ARMY AREA HANDBOOK access is provided courtesy of UM-St. Louis Libraries Match 52 DB Rec# - 645 Dataset-ARMAN Source :U.S. DEPARTMENT OF THE ARMY Source key :AR Program :ARMY AREA HANDBOOKS Program key :AR ARMAN Update sched. :Occasionally ID number :AR ARMAN CHINACH7.00 Title :CHAPTER 7.00 - PARTY AND GOVERNMENT Data type :TEXT End year :1994 Date of record:04/19/1994 Keywords 3 : | China Text : CHINA'S INDUSTRIAL SECTOR has shown great progress since 1949, but in the late 1980s it remained undeveloped in many respects. Although the country manufactured nuclear weapons and delivery systems and could launch domestically-produced satellites, many of its industries used technologies of the 1950s. Although China was one of the world's largest producers of fuel in the mid-1980s and had the world's largest hydropower potential, frequent energy shortages caused lengthy factory shutdowns. Despite massive coal reserves in north China, transportation deficiencies necessitated coal imports to south China. Research institutes developed sophisticated industrial technologies, but bureaucratic and political obstacles impeded implementation. To solve these and other problems, the Chinese leadership initiated sweeping economic reforms in the late 1970s. Although specific industrial reforms were not clearly defined, broad goals included loosening bureaucratic controls on enterprises and managers to promote a decentralization of authority. Other broad goals were to increase worker productivity by offering incentives; to give market forces greater influence on output mix, purchases, sales, and hiring; to make enterprises operate more efficiently and be responsible for profits and losses; and to restructure the price system to reflect supply and demand more accurately. Another major goal of the reform program was development of light industry. Beginning with the First Five-Year Plan (1953-57), China adopted the Soviet model of economic development, stressing a heavy industrial base. However, this emphasis seriously strained China's resources and capital and led the leadership in the late 1970s to shift to development of light industry. Because light industry is labor intensive, this shift helped to alleviate unemployment. It also satisfied growing consumer demand, which had not been met because of overemphasis on heavy industry. Another reason for diversification into light industry was the desire to increase exports to obtain much-needed foreign currency. By the mid-1980s, industrial reforms had achieved substantial success in some areas. Industrial output was about twenty-five times that of 1952. A wide range of modern industries had been established, and the country was one of the world's leading producers of coal, textiles, and bicycles. There were major plants in almost every key industry, and a strong effort had been made to introduce manufacturing into undeveloped and rural areas (see fig. ___, Major Industrial Areas and Facilities, 1983). Light-industry output of consumer goods had increased dramatically. In some cases, enterprises reduced operating costs, managers were able to exercise greater autonomy, and technical innovations were implemented to increase efficiency. Despite these bright spots in the 1980s, overall results were disappointing to Chinese economic planners. Major problems included failure to reform the price system, interference of local cadres in the managers' operation of enterprises, and perpetuation of the life tenure, "iron rice bowl" system (see Glossary) for workers. Rapid industrial growth made energy shortages one of the most critical problems facing the economy, limiting industrial enterprises and mines to 70 or 80 percent of capacity. According to China's energy planners, the country would have to quadruple electricity production to meet the gross value of industrial and agricultural output (GVIAO) target for the year 2000. For a quick increase in output, the industry emphasized short-term development of thermal power plants. In the long term China planned to rely on its vast hydropower potential and nuclear power to meet electricity demand. In the 1980s large-scale, centrally controlled plants dominated manufacturing. These large plants were supplemented with many small-scale town and township enterprises, which accounted for significant percentages of national output of coal, construction materials, and leather products. -------------------------------------------------------------------------- This file extracted from Dept. of Commerce, Economics & Statistic's Division's May 1994 NATIONAL TRADE DATA BANK (NDTB) CD-ROM, SuDoc C1.88:994/5/V.2 Processed 6/10/1994 by RCM (UM-St. Louis Libraries)/ AAH90051 . ARMY AREA HANDBOOK access is