiency if completing these ongoing projectsshowed higher returns than starting selected new projects. A number of highpriority energy and transportation projects were suspended because they werepart of the relatively small share of total investment over which thecentral government had direct control. Towards the end of 1981 it becameapparent that some of the cutbacks in investment had been too severe andthat resources were available to fund more well prepared priority projects.Some of the cancelled projects were revived then and more were revived in1982, but the cancellations and delays themselves will have had an adverseeffect on the overall efficiency of capital construction and on the futuregrowth potential of the Chinese economy.

Investment Process

2.29 As part of China-s reform program, efforts have been made toimprove the overall efficiency of investment by reforming the investmentprocess. In the past the process of selecting investment projects has beencomplicated by a fragmented and inappropriate allocation of responsibilityamong different levels and institutions. The central government has had tomake too many specific investment decisions, it has lacked any objectivecriteria for ranking competing claims for investment resources, and it hasbeen hampered by problems of insufficient information and data, as well as alack of sectoral coordination. The central government has also faceddifficulties in implementing investment decisions and in monitoring andcontrolling the aggregate level of investment. At the local level, manyenterprises and even government units have regarded investment as essentiallycostless (capital charges have been low and enterprises in difficulty havebeen subsidized in various ways); therefore they have tended to demand moreinvestment resources than were available. The lack of objective criteriafor assessing investment projects and insufficient information and data havealso been problems at the local level.

2.30 In recent years there has been substantial decentralization ofinvestment decision making to lower administrative levels of government. Inindustry for example the process by which investment proposals are approvednow depends on the project size, its location (some provinces have moreautonomy) and the type of financial resources required (domestic loans,

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foreign exchange, etc). Large-scale projects must be approved by the StatePlanning Commission in consultation with other national commissions. Forother projects, the threshold of referral varies by sector and region: inShanghai, for example, the local planning commission can now approve projectscosting up to Y 10 million provided no foreign exchange is required. Thebanking system is now playing greater role as a result of the increased use ofcredit in financing fixed investment projects. Since 1979, credit financingof investment has proceeded along two avenues: (a) capital construction loansby the People's Construction Bank of China (PCBC), and (b) short- andmediumr-term equipment loans granted by the People's Bank of China (PBC) andvarious specialized banks including the Agricultural Bank of China. Foreignexchange loans for investment purposes are provided by the Bank of China (BOC)and by the recently established China Investment Bank (CIB). Interest ratesvary between 2.4% and 3.6% per year for capital construction loans and between5.0% and 6.5% per year for equipment loans depending on maturity. As a meansof encouraging enterprises to use capital more productively, taxes ("charges")on the fixed assets and circulating capital of state-owned enterprises wereintroduced in 1982. The rates vary from 2.4% to 9.6% per year for fixedassets (based on their original value) and from 2.5% to 7.2% per year forcirculating capital.

2.31 At the same time, the Government is seeking to improve the proce-dures and criteria for project selection and implementation. Considerableemphasis is now placed on choosing projects that conform to the state plan andnational objectives, and for which materials and markets are available.Emphasis is also being placed on preparing good feasibility studies,strengthening survey and design work, shortening construction periods, puttinglarge projects into operation in stages and improving the overall efficiencyof construction companies and other project implementing agencies.

2.32 These measures are designed to improve the investment process, butthey need to be further refined and clarified if they are to have a signifi-cant impact on investment efficiency in China. Perhaps the most importantissue is the need for formal economic analysis of projects and objectivecriteria against which proposed projects can be measured. This is importantregardless of whether investment decisions are centralized or decentralizedand is particularly important in a context where major distortions in relativeprices can result in inappropriate investment decisions. In the absence ofother reforms the significance of credit financing of investment and capitalcharges is also reduced. Even substantial interest or capital charges may notmotivate state enterprises to economize on the use of investment funds, sincethey can repay loans and finance charges out of the project's profits, most ofwhich would otherwise be remitted to the Government. Moreover, even ifenterprises share the profits from good investments they may take unnecessaryrisks and waste capital unless they are also made responsible for the lossesresulting from bad investment decisions. The result has been that theGovernment has found it difficult to influence the size and composition ofstate enterprise investment even through administrative regulations.

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3. FINANCIAL AND BALANCE OF PAYMENTS MANAGEMENT

3.01 The implementation of adjustment and reform policies was accompaniedin 1979 and 1980 by unprecedented large budget deficits, moderate inflation,rapid growth in the money supply and a widening of the current accountdeficit. Though except for the budget deficit the symptoms of instabilitywere quite mild by international standards, they were taken very seriously ina country that still remembers the hyperinflation of the 1940s and had becomeaccustomed to insignificant inflation rates during the last two decades.Accordingly in 1981 stabilization temporarily took priority over longer-termreform objectives. The main instruments used in achieving stabilization goalswere price controls, a tight budget, sharp cutbacks in investment expendituresand capital goods imports, reduced growth of money and credit and exportpromotion. In 1982 the success of the stabilization program permittedresumption of more rapid growth and a higher aggregate level of investment,but the budget deficit remained relatively small, and prices and currency incirculation were kept under control.

A. Inflation and Prices

Inflation

3.02 Restoration of price stability was a key objective of the stabili-zation program which has been largely achieved. In terms of open inflationthe official index of retail prices increased by 2% in 1979 and by a further6% in 1980 (see Table 3.1), mainly because part of the 22% increase in agri-cultural procurement prices implemented in 1979 was passed on to urban con-sumers (much of the impact was neutralized by increased subsidies). In 1981,however, there were far fewer official price increases and a ceiling wasplaced on "negotiated prices"./1 Free market prices were also put undergreater supervision and control, partly through administrative "monitoring",in part through purchases and sales of commodities by government authorities.As a result, in 1981 the retail price index rose by only 2.4%, and thecost-of-living index (which measures price changes affecting urban residents5by 2.5% (Table 3.1). Prices appear to have remained under control in 1982with the cost of living index rising by no more than about 2%. Of courseprices of some commodities have risen much faster than average; for instance,prices of nonstaple foodstuffs rose by 32.1% between 1978 and 1981./2

/1 Negotiated prices are agreed upon directly between buyer and seller.They apply to surplus production that is not allocated in the stateplan.

/2 Hongqi (Red Flag) 1982 (8), p. 27.

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Table 3.1: INFLATION 1970-81(% per annum)

1970-77 1978 1979 1980 1981

Retail prices 0.4 0.7 2.0 6.0 2.4Cost of living for urban residents 0.6 0.7 2.1 7.3 2.5Agricultural procurement prices 1.0 3.9 22.1 7.1 5.9Prices of industrial products sold

in rural areas -0.3 0 0.1 0.8 1.0Rural market prices n.a. -6.6 -4.5 2.0 6.6

Source: Statistical Appendix Table 11.1.

3.03 Open inflation in an economy like China's results when the authori-ties let inflationary pressures be transformed into changes in official retailprices. The question remains whether repressed inflation and concomitantsupply shortages have increased or diminished during the past several years.In the case of urban areas comparison of the total wage bill (the mostimportant determinant of urban incomes) with the total value of urban retailsales suggests that though the demand-supply situation may have deterioratedsomewhat in 1979 and 1980, measures to restrict increases in nominal incomesin 1981 brought about a considerable improvement (see Table 3.2). Consumersmay still have been obliged to make substitutions when goods of the desiredspecification and quality were not available, but in general the growth insupplies of consumer goods and some open price inflation have largelycounterbalanced the growth of nominal incomes. In rural areas shortages ofconsumer goods may be a more significant issue. In 1979 and 1980, ruralretail sales apparently grew about as fast as estimated total rural income butmore slowly than cash income (the significant variable); in 1981 the gapbetween supply and demand in rural areas appears to have widened as totalincome grew faster than retail sales and there were increases in rural freemarket prices. Nonetheless, supplies of consumer goods in rural areas haveincreased greatly in recent years, contributing to a much improved materialstandard of living.

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Table 3.2: GROWTH RATES OF SALES AND INCOMESAT CURRENT PRICES, 1979-81

(% per annum)

1979 1980 1981

Nominal rate of growth of urban retail sales 9.0 16.6 8.0Total wage bill 13.6 19.5 6.1Nominal rate of growth of rural retail sales 21.5 20.8 11.3Rural incomes (cash and kind) 20.5 20.3 18.0

Source: Statistical Appendix Tables 1.6 and 11.3. Total ruralincome is derived by multiplying average per capita income byestimated rural population.

3.04 Limited information is available for assessing inflation andinflationary pressures in markets for industrial producer goods, but itappears that the previous situation of generalized and self-reinforcingshortages has been transformed into one where continuing severe bottlenecksin certain sectors are accompanied by marked excess supply in others.Shortages of energy supplies have become acute (see para. 4.20), whileshortages of many types of machinery and equipment have disappeared and insome cases prices have been reduced. This variegated pattern is the resultof a number of factors, the most important of which are medium-term physicalresource constraints in sectors like energy and the adjustment program whichcaused sharp cutbacks in demand for certain heavy industry products.Distorted relative prices and the increased emphasis on profits may alsohave resulted in production shortfalls for goods with artificially lowprices and tendencies toward excess supply of high-riced commodities.

Price Structure

3.05 Major changes in relative prices have occurred during the pastseveral years, the most significant being the dramatic improvement in theterms of trade for rural producers. The largest rise in state agriculturalprocurement prices - 22.1% - was implemented in 1979, but there were alsosubstantial increases of 7.1% in 1980 and 5.9% in 1981. Since the prices ofindustrial products sold in rural areas rose only 2% between 1978 and 1981,the terms of trade for rural inhabitants improved by nearly 36%.

3.06 There have also been substantial changes in the prices of differentgoods within sectors. In agriculture, in 1979 the mixed average procurementprice of grain was raised by 26% and that of edible oil by 41% (see

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Statistical Appendix, Table 11.2), /1 while there were increases for otheragricultural commodities including cotton and timber. In 1980, inter alia,the procurement price for cotton was further adjusted and there were priceincreases for both jute and tung oil. In 1981 procurement prices forsoybeans and flue-cured tobacco were raised.

3.07 In industry there were price increases for nonferrous metals andmineral products in 1979, the most important of which was a Y 5 per ton risein the price of coal. Prices of plastic goods, electrical products and sometypes of machinery were reduced. In 1980, prices were raised for 18 types ofmetallurgical products, 8 chemical products and 7 light industrial andmechanical products, partly to compensate for increased costs of raw materialinputs. Prices of some types of machinery, 9 types of steel products and4 types of chemical products were lowered. In 1981, prices of timber,plywood, newsprint, 8 kinds of small steel products and high-qualitycigarettes and alcohol were increased, while those of television sets,domestic appliances and heavy trucks were reduced. Similar price adjustmentscontinued in 1982, and in early 1983 the prices of synthetic fiber textileswere reduced by 20-30% and those of cotton textiles were raised by about 20%.Prices of certain durable consumer goods now in excess supply are beingreduced.

3.08 Though far from complete, the above information does indicate thatmuch greater use is now being made of relatiVe price changes to correct dis-tortions that affect profitability and production decisions. Moreover,changes in official prices have usually been based on production costs orchanging demand-supply conditions. The major exception to this pattern is thecategory of important basic consumer goods from the agricultural sector orthose containing a large agricultural raw material component. Increases inprices paid to rural producers have by and large not been passed on to urbanconsumers but have rather been absorbed by budget subsidies (see para. 3.14).In addition, for many goods, notably coal, the price increases alreadyimplemented probably provide an insufficient profit incentive to spurincreased production and investment. Although the direction of recent changesin prices has usually been appropriate, significant distortions in levels ofrelative prices remain both between and within sectors.

Price Reform

3.09 In the long run, changes in the mode of price formation are moreimportant than administrative measures to rationalize the structure of rela-tive prices. Such changes include both the development of rational criteria

/1 Mixed average procurement prices are obtained by dividing the totalvalue of a certain commodity procured by the volume procured. Thusthey reflect the influence of changes in list prices, changes in theproportion that is procured at above-quota prices and changes in themix of products procured within a larger commodity category.

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for setting official prices and permitting producers and traders more flex-ibility in negotiating prices, presumably subject to effective budget andmarket constraints. Some price flexibility has been introduced in China:above-plan output of many goods and the total output of some goods can besold at prices negotiated directly between buyers and sellers; there is alsosome downward price flexibility for producer goods in excess supply.However price flexibility remains limited and little progress seems to havebeen made in developing rational criteria for setting official prices. Thedifficulties of implementing comprehensive price reform in a country likeChina should not be underestimated. Price policies have traditionally beenused as a means of raising government revenue (via industrial and commercialprofit remittances), influencing income distribution across individuals andregions and promoting stability in living standards (by maintaining stableprices for basic necessities). Given the difficulties in reconciling someof these longstanding goals of Chinese price policy, price reform willinevitably be a difficult and slow process.

B. Fiscal Policy

3.10 The state budget has been and remains one of the main instrumentsby which the Government influences the economy. About 30% of NMP flowsthrough the state budget and most sectors have traditionally relied on itfor a significant proportion of their development expenditures. A keycomponent of the stabilization program has therefore been to reduce thebudget deficit to a more manageable level, despite slow growth in budgetaryrevenues and burgeoning subsidies.

Budgetary Deficits and their Impact

3.11 Official statistics indicate that China achieved large reductionsin its budget deficit in 1980 and 1981 (Table 3.3). Although there has beenno return to the budget surpluses of 1977 and 1978, the 1981 and 1982 defi-cits are relatively modest and appear to pose no great threat to economicstability. However, the statistics need to be adjusted to eliminate financ-ing items like foreign loans and Treasury Bond issues /1 from the revenueside and debt repayments from the expenditure side. For 1979-82 the result-ing deficit figures are higher than those in the official accounts, but thesignificant reductions of 1980 and 1981, indicative of more restrictivefiscal policy, remain.

/1 Treasury Bonds were first issued by the Government in 1981 to dampeninflationary pressures and raise revenue. Y 4.87 billion worth ofTreasury Bonds were sold that year, almost all to organizations on aninvoluntary basis. In 1982 the Government sold an estimated Y 4.2 bil-lion worth of Treasury Bonds, about half to organizations and half, on avoluntary basis, to individuals (with an 8% annual interest payment forthe latter as opposed to 4% for the former).

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Table 3.3: BUDGET DEFICITS, 1977-82 /a

19821977 1978 1979 1980 1981 (estimate)

Official accountsTotal (Y billion) -3.1 -1.0 17.1 12.8 2.6 3.0% of NMP -1.2 -0.3 5.1 3.5 0.7 n.a.

Deficit after eliminationof financing itemsTotal (Y billion) -3.0 -0.7 24.2 17.6 7.1 6.7% of NMP -1.1 -0.2 7.2 4.8 1.8 n.a.

/a Minus indicates a surplus.

Source: Statistical Appendix, Tables 3.4, 5.1 and 5.6 and Annex 2, Table 9.

3.12 The much tighter fiscal policy is even more evident when accountis taken of the mode of deficit financing, which can dramatically affect themacroeconomic impact of any given budget deficit. Financing by means ofTreasury Bond issues basically negates any impact of a budget deficit onaggregate demand, because the bonds soak up the money balances of decision-making units in the domestic economy. On the other hand, deficit financingby means of money creation places more liquidity in the hands of individualsand organizations, stimulating consumption and investment demand. In 1979,Y 17.1 billion of China's budget deficit was financed by money creation, inthe form of a drawdown of accumulated budget surpluses from previous years(totalling Y 8 billion) and a Y 9 billion overdraft from the PEC, whichapparently bears no interest charge. In 1980 the domestic deficit was alsofinanced entirely by money creation, consisting of a Y 8 billion loan fromthe PBC (with an annual interest charge of 6%) and a temporary drawdown ofgovernment deposits at the PBC, which for accounting purposes was replen-ished with the proceeds of Treasury Bond sales in 1981./l Since 1981 theMinistry of Finance has not borrowed additional funds from the PBC; theGovernment intends to adhere firmly to this new policy, and future deficitswill be financed either through Treasury Bond sales or by means of drawdownsof government deposits. The latter financing device does involve moneycreation but is limited by the need to maintain sufficient working capitalin government deposits. In 1982 most of the budget deficit was financed byTreasury Bond sales.

/1 Fiscal policy in 1981 was therefore even more restrictive than isindicated by the official budgetary statistics.

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Trends in Expenditures

3.13 After a rise of 51% from 1977 to 1979, China's total budgetaryexpenditures dropped by 6.7% in 1980 and more sharply by 8.6% in 1981. It isestimated that there was a further very small decline in expenditures in 1982.But expenditures on subsidies are subtracted from the gross profits of enter-prises and therefore do not appear on either the revenue or the expenditureside of the official accounts. If subsidies are included and variousfinancing items subtracted, the 1980 reduction in budgetary expenditures isconverted into a slight rise (2.6%), the 1981 decline becQmes a much moremodest 1.6% decrease and the 1982 fall is converted into a small increase.(Table 3.4). Budgetary stabilization goals, therefore, have been achievedmainly by means of constrained expenditure growth rather than outrightreductions.

3.14 Among expenditure items, spending on capital construction showed thegreatest variation, rising by over 50% in 1978 and nearly 14% in 1979, thenfalling by 19% in 1980 and 21% in 1981. There was apparently no recoveryin 1982. These expenditure cuts may have adversely affected China-s futuregrowth potential, but were necessary to avoid even larger budget deficits thanwere actually recorded. There has also been a cutback in defenseexpenditures. Subsidies, which grew by an estimated 387% between 1978 and1982, now outweigh capital construction as a proportion of total budgetexpenditure. The Y 21.6 billion rise in subsidies between 1979 and 1982 morethan offset the Y 21.2 billion decline in capital construction expendituresduring the same period. Subsidies have increased so rapidly because theGovernment allowed producer prices of many agricultural commodities to risesignificantly while holding retail prices constant (so that urban consumerscould maintain their standard of living) or, in the case of nonstaplefoodstuffs, providing income supplements to workers. In the absence of suchsubsidies, however, the Government might have been obliged to permit largerwage increases and hence lower profit remittances. The overall fiscalsituation might not have been greatly affected. Therefore subsidies reflectmainly a pricing problem rather than fiscal difficulties and need to addressedas part of the overall reform of pricing and taxation.

Revenue Developments

3.15 Official statistics on net domestic revenues (excluding foreignloans) show a decline in total revenues of 9.1% between 1978 and 1981,followed by a rise of 4% in 1982. They also show net profit remittances fromstate enterprises dropping from over 51% of total revenue in 1978 to only 35%in 1981 and an estimated 29% in 1982. But to get a reasonably accuratepicture of revenue performance, the effect of subsidies and in 1982 that ofTreasury Bond sales must also be taken into account. When this is done, itcan be seen that China-s domestic budgetary revenues not only did not fall butgrew substantially by 15.4% between 1978 and 1981 and by a further 1% in 1982(Table 3.5); in addition enterprise profit remittances rose through 1980 andfell only slightly in 1981 and 1982.

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Table 3.4: BUDGETARY EXPENDITURES AND SUBSIDIES, 1977-82(Y billion)

1977 1978 1979 1980 1981 1982(prelim.)

Total Expenditures n.a. 118.9 143.8 147.5 145.1 146.2

Total Expenditures Net of 84.4 111.1 127.4 118.9 108.7 108.2Subsidies /aOf which:

Capital construction (30.1) (45.2) (51.5) (41.9) (33.1) (30.3)Education, culture & health (9.0) (11.3) (13.2) (15.6) (17.1) (19.0)Defense (14.9) (16.8) (22.3) (19.4) (16.8) (17.9)Administration (4.3) (4.9) (5.7) (6.7) (7.1) (8.0)Other (26.0) (32.9) (34.8) (35.2) (34.6) (33.0)

Subsidies n.a. 7.8 16.4 28.7 36.4 38.0Of which:Subsidies on daily livingnecessities n.a. n.a. (13.9) (22.0) (29.4) }

Subsidies on agricultural } 33.0inputs n.a. n.a. (2.1) (2.0) (2.1) }

Wage subsidies /b 0 0 (0.4) (4.7) (4.9) 5.0

/a These figures do not include the cost of amortizing Government debtand therefore differ somewhat from the official statistics.

/b This refers to the Y 5 per month paid to each employee in stateownedunits to offset increases in the retail prices of nonstaple foodstuffsintroduced in 1979. To obtain the total cost of this subsidy, theaverage number of workers and staff in state-owned enterprises wasobtained from figures on the total wage bill and average wages(Statistical Appendix Table 1.6) and then multiplied by Y 60 for 1980-82and Y 5 in 1979 (assuming the increase went into effect in December 1979).In the absence of information on 1982, it is assumed that the cost of thissubsidy went up by 2% in that year.

Sources: Statistical Appendix, Table 5.6 and Annex 2, Table 9.

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Table 3.5: DOMESTIC REVENUES, 1977-82(Y billion)

1977 1978 1979 1980 1981 1982(prelim.)

Domestic Revenues(Net of Subsidies) 87.4 112.0 106.7 104.2 101.6 105.7Of which:Profits (40.2) (57.2) (49.3) (43.5) (35.4) (31.1)Taxes (46.8) (51.9) (53.9) (57.2) (63.0) (68.0)Other (0.3) (2.8) (3.6) (3.5) (3.2) (6.6)/a

Plus Subsidies n.a. 7.8 16.4 28.7 36.4 38.0

Less Domestic RevenuesAttributable to Foreign

Loans /b 0.1 0.2 3.5 3.0 0 0

Total Domestic Revenues n.a. 119.6 119.6 129.9 138.0 139.5Of which:

Profits n.a. 65.0 65.7 72.2 71.8 69.1

/a Including Y 4.2 billion worth of Treasury Bond sales, which are notincluded in the figure on total domestic revenues because they are afinancing item.

/b This adjustment is necessary to ensure rough consistency between infor-mation on 1981-82 and that for earlier years. The difference betweenexpenditures financed by foreign loans and revenue from foreign loans issubtracted from total revenue in 1977-80.

Source: Statistical Appendix, Table 5.1 and Annex 2, Table 9.

3.16 From 1978 tc 1981 domestic revenues grew at only a little more thanhalf the rate of growth in the nominal value of NMP (15% as against a 29%rise in NMP). Economic reforms such as the introduction of profit retentionschemes have contributed to this slow growth. The shift in the composition ofindustrial output from heavy to light industry is another important factor,since the latter generates less government revenue per unit of output valuethan the former. Price adjustments may also have adversely affected profitsand therefore budgetary revenues, aside from the effects counteracted byexplicit subsidies.

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3.17 China has introduced new taxes in the past several years, whileleaving the mainstay of its tax system (the consolidated industrial andcommercial tax) largely unchanged. Many of the new taxes are being imple-mented on an experimental basis in a few areas and units. Potentially themost important are taxes ("charges") on the fixed assets and circulatingcapital of state-owned enterprises (see para. 2.30). An income tax for about460 state-owned industrial enterprises (to substitute for profit remittancesby these enterprises to the state budget) and a value added tax have beeninstituted on an experimental basis. Tax regulations on joint ventures andforeign companies doing business in China have also been published. The newtax on individual incomes will apply almost exclusively to foreign residents.In general, more use is now being made of taxes as a policy instrument andsource of revenue than in the past.

Fiscal Decentralization

3.18 The reform of government finance has been aimed at more efficientprovision of services and better economic decision-making and has involved amajor decentralization of authority and financial resources to lower levelunits. One aspect of fiscal decentralization has been the granting of greaterbudgetary flexibility to provincial and local governments and the provision ofgreater incentives to expand revenues and/or economize on expenditures. In1980 a revenue and expenditure sharing system between provinces and thecentral government was implemented. Provinces whose normal revenues exceedtheir expenditures share certain types of income with the center in fixedproportions, while those whose revenues cannot meet expenditures are granted afixed subsidy by the center. The sharing rates and subsidies are supposed toremain fixed for five years except for the three centrally administeredmunicipalities (Beijing, Shanghai, and Tianjin), whose retained proportion oftotal budgetary revenues is fixed each year. It appears, however, thatrevenue decentralization has exceeded the amount of expenditure decentraliza-tion. Imbalances have resulted with the center incurring large deficits(considerably larger than the reported consolidated budget deficits) and manyprovinces running surpluses. In 1981, the central government's "deficit"vis-a-vis the provinces was a net Y 8 billion. To ameliorate this situationthe Government raised involuntary loans totalling Y 7 billion from theprovinces. These loans carry no interest charge and have no set repaymentperiod. In 1982, the central-local budgetary imbalance was apparentlyconsiderably smaller, and the central government only had to levy aboutY 4 billion in involuntary loans from the provinces. Such transfers of fundsare necessary to deal with the immediate problem of fiscal imbalances betweencentral and local governments, pending development of a more permanentsolution.

3.19 A second aspect of fiscal decentralization has been the rapidgrowth of extra budgetary funds (EBFs). This is a natural consequence ofreforms in the state enterprise sector of the economy, which permitenterprises to retain some funds that would otherwise be remitted to the

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government. Unfortunately, however, indirect control mechanisms have notyet been devised to ensure responsible use of EBFs by the units they accrueto. As a result the rapid growth of EBFs has stimulated excessive invest-ment demand, exacerbating the central government s difficulties in achievingstabilization. The total value of EBFs generated in 1981 was about Y 60billion. Y 47.5 billion consisted of income accruing to enterprises anddepartments supervising enterprises, in the form of depreciation funds,retained profits, enterprise funds, etc. This is the fastest growingcomponent of EBFs but is also the category most amenable to central control,since regulations governing these funds are mostly determined at the centrallevel. In an effort to control the use of this type of EBFs the Governmenthas introduced direct administrative restrictions on investment projectsfinanced with EBFs. In late 1982 the Government announced that it will levya tax on some EBFs of this type to raise revenue for key energy andtransport projects. This tax is expected to raise Y 12 billion in 1983-85.The second main source of EBFs (Y 17 billion in 1981) is the non-budgetaryrevenues of administrative organizations and nonprofit institutions. Thesmallest category of EBFs (Y 4.5 billion in 1981) consists of the extra-budgetary revenues of provincial and local governments, mainly surtaxes onthe industrial and commercial tax and the agricultural tax, as well as othermiscellaneous levies. In contrast to enterprise retained funds, these typesof EBFs have not been growing rapidly and moreover do not have a seriousmacroeconomic impact.

C. Monetary Policy

3.20 In recent years money and credit have come to play an increasinglyimportant role in the Chinese economic system. Innovations like creditfinancing of fixed investmernt and profit retention schemes have given lower-level units greater access to financial resources and more autonomy indeciding how they are used. This places a greater burden on the bankingsystem in mobilizing and guiding the allocation of such resources. In these,circumstances the Government has recognized that monetary policy has animportant role to play in adjustment and stabilization, and it has begun tomake more use of economic levers (such as interest rates) as tools ofeconomic management. Growth of the money supply (especially cash in circu-lation) has been slowed considerably since 1979-80, but it remains rapid.This is understandable in view of the reforms and major structural changesChina is undergoing. Government policies have also been partially success-ful in controlling the growth of credit.

Money and Credit in Stabilization

3.21 Whatever definition is used, China's money supply grew very rapidlyin 1979 and 1980, considerably more slowly in 1981 and 1982 (see Table 3.6).The 1980 growth rates for different aggregates varied between 26.8% for M3

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(currency in circulation, individual deposits and enterprise and collectivedeposits) and 34% for M2 (currency and individual deposits). In 1981 theslowdown in monetary expansion was much more marked for relatively liquidassets like currency in circulation, which grew only half as fast as in1980, than for monetary aggregates including less liquid types of assetssuch as M3, for which the decline in growth rate was only about 20%. Gener-ally speaking, the same appears to be true of 1982. This reflects thedominant focus of China-s restrictive monetary policies on controllingcurrency expansion, with little concern about the rapid growth of individualor enterprise deposits. It also reflects the increasing attractiveness ofsavings deposits in relation to cash holdings.

3.22 Given the rapid monetary expansion, velocity of money has fallenconsiderably. Income velocity of Ml (NMP divided by currency and individualdemand deposits) dropped from 9.9 in 1979 to 7.3 in 1981, a reduction ofover 26%, while transactions velocity (total retail sales divided by moneysupply) fell from 5.3 to 4.4 during the same period, a decrease of 17%./lThe decline in velocity is greater if 1977 or 1978 is taken as the baseyear. Income velocity of M2 dropped by 42-43% between 1977-1978 and 1981,compared with a fall of only a little over 30% from 1979 to 1981. In theabsence of structural change the observed decline in velocity would suggestthat problems of monetary overhang and repressed inflation in China haveworsened significantly. Such a conclusion is premature, however, inview of the massive structural shifts that have occurred during this period.Perhaps the most important are the increased monetization of rural economicactivities and the growth in transactions demand for money balances thathave resulted from the implementation of production responsibility systems.The dramatic shift in the composition of industrial output from heavy tolight industry may also be an important factor. The commercial network inurban areas has expanded rapidly, primarily through proliferation ofcollective and individual commercial and other service undertakings.Finally, holding financial assets has become considerably more attractive toindividuals as a result of government policy measures. Any attempt toquantify the impact of these and other structural changes on the appropriatelevel of velocity in China is fraught with uncertainty. Nevertheless theseshifts may well explain most or all of the observed decline in velocity.

/1 Since the figures on total retail sales do not include free markettransactions within the rural sector, the actual decline in transactionsvelocity is less than this.

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Table 3.6: DEVELOPMENTS IN MONEY AND CREDIT, 1978-82(% increase in balance outstanding at year end)

1978 1979 1980 1981 1982/a

Money SupplyCurrency in circulation 8.5 26.3 29.3 14.3 13.3/bMl n.a. n.a. 32.7 18.0 17.5M2 11.5 36.5 34.0 23.5 21.5M3 n.a. n.a. 26.8 21.5 17.9

Credit _c 11.2 10.2 19.6 14.6 12.3Of which:

To state industry 10.3 12.4 2.5To state commerce 16.6 14.0 11.8To agriculture 33.0 9.1 6.2To collective enterprises and individuals 52.0 27.5 39.5Short- and medium-term equipment loans 600.8 50.9 86.4

/a Annual growth rate from the end of the third quarter of 1981 to the endof the third quarter of 1982. These are estimates based on statisticsin the journal Zhongguo jinrong (China's finance).

/b It is estimated that currency outstanding at the end of 1982 was 11.0%more than at the end of 1981.

/c 1978 and 1979 totals cover only China's state banking system (excludingthe People's Construction Bank of China), while totals and breakdownsfor 1980 and 1981 include the loans of the rural credit cooperatives.Growth in credit outstanding of China's state banking system was 18.4%in 1980 and 14.5% in 1981.

Source: Statistical Appendix, Tables 6.1, 6.2 and 6.3 and InternationalFinancial Statistics.

3.23 As part of the stabilization program there was a decline incredit expansion in 1981 and 1982 (see Table 3.6). There have also beensome changes in the sectoral composition of credit. Loans to individualsand to collective enterprises, as well as short- and medium-term equipmentloans, have grown extremely rapidly from small bases. Credit to stateindustry has grown somewhat more slowly than credit to state commerce,especially in 1982, but within the former category loans outstanding toindustrial supply and marketing units have remained virtually constant whilecredit to production enterprises grew by over 40% in 1979-81. The slow

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growth in outstanding credit to agriculture in 1981 masks a continuedexpansion in the gross flow of loan funds to the sector, since repaymentsalso rose rapidly in that year. Similarly, the sharp slowdown in the growthof credit outstanding to state industry in 1982 probably reflects greaterability on the part of industrial enterprises to repay loans as a result ofthe resumption of more rapid growth in the sector.

Interest Rates and Banking Reform

3.24 Greater reliance on credit financing of fixed investment is oneaspect of the Government's overall program to expand the role of the bankingsystem and strengthen its autonomy at all levels. This has been accompaniedby a less dramatic increase in the proportion of working capitalrequirements financed by credit, resulting from a sharp decrease in statebudget appropriations for this purpose. As an integral part of bankingreforms, greater use is also being made of interest rates to influenceeconomic decision-making at the micro level. Interest rates paid onindividuals' bank deposits have been raised three times (in 1979, 1980, and1982 - see Statistical Appendix, Table 6.5), with the highest increasesreserved for long-term time deposits./l These increases have more than keptup with increases in inflation or inflationary expectations. New types ofdeposits have been created, broadening the range of financial assetsindividuals can choose from. In 1982, enterprises and organizations werefor the first time permitted to hold time deposits, which earn higherinterest payments (see Statistical Appendix, Table 6.6). Perhaps the mostimportant adjustment, however, was the general increase in interest rates onloans implemented in January 1982 (Statistical Appendix Table 6.4). Thestandard rate on circulating capital loans was raised from 5.04% to 7.2% p.a.Certain other loan interest rates were raised even more in proportionalterms. Gradations in rates based on maturity have been introduced, andlower level bank branches have been given some flexibility in settinginterest rates. These adjustments have made the structure of interest ratesmuch more rational.

3.25 The core of institutional reform of the banking system has beensignificant territorial decentralization of authority and implementation ofa kind of "responsibility system" for bank branches. Branches at theprovincial level and below may make more loans than provided for in theirplans if they can increase deposits above the plan level or economize onplanned loans. Bank branches have also been transformed into enterprise-likeorganizations, with bonuses for employees based on branch profitability.This innovation may be more meaningful now that banking activities areprofitable at the margin as a result of the latest adjustments in interestrates. But there is still plenty of scope for transforming the role ofbanks from one of passive monitoring of plan fulfillment and extension of

/1 But since interest payments are not compounded the difference in effec-tive annual yields is much smaller.

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credit based on developments in inventories to one with a more activeinfluence on decision-making related to current production and investment.

D. The Balance of Payments

3.26 Historically China has been a relatively closed economy. Foreigntrade has been low in relation to total production (both exports and importswere less than 5% of GNP in 1977-78). The objective of trade policy was toimport only goods that could not be produced domestically in sufficientquantity, and to export enough to cover essential imports and to fund China'sforeign aid program.

3.27 Following normalization of international relations in the 1970s,China has become more active in seeking foreign loans and investment, aid toother developing countries has been reduced, non-oil exports have grownsteadily and imports of advanced technology from abroad have been expanded.The emergence of an oil surplus in the early 1970s and the sharp increase inoil prices further helped both exports and imports to expand rapidly. Withthe emphasis on modernization after 1977, large contracts to import completeplants and new technology (worth $6.7 billion in 1978-80) were concluded. Thepolicy of adjustment and reform included a continued emphasis on making use offoreign technology and imports, but trade policy was modified in three ways:(a) overall growth and investment targets were scaled down, thus reducingimport demand; (b) emphasis shifted from importing complete plants toimporting selected equipment for modernization of industry; and (c) promotionof exports, especially of industrial products, was stressed.

3.28 Although exports grew rapidly between 1978 and 1980, importsexpanded just as fast and the surplus on factor services and transfersdeclined. The current account deficit therefore widened from $0.7 billion in1978 to$2.4 billion in 1980 (Table 3.7). With imports of equipment fromprevious commitments still growing, the Government cancelled or postponedseveral large import contracts in early 1981 and instituted a sharp cut inoverall investment in order to reduce inflation and the budget and balance ofpayments deficits. Exports continued to grow rapidly in 1981, and thestabilization program was even more successful in improving the balance ofpayments than anticipated. The $2.4 billion deficit of 1980 was convertedinto a $2 billion current account surplus in 1981. Export growth slowedsharply in 1982 (according to Ministry of Foreign Trade figures the value ofexports in current prices increased by only 3%). But imports also declinedsignificantly (by over 12%). As a result the current account surplus widenedto an estimated $4.4 billion in 1982.

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Table 3.7: CURRENT ACCOUNT 1978-82(US$ billion at current prices)

1978 1979 1980 1981 1982(prelim.)

Exports of goods & nonfactor services 10.4 15.0 20.3 24.4 n.a.Imports of goods & nonfactor services 11.7 17.2 23.2 22.7 n.a.

Resource balance -1.3 -2.2 -2.9 1.7 n.a.

Net factor service & transfer income 0.6 0.6 0.5 0.3 n.a.

Current balance -0.7 -1.6 -2.4 2.0 4.4

Source: Statistical Appendix, Table 3.1.

Exports and Imports

3.29 Merchandise exports and imports both nearly doubled in value duringthe two year period 1978-80 (Table 3.8). In 1981, exports again grew by 19.1%but imports fell by 4.5%; and in 1982 export growth slowed and importscontinued to fall. In real terms merchandise exports grew at an annual rateof 19% during 1978-81 and 17% during 1978-82, but the growth rate has beendeclining. The volume of imports and exports grew at similar rates during1979-80, but the stabilization program reduced real imports by 8.6% in 1981and there was a further decline in the volume of imports in 1982. Governmentestimates show the terms of trade declining from 1978 to 1981 before improvingin 1982. The decline is somewhat surprising in view of the doubling ofrelative world petroleum prices between 1978 and 1980. Although China'smanufactured exports consist mainly of goods subject to intense pricecompetition and China is often forced to sell at a discount because ofdifficulties with quality, packaging, or delivery, the official pricestatistics may also be underestimating price increases for non-oil exports.

