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World Bank Documents, Jane-S All the World's Railways, 1980/81, and UN, Annual Bulletin of Transport Statistics for Europe, 1979 Report No. 3391-CHA F ILm, C 0 p y China: Socialist Economic Development (In Nine Volumes) Public Disclosure Authorized The Main Report 3391 June 1, 1981 (reprinted March 10, 1982) Vol. 1 East Asia and Pacific Regional Office FOR OFFICIAL USE ONLY Public Disclosure Authorized Public Disclosure Authorized Public Disclosure Authorized Document of the World Bank This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. CURRENCY EQUIVALENTS The Chinese currency is called Renminbi (RMB). It is denominated in yuan (Y). Each yuan is subdivided: 1 yuan = 10 jiao = 100 fen Exchange rates used in this report are as follows: 1977 $1.00 = Y 1.828 1978 $1.00 = Y 1.661 1979 $1.00 = Y 1.541 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 Preface This report is based on the findings of an economic mission compris- ing several teams, which visited China for periods of 4-5 weeks between October and December, 1980. The mission was led by Parvez Hasan (mission chief) and Edwin R. Lim (deputy mission chief), and also consisted of Ramesh Chander (statistics), Mats G. Hultin (education), Dean Jamison (population, health and nutrition), Adrian Wood (principal economist), Shu-Chin Yang (foreign trade), S. Josephine Woo (research assistant), Helen Kung (mission secretary), and the following teams: Agriculture: David J. Turnham (team leader), Theodore J. Goering (agricultural economist), Wen-poh Ting (agriculturalist), and Henri Boumendil (irrigation engineer - consultant); Energy: Bernard Chadenet (team leader - consultant), Darrel G. Fallen-Bailey (energy resources and technology), David P. Hughart (energy economist), Kuo-Chang Ling (power engineer), and Vatsal P. Thakor (power engineer); Industry: Donald B. Keesing (team leader), Magdi Iskander (industrial economist), and H. Geoffrey Hilton (industrial engineer); Transport: Vincent W. Hogg (team leader), Jacques Yenny (transport economist), Ernst G. Frankel (port specialist - consultant), Paul Banner (railway specialist - consultant), and Clell G. Harral (highway specialist). In addition to the mission members, the following also participated in the preparation of the report: Nancy Birdsall was the co-author of Annex B (Population, Health and Nutrition); Sulekha Patel, Suan Ying, and Janson Chang assisted the mission members in research; Linda Mitchell edited the report; and Dianne Esson was responsible for its processing. Hollis B. Chenery (Vice President, Development Policy) and Caio Koch-Weser (Chief, China Division) participated in the final two weeks of the mission. During its stay, the mission was hosted by the following organiza- tions in the Chinese Government: the Ministry of Finance, which coordinated the mission's overall activities; the State Planning Commission and the State Statistical Bureau, which worked mostly with the general economic team; the Ministry of Agriculture, with the agriculture team; the Ministries of Communi- cations and Railways, with the transport team; the Ministry of Education, with the education team; the State Economic Commission, with the industry team; and the Ministries of Electric Power and Coal, with the energy team. In addition to the many officials of these ministries who worked closely with the mission during the two months, the following Chinese economists worked with the various teams: Zhu Rongji (State Economic Commission), Xing Guang (Ministry of Finance), Zheng Li (State Planning Commission), Zhao Renwei (Economic Institute, Academy of Social Sciences), Zhu Fulin (Ministry of Finance), Chen Lian (Agriculture Institute, Academy of Social Sciences), Hong Huiru (Industry Institute, Academy of Social Sciences), Gong Shaowen (Ministry of Agriculture), This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. He Enlin (Ministry of Railways), Luo Yunqin (Ministry of Communications), Cao Weigong (Ministry of Electric Power), and Gao Huan (Ministry of Education). Xing Guang, Zhao Renwei, Zheng Li and Zhu Fulin also prepared brief background papers for the general economic team. This list is far from exhaustive; the mission teams were also assisted by many others who are not mentioned above, including officials at the government agencies and institutions that the teams visited on field trips. The mission teams travelled extensively outside Beijing. During the two months, the various teams visited two other municipalities, Shanghai and Tianjin, and seventeen provinces - Fujian, Gansu, Guangdong, Guizhou, Hebei, Heilongjiang, Henan, Hubei, Hunan, Jiangsu, Liaoning, Shaanxi, Shandong, Shanxi, Sichuan, Xinjiang, and Zhejiang. To prepare for its work in the field, the mission commissioned a number of background papers on China's economy to be written by foreign scholars, including: Randolph Barker, Cornell University (agricultural development); Wlodzimierz Brus, Oxford University (socialist planning); P.C. Chen, Wayne State University (population and health); Mark Elvin, Oxford University (historical background); Shigeru Ishikawa, Hitotsubashi University (macroeconomic issues); Nicholas Lardy, Yale University (agricultural planning); Dwight Perkins, Harvard University (rural development); Thomas G. Rawski, Toronto University (industrial development); Ashwani Saith, Oxford University (brigade enterprises); Peter Schran, University of Illinois (agricultural statistics and prices); and Christine Wong, Mount Holyoke College (small-scale industries). These papers were generally completed during the summer of 1980 and were discussed with the authors prior to the mission's departure for China. * * * * * * * This report was first issued on June 1, 1981. It was reprinted on March 10, 1982, at which time changes were made in a few places, mainly to correct factual and statistical information. CHINA: SOCIALIST ECONOMIC DEVELOPMENT MAIN REPORT Table of Contents Page No. SUMMARY AND CONCLUSIONS ....................... i-xxi 1. THE CHINESE INHERITANCE. 1 A. Introduction. 1 B. The Physical Setting. 2 C. Historical Development. 6 D. Implications of China's Economic Heritage . 9 Constraints of Prior Achievements . 9 Comparison with Pre-industrial Europe and Japan . 10 E. Economic Situation Before 1949 .11 2. THE ECONOMIC SYSTEM . 16 A. Evolution of the System . 16 B. Instruments of Management and Control . 17 Annual Plan and Flows of Goods . 18 The Budget and Flows of Money ... 20 The Price System .... 23 C. The Commune Economy .. 25 Organization and Management ... 25 Income Distribution and Support . 26 Planning and Control .28 D. The State Economy .29 Production .29 Labor and Wages .30 Income Support .32 E. Education and Health Services . 33 Education System .33 Health Care System .34 Family Planning .35 Finance . 35 3. GROWTH AND POVERTY REDUCTION . 37 A. Development Strategy .37 B. Population . 38 Causes of Fertility Decline .39 Population Distribution .40 C. Macroeconomic Perspective .41 Structure . 41 Growth . 46 Investment .48 Consumption .52 D. Income Distribution .53 Regional Inequality .53 Rural-Urban Inequality .55 Urban Inequality ...................... 58 -2- Page No. Rural Inequality .. 60 Overall Income Distribution . 62 E. Human Development . 65 Basic Education . 65 Health . 67 Nutrition . 71 4. SECTORAL PROGRESS AND PROBLEMS . .. 75 A. Agricultural Development . ..... ....... .. 75 Growth and Development . 75 Per Capita Supplies . .. 77 Productivity and Income Growth . 78 Technological Change .9*.* ... 81 Policy and Problems . 84 B. Industry . ........ ... ..........86 . Growth .... .... 87 Structure . 89 Problems .... ....... 92 C. Energy .. ..... .. 94 Production . .. ........ .... 95 Consumption .... ...... 97 D. Transport . 99 Development Strategy . .. 99 Growth of Traffic .. 100 Modal Development and Problems .. 102 E. Advanced Education and Training ... ..... 105 Skilled Manpower Availability ... ..... 106 Universities . 107 Technical and Vocational Schools . 108 Nonformal and Continuing Education . 108 F. Foreign Trade .... .. ..... 109 Role of Trade .... ...... 109 Trends and Composition ... ... 111 Recent Developments .... 113 5. ADJUSTMENT AND REFORM . 116 A. Strengths and Weaknesses of the Economic System . 116 The State Economy .. 117 Commune Economy .. 120 B. Progress of Reform .. 121 Budgetary Devolution .. 122 Reform of the State Economy .. 122 Urban Collective and Individual Sector . 126 The Commune Sector .... ..... 126 C. Issues of Future Reform .... .... 127 D. Progress of Adjustment .... ..... 133 Short-Term Measures .... ..... 133 Short- and Medium-Term Choices . 135 -3- Page No. E. Adjustment, Reform and Planning . 136 Adjustment Versus Reform . 136 Planning and Management . 138 6. PROSPECTS AND OPTIONS IN THE 1980s..142 A. Introduction . 142 B. Population and Human Resources . 143 Population . 143 Employment . 144 Health and Nutrition . 145 Education ... 146 C. Agricultural Constraints and Perspectives. 147 Food Supply . 148 Nongrain Agriculture . 150 Rural Incomes . 151 Rural Poverty . 154 D. Energy Outlook and Consequences . 155 Domestic Energy Production . 155 Energy Saving and Switching . 158 Energy Conservation and
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