provided courtesy of UM-St. Louis Libraries Match 53 DB Rec# - 646 Dataset-ARMAN Source :U.S. DEPARTMENT OF THE ARMY Source key :AR Program :ARMY AREA HANDBOOKS Program key :AR ARMAN Update sched. :Occasionally ID number :AR ARMAN CHINACH7.01 Title :CHAPTER 7.01: TRENDS IN INDUSTRIAL PRODUCTION Data type :TEXT End year :1994 Date of record:04/19/1994 Keywords 3 : | China Text : TRENDS IN INDUSTRIAL PRODUCTION The shifts in economic policy typical of the People's Republic since 1949 have strongly affected industrial production (see _____________, ch. 5). In the recovery period from 1949 to 1952, industrial output more than doubled as plants were repaired and employment rose. The First Five-Year Plan (1953-57) concentrated on constructing plants and equipment for heavy industry, much of it with Soviet assistance. The machinery, iron and steel, and mining industries all built their foundations in this period. The increases in productive capacity resulted in a second doubling of output. The Great Leap Forward (1958-60, see Glossary) saw production surge by 45 percent in 1958 as new plants went into operation, facilities operated beyond capacity, and great numbers of small local plants were established. But the overambitious plan to revamp China's economy soon encountered problems of misallocation and overextension of resources. The demands of the Great Leap left the work force physically exhausted. As the overburdened economy began to collapse, growth fell to 22 percent in 1959 and 4 percent in 1960. Output dropped precipitously in 1961 because of the earlier withdrawal of Soviet technicians, misallocation of resources, and a serious food shortage (see The 1950s Period, ch. 6). In 1962, with the restoration of planning and coordination, production began to recover. Industrial priorities were transferred from production of industrial goods to agricultural inputs and consumer goods. By 1965 most sectors of industry had regained their 1957 production levels. In the early stages of the Cultural Revolution (1966-76, see Glossary), production declined when civil disturbances disrupted factories and transport in the big industrial cities. In 1967 output fell, and it remained below the 1966 level in 1968. After order was restored, production recovered in 1969 and grew by 18 percent in 1970. With resumption of growth and the beginning of the Fourth Five-Year Plan (1971-75), output grew by over 10 percent in 1971 and 1972, and by 13 percent in 1973. A wide-ranging program of investment in plants and equipment, including foreign imports, raised industrial capacity. Throughout the 1970s thousands of new, small-scale plants added significantly to levels of production, especially in coal, chemical fertilizer, cement, and electricity, although there were some setbacks. In the mid-1970s the influence of the Gang of Four (see Glossary) and disruption by the succession struggle again reduced industrial output. Political activities in factories and uncertainty by managers and planners caused growth to fall to 4.4 percent in 1974. Growth recovered to 10.3 percent in 1975 but fell to zero in 1976 in the uncertainty surrounding the deaths of Mao Zedong and Zhou Enlai, the second fall of Deng Xiaoping, and the destruction caused by the Tangshan earthquake (see End of the Era of Mao Zedong, ch. 1). In 1977 and 1978 the Four Modernizations effort (see Glossary) began in earnest. Growth reached 14 percent in 1977 when political stability was restored and plants resumed full operation. The high growth rate in 1977 and 1978 caused a serious overheating of the economy, however. At the end of 1978, the leadership introduced a comprehensive economic reform. In 1979 the economy entered a period of readjustment, emphasizing a slower, more rational rate of growth. Policy stressed development of light industry and gave priority to the textile and consumer industries in supplying raw and unfinished materials, power, fuel, and finances. Capital investment in light industry increased from 5.4 percent in 1978 to about 8 percent in 1980. Between 1978 and 1981 the proportion of light industry in gross industrial output value increased by about 9 percent. The rate of capital construction decreased, and the government initiated a major drive to correct imbalances in the economy by gearing production to consumer needs and improving efficiency. In 1983 the government took measures to economize on fuel, energy, raw materials, and working capital. The policy experimentally granted enterprises more autonomy. It introduced new types of contracts permitting limited competition among enterprises serving the same markets. The government began to allow market forces to determine production. At the Third Plenum of