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Table 3.8: VALUE, PRICE AND VOLUME INDICES OFEXPORTS AND IMPORTS, 1978-82 /a

(1978 = 100)

Annual Growth1978 1979 1980 1981 1982 1978-81 1978-82

/b -------

ExportsValue 100 142.2 192.5 229.3 236.3 31.9 24.0Volume 100 125.0 146.6 170.0 184.4 19.3 16.5Price 100 113.7 131.3 134.9 128.1 10.5 6.4

ImportsValue 100 145.4 197.7 188.9 165.0 23.6 13.3Volume 100 121.7 142.0 129.8 126.0 9.1 5.9Price 100 119.4 139.2 145.5 131.0 13.3 7.0

Terms of Trade 100 95.2 94.3 92.7 97.8 -2.5 -0.6

/a Price indices are chain-linked with annual rebasing. Growthrates are based on end-points.

/b Estimate.

Source: Statistical Appendix, Tables 3.1 and 3.9.

3.30 Table 3.9 shows the sectoral breakdown of export growth during1978-81. Mineral fuels and oils contributed one-third of incremental exportearnings, but this was mainly due to increases in petroleum prices in 1979 and1980; oil exports were essentially constant from 1979-81. In 1982 however theestimated increase in the value of exports of mineral fuels and oils was dueprimarily to growth in export volume rather than price rises. The rapidgrowth of manufactured exports mainly reflects increases in volume rather thanprice. Heavy industry exports grew especially fast, with machinery andtransport equipment contributing the most to this growth (see para. 4.22).

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In every sector, including the relatively slow-growing "other primarygoods," exports grew faster than domestic production in 1979-81. Exportsalso grew faster than world imports and China has increased its share ofworld trade. The export growth rate fell somewhat in both 1980 and 1981,and then dropped sharply in 1982, reflecting the slowdown in the growth ofworld trade and the increasing difficulty of raising China's share of someexports. The Government is sensibly stressing the importance of quality, inorder to improve competitiveness and to move into products with better priceand growth prospects.

Table 3.9: COMPOSITION AND GROWTH OF EXPORTS, 1978-81(current prices)

Share of incre- Annual growthShare of exports mental exports rate1978 1981 1978-81 1978-81

Primary Products 53.5 49.6 46.1 25.7Mineral fuels and oils 13.8 24.2 33.2 55.5Other primary goods 39.7 25.4 12.9 11.1

Manufactured Products 46.5 50.4 53.9 32.5Heavy industry 10.4 18.2 25.0 55.5Light industry 36.1 32.2 28.8 24.2

Total Exports 100.0 100.0 100.0 28.9/a

/a This table is based on data from the Ministry of Foreign Trade, whichinclude only the net value of export processing trade. The growth oftotal exports therefore differs slightly from that in Table 3.8.

Source: Statistical Appendix, Table 3.3.

3.31 The impact of recent macroeconomic policy is apparent from thechanging structure of imports (Table 3.10). Raw material imports for heavyindustry dropped sharply and those for light industry rose due to the shiftin emphasis of industrial policy. Consumer goods imports also increasedsharply in line with the increased share of consumption in NMP. Half ofthis increase was due to expanded imports of cereals, but there were alsolarge increases in imports of consumer durables such as television sets.Imports of machinery and equipment surged in 1979 and 1980 and complete

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plant imports continued to rise in 1981 despite cancellation and postponementof several major contracts, because delivery of much previously contractedplant and equipment could not be stopped. Other machinery and equipmentimports fell in 1981, however, due to the stabilization program. The laggedeffect of the contract cancellations and suspensions finally became apparentin 1982, when the value of imports of complete plants and sets of equipmentfell precipitously by almost 50%. Other reasons for the decline in importsin 1982 include delays in supplies of equipment already ordered and problemsin obtaining high technology goods.

Table 3.10: COMPOSITION OF IMPORTS, 1978-81(current prices)

Share of imports1978 1979 1980 1981 1978 1981

- ($ billion) ---- () ---

Machinery & Equipment 1.9 4.0 5.4 5.1 17.5 26.2of which: complete plant (0.5) (1.2) (2.5) (3.2)

Raw & Intermediate Materials 7.0 8.8 10.0 9.0 63.9 46.4For heavy industry (4.2) (5.2) (3.9) (2.2) (38.2) (11.5)For light industry (2.1) (2.7) (4.7) (5.4) (19.4) (27.7)For agriculture (0.7) (0.9) (1.4) (1.4) (6.3) (7.2)

Consumer Goods 2.0 2.9 4.1 5.3 18.6 27.4

Total Imports 10.9 15.7 19.6 19.5 100 100

Source: Statistical Appendix, Tables 3.2 and 3.5.

3.32 The dominant pattern in China's direction of trade in recent yearshas been recurrent large import surpluses with industrial market economies andlarge export surpluses with developing countries, as can be seen fromTable 3.11. The most striking change has been the sharp drop in the share ofnonmarket industrial economies in both imports and exports. The share of theindustrial market economies has risen considerably, while that of developingcountries has fallen slightly in terms of China-s exports, risen slightly interms of imports.

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Table 3.11: DIRECTION OF TRADE, 1978-81

Share of Share ofexports imports

1978 1981 1978 1981

Industrial market economies 37.3 45.9 73.3 76.8Developing countries 55.4 52.0 20.8 21.0USSR and Eastern Europe 7.3 2.1 5.9 2.2

Total 100.0 100.0 100.0 100.0

Source: Statistical Appendix, Table 3.8.

External Borrowing and Creditworthiness

3.33 China's approach to foreign borrowing and external debt managementhas been very conservative. After the initial post-1977 flurry of foreigncontracts for plant and equipment imports (many of which were for cashrather than credit), the Government first became cautious about newcommitments, then cut back on existing contracts. Reasons for this decisioninclude the lack of complementary domestic resources of energy andinfrastructure and the desire to avoid large balance of payments deficits

and foreign debt. Poor project preparation was also a reason for thecancellation of certain contracts. The present government borrowingstrategy is to obtain more long-term concessional assistance and make moreuse of subsidized export credits, while avoiding borrowing at highcommercial rates of interest. The Government aims to keep the ratio of debtservice payments to export earnings below 15%.

3.34 Efforts to promote direct foreign investment attracted net inflowsof over $300 million in 1980 and 1981. In the same two years, China securedfrom Japan low interest loans totaling $895 million. The Government hasexpanded use of export credits but remains very cautious. China has usedonly $349 million out of total authorized credits of over $13 billion. In1980 and again in 1981 the Government cutback sharply on interbank borrowingand also took advantage of the unexpectedly strong current account positionto repay large amounts of commercial bank and other loans. As a result,total debt outstanding increased by only $255 million to $5,696

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million in 1981. At the end of 1981, total reserves excluding gold were $5.0billion, equivalent to 3 months of 1981 f.o.b. imports. The ratio of debtservice payments to exports of goods and nonfactor services increased from5.0% in 1980 to 7.8% in 1981, due in part to the accelerated repayment ofcommercial bank and other loans. There was a further build up of reservesduring 1982: by the end of the third quarter of 1982 reserves excluding goldhad reached $9.4 billion.

Institutional and Policy Changes in the External Sector

3.35 China has introduced a number of changes designed to promote thegrowth of exports and economize on the use of foreign exchange for imports.Three related and mutually reinforcing changes in particular appear to haveinfluenced export growth in the past three years: the introduction of a new"internal settlement rate for foreign exchange transactions; devolution ofauthority to conduct foreign trade; and the introduction of a foreign exchangeretention scheme. Attempts have also been made to utilize foreign capital forincreasing exports and modernizing domestic technology.

3.36 One important policy change was the introduction in January 1981 ofan internal settlement rate for all trade. This was fixed at Y 2.8 perUS dollar, which represented about a 75% premium over the official rate atthat time./l This change should not have affected trade conducted by thecentral foreign trade corporations, because enterprises receive the normaldomestic price for exports and pay the domestic price for imports, withprofits and losses balanced by the trading corporations and net balancessettled by the Ministry of Foreign Trade. However, the higher internalsettlement rate has affected the growing share of trade conducted bydecentralized trading corporations and enterprises.

3.37 Decentralization of foreign trade is a second important changewhich has occurred. The monopoly of the Ministry of Foreign Trade overforeign trade transactions (exercised through its subordinate ForeignTrading Corporations) has been effectively ended. Ministries, newterritorially based trading companies and, in many cases, enterprisesthemselves can now export and import. Within the trading system under theMinistry of Foreign trade itself, the powers of local and provincialbranches of the Foreign Trading Corporations (FTCs) appear to have beensubstantially increased. Authority to conduct foreign trade independently

/1 The official exchange rate is pegged to a basket of currencies whereasthe internal settlement rate is pegged to the US dollar. The officialrate was Y 1.6 per US dollar in January 1981 but had risen to Y 1.94per US dollar by the end of 1982. The premium has thus declined toabout 44%.

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is greatest in Guangdong and Fujian Provinces, and in designated SpecialEconomic Zones (SEZs), which have more flexible regulations on foreign trade,foreign currency transactions and direct foreign investment activities.Although in 1981 trading organizations not directly under the centralgovernment accounted for only 8% of exports and 13% of imports (up from 2% and8%, respectively, in 1980), the amount of trade conducted by provincial FTCbranches acting independently of central supervision was much greater.

3.38 This devolution of decision-making authority has been accompanied bythe introduction of material incentives; provinces, large organizations and insome cases lower-level territorial government units may retain part of theirforeign exchange earnings. The proportions vary for different types ofproducts according to the need for encouraging or discouraging exports ofthose goods. Units do not actually hold foreign exchange (as cash or in bankaccounts), but earn foreign exchange retention quotas, which entitle them toobtain foreign exchange from the BOC to purchase imports under certainspecified conditions. The total value of unused foreign exchange quotas grewfrom $1.5 billion at the end of 1979 to $2 billion at the end of 1980 and justunder $4 billion at the end of 1981. Given the attractiveness of foreignexchange in China, this rapid growth suggests that informal restrictions onthe use of foreign exchange quotas may have been imposed by the BOC, in theinterest of balance of payments stability. The scope of the foreign exchangeretention system was expanded in 1981 but has been scaled down 'n 1982, andmany types of products considered essential in the domestic economy no longerearn foreign exchange retention quotas. For other goods, the retention quotasnow vary between 8% and 15% (compared with 20-40% previously). Producersthemselves are rarely if ever entitled to share directly in the proceeds oftheir exports; foreign exchange is retained and allocated only at higherlevels in the economic system.

3.39 A limited and tightly controlled foreign exchange market has beeninstituted by the BOC, in which enterprises with unneeded foreign exchangequotas sell them to enterprises that require but do not have access to foreignexchange. In 1981 some 1,500 transactions worth a total of $217 million tookplace under this so-called "foreign exchange coordination system."

3.40 China has encouraged the inflow of foreign capital in the form ofjoint ventures, /1 compensation trade and processing and assembly contracts.

/1 Joint ventures involve joint management of operations by the Chineseand foreign partner (both of which are represented on the Board ofDirectors), as well as contributions of resources (in the form of equityinvestment or in other forms) and sharing of benefits by both parties.

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Some of these new methods mix true direct foreign investment with activitiesintended simply to economize on the use of foreign exchange in the tradingprocess. Results have been mixed; China has attracted some direct foreigninvestment but less than was originally hoped for. As of 1982, 40 equityjoint venture contracts involving a total of $88 million in foreign investmenthad been signed and approved by the Chinese Government. In addition, 390contractual joint venture agreements involving cooperation on a temporarybasis have been signed. The foreign capital component of these contractsamounts to $1.8 billion, but only a small part has been paid up and only a fewprojects so far have a distinct legal personality. Compensation trade dealsare also important in the aggregate, though on the average each item is muchsmaller. In 1980 alone over 350 compensation trade agreements were signed,involving imported equipment worth $187 million. Processing and assemblyactivities also have increased. More rapid expansion of all these types ofactivities has been held back by the Government's concern to avoid unfavorableagreements, by the lack of detailed regulations on many aspects of foreigninvestment'and by the multiplicity of organizations potential foreigninvestors in China are forced to deal with. Nevertheless, the Governmentremains firmly committed to encouraging growth of these types of activitiesand their future potential is great.

3.41 Foreign trade policy changes and reforms have been partlyresponsible for the impressive growth of exports in the past several years,which has occurred despite relatively poor international market conditions.But they have also had other consequences which led the Government to imposeadditional restrictions in 1982. The export incentives introduced in the formof the foreign exchange retention system appear to have worked too well insome ways. Provinces and organizations have striven to increase theirexports, even if this meant undercutting the exports of other provinces andunits. Where markets are limited, especially in Hong Kong, this may havecaused a deterioration in China's export prices. In addition, some provincesappear to have increased their exports by exporting basic consumer andproducer goods that are in short supply domestically, exacerbating problemswith domestic shortages. Finally, greater access to foreign exchangeresulting from the reforms has allowed imports of certain types of commoditieswhich might not have been permitted under a more centralized system.

3.42 To deal with these complications, the Government introduced exportquotas as of February 1, 1982. They apply to 78 commodities in 12 cate-gories of goods, ranging from coal, oil and various metallurgical indus-trial products, to building materials, nonferrous metals and agriculturalproducts like rice, soybeans, corn, sugar, cotton and tobacco. FromJune 1, 1982, export duties have been levied on rice, soybeans, sugar, coal,pig iron and other raw materials. The rate is Y 40 per metric ton of coalexported, and varies between 10% and 60% ad valorem for the other commodi-ties. Changes have also been introduced on the import side. Imports of

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automobiles, motorcycles, television sets and other electronic productswere restricted in 1981 to protect local industry, and in 1982 localauthorities were prohibited from importing consumer goods not included inthe state import plan. There were also several changes in the tariffstructure in 1981 and 1982. Tariffs were lowered on some raw materials andmachinery and raised on other equipment and consumer durable imports thatwere adversely affecting domestic production. Pending major price reformsuch measures are required to offset some of the effects of domestic pricedistortions.

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4. SECTORAL POLICIES AND REFORMS

4.01 Sectoral policies and reforms have been an integral part of theGovernment-s overall programs of reform and adjustment. For example theadjustment between consumption and investment needs to be accompanied by agood performance of agriculture, because 800 million people depend on itfor their livelihood. Rising incomes elsewhere in the economy and therequirements of light industry have also placed new demands on agriculture.Emphasis on light industry is needed to provide more consumer goods to matchthe higher incomes resulting from greater rural production and higheragricultural procurement prices. Moreover, light industry can be expandedwith less new investment, offers the best prospects for expanding exports topay for imports of new technology and is far less energy intensive thanheavy industry. The continued rapid development of both sectors isdependent, however, on reforms and efficiency improvements within thosesectors and in complementary sectors such as transport and commerce.

A. Agriculture

4.02 Agricultural growth in China has been constrained by severalfactors: the cultivated area per worker has been declining; there isalready much multiple cropping; important yield augmenting technologies havealready been widely adopted; and yields of several crops are significantlyabove the averages for other countries. In these circumstances, increasesin production have had to come from careful selection of agriculturalproduction systems, and crops and inputs that produce the best possibleresults, i.e., from improvements in yields and efficiency. Agriculturalpolicies and reforms have been aimed at such improvements, and the sector sperformance in recent years suggests that they have already met with muchsuccess.

Agricultural Growth and Adjustment

4.03 Between 1978 and 1982, gross agricultural output at constant pricesincreased by 6.0% per year; despite poor weather conditions in 1980, thegrowth rate was 2.7%; in 1981, when China was again affected by seriousfloods and droughts, the growth rate rose to 5.7%; and in 1982 the growthrate was estimated to be 7.0% (Table 4.1). There has also been a substantialdiversification of the agricultural sector, with the share of crops in totalagricultural output and the share of grain in total crop output both fallingsteadily.

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Table 4.1: GROSS AGRICULTURAL OUTPUT, 1970-82

Annual growth % share(constant prices) (current prices)

1970-77 1978 1979 1980 1981 1982 1970 1980(prelim.)

Crops 1.9 9.4 7.2 -1.2 5.4 n.a. 75 65(of which grain) 2.4 7.8 9.0 -3.5 1.4 4.6 n.a. n.a.

Forestry 9.0 4.8 2.2 10.4 4.6 n.a. 2 4Animal husbandry 4.3 4.9 14.5 4.5 6.1 n.a. 13 15Fisheries 3.2 0 -5.0 10.5 3.8 n.a. 1 2Sideline production 10.8 12.7 12.2 16.5 6.9 n.a. 9 14

Total 3.4 9.0 8.6 2.7 5.7 7.0 100 100

Source: Statistical Appendix, Tables 2.5, 7.2 and 7.3.

4.04 Food Supplies. Although the diversification of agriculture hasbeen encouraged, the need to provide minimum foodgrain supplies for agrowing population is still a key component of agricultural developmentstrategy. Following favorable weather and record harvests in 1978 and 1979grain production fell by 3.5% in 1980 and increased by only 1.4% in 1981,partly due to poor weather conditions (Table 4.2). In 1982 however grainproduction grew by an estimated 5%, reaching at least 340 million tons.Grain yields have been increasing steadily and there has been an expansionin the use of hybrid rice varieties, but these trends have been offset inpart by a fall in the area devoted to grain crops of 4.7% between 1978 and1981 (from 120.6 million ha to 115.0 million ha). Meanwhile annual directgrain consumption has been increasing from 192 kg of milled grain per personin 1977 to 219 kg in 1981. It has therefore been necessary to supplementdomestic production with an expanded import program: after increasingsharply to 7 million tons in 1977, grain imports have since doubled, andlong-term agreements signed with major exporting countries imply annualgrain imports of at least 14 million tons for the next few years. However,this is still less than 5% of total domestic production.

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Table 4.2: FOODGRAIN BALANCE, 1977-81 /a

1977 1978 1979 1980 1981

Supply (million tons unmilled)Domestic production 282.8 304.8 332.1 320.6 325.0Imports 7.3 8.8 11.8 13.4 15.4

Total 290.1 313.6 343.9 334.0 340.4

Utilization (million tons unmilled)Exports /b 1.8 2.3 2.0 2.1 1.5Domestic consumption:Direct /c 212.1 219.5 234.9 245.9 254.9Residual Id 76.2 91.8 107.0 86.0 84.0

Total 290.1 313.6 343.9 334.0 340.4

/a Includes tubers converted to grain equivalent at a ratio of 5:1.

/b Rice exports are recorded in paddy terms using a conversion ratio of0.7 to make them comparable with other data.

/c Based on information on milled grain consumption per capita from table2.4 and using a conversion ratio of 0.85.

/d Residual: includes seed, feed and other uses and changes in stocks.

Source: Statistical Appendix, Tables 3.4, 3.6 and 7.3.

4.05 Other Production. While the area under grain crops has beendeclining in recent years, the area planted to other crops has increasedsignificantly, as has their production. Of particular importance has beenthe rapid growth in oilseed, cotton and sugar production; all achievedrecord outputs in both 1980 and 1981, due partly to expanded planted areabut mostly to higher yields. These yield improvements have apparentlyresulted both from greater use of inputs and from regional specializationand the concentration of production in the most suitable zones. As a resultof increased production, China has been able to stabilize and even reduce

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imports of these commodities. Livestock production has continued to expand,there has been an increase in the slaughter rate and more households are nowspecializing in livestock rearing. Sideline production (which includes theoutput of brigade and team industries as well as other agricultural activi-ties) has grown more than other agricultural subsectors, reflecting theencouragement being given to both sideline activities of brigades and teamsand domestic sideline activities of commune members.

4.06 Agricultural Inputs. The increased availability of modern inputs,including fertilizer and power irrigation, has been an important element inrecent agricultural growth. But in 1981 the use of such inputs did notincrease as rapidly (see Table 4.3), and more emphasis has begun to be placedon increasing the efficiency with which these inputs are used. For example,the mix of fertilizer has been shifted towards more emphasis on phosphateand potassium. The new production responsibility systems have made peasantsmore aware of the relative costs and benefits of various inputs: they aremore cautious about purchasing irrigation and drainage equipment, they havereduced the amount of land subject to machine plowing, they are moreconcerned about the quality of equipment and other inputs and theyincreasingly prefer small tractors suitable for use by one household or agroup of households to large tractors. Moreover, some of the increase intractor demand reflects growing transport requirements rather than increasedcultivation requirements. In 1981 and 1982 production of large and mediumtractors dropped greatly (see Table 4.4).

Table 4.3: USE OF MANUFACTURED INPUTS IN AGRICULTURE, 1977-81

1977 1978 1979 1980 1981

Chemical fertilizer (mln tonsnutrient weight) 6.48 8.84 10.86 12.69 13.35

Large and medium tractors ('000) 467.0 557.4 666.8 744.9 792.0Small and walking tractors ('000) 1,090 1,373 1,671 1,874 2,037Power driven irrigation anddrainage equipment (mln HP) 60.1 65.6 71.2 74.6 75.0

Machine plowed area (mln ha) 38.4 40.7 42.2 41.0 36.5

Source: State Statistical Bureau.

4.07 Adjustment Policy. The strong performance of agriculture inrecent years is due in part to policies and programs that ensured thatadditional inputs were available. The additional resources allocated toagriculture by the Government, especially in 1978 and 1979, may also have

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played a role. Since then, however, both the absolute amount of stateagricultural construction and its share in total state capital constructionhave declined, and a similar pattern of cutbacks has occurred in state budgetexpenditures on agricultural support. Of much greater importance have beenthe major improvement in the terms of trade for agriculture (see para. 3.05),the reduction in quota requirements and other policy interventions aimed atencouraging local and institutional specialization according to comparativeadvantage. Provinces and counties have been given a greater role inagricultural planning and surveys have been carried out to identifyappropriate crops and cropping systems. The Government has agreed to supplyfoodgrains to areas and teams that specialize in cash crop production, and newmarketing channels have been opened up (see para. 4.49).

4.08 The differing but complementary roles of collective, state farm andhousehold plot agriculture have also been recognized. Collective agriculturecontinues to account for most production, but state farms are now seen ashaving a critical role to play in meeting the growing demand for marketablegrain and in developing certain specialized agricultural activities (such astree crops and large livestock). The importance of household plot agriculturehas been recognized for specialized activities such as vegetable growing andsmall livestock production. In some areas teams may now allot up to 15% oftheir land for household plots;/l in other areas household plot agriculture isbeing encouraged as part of more wide-ranging reforms in the organization andmanagement of rural collectives.

Production Responsibility Systems

4.09 The changes now under way in the organization and management ofrural collectives are one aspect of the Government s overall program ofeconomic reform. The changes are based on two of the principles that havecharacterized the program as a whole, namely greater decentralization andautonomy for lower level collective units, and more direct linkage betweenrewards and the work and efforts of households and individuals. It has alsobeen recognized that conditions vary greatly between areas and that systemsshould be developed to suit differing agro-climatic and economic conditions,although the collective system of land ownership must be maintained./2Changes were first introduced in 1979, when collective units at all levelswere encouraged to implement the principle of distributing income inproportion to work done. But the movement accelerated in 1980 when the

/1 It is estimated that in 1980 household plots accounted for 13.3% ofthe cultivated area.

/2 This applies throughout China, except for isolated areas of Tibetwhere households are officially permitted to have no obligations tocollective units.

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system of assigning responsibility for production to households was officiallyaccepted as being suitable for certain areas of China./l

4.10 The emphasis on designing systems to suit specific local conditions(in terms of terrain, type of agricultural development, level of managementexpertise, etc.) has resulted in a great range of systems, which vary in termsof both remuneration and assignment of production responsibilities. In someareas where rural development is relatively advanced in terms of systems andtechnologies, the collective economy well established and economies of scaleprobably quite significant, collective farming is still being retained butwith an emphasis on specialized contracts and compensation being linked tooutput. Under such a system, teams, groups, households or individuals enterinto a contract with higher level collective units that stipulates laborcontributions, area to be cultivated, expenditures and output targets.Workpoints are set for the contracted output and there are bonus or penaltyworkpoints for surpluses or shortfalls, but accounting and distribution remaincollectivized.

4.11 Another type of system is in use in some of the intermediate areas,where grain production is the major activity but development is not asadvanced and the collective economy may not be as strong. In such casesemphasis is placed on dividing the land into small plots for farming byindividual households, and contracts are signed to cover output targets,inputs and work points. There may be bonuses or fines for surpluses orshortfalls, but accounting and distribution are still effectivelycollectivized.

4.12 Yet another system (sometimes called the household totalresponsibility system) is in use in many other areas, especially the poorerareas. Fields and sometimes draft animals and implements are all dividedamong households, frequently according to household size and usually for aspecified period. Households may farm the land as they wish but mustguarantee to contribute agreed amounts to the state (in the form of taxes andstate procurement) and to the collective (for welfare and other expenses).There is no system of unified distribution, and households retain whateverthey produce beyond their obligations to the state and to their collective.Such obligations now account for about one third of a household's totalproduction.

4.13 The proportion of teams implementing different types of systemvaries greatly among provinces, among counties within a province, and evenamong the communes and teams within a county. At the end of 1982, 92% of

/1 See Document No. 75 of September 1980 entitled "Certain ProblemsConcerning Further Strengthening and Improvement of the ResponsibilitySystems for Agricultural Production."

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all production teams in China had implemented some form of productionresponsibility system and 78% of teams had implemented some form ofhousehold responsibility system (i.e., some form of the second or third typeof responsibility system discussed above).

4.14 It is difficult to separate the effects on production of suchchanges in the collective system from the effects of other changes inagricultural policy, and much experimentation with responsibility systems isstill taking place. But there is widespread agreement that the changes havealready had a significant and positive effect on agricultural production.The reduction in the size of work units has eased some of the seriousmanagement problems that many communes faced and work incentives have beensubstantially improved.

4.15 The introduction of such changes in the economic system in ruralareas has not, however, been without its problems. Certain issues haveemerged that the Government will need to address. One important issue ishow to preserve some of the strengths of the traditional commune system interms of provision of basic needs and other services and mobilization oflabor for construction and maintenance of community infrastructure. Withthe delegation of more autonomy to individual households to produce whatthey want and the increase in the share of individual household income intotal rural income, there is a danger that there will be insufficentcollective resources to finance good social services and to care forfamilies without able-bodied workers or those who have been affected bynatural disasters. Provision of input services including irrigation willalso be more difficult in areas where farmers are growing a variety ofdifferent crops and using different techniques. In addition, it may be moredifficult to mobilize labor and other resources for construction andmaintenance of irrigation schemes, maintenance of rural roads, pest control,etc.

4.16 A second issue concerns the possible effects of the new systems onpopulation growth and employment. In areas where there is no collectivegrain distribution or where land is being allocated to households accordingto household size or the number of able-bodied workers, family planning andpopulation control programs have apparently become more difficult toimplement. There is also the phenomenon of surplus labor (which wouldpreviously have been hidden because everyone was obliged to work in thefields, even if they were contributing little to increased production) nowbecoming more open. Some of this surplus labor will probably findemployment or set up individual enterprises in rural areas, but theincentives and pressure for rural workers to migrate to urban areas will

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both be increased./l Migration may not be a negative development; in factfrom an overall welfare and income distribution perspective it may be verybeneficial. But policies and programs will have to be developed to addresssuch issues.

4.17 In addition to these issues some government officials are concernedabout the possibility of abuse of land, water and timber resources inpursuit of short-term income gains. The existence of all these issuesshould not, however, be taken as an indication that reforms should berescinded; rather ways need to be found to address them without reversingthe direction or intent of the rural reforms. The Government has in factalready taken some steps in this direction. For example, new guidelines onagricultural policy issued in April 1982 suggest that where the householdresponsibility system is being introduced, land should be allocated not onlyaccording to the size of the family and the number of workers, but alsoaccording to the household s performance in family planning (one childfamilies would get more land than families with more than one child).

B. Industry

4.18 Despite one of the highest long-term rates of industrial growthin the world (gross industrial output at constant prices increased by 9.4%p.a. between 1957 and 1981), Chinese industry has suffered from severalfundamental weaknesses, which became prominent by the end of the 1970s:inefficiency in the use of capital, labor, raw materials and energy; poorproduct quality; and an imbalance in capacity. These were the result ofoveremphasis on heavy industry; neglect of medium-term planning;

/1 This will be further facilitated by the availability of grain at urbanand rural free markets, which greatly weakens what was one of thestrongest deterrents to rural-urban migration in China - the rationcoupon system for grain and other basic foodstuffs.

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technological backwardness due to prolonged international isolation; andinsufficient incentives to conserve inputs, improve product quality, orproperly prepare and evaluate investment projects. In industry, the currentpolicy of adjustment and reform is largely motivated by a desire to correctthese shortcomings, while at the same time maintaining a reasonable rate ofgrowth.

Adjustment in Industry

4.19 Adjustment in industry is intended to correct structural imbalanceand lay a sounder base for sustained long-term economic growth. Theprincipal elements of the adjustment policy, introduced in 1979, were:(a) increased emphasis on light and consumer goods industry rather thanheavy industry; (b) promotion of manufactured exports; (c) stress onmodernization of existing enterprises, particularly through importation ofnew technology, rather than on new capital construction projects; and (d)energy conservation./l

4.20 Structure of Production. The dramatic reversal in emphasisbetween light and heavy industry is shown in Table 4.4. Between 1979 and1981, light industrial output increased by 35% while heavy industrial outputfell by over 3%. In 1982, however, heavy industry grew considerably fasterthan light industry. There have also been substantial differences in thegrowth of industrial subsectors. Light industrial durable consumer goodshave grown most rapidly. Between 1978 and 1982 production of bicycles andsewing machines more than doubled; production of cameras increased fivefold; and production of television sets increased ten fold. Within heavyindustry, the production of certain kinds of machinery saw the greatestdecline, reflecting the cutback in investment and the reorientation towardmodernization of light industry. Primary energy production, which accountsfor over 20% of heavy industry's gross output, fell by 2% between 1979 and1981 (see para. 4.32), but grew by an estimated 3.8% in 1982. Production ofcement and plate glass grew in line with increased housing investment, whileproduction in some contracting sectors, such as rubber tires, was reorientedtoward consumer goods (bicycle tires).

/1 Energy conservation will be covered in Section C.

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Table 4.4: INDUSTRIAL GROWTH: PERCENTAGE CHANGE PER YEAR IN GROSS OUTPUT1970-82

(Constant prices)

1970-77 1978 1979 1980 1981 1982(prelim.)

Heavy Industry 9.3 15.6 7.7 1.4 -4.7 9.3

Light Industry 7.8 10.8 9.6 18.4 14.1 5.6

Total Industry 8.7 13.5 8.5 8.7 4.1 7.4

Selected Heavy Industry ProductsCrude. coal 6.5 12.4 2.8 -2.4 0 4.7Crude oil 17.3 11.1 2.0 -0.2 -4.5 <1.0Electricity 9.8 14.9 9.9 6.6 2.9 5.2Steel 4.2 33.9 8.5 7.7 -4.1 4.3Cement 11.6 17.2 13.3 8.1 5.2 13.5Chemical fertilizer 16.8 20.1 22.6 15.6 0.6 4.8Machine tools 5.2 -7.8 -23.8 -4.0 -23.1 -2.4Motor vehicles 5.3 18.9 24.5 19.5 -20.7 11.5Tractors 17.6 14.3 10.7 -22.0 -45.9 -19.5

Selected Light Industry ProductsCotton cloth 1.5 8.7 10.2 10.9 5.9 5.9Chemical fibers 9.4 49.9 14.4 38.0 17.1 -2.2Television sets 60.2 81.8 157.1 87.5 116.5 3.9Cameras 29.5 -27.5 33.0 56.7 67.0 37.5Bicyles 10.5 15.0 18.2 29.0 34.7 37.6Sewing machines 8.8 14.7 20.6 30.9 35.3 23.1Machine-made paper and

paperboard 6.6 16.4 12.4 8.5 0.9 5.5

Source: Statistical Appendix, Tables 2.5 and 8.1.

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4.21 The general direction of change was planned, but actual growthrates differed markedly from planned growth. For example, in 1981 eventhough production declines in several heavy industry products were plannedand 56 out of 65 major production targets in heavy industry were reached orsurpassed, total output of heavy industry declined by 4.7% instead ofincreasing by 4.4% as originally planned. More remarkably, growth in lightindustry was twice as high as the 8% growth targets in 1980 and 1981. Inheavy industry, the discrepancy appears to be due to: (a) an inability toexpand energy production, which reduced growth directly and also limited thegrowth of some energy-intensive heavy industries; and (b) failure toanticipate the full effect of the cut in capital construction on heavyindustry output./l Much of the extra growth in light industry may have comefrom increased output of rural and urban collective enterprises and varioustypes of joint ventures, all of which are less subject to control by theplanning system.

4.22 Export Production. Manufactured exports more than doubled in valuebetween 1978 and 1981 (Table 4.5). Although price indices are notavailable, an estimated 75% of the increase in value is due to a highervolume of exports. All categories of manufactured exports grew rapidly.Light industry exports (including textiles) contributed the greatest amountof incremental value because of their high initial share, but the mostremarkable growth was in machinery and transport equipment exports, whichincreased in value five fold over three years. The share of exports ingross output also rose for both heavy and light industry, but manufacturedexports in 1981 still accounted for only about 4% of gross industrialoutput, excluding energy and valued at the official exchange rate.

/1 This last effect was reversed, however, with the late-1931increases in capital construction.

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Table 4.5: GROWTH OF MANIUFACTURED EXPORTS, 1978-81(Current prices)

Sector share of Share of Averagemanufactured incremental annualexports (%) exports growth1978 1981 1978-81 rate (%)

Heavy Industry /a 22.3 36.1 46.4 55.5Chemical and related products 5.2 6.6 7.7 44.0Machinery & transport equipment 7.3 16.9 24.1 74.9Other heavy industry products 9.8 12.6 14.6 43.9

Light Industry 77.7 63.9 53.6 24.2Textiles 39 .3 33.7 29.5 25.9Other light industry products 38.4 30.2 24.0 22.3

Total Manufactured Exports 100.0 100.0 100.0 32.5

/a The trade classifications do not correspond exactly to the industrialclassifications. Exports of heavy industry products may be overstated.

Source: Statistical Appendix, Table 3.3.

4.23 Investment in Industry. Changes in the industrial investmentprogram appear to have been slower and less pronounced than the shift in thestructure of industrial output. State capital construction in heavyindustry other than energy was not markedly reduced until 1981. Moreover,while capital construction in light industry has grown, heavy industry(excluding energy) still accounts for twice as much capital construction.Few figures are available on the growth of investment to modernize andrehabilitate existing industrial enterprises. Modernization investment inall sectors was Y 24 billion in 1981 and was reported to reach nearly Y 28billion in 1982. This implies that modernization investment now exceeds newcapital construction in industry. Total fixed investment in industry maytherefore have grown substantially during the past three years. Attempts tocontrol both the level and the composition of industrial investment havebeen partly thwarted by the growing importance of other sources of financethan the central budget.

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4.24 Imports of equipment and machinery have also increased since 1978,but were reduced somewhat in 1981 (Table 4.6). Assuming that all imports ofcomplete sets of equipment were for state capital construction in industry(including energy) and that imported equipment is valued at the officialexchange rate, then imports as a share of capital construction in industryrose from 3% in 1978 to 24% in 1981 before declining in 1982. However, theimport content of modernization investment has probably not grown to thesame extent.

Table 4.6: IMPORTS OF MACHINERY AND EQUIPMENT, 1978-81($ billion)

1978 1979 1980 1981

Complete sets of machinery and equipment 0.5 1.2 2.5 3.2Other machinery and equipment 1.4 2.8 2.9 1.9

Total 1.9 4.0 5.4 5.1

Source: Statistical Appendix, Table 3.5 and Ministry of Foreign Trade.

Institutional and Policy Changes

4.25 Reform has proceeded more slowly in industry than in agriculture,and administrative controls may have been tightened as problems haveemerged. But important changes have occurred in five areas: profitretention, capital charges, marketing and pricing arrangements, payment andemployment practices, and industrial organization. Capital charges andpricing have already been discussed (paras. 2.30, 3.07, and 3.09) andmarketing arrangements are discussed in paras. 4.48-4.51.

4.26 Profit Retention. Profit retention schemes have been widelyintroduced for state industrial enterprises. In 1978 the Governmentreinstated an enterprise fund scheme in which some enterprises fulfillingplan targets were allowed to retain profits amounting to 5% of their wagebill. Starting in 1979, some experimental enterprises in industry andtransport were permitted to keep a share of base profits and a larger share(10-30%) of incremental profits. The retention rates varied by industry andeven by firm, depending on overall profitability, and there were fewerrestrictions on use of these funds. By mid-1980, experimental enterprisesnumbered about 6,600, and they accounted for 44% of state industrial outputand 57% of profits. In the past two years, other schemes have been

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introduced to permit partial retention of the value saved when enterprisesreduce losses, retention of a large share of profits above a target quota,profit sharing controlled by a bureau (e.g. the Shanghai Textile Bureau)rather than by individual enterprises, and a scheme in which 460 state-ownedenterprises pay taxes rather than sharing profits. By the end of 1981, over80% of all state industrial enterprises were under some form of "economicresponsibility system." Altogether, the various schemes have allowed stateenterprises in all sectors to retain over Y 28 billion during 1979-81. Theamount of such retained funds reportedly reached Y 17 billion in 1982 alone,indicating a rapid growth over time. In addition, enterprises have beenallowed to retain a larger share of depreciation funds. Depreciation fundsaccruing to state enterprises in all sectors now amount to over Y 20 billionper year.

