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Industrialization, Technology and Employment in the People's Republiic of China SWP291 Public Disclosure Authorized

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Industrialization, Technology and Employment in the People's Republiic of China SWP291 Public Disclosure Authorized Industrialization, Technology and Employment in the People's Republiic of China SWP291 Public Disclosure Authorized World Bank Staff Working Paper No. 291 August 1978 Public Disclosure Authorized Public Disclosure Authorized The views and interpretations in this document are those of the authors and should not be attributed to the World Bank, to its affiliated organizations, or to any individual acting in their behalf. Prepared by: Thomas G. Rawski Consultant Employment and Rural Developrnent Division Development Economics Department Development Policy Staff Copyright © 1978 Public Disclosure Authorized The Wr ld Bank reet, N.W. PUB n, D.C. 20433, U.S.A. HG 3881.5 .W57 W67 no.291 The views and interpretations in this document are those of the author and should not be attributed to the World Bank, to its affiliated organizations or to any individual acting in their behalf. INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT Staff Working Paper No. 291 August 1978 INDUSTRIALIZATION, TECHNOLOGY AND EMPLOYMENT IN THE PEOP'LE'S REPUBLIC OF CHINA This paper reviews current evidence on employment in China, and the policies pursued to increase labor absorption in agriculture and industry. In the 1950s, China suffered from considerable unemployment in urban and rural areas, but according to all available evidence made major steps towards achieving a fully and productively engaged labor force. Increased labor absorption in rural areas was the main achievement, reflecting a rise in economically productive labor-intensive inputs into agriculture and farm support: activities (including rural industries). Industrial policies, on the other hand, have generally acted to increase capita]. intensity--though there is no evidence of involuntary employment in cities. Prepared by Thomas G. Rawski Consultant Employment and Rural Development Division Development Economics Department Development Policy Staff Copyright Cc) 1978 The World Bank 1818 H Street, N.W. Washington, D.C. 20433, U.S.A. Note on Units of Measurement and Abbreviations One mou, the Chinese unit for land area, equals .0667 hectare or .1647 acre. Tonnage figures are given in terms of metric tons. GVIO = Gross value of industrial output. MMT = million metric tons. One Chinese yuan is equivalent to approximately U.S.$0.50 at official exchange rates prevailing during the mid-1970s. ... indicates gaps in data or estimates. - ii - In preparing this report, my primary obligation is to Alice S. Y. Chan, whose diligent efforts uncovered much of the detailed information contained in the following pages. I am also grateful for financial support from the University of Toronto - York University Joint Centre on Modern East Asia. The following individuals and organizations generously provided me with bibliographic assistance, unpublished research materials and good advice: John Aird, Kang Chao, the Committee on Scholarly Communications with the People's Republic of China, Robert Dernberger, John Philip Emerson, Thomas Gottschang, Ramon Myers, Dwight Perkins, Evelyn Rawski, Peter Schran, Benedict Stavis, Anthony Tang, Joseph Whitney, Bobby Williams and Florence Yuan. , \ N~~~~~~~~~ ( s l~~~~~~~~~~~~~leil-lungk iaAng C. 1.@l9\Kirin Sinkiang -N.* { ( il *--_-2 i -'1 >1 ~iaoningy /t 4~~~~ '-v '. Inner Mlongolia lI!opei ,. , ts8**..- /~~~~~~ . \* * .'\ ,- !Shansi iS - VI Sha ~"Shantung ITsinghai 1anur _i_v x Shensi % llonan i '--,Anhweir.- Tibet Szcchwan IlupCi |Chekiang. \4 t---'/ iiS} 5 t rk ? ililunanI tKlKiangsi-lutan agi / \, 0' 1KweichowT, - J ic Yunnan " .n a '''Kwangsi N2 1w3 / Ki.angtung Provincial Mlap of China Source: Perkins (1969) - iv - TABLE OF CONTENTS Page No. I. ~INTRODUCTION ...................................... I II. TRENDS IN THE SIZE AND SECTORAL DISTRIBUTION OF CHINA'S LABOR FORCE, 1957-1975 ..... ............. 9 III. DETERMINANTS OF INDUSTRIAL EMPLOYMENT ....... o....... 21 IV. RURAL LABOR ABSORPTION, 1957-1975 ..... o... .......... 52 V. CONCLUSION ........................o...... o...o... ooooo .ooooo. 93 APPENDIX A. DERIVATION OF ESTIMATED NON-AGRICULTURAL EMPLOYMENT, 1957 AND 1975 ................ 