4.27 Payment and Employment. Chinese industrial enterprises faceconflicting pressures to provide employment and to raise labor productivity.In the past two years government policy has increasingly stressedproductivity increases. Piece rates have been widely advocated and bonuspayments have become a more important part of labor compensation.Enterprises reaching targets with respect to output, profits, quality,consumption of raw materials and labor productivity have been permitted topay bonuses. Bonuses now average more than one month's pay for workers instate enterprises and are restricted to two months' pay normally, or threemonths' pay in exceptional circumstances. Bonus payments are normally apercentage of base pay rather than an equal absolute amount as in the past,but bonuses still usually depend on performance of the firm rather than thatof the individual worker. However, the Government is planning to linkfuture bonuses more closely to labor productivity and to smaller work unitswithin the enterprise. Employment policy is also shifting. The state nolonger guarantees employment for new entrants to the labor force, andenterprises will be allowed to fire unproductive or undisciplined workers.Despite these changes, widespread overmanning in industry persists and itremains to be seen to what extent the past emphasis on job securityregardless of performance will be reversed.

4.28 Industrial Organization. There has been extensive experimentationwith new forms of industrial organization in China over the past two orthree years. In addition to experiments involving foreign partnerships (seepara. 3.40), four other experiments are particularly significant. First,collective enterprises have been encouraged and individual enterprises withup to two employees and five apprentices have been allowed; these havecontributed significantly to incremental employment (see para. 2.21). Asecond change has been the closure of some inefficient industrialenterprises. Press reports suggest that some enterprises with prolongedlosses, shortages of raw materials, or high energy consumption have beenclosed, but little information is available on the numbers involved or thecriteria for closure. A third institutional change has been the developmentof joint ventures that involve urban state industrial enterprises and rural

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collectives. Shanghai enterprises have been especially active in promotingjoint ventures, which, by subcontracting labor-intensive operations, helpexpand rural industry, link rural and urban areas, and reduce pressures forrural-urban migration. The fourth change has been the creation ofindustrial corporations with authority over a group of enterprises producingsimilar output. Most corporations operate at the provincial level but somenational corporations (e.g. in shipbuilding) are also being formed. Somedecision-making authority and profit retention privileges have devolved tocorporations rather than to enterprises.

4.29 In general, the reforms have succeeded in increasing enthusiasm toexpand output, profits and investment. But there have also been unintendedside effects, which may have offset some of the efficiency gains and whichreflect an absence of complementary reforms in other parts of the economicsystem., First, with increased access to retained profits, depreciationallowances and multiple sources of loans, enterprises have wanted to investfar more than deemed appropriate by central authorities. This has resultedin partial loss of control over the level of industrial investment on thepart of the central government, which has made macroeconomic management moredifficult. Second, control over the composition of investment has also beenweakened. A commonly cited problem is that some localities which provideagricultural raw materials to urban factories have set up their ownprocessing facilities. Increased provincial autonomy also exacerbates thetendency to duplicate investment. Finally, there have been other unwelcomeside effects. Some factories have granted large bonuses to their employees,some provincial and local authorities have restricted sales of products fromother regions in order to protect local industries, and some negotiatedprices have been increased more than the central government wanted.

4.30 Many of these problems are a result of partial reform. Over-investment will always be a problem so long as firms bear no responsibilityfor losses due to unwise investments. Experience in the Soviet Union andEastern Europe has shown that capital charges will do little to restrainoverinvestment without more fundamental change in the responsibility ofenterprises. Similarly, so long as prices do not reflect scarcity or fullproduction costs, the interests of enterprises and localities may notcoincide with the national interest. Decentralized decision-making withdistorted prices can lead to distorted production and investment decisions.

4.31 Given the difficulties entailed in implementing comprehensiveprice reform (see para. 3.09), the Government has decided to postpone thistask until after 1985. Instead, industrial reforms are now focussing onexpansion of the experiment replacing enterprise profit remittances with

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tax payments and revamping and streamlining the system of industrialadministration at lower levels. The government has also imposed restric-tions on the use of retained profits for investment, obliged enterprises tobuy Treasury Bonds, issued new guidelines on bonuses, and placed stricterlimits on negotiated prices.

C. Energy

4.32 China is the fourth largest producer and third largest consumer ofcommercial energy in the world. Coal is by far the most important source ofcommercial energy (70% of total production), but oil production hasincreased rapidly since 1972 to become an important source of primarycommercial production (24% in 1980) and of export revenue (it accounted forabout one quarter of total exports in 1980). Natural gas and hydroelectricpower supply the remaining commercial energy. Noncommercial energy sourcessupply energy equivalent to about 40% of commercial production. Commercialenergy production grew at 10.5% p.a. from 1952-75, but the growth rate hasfallen since then and between 1979 and 1981 total production actuallydeclined by 2%. This trend was reversed in 1982, when there was a 3.8%rise in commercial energy production. About 20% of oil production and 1% ofcoal production is exported.

4.33 China's coal and hydroelectric potential is enormous. At thecurrent rate of production, coal reserves would last for about 1,000 years,while less than 4% of total estimated hydro potential has been developed.Although proven recoverable reserves of petroleum would last less than 20years and natural gas reserves less than 10 years at current productionrates, ultimate possible and probable reserves of oil are estimated to be5-10 times proven reserves and China also has large reserves of oil shale.Unfortunately much of this energy potential lies in remote areas or requiresvery advanced technology for development. Not only will direct capitalcosts of coal and hydro development be high, but indirect costs fortransportation and transmission will also be heavy. Hopes for major newfinds of petroleum are centered on offshore areas and remote onshore areas.These are very promising but will be technologically difficult to developand will not come onstream until the end of the 1980s.

4.34 By the end of the 1970s, several problems had emerged in energysector policy and management: China's very high energy consumption, thelack of incentives to either reduce consumption or switch from oil to coal,planners' excessive concern with short-term production and regionalimbalances and transport bottlenecks which prevent available energy resourcesfrom being fully utilized. These problems persist despite the attentiongiven to them in recent years.

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Energy Consumption

4.35 China's commercial energy consumption per dollar of GDP in 1978/79was approximately 2.5 times that of other developing countries or industri-alized market economies and about 1.5 times the average for nonmarket indus-trial economies. Micro-level energy intensity comparisons on a physicalbasis also point to inefficient energy use in China. In the steel industry,which consumes 12% of total commercial energy, energy consumption per ton inlarge integrated Chinese plants is roughly twice that achieved in bestinternational practice, while energy consumption in small and medium-sizedplants is 25% greater yet. In nitrogenous fertilizer, cement and brickmanufacturing, China's large-scale plants are closer to the internationalnorm, but a large share of production in these sectors is carried out insmall plants using outmoded, energy-intensive techniques.

4.36 Since 1979 the supplies of energy available for domestic usehave been squeezed by stagnation of output and continued exports. Between1979 and 1982 the supply of primary energy available for domestic use grewby less than 1%. Though information on energy consumption is not asreliable as the data on production and exports, consumption probably did notincrease much faster than supplies in 1979-82, while NMP rose by 14-15%.As a result, energy consumption per unit of output has fallen significantly.According to Government estimates energy savings totalled 35 million tons ofstandard coal equivalent in 1980 and 26.5 million tons in 1981./1 Energysavings in 1982 are expected to be less than in 1980 or 1981 because of therelatively rapid growth of heavy industry. Energy savings are dividedinto two main categories: (a) those due to structural changes and (b) thoseresulting from improvements in the efficiency of energy utilization in theproduction of particular types of products. The first category is broadlydefined, and includes savings from: changes in the proportions of heavy andlight industry in gross industrial output value (heavy industry consumesabout four times as much energy per unit of output as light industry);/2changes in product structure within heavy and light industry (includingchanges from more energy-intensive to less energy-intensive products withinthe same product category); and changes in enterprise structure, mainly theclosing down of inefficient plants or the shifting of production toenergy-efficient factories. Conversely, energy savings due to efficiencyimprovements are narrowly defined since changes in product mix are mostlyput in the first category. Savings of 13 million tons of coal in 1980 (37%

/1 Calculated at the rate of 1 kg of coal equivalent = 7,000 kilocalories.These savings are derived by comparing the growth rate of energyproduction or consumption with that of gross indsutrial and agriculturaloutput value.

/2 In addition all energy savings within agriculture are attributed tostructural change rather than efficiency improvements, because of thedifficulty of measuring the latter.

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of total savings) and about 6 million tons in 1981 (23% of total savings)are attributed to efficiency improvements. Improvements in energyutilization rates have apparently been greatest in the following industries:iron and steel; non-ferrous metals; chemical products; and thermal powerplants. Most of these industries as well as the chemical fertilizerindustry still have great potential for further energy-saving efficiencyimprovements.

Incentives for Energy Conservation, Substitution, and Production

4.37 Prior to 1979 there were few price or administrative incentivesfor enterprises to conserve energy. In 1979 the price of coal was increasedby 29% and. that of natural gas by 25%, and more recently subsidies on dieselfuel were eliminated and the price of coal for industrial use was raised byY 2.00 per ton. However, the price structure is still not conducive toenergy conservation. Although the prices of gasoline and kerosene are aboveinternational levels, most industrial fuels are priced well below worldlevels. Equally important, the relative prices of coal and heavy oil havefavored the use of heavy oil./l At the same time, the profitability of coalmining is low and many mines operate at a loss because of low producerprices. The adverse budgetary implications of expanding coal production mayhave affected investment both in the many small mines run by counties,communes and brigades (accounting for 45% of total output) and in largemines run by the central government./2 An increase in the price of coal anda larger increase in the price of petroleum products for industrial usersare needed to encourage increased coal production and a switch to coalconsumption. Higher industrial electricity rates would also encourageconservation and provide resources for capacity expansion, thereby helpingeliminate the chronic shortage of electricity. In the Northeast, North, andEast China grids, losses in industrial production due to power shortages areestimated to have been as high as 20%.

4.38 The Government has been more active in pursuing energy conserva-tion through tighter planning and other administrative measures. Cutbacksin allocations of energy supplies to users appear to have been the main

/1 To correct this problem a special tax has been introduced to encourageenterprises to use coal rather than oil. The charge will vary betweenY 40 and Y 70 per ton of crude oil burned and is Y 70 per ton of heavyoil burned.

/2 To ameliorate this problem the Government is providing subsidies tosmaller coal mines and allowing most of their coal output to be used inthe locality where it was mined.

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factor promoting energy conservation during the past several years. Energyconsumption norms have been reduced and more strictly applied. Enterpriseshave been encouraged to switch from oil to coal. Some very energy-inefficient plants have been closed down. The Government has established 55energy conservation centers which provide enterprises with technicalassistance in evaluating and improving energy efficiency. In the Chineseeconomic system administrative measures have a significant influence onenergy production and use. But it is recognized that as economic reformsproceed further, the role of pricing in energy conservation will become moreimportant.

Short- and Long-term Energy Planning

4.39 Coal and petroleum planning, like most planning in China, is ineffect on an annual basis. This has sometimes led to neglect of long-termdevelopment in favor of maintaining short-term production levels. In coalmines tunneling has been neglected in the past and oil fields have sometimesbeen depleted at a rate that threatens ultimate recovery potential. Thepresent stagnation of energy output is largely attributable to inadequatelong-term planning, but in the past two years the Government has given moreattention to long-term production issues in coal and oil. It has also triedto accelerate petroleum development by inviting foreign oil companies toexplore and help develop both offshore areas and selected onshore areas withdifficult drilling conditions.

4.40 Even though energy is a priority sector, it was still affected bythe large investment reductions in 1981. Capital construction investmentin energy decreased in absolute terms by over 20% in 1981, following asmall increase in 1980. Several coal and hydropower projects were postponedin 1981. Some of these projects were revived in 1982 and investment inenergy began to expand again in line with the overall increase in statecapital construction investment.

D. Transport and Commerce

4.41 Growth and diversification of the agricultural and industrialsectors and improvements in living standards depend crucially on compre-hensive and efficient transportation and commercial systems. In themid-1970s, however, China-s domestic commercial system was characterized bygreat inefficiency and waste, reflected most prominently in excessively highinventories. The state-owned commercial system, which dominated mosttrading, was highly bureaucratic and subject to many administrativecontrols. Collective and individual commercial activities were discouragedand strictly regulated. Domestic commerce has therefore been an importanttarget of the adjustment and reform programs. The transport sector remainsa major bottleneck constraining economic growth. Economic reforms, rising

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personal incomes and greater regional specialization are stimulating rapidincreases in the demand for transportation services. This can be met by acombination of increased investment and, in certain modes, improvedmanagement and coordination.

Transport

4.42 Growth in the volume of freight transport slowed greatly in 1980;in 1981 there was virtual stagnation (see Table 4.7). However, in 1982 anincrease in freight transport appears to have occurred with the tonnagecarried by the railway system rising by nearly 6%. The share of water-waysin freight transport rose from 36% in 1977 to 45% in 1981, while that ofrailways declined from 59% to 50% during the same period./l The slow growthof freight volume reflects capacity constraints and bottlenecks as well asthe slowdown in the growth rate of the economy and the changing compositionof output. On the other hand, freight transport by traditional andunofficial means has probably expanded rapidly with the proliferation offree markets in rural and urban areas. The volume of cargo handled at majorsea ports grew extremely slowly in 1980 and 1981. This is puzzling in viewof the large increases in China's foreign trade during this period; perhapsthe amount of cargo handled at small ports has grown rapidly. Passengertransport volume consistently grew faster than freight volume after 1978.The share of highways has risen (from 28% of the total in 1977 to 34% in1981), while that of railways has fallen (from 64% to 59% during the sameperiod).

Table 4.7: CHANGES IN MAIN TRANSPORTATION INDICATORS, 1978-81(% increase)

1978 1979 1980 1981

Volume of Goods Transport /a 23.2 11.1 5.6 0.9Railway 17.0 4.7 2.1 -0.1Highway 9.2 -2.2 2.6 2.1Water 36.8 20.8 10.7 1.9Air 27.8 27.2 13.9 21.4Pipelines 11.1 10.7 3.2 1.6

Cargo handled at major sea ports 24.2 7.2 2.2 0.9

Volume of Passenger Transport 9.9 12.9 15.9 9.6Railway 7.0 11.3 13.7 6.5Highway 16.3 15.7 20.9 15.1Water 3.1 12.9 13.2 7.0Air 55.6 25.0 14.3 25.0

/a Growth rates for 1978 and 1979 exclude highway freight transport byvehicles owned by units other than specialized transport departments.Those for 1980 and 1981 include this category.

Source: Statistical Appendix, Table 10.1.

/1 Proportions of total freight volume excluding highway transport.

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4.43 The transportation system carries a heavy burden during this periodof adjustment, reform and stabilization. The shift in the composition ofproduction away from heavy industry toward consumer goods necessitates acorresponding adjustment in the composition of freight transport. Risingpersonal incomes generate additional demand for passenger transport.Market-oriented reforms and greater regional specialization call for anoverall expansion of the transport sector, with particular emphasis onshorthaul road transport and carriage of often perishable nonstapleagricultural commodities. The main problem areas that continue to hinderdevelopment of the sector are: shortages of capacity; a weak statisticalsystem; poor horizontal coordination among different modes; an inappropriateprice structure; and high energy consumption (related to the high proportionof steam locomotion in the railway system)./l China's energy and transportconstraints reinforce each other because the latter is a principal bottleneckpreventing more rapid growth particularly of coal output. The sharp reductionin state capital construction investment in transport in 1981 (see para. 2.28)may have exacerbated China's transport problems (especially the 53% reductionin capital construction investment in the railway system). In 1982, however,investment in the transport sector has been increased.

4.44 In addition to capacity-increasing investments which usually have along gestation period, improvements in organizational and managerialefficiency are a means of easing constraints originating in the transportsector. Enterprise-level reforms similar to those in state industry (seeparas. 4.25-4.31) are also being implemented in state-owned transportationenterprises. Attempts are being made to eliminate inefficient patterns oftransport caused by local and regional administrative boundaries.

Commercial Sales and Inventories

4.45 In line with the spectacular growth of light industrial output, thereal value of total retail sales of commodities in China rose steadily in1979-81, showing increases of over 12% in both 1979 and 1980 and over 7% in1981./2 The nominal value of retail sales is estimated to have increased by9% in 1982. These figures underestimate the growth of domestic trade inconsumer goods, agricultural products, and agricultural inputs (the categoriesof goods handled by the commercial system) since they do not includetransactions among peasants at rural free markets, which grew even morerapidly. Inventories of state-owned commercial units have also grownsteadily, rising by 11.6% in 1979, 9.2% in 1980, and 10.8% in 1981.

/1 Detailed information about the problems faced by China's transportsector is available in Report No. 3391-CHA, Annex F.

/2 Statistical Appendix Table 11.3 provides more information on develop-ments in retail sales.

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4.46 The inventory-sales ratio for state commercial units appears tohave risen by over 6% in 1981,/1 following smaller increases in the previoustwo years. This rise could be explained by several factors: (a) the rela-tively good agricultural harvest of 1981, which resulted in higher year-endstocks; (b) changes in consumers tastes, due to higher incomes and theincreased availability of basic consumer goods; (c) increased stocks ofmarketable commodities, which provide benefits in terms of consumerconvenience; and (d) expansion of the commercial network, which mightrequire a higher inventory-sales ratio but again provides important benefitsto consumers. The increase in the inventory-sales ratio of the statecommercial sector has been counterbalanced by the rapid growth of collectiveand individual commerce, which apparently uses inventories more efficiently.Difficulties in matching supplies of consumer goods with consumer demandhave been endemic in China. However more attention is now being focussed onthis long-standing problem.

4.47 Trade in industrial producer goods in China is handled primarilyby the material supply system, though enterprises can increasingly obtainmaterial inputs directly from other enterprises or by market purchases.Indicators such as inventory levels, inventory-output value ratios, andutilization rates of circulating capital funds by state-owned enterprisesshow that great inefficiencies exist, but as with the commercial system,there is little or no evidence of deterioration in the past several years.For instance, the total value of machinery and electrical product inven-tories was reported to be Y 61.9 billion at the end of June 1980 andY 60.3 billion at the end of June 1981./2 The total amount of rolled steelproducts in stock reached 20 million tons as early as 1980, but appears notto have increased sharply from that level. Indeed, by late 1982 thereapparently had been some improvement in the situation, with inventories ofmachinery and electrical products falling to Y 58 billion, and rolled steelstocks declining to 18 million tons./3

/1 Based on a report that retail sales by state-owned commercial unitsincreased by 4.2% in 1981 (New China News Agency, 4/4/82).

/2 Wen Hui Bao, 1/29/81, p.3 (translated in JPRS 77592, Economic AffairsNo. 120, 3/16/81. p.11), and Renmin Ribao, 4/10/82, p.l.

/3 Report by Finance Minister Wang Bingqian at the Fifth Sesion of theFifth National People's Congress, 12/10/82.

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Commercial Reforms

4.48 The primary orientation of commercial reforms during the pastthree years has been expansion of the role of markets and market-likeinstitutions in resource allocation. At the same time, the state commercialsystem has been decentralized and made subject to financial incentive schemessimilar to those instituted in state-owned industry. Collective andindividual commercial activities have been permitted to proliferate, fillinggaps left by the state commercial system, forcing improvements in the latter(by competing with it for customers) and creating jobs. The organizationalstructure of the commercial system has also been drastically simplified,with the total number of personnel and administrative units significantlyreduced.

4.49 A significant, steady increase in the proportions of industrialand agricultural output allocated by voluntary, outside-of-plan means hastaken place. According to preliminary estimates, in 1980 about 15% of grossindustrial output value was allocated by the market or market-like mechanisms,compared with about 10% in 1979. In 1980, 11% of total sales of steel wererealized through the market mechanism, as were 46% of the total sales ofenterprises under the First Ministry of Machine Building. These representdramatic increases over the pre-reform situation. Attempts have also beenmade to increase the number of producer goods previously subject to plannedallocation that are now supplied freely by the material supply system. Therapid increase in the number of markets at which peasants can freely tradecommodities is a prominent feature of rural reforms.

4.50 The expansion of the role of the market in China has already hadvisible benefits. Managers have become more aware of the need to takemarket forces into account in making production decisions. For certainkinds of goods, the previously prevailing "seller-s market" characterized bychronic supply shortages has been transformed into a "buyer's market" whereproduction is to some extent demand-determined. Horizontal ties betweenproducers and consumers, sellers and buyers have become more important,supplementing the vertical channels of command planning. Perhaps mostimportant, use of the market mechanism has facilitated the massive struc-tural changes that have occurred in the economy during the past three years.However, commercial enterprises in many cases still may not have the powerto refuse delivery of substandard or unmarketable products sent to them byinefficient producers. Although commercial services and the availability ofmany goods have improved in both urban and rural areas, there still appearsto be a gap between supply and demand in rural areas.

4.51 Partly because of their recent emergence, markets are fragmented,vulnerable to administrative intervention, and weak in terms of theirinstitutional basis. A serious threat to their efficacy and viability isthe internal trade restrictions imposed by territorial and departmental

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government authorities to "protect" backward, inefficient producers undertheir jurisdictions. A recent State Council circular has strictly pro-hibited such "internal protectionism." A related difficulty stems from thecombination of China's territorially decentralized economic management andfiscal systems and the new emphasis on profits as the primary performanceindicator. Given the distorted structure of relative prices, which greatlyincreases the profitability of processing and manufacturing activities butreduces that of agriculture and mining, provinces have a strong incentive tobuild up the former in their own territories. They do so by constructingsmall, often inefficient plants, which utilize local raw materials that werepreviously sent to factories outside the province. As a result, large andtechnologically advanced factories in the more developed areas are facedwith shortages of raw material supplies, and aggregate efficiency suffers.

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5. ECONOMIC PROSPECTS

A. Constraints and Options

5.01 In view of the still low levels of income in China, a majorGovernment objective during the rest of the 1980s remains improvement ofliving standards and further reduction of urban-rural disparities. Achieve-ment of these objectives is constrained by a number of factors, includingshortages of skilled manpower, limited agricultural land, slow growth ofenergy production, industrial inefficiency and insufficient infrastructuraldevelopment, as well as by institutional constraints. On the other hand,the strong performance of the economy in recent years, the low populationgrowth rate, the renewed emphasis on economic reform and the more openattitude towards use of foreign technology and capital are all encouragingand positive developments. These various features of the Chinese economywere analyzed in detail by the World Bank in its 1981 report /1 and are onlybriefly reviewed and updated in the following paragraphs.

Human Resources

5.02 The Government s intensive campaign to control population growthduring the 1970s has had remarkable results, reducing the birth rate from33.6 per thousand in 1970 to 17.9 per thousand in 1979. However populationestimates based on household registration data and the preliminary resultsof the 1982 population census suggest that an upward trend in the populationgrowth rate may have emerged in the last two years. One major reason forthis is a rise in the number of marriages, as the 1980 Marriage Law had theeffect of voiding local regulations which had kept the marriage agesubstantially higher. In addition, the new responsibility systems in ruralareas have raised incomes and made it easier for people to afford havingchildren. The Government is addressing such issues by encouraging localauthorities and enterprises to promote the one-child family policy witheconomic incentives. But keeping the Chinese population down to 1,200million by the year 2000 (which means an average population growth rate of1% p.a.) will still not be easy to achieve. The continuation of slowpopulation growth remains, however, a critical element in ensuring futurewelfare gains and improved living standards.

5.03 During the 1980s the working age population will be growing atalmost 2% p.a. In addition, economic reforms in rural areas have madehidden underemployment and unemployment more open, and pressures andincentives to find new jobs and to migrate to urban areas have increased.Full employment remains a major objective of the Government, but finding

/1 Report No. 3391-CHA, main text and annexes.

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productive employment opportunities for all these people will be a difficulttask. There have been pressures on state enterprises to employ more peoplethan they really require, but this is only a short-term palliative, and itwill make the task of improving efficiency in the state enterprise sector moredifficult. On the other hand, collective employment and self-employment haveconsiderable potential as sources of productive employment opportunities andare now being encouraged. More generally, the pace and pattern of economicgrowth will have a critical bearing on the country-s ability to expandemployment opportunities.

5.04 The pace at which China can develop remains constrained by theavailability of hign-level trained manpower. Moreover, current enrollmentin both universities and technical and vocational schools is one quarterof the average for other developing countries. It will take many years toalleviate this constraints In the meantime, emphasis is being placed not onlyon the expansion of formal undergraduate and postgraduate education, but alsoon nonformal tertiary education, on technical and vocational education, and ontraining programs of all types.

Agriculture

5.05 The performance of agriculture in recent years has been very good.Despite a decline in the total cultivated area, gross agricultural output atconstant prices increased by 5.7% per year between 1978 and 1981 (4.3% peryear if brigade and team industry is excluded)./l Much of this increasederives from the major improvement in relative prices for agriculture andthe new rural responsibility systems; thus continuation of such high growthrates is unlikely. But a reasonable growth rate of agriculture is critical:800 million people live in rural areas and most will continue to depend onagriculture for some time to come; and rising incomes elseTwhere in theeconomy and the requirements of light industry will place substantial newdemands on agriculture.

5.06 Food security and growth of domestic foodgrain production willremain critical elements in China-s agricultural strategy. The World Bank-s1981 review of the technical possibilities implied that foodgrain productioncould be expanded by about 2.4% per year during the remainder of the 1980s.This figure was based on the assumption that grain yields could be increased(from 2.8 tons/ha to 3.5 tons/ha) and that there would be no furtherdeclines in the area planted to foodgrains. Since then grain yields haveincreased but planted area has fallen. Insufficient information isavailable to accurately estimate foodgrain consumption but it appears to havebeen growing more rapidly than projected. In these circumstances theobjective of meeting both direct foodgrain requirements and a moderate

/1 In this section and in the projections agriculture is defined to excludebrigade and team industry.

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expansion in other requirements (including grain for feed) without anyincrease in net imports will be a very difficult task. Nongrain agricultureis likely to expand more rapidly, but an overall 3-4% growth rate foragriculture during the remainder of the 1980s will still not be easy toachieve.

5.07 With no possibilities for expanding the cultivated area, increasesin agricultural production will have to come from improvements inagricultural systems and yields. These improvements could be brought aboutby increased allocations of inputs - including fertilizers, energy andequipment - to the sector, but the availability of many of these inputs andparticularly energy is also constrained. The present emphasis on improvedpolicies and management will, therefore, have to continue.

Energy

5.08 The World Bank's 1981 projections of energy production andconsumption showed a reduction in China's net energy exports during theremainder of this decade unless GDP growth is about 4% p.a. from 1980 to1985 and 5% from 1985 to 1990 and energy savings are high (resulting in 1%p.a. growth of energy consumption during 1980-85 and 3% during 1985-90).Faster growth, even with high energy savings, would reduce energy exports andlead to net imports of energy before 1990, while with only moderate energysavings, even low growth of GDP would require energy imports before 1990.During the past three years, China appears to have slightly exceeded Bankprojections of faster growth and high energy savings. GDP has probablygrown somewhat faster than the 5% faster growth scenario for 1980-85 andcommercial energy consumption has grown at only 0.5-2.0% per year, comparedto a projected 2.1% per year for 1980-85 under faster growth and high energysavings.

5.09 This commendable performance suggests that China might be able tocontinue to attain rapid growth, but it does not alter the basic conclusionthat domestic supplies of energy will be insufficient to support fastergrowth throughout the remainder of the decade. This conclusion isreinforced by considerations on both the supply and demand sides. Recentperformance and new information on production indicate that previous energyproduction projections should be scaled down. The Government forecasts coaloutput of 700 million tons in 1985, compared to earlier projections of 727million tons. Oil output is projected by the Government to remain at 100million tons through 1985 and, in the projections, is assumed to fall to 95million tons by 1990.

5.10 It is also difficult to assess the degree of success inrestraining demand for energy. Although consumption of energy per unit ofoutput appears to have fallen, the key question is how much of this is due toimproved energy coefficients within sectors. Faster growth of GDP in the

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past three years has mostly come from faster growth of light industry andagriculture. Heavy industry, which is much more energy intensive, hasgrown roughly in line with the Bank's earlier moderate growth projections.Thus, while growth of energy consumption appears to have been very slow, muchof the success in improving energy efficiency may have been due to structuralchange in the economy./l It remains to be seen whether efficiencyimprovements within sectors have been adequate to maintain high energy savingswhen heavy industry grows more rapidly.

5.11 Energy availability thus will continue to constrain growththroughout the 1980s. Since major new oil supplies will not be availableuntil at least the end of the decade and since there is a long lead time forproduction of coal and hydroelectricity, overall growth of the economy willdepend critically on continued success in energy conservation. Several usefulinitiatives to conserve energy have already been taken. These need to besupplemented by more extensive price changes to reinforce administrativemeasures and by development of a plan to phase out very energy-intensiveproduction techniques in heavy industry.

Industry

5.12 Industrial growth will be constrained in the future by limitedsupplies of energy and raw materials. Heavy industry will be more affectedby the energy constraint than light industry, since its consumption ofenergy per unit of output is about four times greater. The supply of otherraw materials, especially agricultural raw materials, will have a relativelygreater impact on light industry. To the extent that manufactured exportscan be increased to pay for additional imports of energy and raw materials,industrial growth also can be increased. China has recently been verysuccessful in expanding manufactured exports, especially in the face of theworld recession, and it should be able to attain the moderate export growthprojections assumed by the World Bank in 1981: textiles subject to quotashould be able to expand at 9% per year through 1985 and at 7% per year during1985-90, while other manufactures should be able to grow at 10% per yearthroughout the decade.

5.13 It may be difficult for light industry to continue to grow at therapid rate of the recent past, but it should be possible to sustain a 7%growth rate throughout the remainder of the decade without running intodomestic or import constraints. Heavy industry will have to grow more

/1 On average, each 1% reduction in heavy industry output saves $600 mil-lion worth of energy valued at world prices, whereas each 1% expansionof light industry output uses only $175 million worth of energy. Ofcourse, some light industries, such as sugar and paper, are more energy-intensive than some heavy industries, such as machinery. Energy savingthrough structural change therefore requires attention to narrowercategories than light and heavy industry.

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slowly unless China can achieve high energy saving. With only moderate energysaving, and with the growth of manufactured exports projected above, heavyindustry could expand at 2.5% per year through 1985 and at 5% per year from1985 to 1990. Overall industrial growth would thus be about 4.5% through1985, rising to about 6% in the latter half of the decade - well belowhistorical growth rates. Higher rates of industrial growth are certainlypossible but wil be dependent on a relaxation of the energy constraint, andto a lesser extent the raw material constraint.

Infrastructure

5.14 The inadequate transport and commercial infrastructure is actingas an increasingly important constraint on economic development. The rapidoverall economic growth of recent years would in any event have strained thecapacity of transport and commercial facilities. But as a result of theGovernment-s reform and adjustment programs, growth has been accompanied byincreased regional specialization and more emphasis on foreign trade, whichtogether have made infrastructure constraints more acute. The port system isnow operating at maximum capacity, short-haul road transport is assuming muchgreater importance, and there is a much increased demand for storage andmarketing facilities. Alleviating these constraints and developing anadequate and efficient transportation and commercial system will requirepriority attention if future growth and income gains are to be realized.

Financial Resources

5.15 Maintenance of a satisfactory rate of growth in the late 1980s and19 90s requires major investments in energy and transport and modernizationand efficiency improvements in industry. At present however investments inmany of these key productive areas are caught between the Government-s desireto reduce the overall investment rate (in order to accelerate consumption),the competing claims of sectors such as housing and decentralization offinancial resources and decision making, without other systemic changes, whichhas resulted in a loss of control by the central government over part of theinvestment program and in resources being used for relatively low priorityprojects. Institutional and policy measures to address these issues andimprove the composition of the investment program need to be developed.China also has the option easing some of the constraints on the investmentprogram by making more use of foreign financial resources. In addition to theresources available as a result of the current account surpluses of the lasttwo years, China can expect to receive some concessional assistance fromJapan, from the World Bank Group and from certain other multilateral andbilateral donors as well as being able to borrow from commercial sources.

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B. Macroeconomic Prospects

The Sixth Five Year Plan (1981-85)

5.16 Covering the period 1981-85, China's Sixth Five Year Plan wasofficially promulgated in December 1982, after a lengthy period of prepara-tion. The abridged version of the plan, published during the FifthSession of the Fifth National Peoples Congress, takes account of theconstraints and strengths of the Chinese economy. Targets are set for allsectors of the economy and include efficiency objectives and financial goalsas well as detailed physical production plans. The plan emphasizescontinuation of the program of "adjustment, reform, consolidation andimprovement of the national economy." With the exception of energy outputmost of the goals set are very modest relative to the economy's performance inrecent years (Table 5.1).

Table 5.1: SELECTED SIXTH FIVE YEAR PLAN TARGETS(% growth per annum)

Sixth five year Actual resultItem plan target 1980-82 /a

(1980-85)

National income 4.0 4.5/bGross industrial

output value 4.0 5.7Gross agricultural

output value 4.0 6.4Grain output 2.4 3.0Coal output 2.5 2.5Crude oil output -1.1 -1.9Electricity output 3.8 4.0Yarn 4.2 7.2Sugar 10.8 13.9Bicycles 20.4 36.1Television sets 22.9 50.0Steel 1.0 0Chemical fertilizer 1.7 2.7Cement 4.2 8.5Machine tools - 5.7 -12.0

/a Based on preliminary figures for 1982.7J Assumes a 6.0% growth rate of national income in 1982.

Source: Sixth Five Year Plan and State Statistical Bureau.

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5.17 The target growth rates for national income and agricultural /1 andindustrial production at constant prices are all 4% per year. Consumption isexpected to rise faster than investment, major efforts will be made to keepthe population growth rate under 1.3% per year, and per capita consumption istargeted to rise by 4.1% per year. In keeping with the continued emphasis onreducing urban-rural disparities, people living in cities and towns will getan average annual increase of 3.2% and those in the countryside 4.2%. Withinagriculture cash crops, livestock and rural industry and sideline productionare expected to grow the most rapidly, while the target growth rate for grainproduction is 2.4% per year. With chemical fertilizer production not expectedto expand as rapidly as in the 1970s, emphasis will continue to be placed onimprovements in efficiency of input use and better economic results.Industrial growth may be constrained because energy output cannot be increasedsignificantly in the near future (the target annual growth rate is only 1.4%)and the pressures on the transport system will take some time to relieve.Heavy industry is targeted to grow by 3% per year and light industry by 5% peryear; as in agriculture major emphasis will be placed on efficiencyimprovements, especially energy conservation.

5.18 During the Sixth Plan period total fixed investment by the statesector is targeted at Y 360 billion, of which Y 230 billion (or Y 46 billionper year) would be capital construction investment and Y 130 billion (Y 26billion per year) would be investment in the renovation and modernization offixed assets. The proportion of total state investment accounted for byrenovation and modernization investment is much higher than in previous planperiods and reflects the priority being given to industrial transformation.Within state capital construction energy and transport are the prioritysectors and the shares of resources going to them have been increasedslightly over earlier years (see Table 5.2). Housing investments will alsocontinue to receive priority. On the other hand, the shares of agricultureand light industry are projected to fall somewhat.

5.19 To help finance these and other priority expenditures the planforecasts a reversal in the recent downward trend in state revenues. Thetarget for annual budgetary revenue growth in 1980-85 is 3.3%, for expendi-ture growth 1.5%. In addition to capital construction expenditures the planemphasizes increased expenditures on education, science and public healthand special programs for minority nationality and economicallyunderdeveloped areas. Through increased revenues as well as strict controlof expenditures the plan is to keep the annual budget deficit below Y 3billion. Though some revisions in prices are expected to take place, theobjective will be to keep the general level of market prices basicallystable. Emphasis will continue to be placed on expanding foreign trade: in

/1 The plan target for agriculture includes the output of brigade and teamindustry.

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Table 5.2: STATE CAPITAL CONSTRUCTION INVESTMENT BY SECTOR(% of total)

1971-75 1976-80 1981-85 1981Sector (actual) (actual) (plan) (actual)

Energy 18.4 21.8 25.5 /a 21.2of which: power 7.7 9.8 9.0 9.3

Coal 5.4 6.1 7.8 5.4Petroleum 5.3 5.9 6.7 6.5

Other Heavy Industry 33.7 26.2 20.4 19.1of which: Metallurgy 10.3 8.5 7.6 6.4

Chemicals 5.7 7.5 5.0 4.4

Light Industry 6.1 6.9 6.1 10.0of which: Textiles 1.9 3.3 n.a. 4.6

Food 1.0 1.3 n.a. 2.2

Transport & Communications 18.9 13.5 13.0 9.5of which: Railways 10.3 6.3 7.5 3.4

Agriculture, etc. 10.3 11.0 6.1 6.8

Other 12.6 20.6 28.9 33.4

Total 100.0 100.0 100.0 100.0

/a Includes an allocation for major energy savings measures; data on thisitem is not available separately for 1981.

Source: Sixth Five Year Plan and State Statistical Bureau.

real terms exports are expected to grow by 8.1% p.a. and imports by 9.2% p.a.over the plan period. Efforts to use foreign loans efficiently and toencourage direct foreign investment and the setting up of joint ventureswill also be continued and the role of coastal provinces and cities,including Shanghai and Tianjin as well as Guangdong and Fujian, in expandingforeign trade will be stressed.

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5.20 The Government views the Sixth Plan Period has an interim periodduring which important readjustments and reforms of the economy will beundertaken. These will lay the foundation for more rapid economic develop-ment during subsequent plan periods. Despite the very strong performance ofthe economy in 1982 the Government recognizes that major inefficienciesremain and that priority should continue to be given to improving efficiencyrather than maximizing gross production. Accordingly the overall targetsfor the Sixth Plan Period will not be revised, but there is everyexpectation that, with continued progress on adjustment and reform, many ofthe targets will be exceeded.

Scenarios for the 1980s

5.21 An attempt has been made to simulate some of the options facing theGovernment during the remainder of the 1980s by applying the Bank's revisedminimum-standard model to China./l Many simplifying assumptions have had tobe made, and the projections should be viewed as providing indications onlyof broad magnitudes and trends. Of crucial importance for the projectionsare the assumptions about growth of manufactured exports, energy productionand conservation and the pace at which imports of capital and intermediategoods will be permitted to rise. Table 5.3 presents selected indicatorsassuming low growth and moderate energy savings. GDP is assumed to grow at4% per year throughout the rest of the Sixth Five Year Plan period and by 5%per year after 1985. Agriculture (excluding brigade and team industry) isprojected to grow at only 3% per year throughout the remainder of thedecade, while light industry would continue to grow more rapidly than heavyindustry. The share of investment in GDP would decline steadily from 29% in1981 to 27.5% in 1985 and 25% in 1990. The overall efficiency ofinvestment, as measured by incremental capital-output ratios might worseninitially as a result of the growing share of nonproductive investment butwould then improve. Overall export growth would be low due to a decline inenergy exports, but textile and other manufactured exports would continue togrow rapidly. Imports of energy would begin in about 1988 and increaserapidly until 1990. The result would be an overall growth rate of 4-5% peryear and a somewhat faster rate of growth of consumption. The currentaccount would move into deficit, due mainly to the change in the net energysituation, but the debt service ratio would remain quite low due to thelarge balance of payments surplus and low debt which presently exist.

/1 This model is essentially an accounting framework for the nationalaccounts and the balance of payments, with special attention to flowsresulting from foreign borrowing. It is not designed to address many ofthe major domestic issues, such as urban-rural imbalances. Annex 2provides information on the assumptions made by the World Bank inconverting Chinese data from the system of material production to the UNsystem of national accounts.

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Table 5.3: EFFECTS OF LOW GROWTH AND MODERATE ENERGY SAVINGS, 1978-90

1978-81 1981-85 1985-90

Total GDP growth (% p.a. constant prices) 5.6 4.6 5.0Agriculture /a 4.3/b 3.7 3.0Light industry 14.o7b 6.6 7.3Heavy industry 1.47b 4.2 5.0

Consumption growth (% p.a. constant prices) 6.2 5.4 5.7Investment growth (" ) 2.5 4.3 3.0Incremental capital-output ratio 5.4 /c 5.7 /d 5.3 /d

Export growth (% p.a. constant prices)/e 21.0 4.5 5.5Import growth (% p.a. constant prices)7e 10.7 9.5 5.3

Resource gap ($ billion) /f 1.7 -4.0 -6.5Current account ($ billion)/f 2.0 -3.1 -6.7Current account (% GDP)/f 0.8 -0.9 -1.1

Debt service ratio (% of exportsof goods and services)/f 7.3 4.1 7.1

/a Excluding brigade and team industry.7T Rate of growth of gross output.7W For period 1970-81.7W Five year averages.7e Includes both goods and nonfactor services.77 In final year of the period.

5.22 Could China afford to aim for a higher overall rate of economicgrowth and a more rapid increase in living standards throughout the remainderof the 1980s? Without substantial efficiency improvements (especially inenergy consumption) and other policy changes the answer is probably no. AsTable 5.4 demonstrates, even 1% per year higher growth would, on its own, meanan increased demand for energy and a rapid deterioration in the balance ofpayments. Without major increases in concessional assistance beyond what isnow being forecast (a most unlikely event),/l the debt service situation wouldrapidly become unsustainable.

/1 The projections are based on the assumption that concessional assistancecommitments would total $1.3 billion in 1985 and $1.8 billion in 1990.

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Table 5.4: EFFECTS OF MODERATE GROWTH AND MODERATE ENERGY SAVINGS, 1978-90

1978-81 1981-85 1985-90

Total GDP growth (% p.a constant prices) 5.6 5.3 6.0Agriculture /a 4.3/b 4.1 3.5Light industry 14.0/b 7.8 8.3Heavy industry 1.4/b 5.3 6.5

Consumption growth (% p.a. constant prices) 6.2 6.4 7.0Investment growth (% p.a. constant prices) 2.5 5.0 4.0Incremental capital-output ratio 5.4 /c 5.1 /d 4.4 /d

Export growth (% p.a. constant prices)/e 21.0 1.7 /g 7.8Import growth (% p.a. constant prices)/e 10.7 9.8 10.0

Resource gap ($ billion) /f 1.7 -7.9 -25.7Current account ($ billion)/f 2.0 -7.3 -31.1Current account (% GDP)/f 0.8 -1.9 -4.2

Debt service ratio (% of exports of goodsand services)/f 7.3 4.8 23.4

/a Excluding brigade and team industry./b Rate of growth of gross output.7c For period 1970-81./d Five year averages./e Includes both goods and nonfactor services./f In final year of the period./g This figure is much below the corresponding figures in Table 5.3 because

of a more rapid decline in energy exports.

5.23 In recent years, however, China has been achieving average GDPgrowth rates of over 5% and the Government has demonstrated its capacity tosuccessfully implement adjustment and reform measures that have increasedefficiency and facilitated growth while maintaining overall stability. AsTable 5.5 shows, further efficiency improvements, particularly continuedincreased efficiency in energy use at the rate apparently achieved in the pastthree years, would permit the economy to grow at 6-7% during the remainder ofthe 1980s while still maintaining a debt service ratio below 15%. A sustainedrate of efficiency improvement would however require a major effort on thepart of the Government in accelerating the program of adjustment and reform.A large part of the efficiency improvement to date has come from the

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restoration of economic management after many years of disruptions and fromeasier means of energy saving such as adjusting the ratio between light andheavy industry. Such opportunities for improvement are being quicklyexhiausted and further improvement will have to come from greater efficiencywithin subsectors and enterprises.

Table 5.5: EFFECTS OF HIGH GROWTH AND HIGH ENERGY SAVINGS, 1978-90

1978-81 1981-85 1985-90

Total GDP growth (% p.a constant prices) 5.6 6.1 7.0Agriculture /a 4.3/b 4.3 3.8Light industry 14.07b 8.9 10.0Heavy industry 1.4/b 5.7 7.5

Consumption growth (% p.a. constant prices) 6.2 7.0 7.8Investment growth (% p.a. constant prices) 2.5 5.8 5.0Incremental capital-output ratio 5.4 /c 4.6 /d 3.8 /d

Export growth (% p.a. constant prices)/e 21.0 4.5 5.5Import growth (% p.a. constant prices)7e 10.7 10.3 6.5

Resource gap ($ billion)/f 1.7 -5.3 -13.5Current account ($ billion)/f 2.0 -4.4 -15.5Current account (% GDP) /f 0.8 -1.1 -2.0

Debt service ratio (% of exports ofgoods and services)/f 7.3 4.1 12.6

/a Excluding brigade and team industry./b Rate of growth of gross output./c For period 1970-817T Five year averages./ e Includes both goods and nonfactor services./f In final year of the period.

- 80 -

5.24 Whatever the actual pace of import expansion and overall growthChina's requirements for foreign capital can be expected to increase greatlyduring the remainder of the 1980s. Current account deficits should remainlow as a percentage of GDP (1-2% by 1990) but they will be high in absoluteterms ($3 billion in 1985 rising to $7 billion in 1990 under a scenario of lowgrowth and moderate energy savings and $4 billion in 1985 rising to $16billion in 1990 under a scenario of high growth and high energy savings). Tofinance such deficits total foreign borrowing commitments will need toincrease from $5 billion in 1985 to $11 billion in 1990 under low growth andmoderate energy savings and from $6 billion in 1985 to $22 billion in 1990under high growth and high energy savings. Given the constraints onconcessional assistance most of the expansion in foreign borrowing will haveto come from commercial sources.

5.25 The three scenarios also demonstrate the fragility of China'soverall balance of payments situation and its sensitivity to assumptionsabout economic trends and policy developments. Even very small changes inassumptions about production and consumption of energy, for example, canmake a very large difference to energy import requirements and the currentaccount deficit, as the moderate growth and moderate energy savings scenariodemonstrates. In these circumstances the Government will need to remaincautious in its import and foreign borrowing strategy during the remainderof the 1980s. The present situation of current account surpluses can beexpected to change quickly to one of moderate current account deficits asimports of capital and intermediate goods are expanded. By the late 1980ssome imports of energy also appear to be necessary before new domesticproduction capacity is established. However, the overall rate of importexpansion and the overall rate of economic growth are crucially dependentnot only a continued good performance of manufactured exports (which areassumed to grow at nearly 10% p.a. in real terms through the remainder of the1980s) but also on the rate at which efficiency, especially energy efficiency,can be improved. The Government will need to monitor developments in theseareas closely and adjust its import and foreign borrowing strategyaccordingly. A high rate of economic growth (6-7% p.a.) will probablyonly be feasible if major improvements in energy efficiency continue tobe achieved.

C. Prospects for Economic Reform

5.26 The brief review of macroeconomic prospects shows clearly thatimprovements in the efficiency with which inputs are converted into outputscan ease some of the short- and medium-term constraints to development,thereby helping China to achieve a higher rate of economic growth and a morerapid improvement in living standards. The same is true of measures thatbring about stronger links between demand and supply and alleviate marketdisequilibrium. The primary goal of China's economic reform program is toimprove efficiency at both micro and macro levels, which would allow highergrowth rates and higher living standards.

- 81 -

5.27 Based on efficiency criteria, the reforms implemented to date appearto have been most successful in agriculture and the rural sector. But itremains to be seen whether the strengths of the commune system in terms ofmeeting basic needs can be retained while further efficiency improvementsare promoted (see paras. 4.09-4.17). In other sectors progress appears tohave been somewhat slower and difficulties have emerged because of theabsence of certain key reforms. In industry, there have been difficultiesin achieving appropriate levels and structures of investment and in ensuringresponsible use of enterprise funds (see paras. 4.25-4.31). In commerce,the expansion of the role of the market has had beneficial results, butimprovements in efficiency have been hampered by distorted relative pricesand by administrative interference (see paras. 4.48-4.51). In foreigntrade, reforms have played an important role in increasing exports over thepast several years, but this may have resulted in some suboptimal patterns oftrade (see paras. 3.35-3.42). In government finance, the 1980 budgetarydevolution has provided additional incentives to provincial and localgovernments, but there have also been imbalances in central-local finances(see paras. 3.18-3.19), as well as increasing difficulties in controllinglocally-financed investments. In the area of overall investment planningthere is still inadequate analysis of major projects, and credit financingof investment has not yet resulted in major efficiency improvements. It alsoappears that the banking system has not yet been given the de facto authorityand responsibility it needs for its role in a post-reform situation (seeparas. 3.24-3.25).

5.28 The emergence of these and other problems during reform imple-mentation by no means signifies that reforms should be rescinded orsignificantly weakened. Rather, it supports the Government's emphasis onmore careful study of the crucial linkages among reforms in different sectorsand on correct timing in the introduction of new reforms. In some areas,partial reforms can proceed independently, while in others they must awaitsuccessful implementation of reforms elsewhere in the economy.

5.29 The Government's strong commitment to economic reforms is evidentin recent policy pronouncements. Reform implementation in some areas is tobe speeded up during the next three years. Future measures will build uponthe experience gained during the initial stages of reform. Successfulreforms will be continued, expanded and consolidated, while in sectors wherereforms so far have been less successful, widespread experimentation will beencouraged to help determine which policy measures are likely to prove mosteffective. All in all reform implementation will continue to move forvwardin the near future, rapidly in a few selected areas, cautiously and on astep-by-step basis in other areas.

5.30 Building on their earlier success, rural reforms are to bebroadened and strengthened. Production responsibility systems will beextended to new spheres of activity. Combinations (formed by small groupsof peasants pooling their assets) and joint ventures between ruralcollectives or individuals and urban state-owned enterprises will beencouraged. Finally, the people's communes will be transformed into

- 82 -

purely economic entities and their governmental functions will be transferredto village-level government administrative bodies. This should helpminimize bureaucratic intervention in rural economic decision making.

5.31 In state-owned industry the Government's strategy reflects the factthat earlier reforms have not been as successful as those in agriculture andthat certain problems have emerged. Among the numerous financial incentiveschemes tried out during the past few years (see para. 4.26), the variousexperiments replacing enterprise profit remittances to the state budget withtax payments are deemed to have been the most successful. In modified formthey will be greatly expanded in scope during the rest of the Sixth Five YearPlan period. Universal implementation of a progressive income tax system forstate enterprises will have to await comprehensive price reform, however.To improve coordination, the system of industrial administration will berevamped and streamlined. Most industrial enterprises will be placed underthe jurisdiction of the city in which they are located, and the number oflayers of higher-level supervisory management will be reduced. More forcefulattempts will be made to close down inefficient plants and make enterprisestake more responsibility for their decisions, and great stress is put ontechnological modernization of Chinese industry, primarily by means of moreextensive and long-term planning and large imports of foreign technology./l

5.32 The commercial system received less attention than productionsectors in the early stages of reform implementation. But it is nowrecognized that an unreformed commercial system can render reforms inboth industry and agriculture less effective. An independent, efficient andflexible commercial system can force industrial enterprises to take theconsequences of their decisions (both good and bad) and bear moreresponsibility for the quality and marketability of their products. In thelight of these considerations, the commercial sector will be a focus ofreform activities during the next three years. The state commercial systemwill be streamlined and more extensive commodity flows will be encouraged.Development of collective and individual commerce, particularly in ruralareas, will be promoted. The commercial system will also try to improve itsmarket forecasting in order to ensure smoother adjustments to changes indemand and supply conditions.

5.33 The stimulation of excessive investment demand on the part of localgovernments and enterprises has perhaps been the worst adverse side effectof administrative and fiscal decentralization. A related problem is contin-uing inefficiency of investment. In the short term the Government plans todeal with these problems primarily through more effective implementation ofadministrative regulations: all investment in fixed assets will be subjectto overall balancing by the State Planning Commission (with large and

/1 The State Economic Commission has already drawn up a plan forimporting 3,000 items of advanced technology in the next three yearsto further technical transformation of existing enterprises, particularlysmall- and medium-sized ones.

- 83 -

medium-sized capital construction projects requiring direct SPC approval);no projects will be permitted to start construction or even be included inannual plans without prior feasibility studies and technical and economicappraisal; and the use of capital construction funds will be closely super-vised by the People's Construction Bank of China. But improving the struc-ture and efficiency of investment will be a long and difficult process,very much dependent on progress on other aspects of reform. Pending pricereform it is especially important that planning agencies and banks atnational and local levels undertake formal economic analysis of investmentprojects (using shadow prices) as well as financial analysis. Attentionalso needs to be paid to the relative responsibilities of administrative andproducing units in investment decision-making at the local level:administrative units may sometimes have a broader prospective than producingunits, but producing units can be made more economically and financiallyresponsible for their decisions through appropriate pricing and incentivesystems.

5.34 It is well recognized in China that many of the problems encount-ered by reforms are caused by the still largely unreformed price system.Reform efforts so far have stressed decentralization of decision-makingauthority and greater use of financial incentives. But with decentralizeddecision making it is important that prices reflect relative scarcity valuesin the economy so that the information enterprises use in making decisions isaccurate. Material incentives also need to bear some meaningful relationshipto actual effort and the efficiency of decisions taken. Inappropriaterelative prices, through their effects on profits, can cause inequities inmaterial rewards for different types of economic activities, with consequentharm to the incentives that are supposed to be fostered by reforms. Inaddition markets do not function well in disequilibrium, and some priceflexibility is needed to achieve demand-supply balance. Given the complexi-ties of price reform, the magnitude of the changes that will be needed andthe importance of extensive preparatory work, the Government has decided thatit will not be possible to implement comprehensive price reform until after1985. However, appropriate upward or downward adjustments in the mostdistorted prices can and will be made and the prices of many minor commodi-ties will be allowed to fluctuate according to market conditions. These areall steps forward in what is likely to be a gradual process of price reformthat will need to take account of the scope for "unfreezing" of prices andhow state determined prices should relate both to domestic costs and to worldprices.

D. Concluding Remarks

5.35 The 1980s is a difficult period of transition for China. Butduring the past few years the Government's programs of adjustment, reform andstabilization have achieved very significant results. In fact in terms ofproduction and growth, efficiency improvements and stability (as measured bybudgetary and current account deficits) the achievements have generally beengreater than expected. Nonetheless China is still a very poor country andits investment and modernization requirements are enormous. To help meet

- 84 -

these requirements and ensure continued growth and improvements inliving standards it is important that the Government continue with itsprogram of structural adjustment (including an expansion in foreign tradeand borrowing), and with its program of economic reform that will helpimprove the overall efficiency of the Chinese economy. Continued effectiveimplementation of these programs should help ensure a reasonable rate ofgrowth during the remainder of the 1980s while helping set the stage formore rapid growth and development in the l9 90s.

- 85 -

ANNEX 1Page 1

RESTRUCTURING OF THE COMMISSIONS AND MINISTRIES OF THE STATE COUNCIL

New Organizations Former Organizations

Ministry of Foreign Affairs Ministry of Foreign Affairs

Ministry of National Defense Ministry of National Defense

State Planning Commission State Planning Commission

State Economic Commission State Economic CommissionState Agricultural CommissionState Machine Building IndustryCommission

State Energy CommissionMinistry of Building Materials

IndustryState Administration of StandardsState Bureau of Metrology and thePatent Bureau

State Commission forRestructuring the EconomicSystem

State Scientific and Technological State Scientific and TechnologicalCommission Commission

State Nationalities Affairs State Nationalities AffairsCommission Commission

Ministry of Public Security Ministry of Public Security

Ministry of Civil Affairs Ministry of Civil Affairs

Ministry of Justice Ministry of Justice

Ministry of Finance Ministry of Finance

_ 86 -

ANNEX 1Page 2

New Organizations Former Organizations

People's Bank of China People's Bank of China

Ministry of Commerce Ministry of Commerce, All-ChinaFederation of Supply and MarketingCooperatives and the Ministry ofFood

Ministry of Foreign Economic State Administrative CommissionRelations and Trade on Import and Export Affairs

Ministry of Foreign Trade,Ministry of Economic Relations withForeign Countries and State

Foreign Investment Commission

Ministry of Agriculture, Animal Ministry of Agriculture, Ministry ofHusbandry and Fishery State Farms and Land Reclamation

and the State Administration ofAquatic Products

Ministry of Forestry Ministry of Forestry

Ministry of Water Conservancy Ministry of Water Conservancy,and Power Ministry of Power Industry

Ministry of Urban and Rural State Capital Construction CommissionReconstruction and Environmental State Administration of Urban Con-Protection struction

General Administration of BuildingConstruction and the NationalBureau of Surveying and Mapping

Ministry of Geology and Minerals Ministry of Geology

Ministry of Mettalurgical Industry Ministry of Metallurgical Industry

Ministry of Machine Building First Ministry of Machine-Building,Industry Ministry of Agricultural Machinery

State Bureau of Instruments andMeters Industry and

National Bureau of Equipment forComplete Industrial Plants

Ministry of Nuclear Industry Second Ministry of Machine-Building

Ministry of Aviation Industry Third Ministry of Machine-Building

- 87 -

ANNEX 1Page 3

New Organizations Former Organizations

Ministry of Electronics Industry Fourth Ministry of Machine-BuildingNational Bureau of Radio andTelevision Industry

State Administration of ComputerIndustry

Ministry of Ordnance Industry Fifth Ministry of Machine-Building

Ministry of Space Industry Seventh Ministry of Machine-Building

Ministry of Coal Industry Ministry of Coal Industry

Ministry of Petroleum Industry Ministry of Petroleum Industry

Ministry of Chemical Industry Ministry of Chemical Industry

Ministry of Textile Industry Ministry of Textile Industry

Ministry of Light Industry Ministry of Light Industry

Ministry of Railways Ministry of Railways

Ministry of Communications Ministry of Communications

Ministry of Posts and Telecommu- Ministry of Posts and Telecommu-nications nications

Ministry of Labor and Personnel State Bureau of LaborState Bureau of PersonnelBureau of Scientific and TechnologicalPersonnel under the State Council

Commission on the Composition ofGovernment Organizations

Ministry of Culture Ministry of CultureCommission for Cultural Relationswith Foreign Countries

National Publishing AdministrationState Administration of Museums andArchaeological Data

Foreign Language Publishing andDistribution Administration

Ministry of Radio and Television Central Broadcasting Administration

- 88

ANNEX 1Page 4

New Organizations Former Organizations

Ministry of Education Ministry of Education

Ministry of Public Health Ministry of Public Health

State Physical Culture and State Physical Culture andSports Commission Sports Commission

State Family Planning Commission State Family Planning Commission

- 89 -

ANNEX 2

CHINA

COUNTRY ECONOMIC MEMORANDUM

Conversion of Macroeconomic Statistics

This annex contains a set of working tables which have formed thebasis for some of the analysis in the main text. The tables have been com-piled using information from the Statistical Appendix and other informationand assumptions as footnoted. As working tables, they provide only roughorders of magnitude and indications of trends and are much less reliablethan most of the tables in the Statistical Appendix itself. Most of theassumptions made are similar to those made in the World Bank's first economicreport (Report No. 3391-CHA, Annex A).

- 90 -

ANNEX 2Table I

CHINA

COUNTRY ECONOMIC MEMORANDUM

Gross and Net Output at Current and Constant Prices(Y billion; 1970 = base)

1970 1977 1978 1979 1980 1981

AgricultureGross output at constant prices 105.8 133.9 145.9 158.4 162.7 172.0Net output at current prices 79.0 98.1 106.5 131.8 146.6 163.4Gross output at current prices /a 105.8 142.2 156.6 195.1 218.7 244.8Inputs at current prices 26.8 44.1 50.1 63.3 72.1 81.4Inputs at constant prices /b 26.8 42.9 48.2 55.4 59.0 63.9Net output at constant prices

(double deflation) 79.0 91.0 97.7 103.0 103.7 108.1Net output at constant prices

(single deflation) 79.0 92.4 99.3 107.0 109.1 114.8Net output as % of gross output

(at current prices) 75 69 68 68 67 67Industry

Gross output at constant prices 207.9 372.8 423.1 459.1 499.2 519.9Net output at current prices 77.0 119.0 140.8 153.6 169.8 171.9Gross output at current prices /a 207.9 360.6 412.4 449.4 497.4 517.8Inputs at current prices 130.9 241.6 271.6 295.8 327.6 345.9Inputs at constant prices /b 130.9 246.8 275.2 292.6 315.0 329.7Net output at constant prices

(double deflation) 77.0 126.0 147.9 166.5 184.2 190.2Net output at constant prices

(single deflation) 77.0 123.1 144.4 156.9 170.5 172.6Net output as % of gross output

(at current prices) 37 33 34 34 34 33Other SectorsNet output at current prices 36.6 47.3 53.7 49.6 50.3 53.4Net output at constant prices /c 36.6 49.7 54.1 51.2 49.5 49.2Net output at constant prices 7 36.6 51.2 56.0 56.8 57.8 60.1

Total NMPNet output at current prices 192.6 264.4 301.0 335.0 366.7 388.7Net output at constant prices 192.6 266.7 299.7 320.7 337.4 347.5

/a Data for 1970 and 1980 from Statistical Appendix, Table 2.5; data for otheryears based on estimates of the relationship between net and gross outputat current prices.

/b For information on deflators see Annex 2, Table 27T Residual after taking account of agriculture and industry (both double

deflated)./d Residual after taking account of agriculture and industry (both single

deflated.

- 91 -

ANNEX 2Table 2

CHINA

COUNTRY ECONOMIC MEMORANDUM

Implicit Deflators (1970 = 100)

1970 1977 1978 1979 1980 1981

Agriculture

Gross output/a 100.0 106.2 107.3 123.2 134.4 142.3/d

InpuLs /b 100.0 102.9 103.9 114.3 122.2 127.4

Net output 100.0 107.8 109.0 128.0 141.4 151.2

Industry

Gross output /a 100.0 96.7 97.5 97.9 99.6 99.6/e

Inputs /c 100.0 97.9 98.7 101.1 104.0 104.9

Net output 100.0 94.4 95.2 92.3 92.2 90.4

NMP Deflator 100.0 99.1 100.5 104.5 108.7 111.9

/a From Annex 2, Table 1 or other assumptions, as noted.

/b Combination of gross output deflators for agriculture and industry withweight attached to industry deflator of 0.35.

/c Combination of gross output deflators for agriculture and industry withweight attached to agriculture deflator of 0.125.

/d Increase based on change in agricultural procurement price index.

/e Based on assumption of no change in prices between 1980 and 1981.

- 92 -ANNEX 2Table 3

CHINA

COUNTRY ECONOMIC MEMORANDUM

Net Material Expenditure at Current Market Prices(Y billion)

1978 1979 1980 1981

Net fixed investment 78.8 84.9 90.2 n.a.Circulating assets 29.9 31.2 26.3 n.a.Total net investment 108.7 116.1 116.5 109.0Material consumption 188.8 219.5 251.9 275.9Investment and consumption 297.5 335.6 368.4 384.9Foreign material trade /a

balance -1.9 -3.0 -4.1 +3.0NMP estimated from expen-

diture side 295.6 332.6 364.3 387.9Residual error /b 5.4 2.4 2.4 0.8Net material product 301.0 335.0 366.7 388.7

/a Exports of goods - imports of goods.

/b This is included with consumption when consumption growth rates are calcula-ted in the main text.

- 93 -

ANNEX 2Table 4

CHINA

COUNTRY ECONOMIC MEMORANDUM

Net Material Expenditure at Constant Prices (1978 = base)(Y billion)

1978 1979 1980 1981

Total net investment /a 108.7 115.6 114.0 106.7

Material consumption /b 188.8 208.7 226.6 239.0

Investment and consumption 297.5 324.3 340.6 345.7

Foreign material trade balance /c -1.9 -2.9 -3.8 +2.7

NMP estimated from expenditure side 295.6 321.4 336.8 348.4

Residual error /d 5.4 0.7 2.2 0.7

Net material product 301.0 322.1 339.0 349.1

/a Deflator for :Lnvestment:gross output deflator for industry.

lb Residual.

/c Deflator for foreign material trade balance: NMP deflator.

/d This is included with consumption when consumption growth rates are calcula-ted in the main text.

- 94 -

ANNEX 2Table 5

CHINA

COUNTRY ECONOMIC MEMORANDUM

Breakdown of Material Consumption at Current Prices(billion yuan)

1978 1979 1980 1981

Total material consumption 188.8 219.5 251.9 275.9

Government /a 18.9 20.9 22.7 23.4

Rural private /b 126.0 147.3 168.0 187.5

Urban private lb 43.9 51.3 61.2 65.0

/a Assumed to decline from 10% of material consumption in 1978 to 8.5% in 1981.

/b Based on 1979 breakdown between rural and urban of 0.74 and 0.26 (urban-rural income ratio of 2 and rural and urban population shares of 87% and13%); urban consumption changes based on per capita income changes in urbanareas and assuming a small increase in the proportion of the population inurban areas; rural consumption is the residual.

- 95 -

ANNEX 2Table 6

CHINA

COUNTRY ECONOMIC MEMORANDUM

Breakdown. of Material Consumption at Constant Prices (Billion Yuan)(1978 = Base)

1978 1979 1980 1981

Total material consumption 188.8 208.7 226.6 239.0Government /a. 18.9 19.9 20.4 20.3Rural private /b 126.0 138.5 149.6 160.0Urban private 7S 43.9 50.3 56.6 58.7

Deflators (1978 = 100)Total material consumption 1.000 1.052 1.112 1.154Rural consumption 1.000 1.064 1.123 1.172Urban consumption 1.000 1.020 1.081 1.107

/a Deflator assumed to be same as for material consumption.

/b Urban deflaLtor assumed to be retail price index: residual is ruraldeflator.

- 96 -

ANNEX 2Table 7

CHINA

COUNTRY ECONOMIC MEMORANDUM

Alternative Estimates of Growth of Per Capita Rural Incomes, 1978-81

Annual % change, 1978-81

National AccountsTotal rural consumption /a (current prices) 14.2

(constant prices) 8.3Total rural savings /b (current prices) 100.0+

(constant prices) 100.0+Total rural population /c 0.8Per capita rural incomes /d (current prices) 17.7

(constant prices) 12.1

SSB Survey of Rural IncomesPer capita income at current prices 15.5Rural consumption deflator /e 5.5Rural expenditure deflator - Cash /f 1.3

- Kind /g 11.5- Total /h 6.6

Real per capita rural income (using consumption deflator) 12.3(using expenditure deflator) 11.3

Rural Production and Terms of TradeTotal agricultural production (constant prices) 5.7Total rural production (constant prices) /i 7.0Per capita rural production (constant prices) 6.2Income deflator /j 11.5Expenditure deflator 6.6Terms of trade change /k 4.6Real per capita rural income 11.1

/a Based on data on material consumption in Tables 5 and 6./b Includes both increase in savings deposits and increase in cash in

circulation./c Based on total population estimates and on small increase in the share of

urban population in total population from 12.5% in 1978 to 13.9% in 1981./d Assuming that consumption accounts for about 95% of income./e From Table 6./f Rural market price index.Tg Agricultural procurement price index./h Using weights of 0.48 and 0.52 for cash and kind expenditures respectively./i Takes account of rapid output growth of commune enterprises which are not

included in agricultural production./j Agricultural procurement price index./k Income deflator divided by expenditure deflator.

- 97 -

ANNEX 2Table 8

CHINA

COUNTRY ECONOMIC MEMORANDUM

Investment at Current Prices(Y billion)

1970 1977 1978 1979 1980 1981

Net investment 61.8 83.2 108.7 116.1 116.5 109.0

+ Depreciation /a 11.2 16.9 19.5 21.6 23.5 24.9

Minus defense investment /b 5.9 7.5 8.4 11.1 9.7 8.4

= Gross investment 67.1 92.6 119.8 126.6 130.3 125.5

Gross fixed investment 49.1 75.6 92.2 98.4 106.2 n.a.

Changes in stocks /c 18.0 17.0 27.6 28.2 24.1 n.a.

/a Includes rural housing; the ratio of depreciation to NMP is assumed to risefrom 5.8% in 1970 to 6.4% in 1977 and then remain at 6.4% through 1981.

/b Assumed to be half of reported defense expenditures in Statistical AppendixTable 5.6.

/c Changes in stccks: based on assumption that defense investment has sameratio of stocks to fixed investment as total net investment; residual isgross fixed investment.

- 98 -

ANNEX 2Table 9

CHINA

COUNTRY ECONOMIC MEMORANDUM

State Budget Accounts, 1977-82(Y billion)

1977 1978 1979 1980 1981 1982(preli-minary)

RevenueOfficial accounts 87.446 112.112 110.327 108.52 108.95 110.69Less revenue derived from

foreign loans /a 0.12 0.3 7.09 7.3 7.3 5.0Less revenue from Treasury

bond sales 0 0 0 0 0 4.2Plus revenue used for

subsidies n.a. 7.8 16.4 28.7 36.4 38.0

Total Domestic Revenues n.a. 119.6 119.6 129.9 138.0 139.5

ExpendituresOfficial accounts 84.353 111.095 127.394 121.27 111.50 113.69Less repayments on foreignloans 0 0 0 2.44 2.34 5.0

Less interest payments on loan 0 0 0 0 0.48 0.48from PBC /b

Plus expenditures on subsidies n.a. 7.8 16.4 28.7 36.4 38.0

Total Domestic Expenditures 84.4 118.9 143.8 147.5 145.1 146.2

Budget DeficitOfficial accounts -3.093 -1.017 17.067 12.75 2.55 3.0Deficit after elimination offinancing items -3.0 -0.7 24.2 17.6 7.1 6.7

/a Before 1980, income from foreign loans was valued at the official foreignexchange rate. 1980 was a transitional year in which a number of differentexchange rates were used (the average was Y2 to US$1), while in 1981, theinternal settlement rate (Y2.8 to US$1) was used. On the expenditure side,the corresponding item "expenditures on capital construction from foreignloans" is valued at cost to recipient before 1981, and at the internal set-tlement rate in 1981. Therefore, the expenditure figures before 1981include some profits and taxes generated in the foreign trade and commercialsystems, which on the revenue side are put in the various domestic revenueitems. Since these "revenues" would not have existed in the absence of theforeign borrowing and associated import of capital goods, it is appropriateto subtract them from the revenue figures in the official accounts. This isdone by evaluating the income from foreign borrowing at the amount of thecorresponding expenditure item. This mode of calculation results in con-sistency between the 1981 accounts and those of earlier years.

/b It is assumed that such payments started only in 1981 and applied only tothe 1980 bank loan of Y 8 billion (at 6% annual interest), not the overdraftof 1979.

- 99 -

ANNEX 2Table 10

CHINA

COUNTRY ECONOMIC MEMORANDUM

Reconciliation of Trade Data($ million)

1978 1979 1980 1981

ExportsBank of China basis /a 9,512 13,123 17,509 20,558Compensation trade - 400 800 1,250Adjustment 1.0% 95 135 183 219

Customs Exports 9,607 13,658 18,492 22,027

ImportsBank of China basis /a 11,399 16,169 21,675 19,998Compensation trade - 400 800 1,250Joint venture and grants - 60 272Minus cancellation fees - - - -3

Subtotal 11,399 16,569 22,535 21,517

Adjustment 2.8% 319 464 631 612

Customs Basis, c.i.f. 11,718 17,033 23,166 22,129

C.i.f. factor 8.3% 973 1,414 1,923 1,837Of which, paid to residents (438) (636) (887) (823)

Customs Basis, f.o.b. 10,745 15,619 21,243 20,292

/a From foreign exchange balance.

Sources: Bank cf China and IMF estimates.

- 100 -

ANNEX 2Table 11

CHINA

COUNTRY ECONOMIC MEMORANDUM

Invisibles($ million)

1978 1979 1980 1981

Shipment of freightCredit 210 348 553 848Debit -611 -877 -1,187 -1,181

Other transportationCredit 13 33 106 113Debit -6 -12 - -

InsuranceCredit 35 68 127 255Debit -12 -32 -66 -176

Port dues, ship chandlering, etc.Credit 180 316 385 422Debit -227 -376 -566 -710

Travel receiptsCredit 241 413 511 672Debit - - - -69

Bank interest and chargesCredit 200 305 512 697Debit -215 -350 -612 -821

Other services /aCredit 120 210 215 123Debit -96 -316 -272 -379

Total ServicesCredit 999 1,693 2,409 3,130Debit -1,167 -1,963 -2,703 -3,336

Net -168 -270 -294 -206

Private unrequited transfersCredit 597 656 668 484Debit - - -28 -17

Public unrequited transfersCredit - - 21 156Debit -69 -30 -91 -48

Net Unrequited Transfers 528 626 570 575

Net Invisibles 360 356 276 369

/a 30% of these services are assumed to be factor services.

Sources: Bank of China and IMF estimates.

- 101 -

ANNEX 2Table 12

CHINA

COUNTRY ECONOMIC MEMORANDUM

Capital Account($ million)

1980 19811978 1979 Credit Debit Net Credit Debit Net

Long-Term CapitalDirect investment - - 92 -35 57 283 -18 265

Stocks and bonds - - - _ - -_ -9Official loans - - 11 - 11 19 - 19

Energy loans - - 435 - 435 460 - 460

Buyers credit - 36 106 - 106 207 -9 198

Interbank loans - 1,330 349 -201 148 44 -841 -797Deferred payments - - - -200 -200 147 -76 71

Nonbank borrowing - - 203 - 203 78 -118 -40Due payments for

processing, etc. - - 294 -57 237 85 -66 19

Foreign credit extension -900 -613 - -253 -253 - -284 -284

Repayment 70 69 35 - 35 34 - 34

Others - - 999 -10 989 280 -10 270

Total credit 70 1,435 2,524 - 2,524 1,637 - 1,637

Total debit -900 -613 - -756 -756 - -1,431 -1,431

Long-Term Capital(Net) -830 822 1,768 206

Short-Term CapitalDeferred payments (net) -35 447 174 121Deferred receipts (net) - - -156 -662

Short-term bank borrow-ing (net) 173 1,234 138 -528

Bilateral paymentsassets -379 -127 -80 110

Short-Term Capital(Net) -241 1,554 76 -959

Total Capital -1,071 2,376 1,844 -753

Sources: Bank of China and IMF estimates.

- 102 -

ANNEX 2Table 13

CHINA

COUNTRY ECONOMIC MEMORANDUM

Gross Value of Agricultural Output at Constant 1970 Prices by Subsector(billion yuan)

1977 1978 1979 1980 1981

Crops 90.4 98.9 106.0 104.70 110.31Forestry 4.2 4.4 4.5 4.97 5.20Animal husbandry 18.4 19.3 22.1 23.10 24.50Fisheries 2.0 2.0 1.9 2.10 2.18

Subtotal 115.0 124.6 134.5 134.87 142.19

Sideline production 18.9 21.3 23.9 27.85 29.78

Total 133.9 145.9 158.4 162.72 171.97

- 103 -

ANNEX 2Table 14

CHINA

COUNTRY ECONOMIC MEMORANDUM

Brigade and Team Industry(Y billion)

1977 1978 1979 1980 1981

Gross OutputConstant pric:es /a 14.74 17.01 19.80 23.65 25.77Current prices lb 14.46 16.69 19.67 23.56 25.67

Net OutputCurrent prices /c 4.34 5.01 5.90 7.07 7.70

/a Data provided by SSB.