109 APPENDIX B. ESTIMATES OF EMPLOYMENT IN LEADING SMALL-SCALE PRODUCER INDUSTRIES .oo............ 119 FOOTNOTES 124 REFERENCES 132 LIST OF TABLES Page No. .. Indicators of Chi;nese Economic Developmnet, 1952-1974 2 2.1 Population of the People's Republic of China 10 2.2 Employed Population as a Percentage of Total Population, Late 1950s 13 2.3 Population ana Employment in Selected Rural Areas, 1975 15 2.4 Alternative Estimates of China's Labor Force, 1957 and 1975 16 2.5 Non-agricultural Employment in China, 1957 and 1975 18 2.6 Agricultural Labor Force, 1957 and 1975 19 3.1 National and Regional Labor Productivity in Industry, 1952-75 22 3.2 Capital Intensity and Output Growth by Sector, 1952-1972 25 3.3 National and Regional Investment Data and Project Size, 1953-1957 29 3.4 Capital, Labor aild Gross Output, Major Industrial Branches and Enterprises, 1952-56 and 1965 (yuan) 30 3.5 Employment Changes at Major Enterprises 32 3.6 Industrial Outpu;: and Employment in 1975 39 3.7 Estimated Share of the "Five Small Industries" in Gross Factory Output for 1972 40 3.8 Estimated 1975-Emnployment in Small-Scale Producer Industries 41 3.9 Capital Intensity and Productivity Indicators at Large and Smal' Plants 45 3.10 Costs and Prices tor Products of Large Plants (1957) and Sma.Ll Plarnts (1975) 47 3.11 Characteristics of Chinese Diesel Engines, 1956-57 and 1975 48 - vi - LIST OF TABLES (Continued) Page No. 4.1 Percentage Distribution of Idle Time by Months, 1929-1933 54 4.2 Agricultural Labor Shortage, 1929-1933 54 4.3 Growth of Industrial Inputs into China's Rural Economy, 1957-1975 58 4.4 Agricultural Labor Performance Using Various Techntiques, 1959 64 4.5 Impact of Machinery on Rural Labor Conditions 65 4.6 Wiens' Estimate of Fertilizer Supply by Source, 1957-1971 67 4.7 Labor Requirements for Cotton, 1930s and 1960s (Man-days per mou) 73 4.8 Agricultural Output Growth, 1957-1974 81 4.9 Sectoral Contributions to Agricultural Output Growth, 1957-74 82 4.10 Water Management Statistics 85 4.11 Impact of Recent Developments on Agricultural Labor Supply and Demand 88 4.12 Supply and Demand for Agricultural Labor, 1957 and 1975 89 5.1 Agricultural Labor Productivity, 1957-1975 97 5.2 Labor Force Projections, 1957-1990 100 A-1 Domestic Transport Growth, 1949-1973 112 A-2 1975 Industrial Output and Employment: Shanghai and Liaoning 114 A-3 Industrial Labor Productivity for 1955: Shanghai, Liaoning, National 115 B-1 Labor Productivity at Selected Farm Machinery Plants 123 I. INTRODUCTION This report studies the relationship between economic growth and employment in the People's Republic of China. The overall performance of the economy is summarized in Table 1.1, which describes the quantitative parameters of China's recetnt progress along the path of modern economic growth. Aggregate and per capita product have grown at rates which are not exceptional, but do exceed the world LDC averages computed by Kuznets (1972) by a considerable margin. Extensive structural change has pushed industry ahead of agriculture as the largest contributor to total output. Rising domestic savings and capital goods production have raised investment ratios far above the 5% levels observed prior to World War II. Massive output growth in energy, rmetallurgy, engineering and other basic industries has enabled China to supply most commodities needed to support economic expansion, but foreign trade has nearly kept pace with total output, allow- ing the external sector to make an ongoing contribution to the development of China's economy. Qualitative changes are less easily documented, but have been of equal significance. Chinese mastery of modern technology has grown enormously. A nation which until 1957 could not manufacture tractors, power plants or wrist watches has now developed the capacity to produce computers, earth satellites, oral contraceptives and nuclear weapons. New technical skills are no longer confined to a thin layer of isolated urban enterprises. The expansion of rural electrification, local industry, education and publishing has brought modern technological knowledge to the doorstep of most of China's 165 million households. Current enrollment of 150 million primary school students ensures that the distribution of knowledge will continue to broaden and deepen. Recent experience in many developing countries shows that progress toward industrialization often fails to provide adequate employment oppor- tunities for broad segments of the labor force. With its huge and thickly clustered population, China has a long history of massive unemployment problems. In addition, t!le concentration of resources on a small number of capital-intensive industrial projects which formed the core of China's First Five-Year Plan (1953-57) produced a classic pattern of rapid output growth combined with open unemployment in the cities and seasonal idleness in the countryside. Chinese and foreign accounts agree that urban unemployment was a severe and persistent problem throughout the 1950s. Rapid growth of labor requirements could not keep pace with a supply of job-seekers swollen by masses of peasants who flocked to the towns in response to bad harvests or to news of jobs in new construction projects. Chinese reports of this period regularly mention unemployment figures running into the millions. Over the twelve year period ending in 1960, C. M. Hou finds that the average -2- TABLE 1.1: INDICATORS OF CHINESE ECONOMC DEVELOPMENT, 1952-1974 Av. Annual Growth Rate 1952 1957 1962 1965 1974 1952-1974 1. GDP (Billion 1957 yuan) 70.41 104.68 108.29 150.64 226.24 6.2% Components (shares in GDP) Agriculture 32.15 44.72 35.30 49.10 67.09 3.4 (45.7) (42.7) (32.6) (32.6) (25.2) Industry & Transport 19.31 34.16 45.67 64.60 138.84 9.4 (27.4) (32.6) (42.2) (42.9) (52.1) Construction 1.48 4.00 4.48 8.00 13.96 10.7 (2.1) (3.8) (4.1) (5.3) (5.2) Services 17.47 21.80 22.84 28.94 46.35 4.5 (24.8) (20.8) (21.1) (19.2) (17.4) 2.
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