/b Based on information supplied by SSB for 1977-79 and an implicit grossoutput deflator for industry for 1980. Same deflator used in 1981 as in1980.

/c Gross outpujt at current prices multiplied by 0.3 (ratio applied by SSBin estimating net output of commune industry).

- 104 -

ANNEX 2Table 15

CHINA

COUNTRY ECONOMIC MEMORANDUM

From NMP to GDP at Market Prices (Y billion) /a1977

Non-Brigade Social Depre- material

NMP ind. services ciation services Rent GDP

Agriculture 98.1 -4.3 -1.0 +1.3 94.1Industry 119.0 +4.3 -1.2 +8.8 130.9Construction 10.5 -0.1 +0.2 10.6Transport 10.5 -0.1 +2.1 12.5Commerce 26.3 -0.2 +0.6 26.7Nonmaterial +2.6 +2.5 +18.0 +9.3 32.4

services

Total 264.4 0 0 15.5 18.0 9.3 307.2

/a For information on the assumptions made in converting NMP data to GDPin this and subsequent tables see Report No. 3391-CHA, Annex A.

- 105 -

ANNEX 2Table 16

CHINA

COUNTRY ECONOMIC MEMORANDUM

From NMP to GDP at Market Prices (Y billion)1978

Non-Brigade Social Depre- material

NMP Ind. services ciation services Rent GDP

Agriculture 106.5 -5.0 -1.1 +1.5 101.9Industry 1.40.8 +5.0 -1.4 +10.5 154.9Construction 12.5 -0.1 +0.3 12.7Transport 11.8 -0.1 +2.3 14.0Commerce 29.4 -0.3 +0.7 29.8Nonmaterial

services +3.0 +2.9 +20.5 +10.5 36.9

Total 301.0 0 0 18.2 20.5 10.5 350.2

- 106 -

ANNEX 2Table 17

CHINA

COUNTRY ECONOMIC MEMORANDUM

From NMP to GDP at Market Prices (Y billion)1979

Non-Brigade Social Depre- material

NMP Ind. services ciation services Rent GDP

Agriculture 131.8 -5.9 -1.3 +1.8 126.4Industry 153.6 +5.9 -1.5 +11.4 169.4Construction 13.0 -0.1 +0.3 13.2Transport 12.1 -0.1 +2.4 14.4Commerce 24.5 -0.2 +0.6 24.9Nonmaterial

services +3.2 +3.2 +22.8 +11.7 40.9

Total 335.0 0 0 19.7 22.8 11.7 389.2

- 107 -

ANNEX 2Table 18

CHINA

COUNTRY ECONOMIC MEMORANDUM

From NMP to GDP at Market Prices (Y billion)1980

Non-Brigade Social Depre- material

NMP Ind. services ciation services Rent GDP

Agriculture 146.6 -7.1 -1.5 +2.0 140.0Industry 169.8 +7.1 -1.7 +12.6 187.8Construction 15.0 -0.2 +0.3 15.1Transport 11.1 -0.1 +2.2 13.2Commerce 24.2 -0.2 +0.6 24.6Nonmaterial +3.7 +3.5 +24.9 +12.8 44.9

services

Total 366.7 0 0 21.2 24.9 12.8 425.6

- 108 -ANNEX 2Table 19

CHINA

COUNTRY ECONOMIC MEMORANDUM

From NMP to GDP at Market Prices (Y billion)

1981

No n-Brigade Social Depre- material

NMP Ind. services ciation services Rent GDP

Agriculture 163.4 -7.7 -1.6 +2.2 156.3

Industry 171.9 +7.7 -1.7 +12.8 190.7Construction 15.2 -0.2 +0.4 15.4Transport 11.2 -0.1 +2.2 13.3

Commerce 27.0 -0.3 +0.7 27.4Nonmaterial

services -3.9 +3.7 +26.4 +13.6 47.6

Total 388.7 0 0 22.0 26.4 13.6 450.7

- 109 -

ANNEX 2Table 20

CHINA

COUNTRY ECONOMIC MEMORANDUM

GDP by Sector at Current Prices(Billion Yuan)

1977 1978 1979 1980 1981

Agriculture 94.1 101.9 126.4 140.0 156.3Industry 130.9 154.9 169.4 187.8 190.7Construction 10.6 12.7 13.2 15.1 15.4Transport 12.5 14.0 14.4 13.2 13.3Commerce 26.7 29.8 24.9 24.6 27.4Nonmaterial services 32.4 36.9 40.9 44.9 47.6

Total 307.2 350.2 389.2 425.6 450.7

- 110 -

ANNEX 2Table 21

CHINA

COUNTRY ECONOMIC MEMORANDUM

GDP by Sector at Constant Prices(Billion Yuan; 1978 = Base)

1978 1979 1980 1981

Agriculture 101.9 107.7 107.9 112.7Industry 154.9 174.6 194.0 200.7Other 93.4 91.9 91.4 91.5

Total 350.2 374.2 393.3 404.9

Deflators (1978 = 100)Gross domestic product /a 1.000 1.040 1.082 1.113Agriculture /b 1.000 1.174 1.297 1.387Industry /c 1.000 0.970 0.968 0.950Other sectors /d 1.000 1.016 1.070 1.133

/a Implicit NMP deflator.

/b Net output deflator for agriculture from Annex, Table 2.

/c Net output deflator for industry from Annex 2, Table 2.

/d Residual.

- ill -

ANNEX 2Table 22

CHINA

COUNTRY ECONOMIC MEMORANDUM

National Accounts Summary in Constant Yuan(Y billion; 1978 = Base Year)

1978 1979 1980 1981

1. Gross domestic product 350.2 374.2 393.3 404.92. Terms of trade effect - -1.0 -1.3 -2.23. Gross domestic income 350.2 373.2 392.0 402.7

4. Resource gap (5-6) 2.2 2.8 3.2 -2.05. Import (g + nfs) 19.6 22.3 25.1 26.66. Capacity to import 17.4 19.5 21.9 28.67. (Exports (g + nfs)) 17.4 20.5 23.2 30.8

8. Total Expenditures 352.4 376.0 395.2 400.7

9. Consumption 232.6 249.9 267.7 277.910. General Government n.a. n.a. n.a. n.a.11. Private n.a. n.a. n.a. n.a.

12. Investment 119.8 126.1 127.5 122.813. Fixed investment n.a. n.a. n.a. n.a.14. Changes in stocks n.a. n.a. n.a. n.a.

15. Domestic savings 117.6 124.3 125.6 127.016. Net factor income .. -0.1 -0.2 -0.317. Current transfers 1.0 1.0 0.9 0.7

18. National savings 118.6 125.2 126.3 127.4

Yuan deflators (1978=100)19. Gross domestic product /a 1.000 1.040 1.082 1.11320. Imports (g + nfs)/b 1.000 1.194 1.392 1.45521. Exports (g + nfs)/c 1.000 1.137 1.313 1.34922. Total expenditures /d 1.000 1.044 1.088 1.11823. Consumption /e 1.000 1.064 1.120 1.15924. Investment If 1.000 1.004 1.022 1.022

/a Implicit NMP deflator./b Import pric:e index (chain)./c Export price index (chain)./d Combination of 19, 20 and 21.7Te Residual.If Gross outpult deflator for industry from Annex 2, Table 2.

- 112 -

ANNEX 2Table 23

CHINA

COUNTRY ECONOMIC MEMORANDUM

Estimates of GNP 1978-81(Y billion at current prices)

1978 1979 1980 1981

GDP. (current prices) 350.2 389.2 425.6 450.7Net factor income from abroad - -0.1 -0.2 -0.3

GNP (current prices) 350.2 389.1 425.4 450.4Implicit NMP deflator 100.0 104.0 108.2 111.3

(1978 = 100)

GNP (constant 1978 prices) 350.2 374.1 393.2 404.7

Exchange rate 1.6836 1.5549 1.4984 1.7050

- 113 -

STATISTICAL APPENDIX

Table of Contents

Table No.

SECTION I - POPULATION, EMPLOYMENT, INCOMES

1.1 Population and Vital Statistics, 1949-811.2 Population by Province, 1978-811.3 Birth and Death Rates for Urban and Rural Areas, 1957-791.4 Percent of Population in Cities, by Province, 1979-811.5 Labor Force and Employment, 1949-811.6 Wages of Staff and Workers, 1952-811.7 Employment and Wages by Branch of (State-Owned) Industry, 1977-811.8 Distribution of Collective Income, 1979-811.9 Distribution of Collective Foodgrains, 1979/801.10 Average Distributed Collective Income, 1957-80

SECTION II - NATIONAL ACCOUNTS

2.1 National Accounts Summary in Current Prices2.2 National Accounts Summary in Constant Prices2.3 Net Material Product, 1949-812.4 Net Material Expenditure Shares, 1952-812.5 Sectoral. Gross Output at Constant Prices, 1949-812.6 Composition of State Capital Construction Expenditure, 1952-812.7 Capital Construction by Sources and Uses at Current Prices, 1952-81

SECTION III - BALANCE OF PAYMENTS

3.1 Balance of Payments3.2 Total Merchandise Exports and Imports and Balance of Trade, 1950-813.3 Merchandise Exports by Broad SITC Categories, 1976-813.4 Major Exports by Volume and Value, 1976-813.5 Imports by Broad End-Use Categories, 1950-813.6 Major Imports by Volume and Value, 1976-813.7 Total Merchandise Exports and Imports to and From Centrally Planned

and MaLrket Economy Countries, 1950-793.8 Direction of Trade, 1977-813.9 Export and Import Price Indices3.10 Exchange Rate, 1957-82

SECTION IV - EXTERNAL DEBT

4.1 External Debt by Type of Credit, 1980-81

- 114 -

Table No.

SECTION V - PUBLIC FINANCE

5.1 State Budget Revenues, 1950-825.2 Budget Revenues from State-Owned Enterprises by Sector, 1957-79

5.3 Budget Revenues: Shares of Central and Local Government, 1957-815.4 Revenue Sharing by Provinces, 19805.5 State Budget Expenditure by Broad Purpose, 1950-815.6 State Budget Expenditure by Activity, 1950-815.7 Breakdown of State Budget Expenditure on Capital Construction,

Education and Health, 1957-815.8 Breakdown of State Budget Expenditure on Agriculture, 1965-815.9 Budget Expenditure: Shares of Central and Local Government, 1957-81

SECTION VI - MONETARY STATISTICS

6.1 Money Supply, 1979-816.2 Consolidated Balance Sheet of the State Banking System, 1979-81

6.3 Deposits and Loans by Rural Credit Cooperatives, 1979-816.4 Interest Rates on Loans6.5 Interest Rates on Individual Deposits6.6 Interest Rates on Deposits of Organizations

SECTION VII - AGRICULTURE

7.1 Arable and Cropped Area, 1949-817.2 Gross Output of Agricultural Subsectors, 1952-817.3 Foodgrain Production, 1952-817.4 Production of Oilseeds, 1952-817.5 Production of Cash Crops, 1952-817.6 Livestock Population, 1952-817.7 Production From Marine and Freshwater Fisheries, 1952-817.8 Output of Marine Products, 1952-817.9 Commune and Brigade Enterprises, 1976-817.10 Commune and Brigade Enterprises by Sector, 1978-817.11 Agricultural Statistics by Province, 1979

SECTION VIII - INDUSTRY

8.1 Output of Major Industrial Products, 1952-828.2 Number of Enterprises and Gross Value of Output by Branch of Industry,

1977-818.3 Capital Construction by Branch of Industry, 1977-818.4 Electricity Consumption by Branch of Industry, 1977-798.5 Key Industrial Statistics by Ownership, 19798.6 Key Industrial Statistics for Light and Heavy Industry, 1979

- 115 -

Table No.

8.7 Gross Industrial Output by Province, 1979-818.8 Components of Value Added in Industry (Current Prices), 1978-81

SECTION IX - ENERGY

9.1 Growth of Energy Production, 1952-819.2 Crude Oil Production by Region and Major Field, 1977-819.3 Electricity Generation and Installed Generating Capacity, 1949-809.4 Hydro and Thermal Installed Capacity by Region, 1970-799.5 Electricity Sales by Consumer Category, 1949-799.6 Electrification of Communes and Brigades by Region, 1979

SECTION X - OTHER SECTORS

10.1 Transportation Indicators, 1949-8110.2 EducaLtion: Number of Pupils Enrolled, 1949-8110.3 Health Service Indicators, 1949-8110.4 Miscellaneous Socioeconomic Indicators, 1949-81

SECTION XI - PRICES AND SALES

11.1 Pricet Indices, 1952-8111.2 Procurement Prices, Ex-factory Prices and Retail Prices, 1957-8111.3 Purchlases of Commercial Departments and Retail Sales, 1952-81

- 116 -

Table 1.1: POPULATION AND VITAL STATISTICS, 1949-81

Rate ofYear-end natural Crude birth Crude deathpopulation increase rate per rate per

Year (millions) per thousand thousand thousand

1949 541.67 16.0 36.0 20.0

1952 574.82 20.0 37.0 17.0

1957 646.53 23.2 34.0 10.8

1965 725.38 28.5 38.1 9.6

1970 825.92 26.0 33.6 7.6

1971 847.79 23.4 30.7 7.3

1972 867.27 22.3 29.9 7.6

1973 887.61 21.0 28.1 7.1

1974 904.09 17.6 25.0 7.4

1975 919.90 15.8 23.1 7.3

1976 932.67 12.7 20.0 7.3

1977 945.24 12.1 19.0 6.9

1978 958.09 12.0 18.3 6.3

1979 970.92 11.7 17.9 6.2

1980 982.55 n.a. n.a. n.a.

1981 996.22 n.a. n.a. n.a.

Source: State Statistical Bureau.

- 117 -

Table 1.2: POPULATION BY PROVINCE, 1978-81(Millions)

Year-end1978 1979 1980 1981

National TotaL 958.09 970.92 982.55 996.22

Southeast RegionSichuan 97.07 97.74 98.20 99.24Guizhou 26.86 27.31 27.77 28.27Yunnan 30.92 31.35 31.73 32.23Xizang 1.79 1.83 1.85 1.86

Northwest RegionShaanxi 27.79 28.07 28.31 28.65Gansu 18.73 18.94 19.18 19.41Qinghai 3.65 3.72 3.77 3.82Ningxia 3.66 3.64 3.74 3.83Xinjiang 12.33 12.56 12.83 13.03

Central South RegionHenan 70.66 71.89 72.86 73.97Hubei 45.75 46.33 46.84 47.40Hunan 51.66 52.23 52.81 53.60Guangxi 34.02 34.70 35.38 36.13Guangdong 55.93 56.81 57.80 58.84

East RegionShanghai 10.98 11.32 11.46 11.63Jiangsu 58.34 58.92 59.38 60.10Zhejiang 37.51 37.92 38.27 38.71Anhui 47.13 48.03 48.93 49.56Fujian 24.50 24.88 25.18 25.57Jiangxi 31.83 32.29 32.70 33.04Shandong 71.60 72.32 72.96 73.95

North RegionBeijing 8.50 8.71 8.86 9.02Tienjin 7.21 7.41 7.51 7.63Hebei 50.57 51.05 51.68 52.56Shanxi 24.24 24.47 24.76 25.09Nei Monggol /a 8.90 18.52 18.77 19.03

Northeast RegionLiaoning 37.43 34.43 34.87 35.35Jilin 24.74 21.85 22.11 22.31Heilongjiang 33.76 31.69 32.04 32.39

/a The boundaries of Nei Monggol were redrawn in 1979 with new boundariesincluding what had been portions of five adjoining provinces; hence thedramatic population increase. The same boundary adjustment accounts, ofcourse, for population declines in the nearby provinces.

Source: State Statistical Bureau.

- 118 -

Table 1.3: BIRTH AND DEATH RATES FOR URBAN AND RURAL AREAS, 1970-79

Urban Rural TotalCBR /a CDR /b CBR /a CDR /b CBR /a CDR /b

1957 44.5 8.5 32.8 11.1 34.0 10.8

1965 27.6 5.9 39.5 10.0 38.1 9.6

1970 n.a. n.a. n.a. n.a. 33.6 7.6

1971 21.9 5.5 31.9 7.6 30.7 7.3

1972 20.1 5.5 31.2 7.9 29.9 7.6

1973 18.1 5.2 29.3 7.3 28.1 7.1

1974 15.1 5.5 26.2 7.6 25.0 7.4

1975 15.2 5.6 24.2 7.6 23.1 7.3

1976 13.7 6.9 20.9 7.4 20.0 7.3

1977 13.9 5.7 19.7 7.1 19.0 6.9

1978 14.1 5.3 18.9 6.4 18.3 6.3

1979 13.9 5.1 18.5 6.4 17.9 6.2

/a Crude birth rate (per thousand).

lb Crude death rate (per thousand).

Source: State Statistical Bureau.

- 119 -

Table 1.4: PERCENT OF URBAN POPULATION BY PROVINCE, 1979-81 /a

1979 1981

National Total 13.2 13.9

Southwest RegionSichuan 9.0 9.3Guizhou 9.3 9.0Yunnan 8.1 8.3Xizang 9.6 8.3

Northwest RegionShaanxi 11.5 12.6Gansu 11.0 11.4Qinghai 16.0 17.1Ningxia 14.1 15.1Xinjiang 21.3 22.4

Central South RegionHenan 7.3 7.8Hubei 12.7 13.4Hunan 9.2 9.7Guangxi 8.1 8.2Guangdong 12.3 12.7

East RegionShanghai 57.0 57.7Jiangsu 11.7 12.3Zhejiang 9.6 10.8Anhui 9.0 9.6Fujian 11.7 12.2Jiangxi 11.0 12.0Shandong 7.2 7.7

North RegionBeijing 53.4 55.4Tianjin 50.7 51.7Hebei 8.9 9.2Shanxi 13.0 13.9Nei MonTggol 22.1 23.4

Northeast: RegionLiaoning 31.4 33.5Jilin 28.1 29.6Heilongjiang 30.3 31.7

/a Includes the population of cities, county towns and some townsbelow the county level. However, the agricultural populationof these cities and towns is counted as rural rather than urban.

Source: State Statistical Bureau.

Table 1.5: LABOR FORCE AND EMPLOYMENT, 1949-81(Millions)

1949 1952 1957 1962 1965 1970 1977 1978 1979 1980 1981

Total Labor Force /a 180.82 207.29 237.71 259.10 286.70 344.32 393.77 398.56 405.81 418.96 432.80

Employment by EconomicSectorAgriculture /b n.a. 173.17 193.10 n.a. 233.98 278.14 293.45 294.26 299.25 302.11 311.71Industry /c n.a. 12.46 14.01 n.a. 18.28 28.09 48.09 50.09 53.40 56.00 57.96Other, of which:/a, /d n.a. 21.66 30.60 n.a. 34.44 38.09 52.23 54.21 53.15 60.85 63.13Construction,transport,commerce /a, /d n.a. n.a. n.a. n.a. n.a. n.a. n.a. 26.01 23.35 n.a. 38.29Other services n.a. n.a. n.a. n.a. n.a. n.a. n.a. 28.20 29.80 n.a. 24.84

Employment byInstitutional SectorWorkers and staff,of which: 8.09 16.03 31.01 43.21 49.65 62.16 91.12 94.99 99.67 104.44 109.40State organiza-tions /b n.a. 15.80 24.51 n.a. 37.38 47.92 71.96 74.51 76.93 80.19 83.72Urban collectives n.a. 0.23 6.50 n.a. 12.27 14.24 19.16 20.48 22.74 24.25 25.68

Commune workers 165.49 182.43 205.66 213.73 235.34 281.20 302.50 303.42 305.82 313.71 322.27Urban self-employed 7.24 8.83 1.04 2.16 1.71 n.a. n.a. 0.15 0.32 0.81 1.13

/a Includes those awaiting permanent jobs, most of whom are in temporary jobs.7W Includes state farms.7c Includes commune but not brigade industry. Industry defined as mining, manufacturing and power.7W Derived residually.

Source: State Statistical Bureau.

- 121 -

Table 1.6: WAGES OF STAFF AND WORKERS, 1952-81

1952 1957 1965 1970 1975 1977 1978 1979 1980 1981

Total wage bill(billion yuan) n.a. n.a. n.a. n.a. n.a. 51.47 56.92 64.66 77.30 82.00

State-owned enter-prises (6.75)(16.64)(23.50)(27.80)(36.60)(42.57)(46.90)(52.94)(62.80)(66.00)

Urban collectives n.a. n.a. n.a. n.a. n.a. (8.90)(10.02)(11.72)(14.50)(16.00)

Average wage (yuan) n.a. n.a. n.a. n.a. n.a. n.a. 614 668 762 772

State-owned enter-prises 446 637 652 609 613 602 644 705 803 812

Urban collectives n.a. n.a. n.a. n.a. n.a. n.a. 505 542 624 642

Source: State Statistical Bureau.

Table 1.7; EMPLOYMENT AND WAGES BY BRANCH OF(STATE-OWNED) INDUSTRY, 1977-81 /a

Number of workers and staff /b Wage bill of workers and staff1977 1978 1979 1980 1981 1977 1978 1979 1980 1981

----------- (-000 persons) ---- ------------- (million yuan) -----------------

Basic metallurgy 3,017 3,068 3,012 3,021 3,123 1,960.6 2,199.9 2,455.0 2,808.3 2,875.0

Electric power 701 742 786 833 887 429.5 491.1 577.6 712.4 760.3

Coal 3,653 3,728 3,770 3,813 3,867 2,684.4 3,024.3 3,422.9 3,844.5 3,962.4

Petroleum 480 485 478 495 552 327.5 371.5 413.0 477.1 536.1

Chemicals 2,765 2,825 2,815 2,898 2,991 1,598.1 1,751.6 1,965.3 2,325.3 2,410.9

Machinery & metalproducts 9,107 9,247 9,175 9,296 9,951 5,601.0 6,174.8 6,723.5 7,644.6 8,140.5

Building materials 1,836 1,848 1,857 1,913 1,939 1,088.1 1,184.5 1,308.9 1,540.8 1,573.2

Timber & woodproducts 1,215 1,181 1,200 1,222 1,263 937.8 956.6 1,039.2 1,170.3 1,248.7

Food, beverages& tobacco 1,970 1,937 2,006 2,132 2,349 1,085.7 1,166.1 1,329.9 1,620.2 1,819.4

Textiles 2,576 2,651 2,740 3,119 3,590 1,559.7 1,726.1 1,981.8 2,527.9 2,827.7

Paper & pulp 382 389 410 451 477 229.0 252.5 296.4 359.6 372.8

Others 1,864 1,770 2,132 1,855 1,958 1,201.4 1,105.6 1,505.4 1,462.7 1,531.7

Total 29,566 29,868 30,381 31,048 32,947 18,702.8 20,404.6 23,018.9 26,493.7 28,058.7

/a State-owned units only. Excludes urban and rural collectives.

/b Average number during year.

Source: State Statistical Bureau.

- 123 -

Table L.8: DISTRIBUTION OF COLLECTIVE INCOME, 1979-81 /a

Range of annual percapita distributed % of production teamscollective income 1979 1980 1981

40 yuan or below 16.1 15.7 11.5

41-50 yuan 11.4 11.7 8.4

51-80 yuan 31.7 31.5 26.8

81-100 yuan 15.6 15.1 16.0

101 yuan or above 25.2 26.0 37.3

Total 100.0 100.0 100.0

/a See also Table 7.11 (which includes data on distribu-ted collective income by province), and notes toTable 1.10.

Source: State Statistical Bureau.

- 124 -

Table 1.9: DISTRIBUTION OF COLLECTIVE FOODGRAINS, 1979/80

Range (amount ofunprocessed grain % of production teams

per capita)/a 1979 1980

Below 300 jin /b 11.7 12.8

301-360 jin 10.0 10.6

361-400 jin 9.0 8.8

401-450 jin 12.0 11.8

451-500 jin 12.2 12.2

More than 501 jin 45.1 43.8

Total 100.0 100.0

/a Distributed by production teams to their members as col-lective income in kind.

/b 1 jin equals 0.5 kg.

Source: State Statistical Bureau.

- 125 -

Table 1.10: AVERAGE DISTRIBUTED COLLECTIVE INCOME, 1957-80

Annual distributedcollective income

per capita (yuan) /a

1957 40.5

1975 63.2

1977 65.0

1978 74.0

1979 83.4/b

1980 85.9/b

/a Distributed collective income is income distributed, incash or in kind, to production team members out of netincome of the team. It excludes income earned by teammembers from noncollective sources - private plots andother activities - as well as income from sales ofmanure by households to the collective and those wagesin collective enterprises that are paid directly incash to individual workers.

lb Income in kind valued at 1978 prices.

Source: State Statistical Bureau.

- 126 -

Table 2.1: NATIONAL ACCOUNTS SUMMARY IN CURRENT PRICES(Billion Yuan)

1978 1979 1980 1981

1. Gross domestic product 350.2 389.2 425.6 450.7

2. Resource Gap (M - X) 2.2 3.3 4.4 -2.93. Imports (g + nfs) 19.6 26.6 34.9 38.74. Exports (g + nfs) 17.4 23.3 30.5 41.6

5. Total Expenditures 352.4 392.5 430.0 447.8

6. Consumption 232.6 265.9 299.7 322.37. General government n.a. n.a. n.a. n.a.8. Private n.a. n.a. n.a. n.a.

9. Investment 119.8 126.6 130.3 125.510. Fixed investment n.a. n.a. n.a. n.a.11. Changes in stocks n.a. n.a. n.a. n.a.

12. Domestic savings 117.6 123.3 125.9 128.413. Net factor income .. -0.1 -0.2 -0.314. Current transfers 1.0 1.0 1.0 0.815. National savings 118.6 124.2 126.7 128.9

Average exchange rates

16. Yuan per US$ 1.6836 1.5549 1.4984 1.705017. Yuan per SDR 2.1078 2.0089 1.9502 2.0105

Source: World Bank estimates.

- 127 -

Table 2.2: NATIONAL ACCOUNTS SUMMARY IN CONSTANT PRICES(US$ billion at constant 1978 prices)

1978 1979 1980 1981

1. Gross domestic product 208.0 222.3 233.6 240.52. Terms of trade effect - -0.6 -0.8 -1.33. Gross domestic income 208.0 221.7 232.8 239.2

4. Resource gap (5-6) 1.3 1.6 1.9 -1.25. Imports (g + nfs) 11.6 13.2 14.9 15.86. Capacity to import 10.3 11.6 13.0 17.07. [Exports (g + nfs)] 10.3 12.2 13.8 18.3

8. Total expenditures 209.3 223.3 234.7 238.0

9. Consumption 138.1 148.4 159.0 165.110. General government n.a. n.a. n.a. n.a.11. Private n.a. n.a. n.a. n.a.

12. Investment 71.2 74.9 75.7 72.913. Fixed investment n.a. n.a. n.a. n.a.14. Changes in stocks n.a. n.a. n.a. n.a.

15. Domestic saving 69.9 73.9 74.6 75.416. Net: factor income .. -0.1 -0.1 -0.217. Current transfers 0.6 0.6 0.5 0.418. National saving 70.5 74.4 75.0 75.6

Yuan deflators (1978=100)19. Gross domestic product 1.000 1.040 1.082 1.11320. Imports (g + nfs) 1.000 1.194 1.392 1.45521. Exports (g + nfs) 1.000 1.137 1.313 1.34922. Tota:L expenditures 1.000 1.044 1.088 1.11823. Consumption 1.000 1.064 1.120 1.15924. Investment 1.000 1.012 1.015 1.015

25. Exchange rate index 1.000 1.083 1.124 0.987(US$ per yuan)

Source: World Bank estimates.

Table 2.3: NET MATERIAL PRODUCT, 1949-81

1949 1952 1957 1962 1965 1970 1975 1977 1978 1979 1980 1981

Net material product at currentprices (billion yuan) 35.8 58.9 90.8 92.4 138.7 192.6 250.3 264.4 301.0 335.0 366.7 388.7

Shares in NMP at Current Prices (%)Industry n.a. 19 28 33 37 40 45 45 47 46 46 44Agriculture n.a. 58 47 48 46 41 39 37 35 39 40 42Construction n.a. 4 5 3 4 4 4 4 4 4 4 4Transport n.a. 4 4 4 .4 4 4 4 4 4 3 3Commerce n.a. 15 16 12 9 11 8 10 10 7 7 7 1

Total n.a. 100 100 100 100 100 *100 100 100 100 100 100 OD

Net material product at constantprices (index, 1949=100) 100.0 169.8 259.8 222.3 335.4 500.4 656.5 692.9 778.7 833.2 876.5 902.8

Source: State Statistical Bureau.

Table 2.4: NET MATERIAL EXPENDITURE SHARES, 1952-81

(billion yuan)

1952 1957 1962 1965 1970 1975 1977 1978 1979 1980 1981

Available nationalincome at currentprices(billion yuan)/a 60.7 93.5 94.8 134.7 187.6 245.1 257.3 297.5 335.6 368.4 384.9

Of which:Accumulation 13.0 23.3 9.9 36.5 61.8 83.0 83.2 108.7 116.1 116.5 109.0

Consumption 47.7 70.2 84.9 98.2 125.8 162.1 174.1 188.8 219.5 251.9 275.9

Composition of H

accumulation (%)Fixed invest-ment 43.8 60.1 n.a. 69.3 67.8 78.1 77.6 72.5 73.1 77.4 n.a.

Circulating assets 56.2 39.9 n.a. 30.7 32.2 21.9 22.4 27.5 26.9 22.6 n.a.

Productiveinvestment n.a. n.a. n.a. n.a. 73 n.a. 74 71 65 57 50

Nonproductiveinvestment n.a. n.a. n.a. n.a. 27 n.a. 26 29 35 43 50

la Available national income is defined as investment plus material consumption; it is not equal

to national income because of the difference between imports and exports and because of statis-

tical discrepancies.

Sources: State Statistical Bureau.

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Table 2.5: SECTORAL GROSS OUTPUT AT CONSTANT PRICES, 1949-81(Billion yuan except where otherwise specified)

1949 1952 1957 1962 1965 1970 1971 1975 1977 1978 1979 1980 1981

Agriculture andIndustry

1952 prices 46.6 82.7 138.81957 prices 124.1 128.0 198.4 313.7 352.01970 prices 347.9 450.4 506.7 569.0 617.5 661.9 691.S1980 prices 716.1 749.1Index (1952=100) 56.3 100.0 167.8 173.0 268.3 424.2 n.a. 616.6 693.7 779.0 845.2 906.0 946.8

Agriculture /a1952 prices 32.6 48.4 60.4/b1957 prices 53.7/b 43.0 59.0 71.6 73.81970 prices 109.0 128.5 133.9 145.9 158.4 162.7 172.C1980 prices 218.7 231.2Index (1952=100) 67.3 100.0 124.8 99.9 137.1 166.3 n.a. 202.2 210.7 229.6 249.4 256.1 270.7

Light and HeavyIndustry

1952 prices 14.0 34.3 78.41957 prices 70.4 85.0 139.4 242.1 278.21970 prices 238.9 321.9 372.8 423.1 459.1 499.2 519.91980 prices 497.4 517.8Index (1952=100) 40.8 100.0 228.6 275.9 452.6 786.1 n.a. 1,216.5 1,408.5 1,598.6 1,734.4 1,885.3 1,962.7

Light Industry /c1952 prices 10.3 22.1 40.51957 prices 37.4 39.5 70.3 105.1 111.9

1970 prices 102.3 139.3 163.0 180.6 198.0 234.4 267.'1980 prices 233.4 266.3Index (1952=100) 46.6 100.0 183.2 193.5 344.5 514.9 n.a. 746.5 873.7 968.1 1,061.0 1,256.2 1,433.3

Heavy Industry /c1952 prices 3.7 12.2 37.91957 prices 33.0 45.5 69.1 137.0 166.31970 prices 136.6 182.6 209.8 242.5 261.1 264.8 252.41980 prices 264.0 251.5Index (1952=100) 30.3 100.0 310.7 428.4 650.6 1,290.0 n.a. 2,091.7 2,402.8 2,777.7 2,991.6 3,033.5 2,890.9

/a For a breakdown of agricultural output, see Table 7.2.

/b In 1957, there was a substantial change in the coverage of "agriculture." The difference between these two figuresreflects this, in addition to the change in prices between 1952 and 1957.

/c For a more detailed breakdown of industrial output, see Table 8.8.

Source: State Statistical Bureau.

Table 2.6: COMPOSITION OF STATE CAPITAL CONSTRUCTION EXPENDITURE(CURRENT PRICES), 1952-80

(Million yuan)

1952 1957 1965 1970 1975 1977 1978 1979 1980 1981

Industry &Construction /a 1,90o 7,900 9,400 19,100 23,700 22,500 29,400 28,200 28,529 22,447Of which: Light (400) (800) (700) (1,200) (3,400) (2,500) (2,700) (3,000) (n.a.) (n.a.)

Heavy (1,500) (7,100) (8,700) (17,900) (20,300) (20,000) (26,700) (25,200) (n.a.) (n.a.)

Transport &commlnications 800 2,200 3,400 6,100 7,400 5,300 7,200 6,600 6,234 4,047

Agriculture, etc. 600 1,300 2,500 2,600 4,200 4,500 5,600 6,300 5,203 2,921

Commerce, food H

distribution,trade 100 400 400 600 1,300 1,300 1,500 1,900 2,857 2,801

Culture, health,education,research, etc. 300 700 500 300 1,000 1,000 1,400 2,100 4,429 4,363

Public utilities 200 400 300 300 800 900 1,400 2,700 3,381 3,185

Others 500 900 600 500 800 900 1,500 2,200 3,306 3,025

Total 4,400 13,800 17,100 29,500 39,200 36,400 48,000 50,000 53,939 42,789

/a For a more detailed breakdown of industrial investment, see Table 7.3.

Source: State Statistical Bureau.

Table 2.7: CAPITAL CONSTRUCTION BY SOURCES AND USES AT CURRENT PRICES, 1952-81(Million yuan)

1952 1957 1965 1970 1975 1977 1978 1979 1980 1981

Value of completed statecapital constuction 3,114 12,922 15,993 19,257 25,053 26,031 35,637 41,827 42,664 37,117

State capital constructionexpenditure 4,356 13,829 17,089 29,499 39,186 36,441 47,955 49,988 53,939 42,789

State budget (3,711) (12,645) (15,437) (25,517) (31,812) (29,439) (39,593) (39,497) (28,061) (20,760)

Locally financed (645) (1,184) (1,652) (3,982) (7,374) (7,002) (8,362) (10,491) (16,390) (14,090)

Other - _ _ _ _ _ , _ (9,488) (7,939)

Proportion for productivepurposes 66.9 76.0 84.7 93.5 85.7 83.3 82.6 73.0 66.3 58.7

Proportion for nonproduc-tive purposes 33.1 24.0 15.3 6.5 14.3 16.7 17.4 27.0 33.7 41.3

Of which housing 10.3 9.3 5.5 2.6 5.9 6.9 7.8 14.8 20.0 25.5

Source: State Statistical Bureau.

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Table 3.1: BALANCE OF PAYMENTS(US$ million at current prices)

1978 1979 1980 1981

1. Exports (g + nfs) 10,370 14,983 20,324 24,4232. Merchandise (f.o.b.) 9,607 13,658 18,492 22,0273. Nonfactor services 763 1,325 1,832 2,396

4. Imports (g 4 nfs) 11,668 17,137 23,252 22,6935. Merchandise (f.o.b.) 10,745 15,619 21,243 20,2926. Nonfactor services 923 1,518 2,009 2,401

7. Resource balance -1,298 -2,154 -2,928 1,730

8. Net factor income -8 -77 -117 -2019. Factor receipts 236 368 577 73410. Factor payments 244 445 694 93511. (M&LT interest paid) n.a. n.a. n.a. n.a.

12. Net current transfers 597 656 640 46713. Transfer receipts 597 656 668 48414. Transfer payments - - 28 17

15. Current balance -709 -1,575 -2,405 1,996

16. Direct investment - - 57 26517. Official grant aid - - 21 156

18. Net M&LT loans (DRS) -830 822 1,756 76919. Disbursements 70 1,435 2,102 1,43220. Repayments 900 613 346 66321. Other M&LT ( net) - - -45 -449

22. Net credit f-rom IMF - - - 52423. Disbursements - - 52424. Repayments - - - -

25. Net short-term capital -241 1,554 76 -95926. Capital flows NEI -69 -30 -91 -4827. Errors and omissions 1,141 -162 1,121 -11

28. Change in net reserves 708 -609 -490 -2,243(- indicates increase)

Source: Bank of China and IMF and World Bank estimates.

- 134 -

Table 3.2: TOTAL MERCHANDISE EXPORTS AND IMPORTS AND BALANCE OFTRADE, 1950-81(US$ million)

Year Total trade Exports Imports Balance

1950 1,135 552 583 -31

1953 2,368 1,022 1,346 -324

1957 3,103 1,597 1,506 91

1962 2,663 1,490 1,173 317

1966 4,614 2,366 2,248 118

1970 4,586 2,260 2,326 -66

1975 14,750 7,264 7,486 -222

1976 13,433 6,855 6,578 277

1977 14,804 7,590 7,214 376

1978 20,638 9,745 10,893 -1,148

1979 29,333 13,658 15,675 -2,017

1980 37,822 18,272 19,550 -1,278

1981 40,375 20,893 19,482 1,411

Source: Ministry of Foreign Trade.

Table 3.3: MERCHANDISE EXPORTS BY BROAD SITC CATEGORIES, 1976-81(In US$ million)

1976 1977 1978 1979 1980 1981

Value Share Value Share Value Share Value Share Value Share Value Share

(X) (X (X MZ (%) (X)

Total Value of Exports 6,855 100.0 7,590 100.0 9,745 100.0 13,658 100.0 18,272 100.0 20,893 100.0

Primary products: 3,744 54.6 4,065 53.6 5,216 53.5 7,315 53.6 9,762 53.4 10,360 49.6

Food and animal products mainly foruse as food (1,661) (24.2) (1,797) (23.7) (2,316) (23.8) (2,701) (19.8) (3,154) (17.3) (3,071) (14.7)

Beverages and tobacco (62) (0.9) (71) (0.9) (71) (0.7) (86) (0.6) (92) (0.5) (85) (0.4)

Nonedible raw materials (excludingfuels) (1,038) (15.2) (1,088) (14.3) (1,417) (14.5) (1,804) (13.2) (1,868) (10.2) (2,062) (9.9)

Mineral fuels, lubricants and relatedraw materials (942) (13.7) (1,068) (14.1) (1,345) (13.8) (2,654) (19.5) (4,588) (25.1) (5,054) (24.2)

Animal and vegetable oil, fats and wax (41) (0.6) (41) (0.6) (67) (0.7) (70) (0.5) (60) (0.3) (88) (0.4)

Industrial products: 3,111 45.4 3,,525 46.4 4,529 46.5 6,343 46.4 8,510 46.6 10,533 50.4

Heavy and chemical industrial products 808 11.8 851 11.2 1,010 10.4 1,497 10.9 2,357 12.9 3,798 18.2

-Chemical and related products (198) (2.9) (184) (2.4) (234) (2.4) (424) (3.1) (630) (3.4) (699) (3.4)

-Machinery and transport equipment (238) (3.5) (296) (3.9) (332) (3.4) (464) (3.4) (851) (4.7) (1,777) (8.5)

-Other heavy industrial products (372) (5.4) (371) (4.9) (444) (4.6) (609) (4.4) (876) (4.8) (1,322) (6.3)

Light industrial and textile products 2,303 33.6 2,674 35.2 3,519 36.1 4,846 35.5 6,153 33.7 6,735 32.2

-Textiles n.a. n.a. n.a. n.a. (1,780) (18.3) (2,450) (17.9) (2,908) (15.9) (3,553) (17.0)

Source: Ministry of Foreign Trade.

Table 3.4: MAJOR EXPORTS, BY VOLUME AND VALUE, 1976-81

Volume Value (in US$ million)1976 1977 1978 1979 1980 1981 1977 1978 1979 1980 1981

Total 7,590 9,745 13,658 18,271 20,893

Cereals (O000 tons) 1,474.9 1,365.1 1,682.8 1,542.1 1,618.3 1,260.8 361 516 489 527 456Rice ('000 tons) 876.1 1,032.9 1,435.2 1,053.1 1,116.4 583.3 256 442 338 391 240Soybeans ('000 tons) 199.2 129.5 112.9 305.9 113.5 136.0 41- 32 98 39 53Beans ( 000 tons) 84.4 55.4 45.8 67.2 56.1 76.4 42 24 31 25 48Other cereals ( 000 tons) 211.9 147.3 88.9 115.9 332.3 465.1 23 17 22 72 115

Peanut oil ( 000 tons) 13.7 4.3 11.2 17.4 19.8 56.4 5 13 17 19 56Peanut kernel ('000 tons) 28.4 14.9 18.1 35.2 75.6 238.7 13 18 36 68 326Fresh eggs ( 000 jin) 69,700 67,620 81,170 99,510 105,630 110,240 32 38 46 50 59Live hogs ('000 head) 2,310.8 2,313.0 2,462.8 2,422.1 2,468.2 2,574.2 169 179 197 214 229Frozen pork ( 000 tons) 38.4 26.2 42.8 44.9 63.8 67.2 45 69 72 111 111Frozen rabbit meat ( 000 tons) 28.5 27.8 39.3 43.5 38.6 31.5 40 53 53 49 43Aquatic products ('000 tons) 93.4 87.7 92.0 97.8 105.7 102.2 158 258 348 356 343Frui,t ('000 tons) 198.5 227.9 251.0 259.1 260.5 204.8 67 82 95 10o 75Canned fruit ( 000 tons) 197.8 183.3 222.2 286.3 352.8 369.8 150 202 273 336 336Beer ('000 tons) - 20.8 17.9 19.2 25.9 31.1 7 6 6 8 11Cotton yarn ('000 bales) 146.1 117.5 128.8 133.7 171.1 185.5 52 57 68 86 91Cotton cloth (mln. meters) - 771.61 1,095.64 1,108.83 1,086.30 1,173.94 400 580 699 712 745Filature silks (tons) 6,483 5,022 8,739 9,040 7,731 5,198 130 255 271 267 152Silk and satin materials (mln. meters) 115.55 95.22 123.52 145.75 132.25 142.66 136 199 263 253 287Woolen materials (mln. meters) 8.55 6.63 6.39 12.65 15.63 14.36 26 25 47 65 64Tea (-000 tons) 61.2 81.8 86.9 106.8 108.0 89.50 158 186 229 254 196Resin ('000 tons) 160.5 127.4 142.1 183.9 137.2 114.60 50 52 78 89 96Jute bags (-000) 27,800 24,200 37,550 52,850 109,510 130,650 8 14 23 52 57Bristles ('000 cases) 139.5 140.8 130.5 174.7 152.2 140.7 59 55 80 68 58Bristle brushes ('000 dozens) 2,739.6 3,860.0 4,180.0 5,770.0 6,781 9,232 10 14 18 22 26Camel hair (tons) 580 669 623 1,019 538 322 4 3 6 3 2Rabbit hair (tons) 1,970 1,876 2,250 2,675 4,242 4,566 28 42 60 114 147Carpets, superior quality handmade

( 000 square meters) 343.8 501.5 740.2 850.4 846.9 1,150.6 38 61 83 90 114Goat skin ('000 hides) 5,304 6,841 8,160 11,010 9,675 15,102 21 26 53 53 62Fur mattresses ('000 pieces) 4,076.6 3,028.0 5,090.0 6,350.0 6,872.0 4,810.6 50 65 88 100 73Paper ('000 tons) 131.5 104.1 134.0 161.2 173.9 191.8 44 57 78 94 103Sewing machines (-000 units) 336.0 284.0 386.3 496.7 621.0 562.2 12 18 21 26 29Bicycles ('000 units) 392.8 375.9 302.8 642.1 839.0 1,119.4 13 12 26 35 51Porcelain (min. pieces) 542.19 629.81 568.03 740.33 803.46 788.29 81 83 117 140 157Tin ( 000 tons) 7.8 5.6 5.5 4.6 4.2 3.4 57 65 67 67 50Antimony ('000 tons) 2.5 7.7 11.5 12.5 8.9 7.2 22 26 37 29 20Tungsten (U000 tons) 20.5 13.6 18.2 21.3 20.4 22.1 149 172 203 195 208Coal ('000 tons) 2,270 2,633 3,120 4,630 6,317 6,573 70 100 177 265 327Crude oil (U000 tons) 8,495.9 9,107 11,310 13,430 13,309 13,754 773 958 1,750 3,012 3,287Paraffin wax ( 000 tons) 84.5 49.6 62.7 66.0 71.8 59-3 14 24 31 52 41Tires ('000 sets) 299.5 269.8 289.3 414.8 542.6 388.5 20 20 23 31 22Machine tools (pieces) 4,366 4,296 4,805 6,556 7,656 7,968 18 22 31 37 32

Source: Ministry of Foreign Trade.

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Table 3.5: IMPORTS BY BROAD END-USE CATEGORIES, 1950-81(% of total)

1950 1953 1957 1976 1977 1978 1979 1980 1981

Producer goods 83.4 92.1 92.0 86.8 76.1 81.4 81.3 78.9 72.6

Machinery &equipment n.a. n.a. n.a. 30.9 17.7 17.5 25.2 27.5 26.2

Raw materials,of which: n.a. n.a. n.a. 55.9 58.4 63.9 56.1 51.4 46.4

For heavyindustries n.a. n.a. n.a. (33.7) (32.0) (38.2) (32.9) (19.8) (11.5)

For lightindustries n.a. n.a. n.a. (16.5) (19.6) (19.4) (17.3) (24.3) (27.7)

For agricul-ture n.a. n.a. n.a. (5.7) (6.8) (6.3) (5.9) (7.3) (7.2)

Consumer goods 16.6 7.9 8.0 13.2 23.9 18.6 18.7 21.1 27.4

Sources: State Statistical Bureau, Ten Great Years (Peking, Foreign LanguagesPress, 1960), p. 176, and Ministry of Foreign Trade.

Table 3.6: MAJOR IMPORTS, BY VOLUME AND VALUE, 1976-81

Volume Value (in US$ million)1976 1977 1978 1979 1980 1981 1977 1978 1979 1980 1981

Total - - - - - - 7,214 10,893 15,675 19,550 19,482

Trucks /a (units) 18,248 14,916 21,872 24,768 22,015 9,896 139 310 450 323 85Ships & vessels (units) 13 15 29 47 43 19 162 156 231 230 40Airplanes (units) 38 18 13 14 28 7 67 43 25 60 8Steel products (mln. tons) 4.931 5.256 8.638 8.473 5.006 3.319 1,477 2,698 3,522 2,240 1,362Copper ('000 tons) 67.3 91 134 134 128 46 111 168 234 273 84Aluminum ('000 tons) 300.1 150 211 146 110 46 150 215 183 183 70Pig iron (mln. tons) 0.4298 1.183 1.391 0.726 0.353 0.012 97 130 97 50 2Iron ore (mln. tons) 1,4007 2.568 8.022 7.162 7.253 3.336 30 109 101 102 55Natural rubber (00O tons) 197.6 257 227 246 263 132 182 201 280 331 143Chemical fertilizer (mln. tons) 4.5881 6.396 7.333 8.395 10.017 9.306 340 481 655 1,065 1,092Chemicals n.a. n.a. n.a. n.a. 950 991 402 530 635 950 991Agricultural chemicals ('000 tons) 45.1 72 82 82 50 133 60 75 110 78 72Wood pulp ('000 tons) 171.5 216 221 239 420 654 55 49 78 195 291Paper ('000 tons) 154.1 254 364 487 752 762 55 102 173 330 340Watches (mln. units) 0.7636 0.937 2.197 1.876 3.127 5.447 11 34 31 52 73Televisions ('000 units) n.a. 31 89 784 1,605 1,710.8 4 12 82 102 159Tape recorders ('000 units) n.a. n.a. n.a. 201 361 667 n.a. n.a. 6 11 13Cotton ('000 tons) 188.4 181 510 549 898 766 318 680 815 1,420 1,456Acrylic fibers ('000 tons) 18.6 19 24 26 52 115 22 29 32 82 190Polyester fibers ('000 tons) 94.2 142 180 126 251 341 134 157 160 396 548Polyamide fibers ('000 tons) 9 11 13 15 6 32 28 34 54 22 136Cereals (mln. tons) 2.3372 7.014 8.642 11.176 12.895 14.812 679 949 1,485 2,118 2,736Soybeans ('000 tons) 29.5 330 190 579 534 565 100 52 159 141 159Animal fats & oilseeds ('000 tons) /b 102.5 284 331 298 355 183 153 182 194 213 112Sugar (mln. tons) 0.5771 1.598 1.299 1.096 0.912 1.029 342 264 219 294 485Timber /c ('000 cu m) 737.7 539 535 554 1,804 1,552 27 30 47 204 267Cocoa ('000 tons) 10.7 12 15 17 15 5.6 31 54 61 46 11Coffee ('000 tons) 6.3 6 5 4 5 5.8 30 17 11 17 8

/a Includes chassis, trucks, jeeps, trailers, cabs, etc.7h In oil equivalent./c Timber refers to lumber only and does not include other kinds of wood.

Source: Ministry of Foreign Trade.

Table 3.7: TOTAL MERCHANDISE EXPORTS AND IMPORTS TO AND FROMCENTRALLY PLANNED AND MARKET ECONOMY COUNTRIES, 1950-79

(Us$ million)

Total trade Exports Imports BalanceTo To To To

centrally To countries centrally To countries centrally To countries centrally To countriesplanned with market planned with market planned with market Over- planned with market

Year Total countries economy Total countries economy Total countries economy all countries economy

1950 1,135 368 767 552 176 376 583 192 391 -31 - 16 -15

1953 2,368 1,662 706 1,022 717 305 1,346 945 401 -324 -228 -96

1957 3,103 2,065 1,038 1,597 1,129 468 1,506 936 570 91 193 -102

1962 2,663 1,180 1,483 1,490 799 691 1,173 381 792 317 418 -101 qa

1966 4,614 1,014 3,600 2,366 574 1,792 2,248 440 1,808 118 134 -16

1970 4,586 739 3,847 2,260 475 1,785 2,326 264 2,062 -66 211 -277

1975 14,750 2,269 12,481 7,264 1,267 5,997 7,486 1,002 6,484 -222 265 -487

1976 13,433 2,140 11,293 6,855 1,039 5,816 6,578 1,101 5,477 277 - 62 339

1977 14,804 2,276 12,528 7,590 1,321 6,269 7,214 955 6,259 376 366 10

1978 20,638 2,836 17,802 9,745 1,495 8,250 10,893 1,341 9,552 -1,148 154 -1,302

1979 29,332 3,566 25,766 13,658 1,664 11,994 15,674 1,902 13,772 -2,016 -238 -1,778

Source: Ministry of Foreign Trade.

- 140 -

Table 3.8: DIRECTION OF TRADE, 1977-81(US$ milllion)

Exports Imports1977 1978 1979 1980 1981 1977 1978 1979 1980 1981

Industrialized Countries .. . . 3,634.9 5,776.9 8,109.8 9,418.9 ... 7,995.5 11,427.1 14,355.5 14,911.5

United States 179.6 270.7 595.0 982.6 1,505.8 114.6 721.1 1,856.6 3,830.2 4,282.5Canada 80.0 94.8 145.1 137.4 178.6 460.6 574.0 622.4 816.8 1,046.8

Australia 100.9 117.6 156.1 223.7 225.0 517.9 715.1 985.2 1,063.0 676.4Japan 1,356.7 1,718.7 2,764.1 4,032.2 4,597.2 2,108.5 3,105.2 3,944.0 5,168.9 5,380.9New Zealand 17.2 15.8 30.5 30.3 28.0 39.3 65.1 85.4 156.5 128.1

Austria 7.6 8.5 10.3 14.6 24.9 26.9 69.0 100.2 90.9 85.0Belgium 28.0 36.8 66.4 89.9 99.7 37.6 80.2 106.7 66.1 64.4Denmark 17.7 20.4 34.5 41.2 37.8 4.0 24.1 22.0 52.3 44.3Finland 14.1 20.3 29.7 26.5 25.8 25.3 31.9 50.1 65.3 71.9France 141.5 178.4 234.0 340.5 340.6 279.2 247.1 406.2 314.7 364.9Germany 260.8 329.5 459.2 710.5 785.4 529.8 1,030.1 1,739.4 1,332.8 1,539.4Iceland 0.5 0.5 0.9 0.8 0.9 - - - -Ireland 2.1 2.4 4.4 5.0 7.0 - - 0.5 0.4 7.4Italy 112.2 165.5 302.8 351.1 286.3 95.9 190.9 308.7 248.9 309.8Luxembourg 0.7 3.1 5.7 7.3 6.5 2.8 91.4 56.7 16.6 5.4Netherlands 66.7 92.2 136.9 196.8 205.6 39.5 125.8 200.0 157.0 107.5Norway 6.4 7.1 9.6 14.7 17.4 29.7 79.0 25.4 27.5 24.5Spain 19.0 21.9 56.0 49.6 50.5 17.9 50.4 91.7 69.9 108.8Sweden 48.1 47.1 75.0 86.0 68.2 38.2 74.1 112.6 99.1 76.7Switzerland 85.6 103.4 169.3 205.4 217.6 170.7 299.2 207.6 235.0 180.5United Kingdom 251.0 370.4 478.9 563.7 710.3 279.4 296.3 501.2 540.0 306.8

Developing Countries and Areas ... 5,031.7 6,608.4 8,788.4 10,299.2 .. . 1,912.7 2,829.6 3,755.6 3,622.1

Africa /a . .. . .. . . . 747.0 798.1 ... ... ... 384.0 299.4Egypt 55.4 53.7 69.4 I 215.2 229.8 37.2 62.9 56.5 97.4 115.1Libya 43.4 37.1 22.6 5.0 69.8 - - - - -

Mozambique 4. 9 7.7 3.0 3.4 4.7 ... .Nigeria 32.6 43.7 24.7 51.9 40.6 12.4 - 7.9 4.9 -

Sudan 13.1 23.7 16.4 9.0 5.1 20.5 16.2 1.9 9.5 2.1Tanzania 42.4 38.2 44.7 35.3 44.8 51.6 54.9 89.3 61.0 40.4Zambia 9.3 1.9 1.6 16.1 2.3 28.9 31.8 59.5 90.2 14.8

Asia /a, /b . .. . .. . . . 7,067.6 8,737.6 ... 1,944.4 2,127.1Hong Kong /c 2,012.4 2,532.6 3,328.3 4,350.8 5,174.0 136.2 74.7 214.5 569.8 1,018.6Indonesia - 0.2 - 20.7 26.4 0.2 0.4 - 14.2 20.9Iran 52.5 65.0 36.5 120.6 149.4 48.0 53.5 31.4 58.6 19.2Iraq 83.7 69.1 134.7 124.4 200.0 23.0 56.8 48.6 128.0 3.8Kuwait 94.5 93.0 136.2 157.0 146.2 20.9 33.1 38.7 42.1 8.6

Malaysia 94.4 163.2 171.4 184.5 194.3 105.3 111.2 189.1 239.9 95.0Pakistan 63.9 89.3 121.8 139.8 186.0 8.5 43.0 30.2 175.5 332.3Philippines 60.6 86.3 134.7 258.0 235.3 33.1 57.2 47.2 70.1 93.6Saudi Arabia 14.8 37.0 68.0 136.2 168.3 ... - 8.4 15.5 12.3Singapore 202.1 247.9 296.5 420.9 511.5 76.1 46.3 104.7 189.8 57.0Sri Lanka 45.6 53.7 95.0 60.9 56.0 44.6 60.5 62.4 72.0 45.1Thailand 42.7 70.5 211.9 311.5 206.7 18.9 73.6 83.4 139.6 173.2Viet Nam 51.7 16.3 - - - 27.7 40.7 - - -

Europe /d .-. ... ... 578.8 368.5 ... ... ... 711.7 532.8Greece 1.6 3.4 16.6 7.7 15.6 5.6 6.0 5.2 8.9 10.1Malta 1.9 2.4 4.0 5.0 4.3 - 15.8 - - 9.4Romania 254.3 396.3 490.1 513.0 324.9 272.9 368.8 603.7 524.7 468.3Yugoslavia 43.7 58.4 48.4 46.4 17.5 45.8 29.2 50.3 150.1 38.7

Western Hemisphere ... ... ... 395.0 527.1 ... ... ... 715.5 662.8Argentina 1.2 2.3 16.2 30.2 22.8 116.8 89.6 271.2 159.7 130.1Brazil 0.3 8.0 93.5 246.6 346.7 19.5 74.4 122.4 63.2 64.4Chile 2.9 6.0 10.7 19.6 36.2 14.6 38.7 86.4 121.7 53.4Guatemala 0.5 0.7 1.1 1.5 2.1 32.8 45.9 85.7 107.3 114.5Mexico 1.2 6.3 9.0 22.7 35.3 50.7 103.1 102.5 80.0 148.1Nicaragua 0.6 0.8 0.1 0.3 0.1 29.7 67.5 87.9 1.5 22.7Peru - 1.4 1.4 11.0 7.2 56.1 41.3 59.3 104.6 74.7

USSR, Eastern Europe, etc. .. . . 1,078.4 1,271.7 1,241.1 792.6 ... 1,006.6 1,418.4 1,393.9 878.4

Albania 60.3 19.9 - - - 36.1 4.7 - - -Bulgaria 24.8 33.4 46.6 34.6 27.7 30.5 66.3 58.7 30.4 25.6Cuba 54.1 59.3 93.6 92.8 106.1 58.9 93.8 117.8 127.3 219.8Czechoslovakia 81.1 119.1 112.6 147.3 74.1 93.2 109.0 161.6 131.4 77.5German Democratic Republic 121.1 162.2 197.9 169.2 101.2 131.7 152.5 197.6 259.8 113.9Hungary 34.7 57.6 61.7 49.7 37.6 33.4 48.8 80.5 83.9 36.9North Korea 227.2 230.7 317.0 374.2 247.4 147.2 223.6 330.2 303.3 233.0Mongolia 2.6 2.4 4.4 3.5 2.5 2.8 3.6 3.2 4.2 2.2Poland 62.9 105.0 142.9 141.5 79.5 79.6 65.5 166.5 189.5 61.1USSR 176.5 229.7 242.2 228.3 116.5 152.6 206.9 250.4 264.1 108.4

Total (Direction of trade) 7,590.0 9,745.0 13,657.0 18,139.0 20,510.0 7,214.0 10,915.0 15,675.0 19, 505.0 19,412.0(All trade) 7,590.0 9,745.0 13,658.0 18,272.0 20,893.0 7,214.0 10,893.0 15,675.0 19, 550.0 19,482.0

/a Including some Middle East./b Including Turkey./c For 1977-80, imports from Hong Kong include those from Macao.7d Excluding Turkey.

Source: Ministry of Foreign Trade.

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Table 3.9: EXPORT AND IMPORT PRICE INDICES(1978 = 100)

Terms of Terms ofExporl:s Exports Imports Imports trade trade

(1) (2) (1) (2) (1) (2)

1977 92.6 ... 90.7 ... 102.1 ...

1978 100.0 100.0 100.0 100.0 100.0 100.0

1979 115.0 113.7 124.1 119.4 92.7 95.2

1980 132.4 131.3 144.8 139.2 91.4 94.3

1981 134.5 134.9 159.2 145.5 84.5 92.7

Note: Indexes (1) are computed on the basis of 1970 weights and reset at 1978 =

100. Indexes (2) use the previous years' weights as base and are linkedin a chain fashion.

Source: Ministry of Foreign Trade.

Table 3.10: EXCHANGE RATE, 1957-82(Y per US$)

Period average /aYear Jan. Feb. Mar. Apr. May June July Aug. Sep. Oct. Nov. Dec. Q1 Q2 Q3 Q4 Ann.

1957 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.46181958 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.46181959 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.46181960 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.46181961 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.46181962 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.46181963 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.46181964 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.46181965 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.46181966 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.46181967 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.46181968 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.46181969 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.46181970 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.46181971 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.4618 2.h618 2.4618 2.4618 2.4532 2.4618 2.4618 2.4618 2.4589 2.46111972 2.2673 2.2673 2.2673 2.2673 2.2673 2.2673 2.2174 2.2174 2.2174 2.2174 2.2272 2.2401 2.2673 2.2673 2.2174 2.2282 2.24511973 2.2401 2.1294 1.9900 2.0066 1.9832 1.9164 1.8773 1.9219 1.9213 1.9112 1.9700 2.0053 2.1198 1.9687 1.9068 1.9622 1.98941974 2.0360 2.0181 1.9904 1.9552 1.9013 1.9395 1.9464 1.9741 2.0019 1.9660 1.9275 1.8770 2.0150 1.9320 1.9741 1.9235 1.96121975 1.8154 1.7866 1.7580 1.7866 1.7762 1.7692 1.8535 1.9414 1.9637 1.9524 1.9479 1.9663 1.7867 1.7773 1.9195 1.9555 1.85981976 1.9663 1.9513 1.9611 1.9642 1.9686 1.9676 1.9569 1.9386 1.9185 1.9078 1.9025 1.8933 1.9596 1.9668 1.9380 1.9012 1.94141977 1.8971 1.9102 1.9012 1.8896 1.8775 1.8765 1.8537 1.8466 1.8485 1.8326 1.8051 1.7553 1.9028 1.8812 1.8496 1.7977 1.85781978 1.7081 1.6774 1.6593 1.6923 1.7315 1.7250 1.7150 1.6945 1.6939 1.6573 1.6347 1.6139 1.6816 1.7163 1.7011 1.6353 1.68361979 1.5822 1.5739 1.5717 1.5827 1.5899 1.5776 1.5446 1.5458 1.5329 1.5255 1.5258 1.5067 1.5759 1.5834 1.5411 1.5193 1.55491980 1.4937 1.5005 1.5512 1.5470 1.4906 1.4650 1.4525 1.4726 1.4681 1.4803 1.5173 1.5419 1.5151 1.5009 1.4644 1.5132 1.49841981 1.5487 1.6106 1.6280 1.6620 1.7227 1.7605 1.7598 1.7952 1.7501 1.7505 1.7346 1.7378 1.5958 1.7150 1.7684 1.7409 1.70501982 1.7677 1.8174 1.8379 1.8519 1.8097 1.8970 1.9236 1.9387 1.9504 1.9822 1.9941 1.9399 1.8077 1.8529 1.9376 1.9721 1.8926

/a Months are period end. Quarters and years are averages of monthly and quarterly data, respectively.

Source: Bank of China.

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Table 4.1: EXTERNAL DEBT BY TYPE OF CREDIT, 1980/81(In US$ million)

Outstanding at the end of the year1980 1981

Official intergovernmental loans 11 31

Energy credits 435 895

Export credits 142 340

Deferred payments 1,038 1,108

Bank borrowing /a 3,612 2,277

Nonbank borrowing 203 161

Total Disbursements 5,441 4,812

Fund lending: Credit tranche - 524

Trust fund - 360

Overall Total 5,441 5,696

/a Including some short-term debt.

Source: Bank of China.

Table 5.1: STATE BUDGET REVENUES, 1950-82(Billion yuan)

1950 1957 1965 1977 1978 1979 1980 1981 1982(estimate)

Total revenue 6.52 31.02 47.33 87.45 112.11 110.33 108.52 108.95 110.69

Enterprise profits 0.87 12.48 26.42 40.24 57.20 49.29 43.52 35.37 31.10

Tax revenue 4.90 15.49 20.43 46.83 51.93 53.78 57.17 62.99 67.95Taxes on industry and

commerce (2.36) (11.31) (16.55) (40.09) (45.13) (47.27) (50.14) (53.84) (60.05)Taxes on salt (0.27) (0.63) (0.73) (1.18) (1.08) (0.96) (0.92) (0.91) (0.90)Customs duties (0.36) (0.58) (0.57) (2.62) (2.88) (2.60) (3.35) (5.40) (4.30)Taxes on agriculture (1.91) (2.97) (2.58) (2.94) (2.84) (2.95) (2.77) (2.54) (2.70)

Foreign borrowing /a 0.30 0.70 0.08 0.06 0.15 3.64 4.30 7,.31 5.00

Other revenues /b 0.45 2.35 0.47 0.32 2.83 3.62 3.53 3.28 6.64

/a Under Chinese budgetary accounting procedures, receipts from foreign loans are included as a revenue Item.The US dollar equivalents of these loans were $2.25 billion in 1979, $1.8 billion in 1980 and $2.85 bil-lion in 1981.

/b Including the following amounits of depreciation funds turned over to central authorities: Y 2.46 billionin 1979, Y 2.67 billion in 1980, Y 2.56 billion and 1981 and an estimated Y 2.2 billion in 1982. Anestimated Y 4.2 billion in receipts from sales of Treasury Bands is also included in the figure for 1982.

Source: Ministry of Finance.

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Table 5.2: BUDGET REVENUES FROM STATE-OWNED ENTERPRISES, BY SECTOR, 1957-79(Billion yuan)

Enterprises incomesTotal Industry Rail- Trans- Civilincome Total Heavy Light road port aviation

1957Total 19.967 8.646 6.361 2.285 1.770 0.512 0.008Taxes 5.549 2.721 1.342 1.370 0.062 0.039 0.001Profit 14.418 5.934 5.019 0.915 1.708 0.473 0.007

1965Total 38.519 30.378 20.082 10.296 2.818 1.036 -0.012Taxes 12.092 8.729 4.106 4.623 0.162 0.099 0.002Profit 26.427 21.649 15.976 5.673 2.656 0.937 -0.014

1970Total 57.825 43.306 28.408 14.898 3.932 0.876 -0.055Taxes 19.928 15.242 7.867 7.375 1.805 0.156 0.001Profit 37.897 28.064 20.541 7.523 2.127 0.720 -0.056

1975Total 66.057 54.417 35.859 18.558 4.661 1.584 -0.079Taxes 26.037 21.108 10.724 10.384 1.339 0.264 0.006Profit 40.020 33.309 25.135 8.174 3.322 1.320 -0.085

1977Total 69.919 56.551 35.927 20.624 4.349 1.845 -0.049Taxes 29.684 23.926 11.839 12.087 1.320 0.296 0.006Profit 40.235 32.625 24.088 8.537 3.029 1.549 -0.055

1978Total 90.329 70.767 47.322 23.445 4.928 2.381 -0.050Taxes 33.130 26.725 13.779 12.946 1.501 0.325 0.010Profit 57.199 44.042 33.543 10.499 3.427 2.056 -0.060

1979Total 85.275 73.883 49.150 24.733 5.389 2.286 0.041Taxes 35.985 28.764 14.654 14.110 1.605 0.344 0.013Profit 49.290 45.119 34.496 10.623 3.784 1.942 0.028

Source: Ministry of Finance.

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Table 5.3: BUDGET REVENUES: SHARES OF CENTRAL AND LOCALGOVERNMENT, 1957-81

1957 1965 1971 1977 1978 1979 1980 1981

Absolute value(billion yuan)

National total 31.019 47.332 74.473 87.446 112.112 110.327 108.520 108.946Central 22.738 15.607 11.936 11.385 16.463 18.756 30.670 30.387Local 8.281 31.725 62.537 76.061 95.649 91.571 77.860 78.559

Ratio (%)

National total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0Central 73.3 33.0 16.0 13.0 14.7 17.0 28.3 27.9Local 26.7 67.0 84.0 87.0 85.3 83.0 71.7 72.1

Source: Ministry of Finance.

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Page 1 of 2

Table 5.4: REVENUE SHARING BY PROVINCES, 1980

Percentage retained byprovince out of revenues Percentage of industrialother than industrial and commercial tax revenueand commercial taxes retained by province

Hebei 88.00 (0)Liaoning 48.70 (0)

Sichuan 100.00 72.0Shaanxi 100.00 88.1Gansu 100.00 53.2Henan 100.00 75.4Hubei 100.00 44.7Hunan 100.00 42.0Zhejiang 100.00 13.0Anhui 100.00 58.1Shandong 100.00 10.0Shanxi 100.00 57.9

Annual transfer from centralgovernment to province

(million yuan)

Jiangxi 138Jilin 300Heilongjiang 886Guizhou 478Yunnan 300Xizang Autonomous Region 438Xinjiang Autonomous Region 827Qinghai Autonomous Region 365Guangxi Autonomous Region 270Ningxia Autonomous Region 273Nei Monggol Autonomous Region 1,062

- 148 -

Page 2 of 2

Table 5.4: (continued)

Percentage of total revenuesretained by province

Jiangsu 39.0

Annual transfer from provinceto central government (+)or subsidy from centralgov't to province (-)

(million yuan)

Guangdong + 1,000Fujian - 150

Percentage of total revenuesretained by municipality /a

Beijing 36.5Tianjin 31.2Shanghai 11.2

/a Retention ratios are revised yearly; these percentages are for 1979.

Source: Ministry of Finance.

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Table 5.5: STATE BUDGET EXPENDITURE BY BROAD PURPOSE, 1950-81(Billion yuan)

1950 1957 1965 1977 1978 1979 1980 1981

Total expenditure 6.808 30.421 46.633 84.353 111.095 127.394 121.273 111.497

Economic 1.736 16.304 25.421 49.373 70.784 76.159 66.777 53.678

Social, cultural andeducational 0.755 4.642 6.270 11.943 14.696 17.518 19.877 21.339

Defense 2.801 5.511 8.676 14.904 16.784 22.266 19.384 16.797

Administration andmanagement 1.313 2.270 2.634 4.518 5.290 6.305 7.553 8.298

Debt payment 0.003 0.826 0.636 - - - 2.858 6.289

Other 0.200 8.868 3.006 3.615 3.541 5.146 4.824 5.096

Source: Ministry of Finance.

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Table 5.6: STATE BUDGET EXPENDITURE BY ACTIVITY, 1950-81(Billion yuan)

1950 1957 1965 1977 1978 1979 1980 1981

Total expenditure 6.81 30.42 46.63 84.35 111.10 127.39 121.27 111.50

Of which:Capital construction /a 1.25 12.37 15.85 30.09 45.19 51.47 41.94 33.06Modernization investment 1.71 3.78 4.36 5.31 4.16Working capital n.a. 2.08 2.75 6.57 6.66 5.21 3.67 2.28Product development n.a. 0.23 2.52 2.23 2.55 2.84 2.73 2.37Geological survey n.a. 0.62 0.77 1.73 2.01 2.17 2.26 2.18Industry, transportand commerce n.a. 1.24 1.59 1.44 1.78 2.10 2.29 2.37

Agricultural support n.a. 0.80 1.73 5.07 7.70 9.01 8.21 7.37Education, culture andhealth 0.50 2.78 4.56 9.02 11.27 13.21 15.63 17.14

Defense 2.80 5.51 8.68 14.90 16.78 22.26 19.38 16.80Administration n.a. 2.17 2.53 4.33 4.91 5.69 6.68 7.09Other /b n.a. 2.62 5.65 7.26 8.47 9.07 13.17 16.68

/a Including the following amounts of capital construction expenditures financed withforeign loans: Y 7.09 billion in 1979; Y 7.3 billion in 1980; and Y 7.31 billionin 1981.

/b Residual includes items like repayments of interest and principal on foreign loansand interest on the Ministry of Finance's overdraft with the People's Bank ofChina, as well as certain reserve funds.

Source: Ministry of Finance.

Table 5.7: BREAKDOWN OF STATE BUDGET EXPENDITURE ONCAPITAL CONSTRUCTION, EDUCATION AND HEALTH, 1957-81

(billion yuan)

1957 1965 1970 1975 1976 1977 1978 1979 1980 1981

Total expenditures 30.421 46.633 64.941 82.088 80.620 84.353 111.095 127.394 121.273 111.497

Of which:Capital construction 12.371 15.849 29.836 32.696 31.125 30.088 45.192 51.469 41.939 33.060Of which:Heavy industry 7.105 7.815 n.a. 17.490 16.790 16.389 24.976 27.372 n.a. n.a.Light, textile industries 0.405 0.644 n.a. 2.067 1.987 1.908 2.723 2.642 n.a. n.a.Agriculture, forestry, waterconservancy, meteorology 1.093 2.351 n.a. 3.556 3.991 3.598 5.107 6.241 4.460 n.a.

Railroad, transport, post, civilaviation 1.940 3.176 n.a. 6.420 5.221 4.299 6.587 6.126 n.a. n.a.

Commerce, foodgrains, foreigntrade, banking 0.273 0.275 n.a. 0.741 0.690 0.724 0.894 0.941 n.a. n.a.

Education 0.503 0.282 n.a. 0.314 0.327 0.301 0.445 0.689 n.a. n.a.Health 0.069 0.087 n.a. 0.178 0.186 0.191 0.259 0.311 n.a. n.a.

Culture, education and health 2.776 4.559 4.365 8.129 8.549 9.020 11.266 13.212 15.626 17.136Of which:Education 1.952 2.912 2.756 4.826 5.049 5.304 6.560 7.698 9.418 10.248Health 0.482 0.929 1.047 1.992 2.095 2.229 2.726 3.174 3.684 4.055

Source: Ministry of Finance.

I-.

l-

Table 5.8: BREAKDOWN OF STATE BUDGET EXPENDITURE ON AGRICULTURE, 1965-81(Billion yuan)

1965 1970 1975 1976 1977 1978 1979 1980 1981

Total 1.729 1.591 4.253 4.601 5.068 7.695 9.011 8.212 7.368

Opening up of new land 0.036 } 0.048 0.033 0.031 0.382 0.526 0.527 0.522

Agriculture, animal husbandry 0.464 } 0.720 0.835 0.898 1.351 1.591 1.666 1.629

Forestry 0.137 } 0.221 0.255 0.265 0.372 0.472 0.549 0.570} 1.316

Water conservancy 0.887 } 1.994 2.004 2.245 3.473 4.524 3.426 2.936

Aquaculture, fishery 0.023 } 0.045 0.048 0.051 0.082 0.153 0.204 0.227

Meteorology 0.046 } 0.094 0.106 0.116 0.146 0.175 0.182 0.176

Commune support 0.055 0.203 0.916 1.119 1.235 1.620 1.085 1.240 0.856

Agricultural mechanization - 0.072 0.188 0.199 0.227 0.269 0.378 0.345 0.313

Other agricultural support 0.081 - 0.027 0.002 - - 0.107 0.073 0.139

Source: Ministry of Finance.

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Table 5.9: BUDGET EXPENDITURE: SHARES OF CENTRAL AND LOCALGOVERNMENT, 1957-81

1957 1965 1971 1977 1978 1979 1980 1981

Absolute value(billion yuan)

National total 30.421 46.633 73.217 84.353 111.095 127.394 121.273 111.497Central 21.829 28.984 43.567 39.370 52.098 64.589 65.071 60.221Local 8.592 17.649 29.650 44.983 58.997 62.805 56.202 51.276

Ratio (%)

National total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0Central 71.8 62.2 59.5 46.7 46.9 50.7 53.7 54.0Local 28.2 37.8 40.5 53.3 53.1 49.3 46.3 46.0

Source: Ministry of Finance.

- 154 -

Table 6.1: MONEY SUPPLY, 1979-81(Billion yuan year-end levels)

1979 1980 1981

1. Currency in circulation 26.771 34.620 39.634

2. Individual demand deposits 7.1 10.4 13.5Urban (3.6) (5.4) (6.5)Rural /a (3.5) (5.0) (7.0)

3. Individual time deposits 23.8 32.3 42.4Urban (16.7) (22.8) (28.9)Rural /a (6-1) (9.5) (13.5)

4. Enterprise deposits /b 49.084 60.256 73.119

5. Deposits of rural collectives 9.833 10.548 11.324

Monetary Aggregates Ic

Ml (1 + 2) 33.9 45.0 53.1

M2 (Ml + 3) 57.7 77.3 95.5

M3 ( M2 + 4 + 5) 116.8 148.1 180.0

/a Sum of individual savings deposits at RCCs and at the ABC. In 1981 63.9% ofindividual savings deposits at RCCs were time deposits. It is assumed thatthe corresponding ratios for 1980 and 1979 are 62% and 60% respectively. In1980 individual savings deposits at the ABC consisted of Y 0.55 billion indemand deposits and Y 2.22 billion in time deposits. In 1979 and 1981 theamount of individual savings deposits at the ABC was derived by subtractingRCC deposits at the ABC from deposits in rural areas in the consolidatedbalance sheet. It is assumed that 80% of these deposits are time depositsin both 1979 and 1981.

/b Sum of enterprise deposits in the consolidated balance sheet and deposits ofcommune- and brigade-run enterprises at the RCCs. Does not include enter-prise deposits at the PCBC, which may be quite significant.

/c Classified in terms of decreasing liquidity. Ml consists of cash plus depo-sits that can be freely withdrawn and used. M2 adds individual time depo-sits, while M3 includes enterprise and rural collective deposits, which aresubject to bank supervision in disbursement and use. None of these aggre-gates should be precisely equated with those used in market economies how-ever.

Source: People's Bank of China and Agricultural Bank of China and World Bankestimates.

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Table 6.2: CONSOLIDATED BALANCE SHEET OFSTATE BANKI.NG SYSTEM, 1979-81 /a(Billion yuan, year-end levels)

1979 1980 1981

AssetsLoans 203.963 241.430 276.467

To indListrial enterprises (36.309) (43.158) (50.885)To industrial supply and marketing units (24.212) (23.603) (24.124)To state commerce (123.225) (143.702) (163.913)Short- and medium-term equipment purchaseloans (0.792) (5.550) (8.375)

To collective and individual industry andcommerce (5.751) (7.829) (9.915)

For advance purchases (0.698) (0.788) (0.739)To state farms (0.686) (0.940) (1.675)To rural coumunes and production brigades (12.290) (15.860) (16.841)

Cold holdings 1.216 1.216 1.204Foreign exchange holdings 2.058 -0.847 6.218Balances with the IMF 0 3.604 3.874Money advanced to the Ministry of Finance 9.023 17.023 17.023

Total Assets 216.260 262.426 304.786

LiabilitiesDepositsl 134.004 165.864 203.297

By enterprises (46.891) (57.309) (70.146)By the Treasury (14.868) (16.202) (19.494)By government departments and organizations (18.488) (22.945) (27.488)Capital construction funds /b (13.130) (17.175) (22.915)Deposits in rural areas /c (20.371) (23.984) (27.840)Individual savings deposits in cities and

townis (20.256) (28.249) (35.414)Deposits by international monetary institu-

tions 0 3.427 5.405Currency in circulation 26.771 34.620 39.634The banlk's own funds 42.788 47.733 49.705The banlc's surplus 4.945 2.719 1.722Other lLabilities 7.752 8.063 5.023

Total Liabilities 216.260 262.426 304.786

la Includes the People's Bank of China (PBC), Agricultural Bank of China (ABC),and Bank of China (BOC) (domestic currency operations only). Excludes RuralCredit Cooperatives (RCCs - see Table 6.3) except for their deposits at theABC, which are included in the category "rural deposits." Also excludes thePeople's Construction Bank of China (PCBC), except for its deposits at thePBC, which comprise at least 95% of the item "capital construction deposits"in the consolidated balance sheet.

/b Consists almost entirely of deposits by the PCBC with the PBC.

/c Consists of individual savings deposits at the ABC and RCC deposits with theABC.

Source: People's Bank of China.

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Table 6.3: DEPOSITS AND LOANS BY RURAL CREDIT COOPERATIVES, 1979-81(Billion yuan, year-end levels)

1979 1980 1981

Total Deposits 21.588 27.234 31.961

Deposits by communes and production brigades (9.833) (10.548) (11.324)

Deposits by commune- and brigade-run enterprises (2.193) (2.947) (2.973)

Savings deposits by individual commune members (7.843) (11.703) (16.955)

Others (1.719) (2.036) (0.709)

Total Loans 4.754 8.164 9.638

Agricultural loans to communes and brigades (2.254) (3.454) (3.571)

Loans to commune- and brigade-run enterprises (1.415) (3.111) (3.546)

Loans to individual commune members (1.085) (1.599) (2.521)

RCC Deposits with the ABC 18.559 21.245 24.286

Source: People's Bank of China and Agricultural Bank of China.

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Table 6.4: INTEREST RATES ON LOANS(percent per annum)

Before After01/01/82 01/01/82

Industrial and Commercial Loans /aCirculating capital loans 5.04 7.20Loans for equipment and major repairsUp to 1 year term 5.04 5.041-3 years 5.04 5.763-5 years 5.04 6.48

Agricultural LoansLoans to state farms

- for production expenses 4.32 5.76- for equipment 4.32 5.04

Loans to communes and brigades- for production expenses 4.32 5.76- for equipment 2.16 4.32

Loans to communes and brigade enterprisesfor farming and animal husbandryactivities/b- for production expenses 4.32 5.76- for equipment 2.16 4.32

Special item loans for agricultural equipment 2.16 4.32

Loans for advanced purchases of agriculturalproducts 4.32 5.76

Loans to individual peasants- natural disasters 0 0- other 4.32-5.04 5.76-8.64

OtherInter-branch loans within the bankingsystem and RCC deposits at the ABC 3.24 n.a.

ABC loans to RCCs 2.16 n.a.

Capital construction loans by the PCBC /c 2.4-3.6 2.4-3.6

/a These rates apply to both state-owned and collective enterprises, as wellas individual enterprises in the case of circulating capital loans. Over-due loans carry a penalty interest rate 20% higher than the listed one;the rate for loans that are diverted for uses other than those originallystipulated is 50% above the listed rate.

/b LoELns to commune and brigade enterprises engaged in industrial or commer-cial activities carry the same interest rate as the corresponding industrialcoTmmercial loans.

/c These originally carried a uniform rate of 3.0% p.a., 6% for overdue loansand 9% for loans whose funds are misused for purooses not in accordancewith the plan.

Source: People's Bank of China, Agricultural Bank of China, People'sConstruction Bank of China.

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Table 6.5: INTEREST RATES ON INDIVIDUAL DEPOSITS(Simple interest, in percent per annum)

BeforeType of Deposit 04/01/79 04/01/79 04/01/80 04/01/82

Demand deposits 2.16 2.16 2.88 /a 2.88

Fixed term time deposits(lump sum deposit andwithdrawal)

6 month n.a. 3.60 4.32 4.321 year 3.24 3.96 5.40 5.763 year n.a. 4.50 6.12 6.845 year n.a. 5.04 6.84 7.928 year n.a. n.a. n.a. 9.00

Installment deposit andlumpsum withdrawal1 year 3.24 3.60 4.32 4.683 year n.a. n.a. 5.40 6.125 year n.a. n.a. 6.12 7.20

Lump sum deposit andwithdrawal by install-ments

1 year n.a. n.a. 4.32 4.323 year n.a. n.a. 5.40 5.765 year n.a. n.a. 6.12 6.84

Lump sum deposit withmonthly withdrawalof interest earned

1 year n.a. n.a. 4.32 4.323 year n.a. n.a. 5.40 5.765 year n.a. n.a. 6.12 6.84

Deposits in RMB byOverseas Chinese(fixed term timedeposits)1 year 3.96 4.68 5.76 6.483 year 3.96 5.04 6.48 7.205 year 3.96 5.40 7.20 8.28

/a For demand deposits the adjustment was made as of July 1, 1980.

Source: People's Bank of China.

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Table 6.6: INTEREST RATES ON DEPOSITS OF ORGANIZATIONS(simple interest, in % p.a.)

Before Atter01/01/82 01/01/82

Demand deposits(enterprises andrural collectives) 1.80 1.80

Time deposits(enterprises, non-profit institutions,and governmentdepartments)

1 year /a 3.602 year /a 4.323 year /a 5.04

/a Time deposits for units did not exist before January 1, 1982.

Source: People's Bank of China.

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Table 7.1: ARABLE AND CROPPED AREA, 1949-81(Million ha)

1949 1952 1957 1965 1970 1973 1979 1980 1981

Arable area 97.9 107.9 111.8 103.6 101.1 100.2 99.5 n.a. n.a.

Cropped area n.a. 141.3 157.2 143.3 143.5 148.5 148.5 146.4. 145.2

Cropping index n.a. 131.0 140.6 138.3 141.9 148.2 149.2 n.a. n.a.

Source: Ministry of Agriculture.

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Table 7.2: GROSS OUTPUT OF AGRICULTURAL SUBSECTORS, 1952-81 /a

1952 1957 1965 1970 1977 1978 1979 1980 1981

Crops 83.1 80.6 75.8 74.7 67.5 67.8 66.9 64.3 64.1

Forestry 0.7 1.7 2.0 2.2 3.2 3.0 2.8 3.1 3.0

Animal husbandry 11.5 12.9 14.0 12.9 13.7 13.2 14.0 14.2 14.3

Fisheries 0.3 0.5 1.7 1.5 1.5 1.4 1.2 1.3 1.3

Sideline occupa-tions 4.4 4.3 6.5 8.7 14.1 14.6 15.1 17.1 17.3

Of which bri-gade and team-run industrialenterprises (n.a.) (n.a.) (n.a.) (n.a.) (n.a.) (11.7) (12.5) (14.5) (15.0)

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

/a Data for 1952-65 are at constant 1957 prices; data for other years are atconstant 1970 prices. The percentage breakdown for 1981 at constant 1970prices is substantially different from the corresponding breakdown at con-stant 1980 prices which is crops 64.4, forestry 4.1, animal husbandry 15.4,fisheries 1.8 and sideline occupations 14.3 (of which brigade and team-runindustrial enterprises account for 11.9).

Source: State Statistical Bureau.

Table 7.3: FOOD GRRAIN PRODUCTION, 1952-81

1952 1957 1965 1970 1976 1977 1978 1979 1980 1981

Rice (Paddy)Area (million ha) 28.38 32.24 29.82 32.22 36.22 35.53 34.42 33.87 33.88 33.29Yield (tlha) 2.41 2.69 2.94 3.40 3.47 3.62 3.98 4.24 4.13 4.32Production (mln t) 68.45(41.7%) 86.80(44.5%) 87.70(45.1%) 109.55(45.7%) 125.80(43.9%) 128.55(45.5%) 136.95(44.9%) 143.75(43.3%) 139.90(43.6%) 143.95(44.3%)

WheatArea (million ha) 24.78 27.54 24.71 25.46 28.42 28.07 29.18 29.36 29.23 28.31Yield (t/ha) 0.74 0.86 1.02 1.15 1.77 1.46 1.85 2.14 1.89 2.11Production (mln t) 18.15(11.0%) 23.65(12.1%) 25.25(13.0%) 29.25(12.2%) 50.35(17.6%) 41.10(14.5%) 53.85(17.7%) 62.73(18.9%) 55.20(17.2%) 59.65(18.4%)

CornArea (million ha) 12.57 14.94 14.56 14.56 19.23 19.66 19.96 20.13 20.35 19.42Yield (t/ha) 1.34 1.43 1.51 2.11 2.50 2.51 2.81 2.98 3.08 3.05Production (mln t) 16.85(10.3%) 21.45(11.0%) 23.65(12.2%) 30.65(12.8%) 48.15(16.8%) 49.40(17.5%) 55.95(18.4%) 60.04(18.2%) 62.60(19.5%) 59.20(18.2%)

Sorghum

Area (million ha) 9.39 6.63 6.15 4.75 4.33 3.76 3.46 3.17 2.69 2.61Yield (t/ha) 1.19 1.16 1.16 1.73 2.01 2.05 2.33 2.41 2.51 2.55Production (mln t) 11.10(6.8%) 7.65(3.9%) 7.10(3.6X) 8.20(3.4%) 8.70(3.0%) 7.70(2.7%) 8.05(2.6%) 7.66(2.3%) 6.75(2.1%) 6.65(2.0%) H

SoybeanArea (million ha) 11.68 12.75 8.59 8.36 6.69 6.85 7.14 7.25 7.23 8.02Yield Ct/ha) 0.81 0.79 0.71 1.10 0.99 1.06 1.06 1.03 1.10 1.16Production (mln t) 9.50(5.8%) 10.05(5.2%) 6.15(3.2%) 9.20(3.8%) 6.65(2.3%) 7.25(2.6%) 7.55(2-5%) 7.45(2.2%) 7.95(2.5%) 9.30(2.9%)

MilletArea (million ha) 9.84 8.38 6.56 6.33 4.50 4.48 4.27 4.17 3.87 3.89Yield (t/ha) 1.17 1.02 0.95 1.40 1.24 1.37 1.53 1.47 1.40 1.48Produietion (mln t) 11.55(7.0%) 8.55(4.4%) 6.20(3.2%) 8.80(3.7%) 5.55(1.9%) 6.15(2.2%) 6.55(2.1%) 6.15(1.9%) 5.45(1.7%) 5.75(1.8%)

Tuibers /aArea (million ha) 8.69 10.50 11.18 10.26 10.37 11.23 11.80 10.95 10.15 9.62Yield (t/ha) 1.88 2.09 1.78 2.48 2.57 2.64 2.69 2.60 2.83 2.70Production (mln t) 16.35(10.0%) 21.90(11.2%) 19.85(10.2%) 25.50(10.6%) 26.65(9.31%) 29.65(10.5%) 31.75(10.4%) 28.45(8.6%) 28.70(8.9%) 25.95(8.0%)

Total /b

Area (million ha) 123.98 133.63 119.63 119.27 120.74 120.40 120.59 119.26 117.23 114.96Yield (t/ha) 1.32 1.46 1.63 2.01 2.37 2.35 2.53 2.78 2.73 2.83Produetion (mln t) 163.90 195.05 194.55 239.95 286.30 282.75 304.75 3 332.10 320.55 325.02

/a Expressed as grain equtivalent on the basis of one fifth the wet weight (one fourth prior to 1965).7T Incltudes other miscellaneotis coarse grains.

Notes: (a) Area represents sown area.(b) Figttre in parenthesis on prodturtion line expresses the amount as a percentage of total grain production.

Source: Ministry of Agricultutre.

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Table 7.4: PRODUCTION OF OILSEEDS, 1952-81

1952 1957 1965 1970 1976 1977 1978 1979 1980 1981

PeanutArea (million ha) 1.80 2.54 1.85 1.71 1.84 1.69 1.77 2.07 2.34 2.47Yield (t/ha) 1.28 1.01 1.04 1.26 1.02 1.17 1.34 1.36 1.54 1.55Production (mln t) 2.31 2.57 1.93 2.15 1.87 1.98 2.38 2.82 3.60 3.83Oil equiv. (mln t) 1.03 1.15 0.86 0.96 0.83 0.89 1.06 1.26 1.60 1.71

SesameseedsArea (million ha) 1.06 0.94 0.66 0.55 0.56 0.56 0.64 0.84 0.78 0.82Yield (t/ha) 0.45 0.33 0.38 0.47 0.41 0.44 0.50 0.50 0.33 0.62Production (mln t) 0.48 0.31 0.26 0.26 0.23 0.24 0.32 0.42 0.26 0.51Oil equiv. (mln t) 0.23 0.15 0.12 0.12 0.11 0.12 0.15 0.20 0.13 0.25

RapeseedsArea (million ha) 1.86 2.31 1.82 1.45 2.35 2.22 2.60 2.76 2.84 3.80Yield (t/ha) 0.50 0.38 0.60 0.66 0.57 0.53 0.72 0.87 0.84 1.07Production (mln t) 0.93 0.88 1.09 0.95 1.35 1.17 1.87 2.40 2.38 4.07Oil equiv. (mln t) 0.36 0.34 0.42 0.37 0.52 0.46 0.72 0.93 0.92 1.58

Other OilseedsArea (million ha) 0.99 1.14 0.84 0.81 1.04 1.18 1.22 1.37 1.97 2.04Yield (t/ha) 0.47 0.37 0.42 0.51 0.54 0.53 0.53 0.58 0.74 0.88Production (mln t) 0.47 0.42 0.35 0.41 0.56 0.62 0.64 0.80 1.45 1.79Oil equiv. (mln t) 0.16 0.14 0.12 0.14 0.18 0.20 0.21 0.26 0.46 0.57

TotalArea (million ha) 5.71 6.93 5.17 4.52 5.79 5.64 6.23 7.04 7.93 9.13Production (mln t) 4.19 4.20 3.63 3.77 4.01 4.02 5.22 6.44 7.69 10.21Oil equiv. (mln, t) 1.78 1.77 1.51 1.66 1.65 1.71 2.22 2.74 3.27 4.34

Source: Ministry of Agriculture.

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Table 7.5: PRODUCTION OF CASH CROPS, 1952-81

1952 1957 1965 1970 1976 1977 1978 1979 1980 1981

CottonArea (million ha) 5.58 5.78 5.00 5.00 4.93 4.85 4.87 4.51 4.92 5.19Yield (t/ha) /a 0.23 0.28 0.42 0.46 0.42 0.42 0.45 0.49 0.55 0.57Production (mln t) 1.30 1.64 2.10 2.28 2.06 2.05 2.17 2.21 2.71 2.97

JuteArea (million ha) 0.16 0.14 0.11 0.13 0.33 0.38 0.41 0.36 0.31 0.31Yield (t/ha) 1.94 2.14 2.55 2.15 2.21 2.26 2.66 3.03 3.55 4.06Production (mln t) 0.31 0.30 0.28 0.28 0.73 0.86 1.09 1.09 1.10 1.26

MulberryArea (million ha) 0.20 0.31 n.a. n.a. 0.27 0.29 0.28 0.27 0.29 0.32Yield (t/ha)

(cocoon) 0.30 0.23 n.a. n.a. 0.59 0.59 0.61 0.78 0.86 0.78Production (mln t) 0.06 0.07 0.07 0.12 0.16 0.17 0.17 0.21 0.25 0.25

TussahArea (million ha) n.a. 0.74 n.a. n.a. 0.80 0.76 0.77 0.79 0.86 1.03Yield (t/ha) n.a. 0.05 n.a. n.a. 0.04 0.07 0.08 0.10 0.09 0.06Production (mln t) 0.06 0.04 0.04 0.04 0.03 0.05 0.06 0.08 0.08 0.06

TeaArea (million ha) 0.22 0.33 0.34 0.49 0.96 1.01 1.05 1.04 0.78 1.06Yield (t/ha) 0.36 0.33 0.29 0.29 0.24 0.25 0.27 0.29 0.39 0.32Production (mln t) 0.08 0.11 0.10 0.14 0.23 0.25 0.27 0.28 0.30 0.34

SugarcaneArea (million ha) 0.18 0.27 0.35 0.39 0.54 0.51 0.55 0.51 0.48 0.55Yield (t/ha) 39.56 38.48 38.26 34.51 30.80 34.80 38.40 42.18 47.52 53.95Production (mln t) 7.12 10.39 13.39 13.46 16.63 17.75 21.12 21.51 22.81 29.67

SugarbeetArea (million ha) 0.04 0.16 0.17 0.20 0.36 0.35 0.33 0.33 0.44 0.44Yield (t/ha) 13.64 9.42 11.65 10.38 8.14 7.03 8.18 9.42 14.34 14.45Production (mln t) 0.48 1.50 1.98 2.06 2.93 2.46 2.70 3.11 6.31 6.36

FruitsArea (million ha) 0.68 0.94 n.a. n.a. 1.58 1.67 1.66 1.76 1.78 1.80Yield (t/ha) 3.59 3.46 n.a. n.a. 3.42 3.40 3.96 3.99 3.82 4.33Production (mln t) 2.44 3.25 n.a. 3.41 5.41 5.68 6.57 7.01 6.79 7.80

VegetablesArea (million ha) n.a. 3.74 n.a. 2.66 3.14 3.30 3.33 3.23 3.16 3.45

/a Yield expressed as ginned weight.

Source: Ministry of Agriculture.

Table 7 6: LIVESTOCK POPULATION 1952-81(Million head)

1952 1957 1965 1970 1976 1977 1978 1979 1980 1981

Large animals 76.459 83.822 84.205 94.363 94.978 93.754 93.892 94.591 95.246 97.641

Cattle 44.961 50.485 53.573 57.152 53.825 52.723 52.526 52.412 52.515 53.833

Buffalo 11.640 13.127 13.378 16.431 17.443 17.229 17.723 18.377 18.520 18.770

Horses 6.130 7.302 7.921 9.648 11.438 11.447 11.245 11.145 11.042 10.972

Donkeys 11.806 10.864 7.438 8.400 7.766 7.630 7.481 7.473 7.748 8.415

Mules 1.637 1.679 1.447 2.245 3.536 3.714 3.868 4.023 4.166 4.325

Camels 0.285 0.365 0.448 0.487 0.545 0.564 0.574 0.604 0.614 0.628

Pigs 89.765 145.895 166.925 206.101 287.247 291.777 301.285 319.705 305.430 293.702

Goats 24.898 45.147 60.765 62.784 65.465 67.824 73.540 80.574 80.684 78.264

Sheep 36.880 53.435 78.363 87.328 92.705 93.532 96.397 102.568 106.627 109.466

Note: The total for large animals includes dairy cows prior to 1976.

Source: Ministry of Agriculture.

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Table 7-7 PRODUCTION FROM MARINE AND FRESHWATER FISHERIES. 1952-81('000 tons)

Marine FreshwaterYear Capture Farming Subtotal Capture Farming Subtotal Total

1952 1,060 - 1,060 606 - 606 1,666

1957 1 815 122 1,937 614 565 1,179 3,116

1965 1,910 104 2,014 456 514 970 2,984

1970 2,097 184 2,281 322 582 904 3,185

1976 3,122 298 3,420 316 740 1,056 4,476

1977 3,195 424 3,619 308 768 1,076 4,695

1978 3,145 450 3,595 296 762 1,058 4,653

1979 2,773 416 3,189 303 813 1,116 4,305

1980 2 813 444 3,257 338 902 1,240 4,597

1981 2,774 458 3,232 359 1,014 1,373 4,605

Source: General Bureau of Aquatic Products.

- 167 -

Table 7.8: OUTPUT OF MARINE PRODUCTS, 1952-81(Tons)

Year Fish Shrimps & crabs Shellfish Seaweed

1952 829,717 104,540 - 118,336 7,469

1957 1,373,021 348,750 195,593 19,586

1965 1,595,654 279,423 106,798 32,174

1973 2,254,108 382,275 137,102 137,777

1976 2,611,363 397,674 254,753 155,821

1977 2,652,865 445,503 288,817 231,402

1978 2,560,721 505,862 268,365 259,839

1979 2,312,553 408,297 217,570 250,377

1980 2,341,000 420,000 234,000 262,000

1981 2,317,000 418,000 269,000 228,000

Sources: General Bureau of Aquatic Products and State Statistical Bureau.

- 168 -

Table 7.9: COMMUNE AND BRIGADE ENTERPRISES, 1976-81

1976 1977 1978 1979 1980 1981

Number of Enterprises(-000) 1,115 1,392 1,524 1,480 1,425 1,338Of which:Commune n.a. n.a. (320) (320) (338) (336)Brigade n.a. n.a. (1,204) (1,160) (1,087) (1,002)

Employment ('000) 17,919 23,284 28,265 29,093 29,997 29,696Of which:Commune n.a. n.a. (12,576) (13,144) (13,938) (14,176)Brigade n.a. n.a. (15,689) (15,949) (16,059) (15,520)

Gross Output (Y billion) 27.33 39.12 43.14 49.11 59.61 67.04Of which:Commune n a. n.a. (23.97) (26.99) (33.22) (37.90)Brigade n.a. n.a. (19.17) (22.12) (26.39) (29.14)

Total Profit (Y billion) n.a. 7.84 8.81 10.45 11.84 11.30Of which allocation for:Reinvestment n.a. n.a. (3.09) (4.06) (4.70) (4.30)Support to agriculture n.a. n.a. (2.63) (2.69) (2.27) (1.70)Collective welfare n.a. n.a. (0.40) (0.49) (0.68) (0.70)

Taxes (Y billion) n.a. n.a. 2.20 2.26 2.57 3.40

Sources: Bureau of Commune and Brigade Enterprises, Ministry of Agriculture andState Statistical Bureau.

Table 7.10: COMMUNF AND BRIGADE ENTERPRISES BY SECTOR, 1978-81

1978 1979 1980 1981

No. of No. of No. of No. of

enter- Employ- Gross enter- Employ- Gross enter- Employ- Gross enter- Employ- Gross

prises ment output prises ment output prises ment output prises ment output

---- (-000) --- (Y bln) ---- (-000) --- (Y bln) ---- (-000) --- (Y bln) ---- (-000) --- (Y bln)

Agriculture 495 6,084 3.62 444 5,330 3.85 378 4,561 3.94 319 3,800 3.90

Industry 794 17,344 32.61 767 18,144 37.22 758 19,423 45.56 726 19,808 51.10

Transport 65 1,038 1.87 82 1,169 2.30 89 1,136 2.45 89 1,074 2.50 >

Construction 46 2,356 2.60 49 2,984 3.50 51 3,347 4.49 48 3,488 5.26

Others 124 1,443 2.44 138 1,466 2.24 149 1,530 3.17 156 1,526 4.28

Total 1,524 28,265 43.14 1,480 29,093 49.11 1,425 29,997 59.61 1,338 29,696 67.04

Sources: Bureau of Commune and Brigade Enterprises, Ministry of Agriculture and State Statistical Bureau.

- 170 -

Table 7.11: AGRICULTURAL STATISTICS BY PROVINCE, 1979

Communes, brigades andproduction teams

Livestock No. of Commune

Arable Irrigated Grain Cropping Sheep produc- house-area area output index Pigs & goats Cattle No. of No. of tion teams holds

(amln ha) (mln ha) (mln tons) () ------ (mln head) ------ communes brigades (-000) (-000)

Southwest RegionSichuan 6.625 3.290 32.01 178.8 50.92 10.92 9.12 8,373 74,647 523 19,492Guizhou 1.898 0.798 6.23 158.6 8.75 2.07 3.69 3,732 24,150 169 4,789

Yunnan 2.781 1.119 7.93 148.2 13.10 7.02 5.52 1,401 13,455 156 5,152Xizang 0.230 0.153 0.43 97.7 0.25 18.16 4.74 2,060 - 10 310

Northwest Region

Shaanxi 3.839 1.241 9.09 133.2 8.22 6.49 1.76 2,522 30,145 143 4,910Gansu 3.555 0.847 4.62 97.7 4.40 11.13 2.11 1,370 15,872 102 3,010

Qinghai 0.579 0.162 0.82 87.7 0.76 15.96 4.89 399 3,603 15 469

Ningxia 0.898 0.241 1.06 101.1 0.65 3.20 0.18 247 2,189 14 526Xinjiang 3.200 2.958 3.94 94.3 1.04 20.15 2.37 603 7,109 33 1,686

Central South RegionHenan 7.139 3.656 21.34 152.9 15.92 11 08 3.39 2,059 43,121 375 13,448

Hubei 3.755 2.299 18.50 207.1 17.49 1.77 3.26 1,256 30,425 238 8,029

Hunan 3.440 2.735 22.18 242.3 21.20 0.88 3.29 3,304 46,378 420 10,627Guangxi 2.628 1.729 11.73 194.2 11.03 0.88 4.16 967 12,738 217 5,912

Guangdong 3.218 2.417 17.38 217.4 20.09 0.41 3.83 1,927 26,173 359 9,651

East Region

Shanghai 0 356 0.356 2.59 216.8 3.42 0.45 0.06 204 2,929 29 1,234

Jiangsu 4.650 3.411 25.14 182.6 23.56 6.16 1.06 1,872 34,678 319 12,350Zhejiang 1.832 1.597 16.12 246.6 15.50 3.46 0.85 3,008 42,021 270 7,991Anhui 4.456 2.542 16.10 179.6 11.32 3.63 2.17 2,909 28,330 364 9,136

Fujian 1.295 1.048 7.62 204.3 6.99 0.69 0.99 880 13,689 147 4,166

Jiangxi 2.533 2.067 12.96 225.0 10.05 0.10 2.12 1,650 23,380 229 5,287

Shandong 7.260 4.405 24.72 146.8 21.18 9.26 2.22 2,092 83,927 364 15,149

North RegionBeijing 0.427 0.341 1.73 158.7 2.47 0.57 0.10 263 3,986 12 929

Tianjin 0.468 0.373 1.39 146.9 1.01 0.27 0.05 219 3,879 15 812

Hebei 6.659 3.671 17.79 138.8 13.52 7.29 1.28 3,645 50,144 256 10,541

Sbanxi 3.924 1.121 8.00 109.5 5.59 9.21 1.08 1,887 30,707 107 4,912

Nei Monggol 5.347 1.169 5.10 91.3 5.55 26.32 3.54 1,373 11,994 59 2,781

Northeast RegionLiaoning 3.787 0.804 11.94 104.8 11.89 1.67 1.34 1,149 15,385 89 4,911Jilin 4.052 0.571 9.03 100.2 5.86 1.49 1.11 902 9,907 61 2,996

Heilongjiang 8.663 0.605 14.63 98.4 7.98 2.46 1.07 1,075 13,652 59 3,705

Total 99.498 47.718 332.12 149.2 319.71 183.14 71.35 53,348 698,613 5,154 174,911

- 171 -

Table 7.11: (continued)

Distributed Gross Commune & brigade enterprises Mechanizationcollective value of No. of Tractors Grainincome agricultural enter- Gross (large & Hand Irrigation processing

per capita output prises Employees output medium) tractors machinery machines(yuan) (Y bln) /a ('000) ('000) (Y bln) /a -- --- (000) … (000 hp) ('000 units)

Southwest RegionSichuan 80.1 13.205 130 1,874 1.911 21 82 3,339 295Guizhou 46.8 2.860 24 276 0.273 8 9 877 53

Yunnan 6L.7 3.823 24 469 0.497 17 31 873 100Xizang 127.0 0.408 - - - 2 4 84 -

Northwest RegionShaanxi 80.6 4.005 41 601 0.777 19 63 2,248 130Gansu 57.1 2.179 20 251 0.363 16 52 1,968 68Qinghai 98.8 0.577 3 40 0.080 5 13 102 6Ningxia 69.1 0.461 6 54 0.109 5 15 168 18Xinjiang 105.2 2.142 16 201 0.305 24 12 580 14

Central South RegionHenan 63.6 10.294 70 1,551 2.649 52 106 7,819 307Hubei 106.6 9.417 114 1,576 1.957 33 98 2,705 206Hunan 96.0 9.416 126 2,080 2.842 18 56 3,004 147Guangxi 74.7 8.115 37 708 0.841 22 89 892 101Guangdong 87.6 4.823 89 2,067 3.344 20 119 2,358 79

East RegionShanghai 228.8 2.345 5 596 2.098 7 31 356 73iangsu 110.6 13.964 72 3,350 7.475 14 225 5,543 147Zhejiang 119.5 8.209 79 2,083 3.186 10 80 1,480 99Anhui 71.0 6.773 43 816 1.065 16 101 4,718 147Fujian 69.2 3.823 40 1,059 1.265 7 56 579 46Jiangxi 90.2 5.302 41 808 1.210 19 48 1,881 81Shandong 81.5 12.370 202 3,292 5.347 98 96 8,969 137

North RegionBeiiing 150.7 1.262 5 263 1.010 6 25 915 28Tianjin 145.5 1.354 4 254 0.818 12 8 1,378 17Hebei 84.3 9.346 118 1,854 3.785 37 106 10,523 207Shanxi 87.9 3.921 83 880 1.563 29 30 2,484 107Nei Monggol 77.3 2.853 17 254 0.411 31 16 1,360 85

Northeast RegionLiaoning 116.0 5 530 32 988 2.305 39 47 2,279 108Jilin 116.3 3.688 16 352 0.675 23 27 772 89Heilongjiang 110.4 5.965 23 496 0.949 57 26 967 83

Total 86.7 158.430 1,480 29,093 49.11 667 1,671 71,221 2,912

/a In 1970 prices.

Sources: State Agricultural Commission; Bureau of Commune and Brigade Enterprises, Ministry of Agriculture.

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Table 8.1: OUTPUT OF MAJOR INDUSTRIAL PRODUCTS, 1952-82

Unit 1952 1957 1965 1970 1975 1977 1978 1979 1980 1981 1982(prelimi-

nary)

A. Heavy Industry ProductsCrude coal mln tons 66 131 232 354 482 550 618 635 620.15 621.64 651.00Crude oil mln tons 0.44 1.46 11.31 30.65 77.06 93.64 104.05 106.15 105.95 101.22 102.05Natural gas mln cu m 8 70 1,112 2,870 8,850 12,120 13,730 14,510 14,270 12,740 n.a.Electricity bln kWh 7.3 19.3 67.6 115.9 195.8 223.4 256.6 282.0 300.6 309.3 325.54Pig iron mln tons 1.93 5.94 10.77 17.06 24.49 25.05 34.79 36.73 38.02 34.17 35.54Steel mln tons 1.35 5.35 12.23 17.79 23.90 23.74 31.78 34.48 37.12 35.60 37.12Rolled steel mln tons 1.06 4.15 8.81 11.88 16.22 16.33 22.08 24.97 27.16 26.70 29.01Coke (machine-made) mln tons 2.22 5.55 12.03 19.16 27.38 26.83 32.38 !33.54 34.05 31.72 33.25

Cement mln tons 2.86 6.86 16.34 25.75 46.26 55.65 65.24 73.90 79.86 82.90 94.07Plate glass mln std.cases 2.13 4.62 6.87 10.53 14.53 16.97 20.04 23.30 27.71 30.64 35.69Timber mln cu m 11.20 27.87 39.78 37.82 46.26 49.67 51.62 54.39 53.59 49.42 n.a.Sulphuric acid '000 tons 190 632 2,340 2,914 4,847 5,375 6,610 6,998 7,640 7,810 8,158Soda ash '000 tons 192 506 882 1,077 1,243 1,077 1,329 1,486 1,613 1,652 1,734Caustic soda '000 tons 79 198 556 892 1,289 1,386 1,640 1,826 1,923 1,923 2,070Chemical fertilizer '000 tons of 39 151 1,726 2,435 5,247 7,238 8,693 10,654 12,320 12,390 12,990

nutrientsChemical insecticides '000 tons 2 65 193 321 422 457 533 537 537 484 462Plastics '000 tons 2 13 97 176 330 524 679 793 898 916 n.a.Ethylene '000 tons 0 0 3 15.1 65 303 380 435 490 500 n.a.Calcium carbide '000 tons 11 49 440 696 983 989 1,238 1,407 1,520 1,510 n.a.Rubber tires °000 420 880 2,320 4,250 7,000 7,720 9,360 11,688 11,460 7,290 n.a.

Power generating equipment MW 6 198 683 2,918 4,965 3,181 4,838 6,212 4,193 1,395 n.a.Mining equipment '000 tons 1.6 52.9 40 96.3 196.1 184.5 242.9 264 163 115 134Machine tools '000 13.7 28.0 39.6 138.9 174.9 198.7 183.2 139.6 134.0 103.0 100.0Motor vehicles 000 0 7.9 40.5 87.2 139.8 125.4 149.1 185.7 222.0 176.0 196.0Tractors '000 0 0 9.6 31.9 78.4 99.3 113.5 125.6 98.0 53.0 43.0Hand tractors '000 0 0 3.6 51.4 209.4 320.5 324.2 317.5 218.0 199.0 n.a.Internal combustion engines '000 hp 40 690 2,790 7,330 23,480 27,410 28,180 29,080 25,390 20,040 n.a.Locomotives units 20 167 146 573 526 293 521 573 512 398 481Railway passenger wagons units 6 454 160 576 804 538 784 856 1,002 1,159 n.a.Railway freight wagons 000 5.8 7.3 2.9 13.8 15.7 6.4 17.0 16.0 10.6 8.8 n.a.Steel ships for civilian use '000 tons 21 108 n.a. n.a. n.a. 634 861 809 818 916 n.a.

). Light Industry ProductsYarn '000 tons 656 844 1,300 2,052 2,108 2,230 2,382 2,635 2,930 3,170 3,360Cloth bln m 3.83 5.05 6.28 9.15 9.40 10.15 11.03 12.15 13.47 14.27 15.12Woolen piece goods mln m 4.23 18.17 n.a. n.a. n.a. 78.40 88.85 90.17 101 113 n.aSilk '000 tons 5.6 9.9 n.a. n.a. n.a. 26.9 29.7 29.7 35.4 37.4 n.a.Silk textiles mln m 65 145 n.a. n.m. n.a. 529 611 663 759 835 n.asunny bags mln 67 83 125 184 191 245 290 344 433 429 n.a.Chemical fibers -000 tons 0 0.2 50.1 100.9 154.8 189.8 284.6 326 450 527 516

Television sets 000 0 0 4.3 10.5 177.8 284.6 517.3 1,329 2,492 5,394 5,607Radios 000 17 352 815 3,108 9,356 10,494 11,677 13,810 30,040 40,570 17,036Cameras '000 0 0.1 17.2 40.4 184.9 246.6 178.9 238 373 623 857Bicycles -000 80 806 1,838 3,688 6,232 7,427 8,540 10,095 13,020 17,540 24,133Sewing machines '000 66 278 1,238 2,352 3,567 4,242 4,865 5,868 7,680 10,390 12,793Wrist watches '000 0 0.4 1,008 3,476 7,822 11,043 13,511 17,070 22,160 28,720 n.a.Washing machines '000 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 305 1,281 2,517Refrigerators '000 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 49.0 55.6 n.a.Electric fans 000 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 7,241 10,500 n.a.

Machine-made paper & paperboard 372 913 1,730 2,410 3,410 3,769 4,387 4,929 5,350 5,400 5,698Synthetic detergents '000 tons 0 0 30 93 223 257 324 397 393 478 n.a.Light bulbs mln 26 69 192 386 520 617 770 850 950 970 n.a.

Sugar '000 tons 451 864 1,460 1,350 1,740 1,815 2,267 2,500 2,570 3,166 3,335Salt '000 tons 4,945 8,277 11,470 11,090 14,810 17,104 19,535 14,770 17,280 18,320 16,008Beer '000 tons n.a. n.a. n.a. n.a. n.. n.a. n.a. n.a. 688 910 n.a.

Sources: State Economic Commission, State Statistical Bureau and official submission to United Nations Statistical Office.

Table 8.2: NUMBER OF ENTERPRISES AND GROSS VALUE OF OUTPUT BY BRANCH OF INDUSTRY, 1977-81 /a

Number of enterprises (end year) Gross value of output (million 1970 yuan)

Industry names 1977 1978 1979 1980 1981 1977 1978 1979 1980 1981

1 Basic metallurgy & metal mining 4,259 4,934 5,138 5,000 4,600 29,052 36,891 41,027 43,027 41,540

Of which:1.1 Iron & steel (incl. mining) n.a. n.a. 2,828 n.a. n.a. n.a. n.a. 28,702 n.a. n.a.

1.2 Nonferrous metals (incl. mining) n.a. n.a. 2,310 n.a. n.a. n.a. n.a. 12,325 n.a. n.a.

2 Electric power 7,386 8,262 8,923 9,800 10,300 14,135 16,142 17,672 18,839 19,409

3 Coal mining, washing & dressing 8,887 9,389 9,172 8,700 8,500 10,312 11,685 12,818 12,401 12,205

Of which:3.1 Coal mining 8,549 9,160 8,805 8,500 8,200 10,191 11,001 11,624 11,397 11,276

4 Petroleum extraction & refining 209 250 307 400 300 22,680 23,329 24,957 25,231 24,537

Of which:4.1 Petroleum and natural gas extraction 21 21 21 21 19 8,394 9,480 9,803 10,224 9,874

5 Chemicals (incl. mining), plastic andrubber products 20,599 22,393 22,384 23,600 23,800 42,366 52,498 56,184 62,230 65,128

Of which:5.1 Basic chemicals 1,854 2,300 2,570 2,700 2,600 5,161 6,167 7,221 7,578 7,602

5.2 Chemical fertilizers & insecticides 6,840 6,427 5,232 4,500 4,000 8,083 10,200 10,690 12,463 12,365

5.3 Rubber & plastic producer goods 3,909 4,642 4,876 n.a. n.a. 8,664 10,240 11,175 n.a. n.a.

5.4 Pharmaceuticals, photo film, fats & oil,soap & detergents 2,994 3,297 3,238 n.a. n.a. 8,785 9,981 10,011 n.a. n.a.

6 Machinery & metal products (incl. electronics& repairing) 94,797 103,753 104,071 107,300 104,100 103,710 115,546 124,484 127,362 122,617

Of which:6.1 Agricultural equipment 9,768 11,158 9,608 8,400 7,200 10,676 11,588 10,913 8,658 6,768

6.2 Industrial machinery & equipment 7,139 7,636 7,786 7,700 7,600 22,992 25,541 24,027 22,465 19,945

6.3 Transport equipment (except bicycles) 2,409 2,610 2,842 2,800 2,700 11,183 12,720 14,542 14,955 12,813

6.4 Construction & road bldg. machinery 159 160 238 n.a. n.a. 507 553 826 n.a. n.a.

6.5 Machinery for nonproductive use 1,465 1,715 1,871 n.a. n.a. 4,365 5,107 6,040 n.a. n.a.

7 Nonmetallic mineral building materials(incl. mining) 39,065 44,118 46,022 48,900 48,500 13,334 15,391 16,732 18,153 18,087

Of which:7.1 Cement and cement products 6,554 7,669 9,927 11,200 11,600 4,122 4,877 6,003 6,759 6,806

7.2 Refractory materials, (ceramic, brick,lime, etc.) 30,045 33,700 32,941 32,500 32,000 6,964 8,071 8,119 7,172 7,262

7.3 Glass 522 553 627 700 700 1,056 1,167 1,278 1,383 1,283

7.4 Nonmetallic mineral mining 1,944 2,196 2,527 n.a. n.a. 1,192 1,276 1,332 n.a. n.a.

8 Timber, wood products &.furniture 10,419 12,128 14,252 16,800 17,500 7,000 7,741 8,475 8,665 8,616

Of which:8.1 Logging & transport of timber 1,398 1,412 1,569 1,700 1,700 2,703 2,805 2,976 3,016 2,845

9. Food, beverages and tobacco (incl. salt mining) 37,058 40,953 44,682 51,800 55,600 43,574 47,171 51,872 56,796 64,023

10 Textiles 11,305 12,145 13,036 15,300 17,100 46,065 52,909 59,306 73,546 86,825

Of which:10.1 Synthetic fiber production 200 245 176 200 200 2,265 3,129 3,781 5,349 6,959

11 Paper, pulp and paperboard 2,977 3,648 4,105 4,400 4,700 4,754 5,384 6,030 6,414 6,402

12 Other industries (incl. piped water) 85,762 86,474 83,228 n.a. n.a. 35,846 38,388 40,523 n.a. n.a.

Of which:12.1 Clothing, footwear & leather products n.a. n.a. 23,551 n.a. n.a. n.a. n.a. 13,880 n.a. n.a.

12.2 Paper products, printing, cultural,educational & sport goods n.a. n.a. 11,256 n.a. n.a. n.a. n.a. 9,650 n.a. n.a.

Total 322,723 348,447 355,320 377,300 381,500 372,828 423,075 460,080 499,243 519,883

/a Excludes brigade and team industrial enterprises.

Sources: State Economic Commission, State Statistical Bureau and data provided by Chinese authorities to UN Statistical Office.

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Table 8.3: CAPITAL CONSTRUCTION BY BRANCH OF INDUSTRY, 1977-81 /a

Value in million current yuanIndustry names 1977 1978 1979 1980 1981

1 Basic metallurgy & metal mining 4,273 4,648 3,472 3,248 2,7352 Electric power 3,472 5,091 5,099 4,814 4,0143 Coal mining, washing & dressing 2,258 3,180 3,186 3,347 2,315

Of which:3.1 Coal mining 2,247 3,167 3,119 3,308 2,285

4 Petroleum extraction & refining 2,076 3,160 2,707 3,338 2,795Of which:

4.1 Petroleum & natural gasextraction 1,488 2,347 2,085 2,695 2,314

5 Chemicals (incl. mining), plastic &rubber products 2,905 3,134 2,946 2,961 1,902Of which:

5.1 Basic chemicals 668 1,196 1,318 n.a. n.a.5.2 Chemical fertilizers &

insecticides 1,907 1,500 1,234 891 4425.3 Rubber & plastic producer goods 68 72 73 89 465.4 Pharmaceuticals, photo film,

fats & oil, soap & detergents 131 173 150 n.a. n.a.6 Machinery & metal products (incl.

electronics & repairing) 3,252 4,081 3,624 3,775 2,439Of which:

6.1 Agricultural equipment 534 651 445 248 1476.2 Industrial machinery & equipment 940 1,388 789 634 4376.3 Transport equipment (except

bicycles) 572 558 443 391 2606.4 Construction & road bldg.

machinery 55 55 65 40 256.5 Machinery for nonproductive use 162 210 157 192 167

7 Nonmetallic mineral building matls.(incl. mining) 669 916 1,244 1,174 879Of which:

7.1 Cement & cement products 297 422 728 659 4677.2 Refractory materials, (ceramic,

brick, lime, etc.) 254 327 381 n.a. n.a.7.3 Glass 42 41 44 53 597.4 Nonmetallic mineral mining 76 126 91 76 60

8 Timber, wood products & furniture 286 437 494 705 663Of which:

8.1 Logging & transport of timber 247 388 436 580 5239 Food, beverages & tobacco (incl. salt

mining) 364 512 512 813 92610 Textiles 1,496 1,338 1,412 2,330 1,986

Of which:10.1 Synthetic fiber production 1,190 904 760 820 837

11 Paper, pulp & paperboard 147 207 280 291 19112 Other industries (incl. piped water) 538 660 709 495 280

Total 21,736 27,316 25,685 27,398 21,526

/a Includes investment in the state budget and by various localities, stateenterprises and industrial departments. Does not include renewal andreplacement of fixed assets, or investment of collectives.

Sources: State Statistical Bureau and data provided by Chinese authorities tothe UN Statistical Office.

- 175 -

Table 8.4: ELECTRICITY CONSUMPTION BY BRANCH OF INDUSTRY,/a 1977-79(in million kWh)

1977 1978 1979

Basic metallurgy 34,913 42,333 45,631

Electric power 35,320 39,573 42,629

Coal 13,871 15,162 16,903

Petroleum 6,133 7,410 8,203

Chemicals 35,817 43,228 48,338

Machinery and metal products 16,161 17,692 19,643

Building materials 6,902 8,034 9,405

Food, beverages and tobacco 3,453 3,734 4,565

Textiles 7,774 8,646 9,981

Paper & pulp 3,668 4,353 4,950

Others /b 13,999 15,495 15,868

Total 178,011 205,660 226,107

/a Independent (state and collective) accounting units only. Excludes bri-gade and team industrial enterprises. See Table 7.2 for more details ofsectoral classification.

/b Includes timber and wood products.

Source: Data provided by Chinese authorities to UN Statistical Office.

- 176 -

Table 8.5: KEY INDUSTRIAL STATISTICS BY OWNERSHIP, 1979

Industrial enterprisesCollective

Total Urbanenter- State- Sub- collec- Ruralprises owned total tive commune

All Industrial Enterprises /aNo. of enterprises

(end of year) 355,013 83,837 271,176 99,679 171,497Gross output(Y billion 1970) 459.07 371.98 87.09 63.72 23.37

Net output(Y billion current) 154.54 126.50 28.04 18.06 9.98

Employment(thousands, end of year) 53,400/b 31,091/c 22,300/b 13,277 9,000/b

Wages and salaries(Y billion current) n.a. 23.02/d n.a. 6.76 n.a.

Independent Accounting UnitsOnlyGross fixed assets

(Y billion, end of year) 380.38 346.67 33.71 20.91 12.80Net fixed assets

(Y billion, end of year) 262.97 237.86 25.11 14.96 10.15Circulating funds(Y billion, average) 133.44 110.87 22.55 17.12 5.43

Net fixed assets plus circu-lating funds 396.41 348.75 47.66 32.08 15.58

Profits and taxes(Y billion current) 99.41 86.44 12.97 8.56 4.41

/a All industrial enterprises except those in rural production brigades andproduction teams.

/b Approximate.

/c Average during the year was 30,381. For the breakdown among industrialbranches, see Table 10.3.

/d For the breakdown among industrial branches, see Table 10.3.

Source: State Economic Commission.

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Table 8.6: KEY INDUSTRIAL STATISTICS FOR LIGHT AND HEAVY INDUSTRY, 1979

Percentage SharesLight Heavy Light Heavy

industry industry Total industry industry

All Industrial Enterprises

Number 207,853 147,160 355,013 58.5 41.5

Gross output (bil 1970 yuan) 197.96 261.11 459.07 43.1 56.9

Net output (bil current yuan) 59.13 95.41 154.54 38.3 61.7

Independent AccountingUnits Only

Gross fixed assets (Y billion) 66.55 313.83 380.38 17.5 82.5

Net fixed assets (Y billion) 45.40 217.57 262.97 17.3 82.7

Circulating funds (Y billion) 37.28 96.16 133.44 27.9 72.1

N.F.A. plus C.F. (Y billion) 82.68 313.73 396.41 20.9 79.1

Profits and taxes (Y billion) 39.46 59.95 99.41 39.7 60.3

Source: State Economic Commission.

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Table 8.7: GROSS INDUSTRIAL OUTPUT BY PROVINCE, 1979-81(% of national total)

1979 1981Total Light Heavy Total

Northeast RegionLiaoning 9.1 3.1 5.6 8.7Jilin 2.7 1.1 1.5 2.6Heilongjiang 4.6 1.6 3.2 4.8

North RegionBeijing 4.6 2.0 2.2 4.2Tianjin 3.8 2.3 1.6 3.9Hebei 4.4 2.0 2.2 4.2Shanxi 2.3 0.7 1.6 2.3Nei Monggol 1.2 0.5 0.6 1.1

East RegionShandong 6.5 3.7 2.9 6.6Anhui 2.5 1.4 1.1 2.5Shanghai 12.9 6.7 5.0 11.7Jiangsu 8.4 5.5 3.5 9.0Zhejiang 3.3 2.7 1.4 4.1Jiangxi 1.7 0.9 0.9 1.8Fujian 1.5 1.0 0.6 1.6

Central South RegionHenan 3.7 2.2 1.8 4.0Hubei 4.1 2.5 2.3 4.8Hunan 3.4 1.6 1.8 3.4Guangxi 1.6 1.0 0.6 1.6Guangdong 4.6 3.1 1.7 4.8

Northwest RegionShaanxi 2.3 1.1 0.9 2.0Gansu 1.8 0.3 1.1 1.4Qinghai 0.3 0.1 0.1 0.2Ningxia 0.3 0.1 0.2 0.3Xinjiang 0.7 0.4 0.4 0.8

Southwest RegionSichuan 5.4 2.7 2.6 5.3Guizhou 1.0 0.4 0.5 0.9Yunnan 1.3 0.7 0.7 1.4Xizang /a /a /a /a

Total 100.0 51.4 48.6 100.0

/a Negligible.

Source: State Economic Commission and State Statistical Bureau.

- 179 -

Table 8.8: COMPONENTS OF VALUE ADDED IN INDUSTRY(CURRENT PRICES), 1978-81

(unit: %)

1978 1979 1980 1981

Wages and salaries, welfare fund and bonuses 25 26 26 26

Taxes and profits 70 68 68 67

Interest paid to banks 2 2 1 2

Other 3 4 5 5

Total 100 100 100 100

Source: State Statistical Bureau.

Table 9.1: GROWTH OF ENERGY PRODUCTION, 1952-81

Electricity Hydro Coal Oil Natural gas Total primary(GWh) (% p.a.) (GWh) (X p.a.) (mln tons) (% p.a.) (mln tons) (% p.a.) (Bln cu m) (7 p.a.) (Mtce) (% p.a.)

1952 7,260 1,260 66.49 0.436 0.008 48.7

1952-57 21.6 30.8 14.5 27.3 54.3 14.9

1957 19,340 4,820 130.73 1.458 0.070 97.6

1957-65 16.9 10.1 7.4 29.2 41.3 8.5

1965 67,600 10,410 231.80 11.31 1.112 187.9

1965-70 11.4 14.5 8.8 22.1 20.9 10.5

1970 115,860 20,460 353.99 30.65 2.870 310.0

1970-75 11.1 18.4 6.4 20.2 25.3 9.5

1975 195,840 47,630 482.24 77.06 8.850 488.6

1975-78 10.7 -2.1 8.6 10.5 18.7 8.9

1978 256,600 44,600 618.00 104.05 13.730 630.11979 282,000 50,100 635.00 106.15 14.510 648.71980 300,627 58,211 620.13 105.95 14.270 640.91981 309,269 65,546 622.00 101.22 12.740 636.4

Notes: (1) Mtce (million tons of coal equivalent) coefficients based on tce of 7 million Kcal, with calorific values assumed asfollows: coal 5,000 Kcal/kg; oil 10,200 Kcal/kg, natural gas 9,310 Kcal/cu m; hydroelectric power 2,954 Kcal/kWh.

(2) Oil production includes shale oil.

Source: Ministries of Electric Power, Coal and Petroleum Industry.

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Table 9.2: CRUDE OIL PRODUCTION BY REGION AND MAJOR FIELD, 1977-81

(million tons)

1977 1978 1979 1980 1981

Northeast 54.875 56.039 57.363 58.59 58.63Daqing 50.314 50.375 50.753 51.50 51.75Others 4.561 5.664 6.610 7.09 6.88

North 15.554 20.399 20.404 19.11 15.26Renqiu 12.298 17.230 17.331 16.03 12.22Dagang 3.150 3.000 2.901 2.91 2.88Others 0.106 0.169 0.172 0.17 0.16

East 17.660 19.743 19.206 17.92 16.41Shengli 17.520 19.468 18.880 17.59 16.11Others 0.140 0.275 0.326 0.33 0.30

Central-South 1.261 2.832 3.385 4.16 4.80Northwest 4.207 4.942 5.687 6.06 5.99Southwest 0.081 0.094 0.104 0.10 0.09

Total 93.638 104.049 106.149 105.94 101.18

Source: Ministry of Petroleum.

-182 -

Table 9.3: ELECTRICITY GENERATION AND INSTALLEDGENERATING CAPACITY, 1949-80

Total Installedgeneration capacity

Year (GWh) (MW)

1949 4,310 1,848.61952 7,260 1,964.01957 19,340 41,635.01962 45,800 13,037.21965 67,600 15,076.31970 115,860 23,770.01971 138,360 26,282.01972 152,450 29,501.01973 166,760 33,925.01974 168,850 38,108.01975 195,840 43,406.01976 203,130 47,147.41977 223,400 51,450.51978 256,550 57,122.11979 281,950 63,015.91980 300,627 n.a.

Source: Ministry of Electric Power.

- 183

Table 9.4: HYDRO AND THERMAL INSTALLED CAPACITY BY REGION, 1970-79(MW)

North North CentralYear Type East North West East South Southwest Total

1970 Hydro 1,308 254 912 1,328 1,764 669 6,235Thermal 3,820 3,373 1,509 4,304 2,406 2,085 17,535Total 5,128 3,627 2,421 5,632 4,170 2,754 23,770

1971 Hydro 1,324 288 981 1,591 2,250 1,370 7,804Thermal 3,986 3,489 1,625 4,748 2,473 2,151 18,478Total 5,310 3,777 2,606 6,339 4,723 3,521 26,282

1972 Hydro 1,335 272 1,231 1,718 2,640 1,499 8,700Thermal 4,328 3,836 1,726 5,580 3,016 2,296 20,801Total 5,663 4,113 2,957 7,298 5,656 3,795 29,501

1973 Hydro 1,407 308 1,621 1,893 3,243 1,827 10,299Thermal 4,611 4,621 1,928 6,655 3,363 2,431 23,626Total 6,018 4,929 3,549 8,548 6,606 4,258 33,925

1974 Hydro 1,456 339 1,964 2,198 3,872 1,988 11,817Thermal 5,113 5,310 2,120 7,577 3,560 2,583 26,291Total 6,569 5,649 4,084 9,775 7,432 4,571 38,108

1975 Hydro 1,564 397 2,290 2,681 4,315 2,181 13,428Thermal 6,036 6,026 2,274 8,516 4,484 2,608 29,978Total 7,600 6,423 4,564 11,197 8,799 4,789 43,406

1976 Hydro 1,574 428 2,543 2,846 4,787 2,477 14,655Thermal 6,676 6,252 2,434 9,438 4,950 2,720 32,492Total 8,251 6,680 4,977 12,284 9,737 5,197 47,147

1977 Hydro 1,619 517 2,666 3,097 5,071 2,795 15,765Thermal 7,253 7,182 2,504 10,327 5,560 2,848 35,686Total 8,872 7,699 5,170 13,424 10,631 5,644 51,451

1978 Hydro 1,658 573 2,833 3,341 5,841 3,032 17,277Thermal 8,008 8,123 2,596 11,299 6,735 3,038 39,845Total 9,666 8,696 5,428 14,640 12,576 6,070 57,122

1979 Hydro 1,713 597 2,933 3,784 6,528 3,556 19,110Thermal 7,919 9,582 2,936 12,688 7,517 3,210 43,906Total 9,632 10,179 5,869 16,472 14,045 6,766 63,016

Source: Ministry of Electric Power.

- 184 -

Table 9.5: ELECTRICITY SALES BY CONSUMER CATEGORY, 1949-79

Energy sales (GWh) /a (% figures in parentheses)Residential

Year & commercial Industrial Agricultural Transportation Others Totallb /c /d

1949 490(14.2) 2,390(69.0) 20 (0.6) 20 (0.6) 540(15.6) 3,460(100)1952 817(13.1) 4,981(80.0) 43 (0.7) 59 (0.9) 327 (5.2) 6,227(100)1957 1,975(11.9) 13,605(82.9) 108 (0.7) 70 (0.4) 649 (4.0) 16,407(100)1965 3,839 (6.8) 47,723(84.0) 3,710 (6.5) 332 (0.6) 1,198 (2.1) 56,802(100)1970 -- -- -- - - _ -_1971 4,558 (4.5) 84,203(83.2) 10,433(10.3) 452 (0.4) 1,628 (1.6) 101,274(100)1972 5,305 (4.3) 101,784(82.3) 12,989(10.5) 707 (0.6) 2,815 (2.3) 123,600(100)1973 5,830 (4.3) 110,194(81.6) 15,823(11.7) 1,126 (0.8) 2,133 (1.6) 135,106(100)1974 6,453 (4.7) 107,860(79.5) 17,982(13.3) 1,171 (0.9) 2,242 (1.6) 135,708(100)1975 7,150 (4.6) 124,782(79.5) 20,877(13.3) 1,435 (0.9) 2,725 (1.7) 156,969(100)1976 7,721 (4.7) 128,966(78.3) 23,154(14.1) 1,846 (1.1) 3,011 (1.8) 164,698(100)1977 8,498 (4.7) 142,691(78.5) 24,834(13.7) 2,104 (1.2) 3,564 (1.9) 181,691(100)1978 8,967 (4.3) 166,087(79.0) 28,742(13.5) 2,280 (1.2) 4,163 (2.0) 210,239(100)1979 11,252 (4.8) 184,636(79.0)/e 32,493(13.9) 1,323 (0.6) 3,973 (1.7) 233,577(100)

/a Excludes self-generation by industries and mini-hydro owned by communes and brigades.

/b Urban areas only.

/c For details of industrial electricity use, see Table 7.4.

/d Includes rural residential and commercial use.

/e Of which: 35,057 GWh to light industries and 149,579 GWh to heavy industries.

Source: Ministry of Electric Power.

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Table 9.6: ELECTRIFICATION OF COMMUNES AND BRIGADES BY REGION, 1979

% of communes % of brigadesRegion electrified electrified

Northeast 98.2 94.5

North 88.0 78.3

Northwest 70.0 47.8

East 90.2 60.7

Central and South 93.3 64.1

Southwest 82.6 46.9

National 87.1 62.6

Source: Ministry of Electric Power.

Table 10.1: TRANSPORTATION INDICATORS, 1949-81

Item Unit 1949 1952 1957 1977 1978 1979 1980 1981

Railway line open to traffic thousand km 22.0 24.5 29.9 49.5 50.4 54.7 55.3 56.0Highway open to traffic 80.7 126.7 254.6 855.6 890.2 875.8 888.2 897.5Navigable inland waterway 73.6 95.0 144.1 137.5 136.0 107.8 108.5 108.7Civil aviation routes 11.4/a 13.1 26.4 132.1 148.9 108.7 110.4 n.a.

Total Volume of Goods Transport 1000 millon n.a. n.a. n.a. n.a. n.a. 1,138.4 1,202.6 1,214.3ton-km

(Excluding highway freight trans-port by vehicles other than thoseowned by transport departments) (25.5) (76.2) (181.0) (796.9) (982.9) (1,090.7) (1,151.7) (1,161.6)

Railway freight transport 18.4 60.2 134.6 456.8 534.5 559.8 571.7 571.2Highway freight transport /b n.a. n.a. n.a. n.a. n.a. 74.5 76.4 78.0

(Of which: handled by transportdepartments) (0.8) (1.4) (4.8) (25.1) (27.4) (26.8) (25.5) (25.3)

Water cargo transport 6.3 14.6 41.6 276.2 377.9 456.4 505.3 515.0Air freight shipment .. n.a. .. 0.1 0.1 0.1 0.1 0.2 1Oil and gas carried through

pipelines 0 0 0 38.7 43.0 47.6 49.1 49.9 a'

Cargo handled at vmajor sea ports million ton 8.72 14.40 37.27 159.69 198.34 212.57 217.31 219.31

Volume of Passenger Transport 1000 millionperson-km 15.5 24.8 49.6 158.7 174.3 196.8 228.1 250.0

By railway 13.0 20.1 36.1 102.3 109.3 121.6 138.3 147.3By highway (handled by transport

departments) /c 0.8 2.3 8.8 44.8 52.1 60.3 72.9 83.9By waterway 1.5 2.5 4.6 9.8 10.1 11.4 12.9 13.8By air 0.2 .. 0.1 1.8 2.8 3.5 4.0 5.0

la Figure for 1950./b Figures exclude highway freight transport by traditional means, including hand tractors.7T i.e. excludes passenger traffic by enterprise-owned vehicles and by traditional means.

Source: State Statistical Bureau.

- 187 -

Table 10.2: EDUCATION: NUMBER OF PUPILS ENROLLED, 1949-81 /a(millions)

Year Primary Secondary Tertiary Total

1949 24.39 1.27 0.117 25.781950 28.92 1.57 0.137 30.631951 43.15 1.96 0.153 45.261952 51.10 3.15 0.191 54.441953 51.66 3.63 0.212 55.501954 51.22 4.25 0.253 55.721955 53.13 4.47 0.288 57.891956 63.47 6.01 0.403 69.881957 64.28 7.08 0.441 71.801958 86.40 12.00 0.660 99.061959 91.18 12.90 0.812 104.891960 93.79 14.87 0.962 109.621961 75.79 10.34 0.947 87.081962 69.24 8.34 0.830 78.411963 71.58 8.38 0.750 80.711964 92.95 10.20 0.685 103.831965 116.21 14.32 0.674 131.201966 103.42 12.97 0.534 116.921967 102.44 12.55 0.409 115.401968 100.36 14.05 0.259 114.671969 100.67 20.25 0.109 121.031970 105.28 26.48 0.048 131.811971 112.11 31.49 0.083 143.681972 125.49 36.17 0.194 161.851973 135.70 34.95 0.314 170.961974 144.81 37.14 0.430 182.381975 150.94 45.37 0.501 196.811976 150.06 59.06 0.565 209.681977 146.18 68.49 0.625 215.291978 146.24 66.37 0.856 213.471979 146.63 60.25 1.020 207.901980 146.27 56.78 1.144 204.191981 143.33 50.15 1.279 194.76

/a Excludes, for example, TV university, factory-run and spare-timeeducation, adult education, etc.

Source: Ministry of Education and State Statistical Bureau.

Table 10.3: HEALTH SERVICE INDICATORS, 1949-81

1949 1952 1957 1965 1970 1975 1977 1978 1979 1980 1981

HealthHospital beds ('000) 80 160 295 766 1,105 1,598 1,777 1,856 1,932 1,982 2,017

Professional medical workers (000) 505 690 1,039 1,532 1,453 2,057 2,341 2,464 2,642 2,798 3,011

Of which:Doctors - Traditional medicine

( 000) (276) (306) (337) (321) (225) (229) (240) (251) (258) (262) (290)

Senior doctors - Western ('000) (38) (52) (74) (189) (221) (293) (329) (359) (395) (447) (516)

Junior doctors - Western (-000) (49) (67) (136) (253) (256) (356) (409) (423) (435) (444) (436)

Nurses ('000) (33) (61) (128) (235) (295) (380) (405) (407) (421) (466) (525)

Barefoot doctors ('000) - - - 94 1,218 1,559 1,760 1,666 1,575 1,463 1,396

Source: State Statistical Bureau.

co

oo

- 189 -

Table 10.4: MISCELLANEOUS SOCIOECONOMIC INDICATORS, 1949-81

Unit 1949 1952 1957 1977 1978 1979 1980 1981

Electricity consumed by ('000 mln n.a. 0.05 0.14 22.2 25.3 28.3 32.1 37.0rural areas kWh)

Post & telecommunication (mln yuan) 97 164 294 1,114 1,165 1,255 1,334 1,402transactions (at conr-stant prices of 1970)

Total number of tourists (thousands) n.a. n.a. n.a. n.a. 1,883 4,204 5,700 7,767coming to China

Feature films produced (number) 6 4 40 n.a. 46 65 82 105

Film projection units (thousands) 0.6 2.3 10.0 103.2 115.9 122.1 125.5 130.8

Performing art troupes (number) 1,000 2,084 2,884 2,941 3,150 3,482 3,533 3,483

Cultural centers (number) 896 2,430 2,748 2,644 2,748 2,892 2,912 2,893

Public libraries (number) 55 83 400 842 1,256 1,651 1,732 1,787

Broadcasting stations (number) 49 72 61 90 93 99 106 114

Television centers (number) - - - 32 32 38 38 42

Books produced (mln copies) 105 786 1,275 3,308 3,770 4,072 4,593 5,578

Magazines (mln copies) 20 204 315 559 762 1,184 1,125 1,462

Newspapers ('000 mln n.a. 1.61 2.44 12.37 12.78 13.08 14.04 14.07copies)

Source: State Statistical Bureau.

- 190 -

Table 11.1: PRICE INDICES, 1952-81

(1950 = 100)

1952 1957 1965 1970 1975 1977 1978 1979 1980 1981

Retail price index 111.8 121.3 134.6 131.5 131.9 135.0 135.9 138.6 146.9 150.4

Cost of living of

staff and workers 115.5 126.6 139.0 137.8 139.5 143.7 144.7 147.7 158.5 162.5

Ex-factory prices of

industrial products 113.2 98.7 99.3 84.9 84.2 81.4 81.6 82.9 83.4 83.6

Agricultural procure-

ment price index 121.6 146.2 187.9 195.1 208.7 209.2 217.4 265.5 284.4 301.2

Rural market price

index 111.0 120.9 192.2 n.a. n.a. 263.3 246.0 234.9 239.6 255.4

Industrial products

sold in rural areas 109.7 112.1 118.4 111.9 109.6 109.8 109.8 109.9 110.8 111.9

Services n.a. n.a. n.a. n.a. n.a. 128.4 127.9 128.4 129.4 130.4

List prices at statecommercial units 112.1 121.4 132.3 n.a. n.a. 128.7 129.0 130.9 136.7 138.5

Source: State Statistical Bureau.

- 191 -

Table 11.2: PROCUREMENT PRICES, P.X-FACTORY PRICES AND RETAIL PRICES

(NATIONAL LEVFL), 1957-81

1957 1967 1970 1977 1978 1979 1980 1981

Mixed Average Procurement Prices of MajorAgricultural Products (Y)

Foodgrain (500 kg) 128.30 131.73 165.34 180.28 190.85

Edible vegetahle oil (500 kg) n.a. n.a. n.a. 836.40 873.24 1,229.10 1,320.42 1,409.42

Hogs (head) n.a. n.a. n.a. 70.30 74.50 102.10 115.70 120.70

Cattle (head) n.a. n.a. n.a. 98.80 100.90 120.80 154.30 175.40

Sheep (head) n.a. n.a. n.a. 13.50 14.70 17.70 21.70 25.60Poultry (head) n.a. n.a. n.a. 1.60 2.00 2.20 2.63 2.78Eggs (50 kg) n.a. n.a. n.a. 67.90 68.90 84.00 85.70 92.00

Tea (50 kg) n.a. n.a. n.a. 117.00 119.70 153.00 157.80 161.90Sugarcane (O000 kg) n.a. n.a. n.a. 35.00 36.20 44.90 50.30 54.00

Sugar beets (000 kg) n.a. n.a. n.a. 62.00 60.50 81.80 85.20 87.00

Cotton (50 kg) n.a. n.a. n.a. 104.00 113.90 134.00 158.70 155.80

Jute and hemp (50 kg) n.a. n.a. n.a. 26.00 28.40 28.70 54.10 47.00

Tussah cocoons (50 kg) n.a. n.a. n.a. 49.00 50.00 64.40 65.00 62.70

Silkworm cocoons (50 kg) n.a. n.a. n.a. 133.00 138.40 163.00 170.40 169.60

Vegetables (50 kg) n.a. n.a. n.a. 3.80 4.10 4.50 5.20 5.60

Ex-Factory Prices - Agrochemicals and

Machinery (Y)Tractor (East is Red 54/75, unit) 21,000.00 17,000.00 14,500.00 n.a. n.a. 14,500.00 n.a. n.a.Tractor (East is Red 28, urnit) 18,000.00 10,000.00 9,000.00 n.a. n.a. 9,000.00 n.a. n.a.Tractor (Iron Cow 40/55, .,nit) 18,000.00 14,000.00 12,000.00 n.a. n.a. 12,000.00 n.a. n.a.

Hand tractor (Kung-Long 7/11, unit) 4,130.00 2,500.00 2,355.00 n.a. n.a. 2,300.00 n.a. n.a.

Combined threshing machine (GT-4.9model, unit) n.a. 22,000.00 15,000.00 n.a. n.a. 13,000.00 n.a. n.a.

(NH 4)2 S04 (N 20.R%, ton) 184.00 184.00 185.00 n.a. n.a. 185.00 n.a. n.a.

Urea (N 46%, ton) 1,000.00 540.00 400.00 n.a. n.a. 350.00 n.a. n.a.NH4 NO3 (N 34%, ton) 400.00 315.00 260.00 n.a. n.a. 220.00 n.a. n.a.

Calcium superposphate (P 14-18%, ton) n.a. 120.00 110.00 n.a. n.a. 100.00 n.a. n.a.

"Retail Prices of Industrial Goods in

Rural Areas (Y)Chemical fertilizer (ton) n.a. n.a. n.a. n.a. 231.00 236.00 237.10 242.50Pesticides (ton) n.a. n.a. n.a. n.a. 1,358.00 1,525.00 1,422.80 1,655.00

Coal (ton) n.a. n.a. n.a. n.a. 30.00 31.30 31.40 32.60

Transistor radio n.a. n.a. n.a. n.a. 34.60 39.20 40.70 41.40Bicycle n.a. n.a. n.a. n.a. 159.00 159.00 161.20 163.70

Watch n.a. n.a. n.a. n.a. 125.00 123.00 122.80 113.50

Clock n.a. n.a. n.a. n.a. 19.00 20.10 21.10 23.10Thermos bottle n.a. n.a. n.a. n.a. 4.00 4.10 4.25 4.44

Chrome gold pen n.a. n.a. n.a. n.a. 1.44 1.56 1.60 1.62

Pencil n.a. n.a. n.a. n.a. 0.05 0.05 0.05 0.05

Sewing machine n.a. n.a. n.a. n.a. 146.00 149.00 147.20 148.60

Sources: State Agricultural Commission and State Statistical Rureau.

Table 11.3: PURCHASES OF COMMERCIAL DEPARTMENTS AND RETAIL SALESAT CURRENT PRICES, 1952-81

(billion yuan)

1952 1957 1965 1970 1975 1977 1978 1979 1980 1981

Total purchases. 17.50 42.81 71.05 93.30 139.74 156.63 173.67 199.24 226.30 246.90

Of which:

Manufactures (8.45) (24.76) (43.02) (61.18) (97.19) (113.92) (126.34) (140.56) (156.76) (168.51)

Farm and sideline (9.01) (1.765) (27.42) (31.40) (41.46) (41.33) (45.99) (58.68) (67.70) (76.47)

Total retailsales /a n.a. n.a. 65.73 84.10 124.61 141.10 152.75 175.25 207.10 226.06

/b 27.68 47.42 67.03 85.80 127.11 143.28 155.86 180.00 214.00 235.00

Of which:

Urban (12.56) (23.84) (33.89) (40.00) (60.69) (68.79) (74.82) (81.52) (95.03) (102.60)Rural (15.12) (23.58) (33.14) (45.80) (66.42) (74.49) (81.04) (98.48) (118.97) (132.40)

/a Excluding sales by peasants to the nonagricultural population.

/b Including sales by peasants to the nonagricultural population.

Source: State Statistical Bureau.

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