the Twelfth Central Committee of the Chinese Communist Party (CCP), in October 1984, the party officially reiterated its commitment to reform of the urban economy, signalling a high priority for industrial modernization. The Seventh Five-Year Plan (1986-90) called for greater responsiveness to consumer demand, increased efficiency, and a further assimilation of modern technology. The plan sought to accelerate development of the energy and raw-materials industries and control growth of manufacturing industries, making the two sectors develop more proportionately. Development of the transportation and communications sectors received high priority, and plans called for expanding the building industry. The leadership hoped to speed development of tertiary industry, such as restaurants and small shops, to meet consumer needs. -------------------------------------------------------------------------- This file extracted from Dept. of Commerce, Economics & Statistic's Division's May 1994 NATIONAL TRADE DATA BANK (NDTB) CD-ROM, SuDoc C1.88:994/5/V.2 Processed 6/10/1994 by RCM (UM-St. Louis Libraries)/ AAH90052 . ARMY AREA HANDBOOK access is provided courtesy of UM-St. Louis Libraries Match 54 DB Rec# - 647 Dataset-ARMAN Source :U.S. DEPARTMENT OF THE ARMY Source key :AR Program :ARMY AREA HANDBOOKS Program key :AR ARMAN Update sched. :Occasionally ID number :AR ARMAN CHINACH7.02 Title :CHAPTER 7.02: ORGANIZATION Data type :TEXT End year :1994 Date of record:04/19/1994 Keywords 3 : | China Text : ORGANIZATION The government managed industry according to type and level of control, using various State Council ministries and commissions (see The State Council, ch. 10). In 1987, there were separate ministries for aeronautics, astronautics, chemical, coal, electronics, metallurgy, nuclear-energy, ordnance, petroleum, and textiles industries, light industry, the railways, and water resources and electric power; there were two commissions--the National Defense Science, Technology, and Industry Commission and the State Machine-Building Industry Commission. In 1986 the government recognized four types of economic enterprise ownership: "ownership by the whole people" (or state ownership), collective, individual, and other. Under state ownership the productive assets of an enterprise were owned by the state, activities of the enterprise were determined by national economic plans, and profits or losses accrued to the state budget. Most of the largest modern enterprises were state-owned and directly controlled by the central government. Many other enterprises also were state-owned but were jointly supervised by the central government and authorities at the provincial, prefectural, or county levels. Profits from these enterprises were divided among the central and lower-level units (see Local Administration, ch. 10). Under collective ownership, productive assets were owned by the workers themselves (in the case of an urban enterprise) or by the members of enterprises established by rural units. Profits and losses belonged to the members of the collective, and government authorities directed the enterprise loosely. Collectively owned enterprises were generally small and labor intensive, employing approximately 27 million people in cities and towns in 1983. Individual ownership belonged to the category of individual handicrafts in the 1950s; by the mid-1980s it also included individual enterprises with a maximum of thirty employees. The Chinese authorities left the "other" category undefined. -------------------------------------------------------------------------- This file extracted from Dept. of Commerce, Economics & Statistic's Division's May 1994 NATIONAL TRADE DATA BANK (NDTB) CD-ROM, SuDoc C1.88:994/5/V.2 Processed 6/10/1994 by RCM (UM-St. Louis Libraries)/ AAH90053 . ARMY AREA HANDBOOK access is provided courtesy of UM-St. Louis Libraries Match 55 DB Rec# - 648 Dataset-ARMAN Source :U.S. DEPARTMENT OF THE ARMY Source key :AR Program :ARMY AREA HANDBOOKS Program key :AR ARMAN Update sched. :Occasionally ID number :AR ARMAN CHINACH7.03 Title :CHAPTER 7.03: GEOGRAPHIC DISTRIBUTION OF INDUSTRY Data type :TEXT End year :1994 Date of record:04/19/1994 Keywords 3 : | China Text : GEOGRAPHIC DISTRIBUTION OF INDUSTRY Before 1949 industry was concentrated in the large east-coast cities and in the northeast. Shanghai was the largest industrial center, followed by Anshan, Fushun, and Shenyang, all in Liaoning Province. Qingdao, in Shandong, and Tianjin also were important industrial centers. Only a few cities in the interior had any modern industry; they included Wuhan, Chongqing, and Taiyuan (see fig. __. Major Industrial Areas and Facilities, 1983). During the First Five-Year Plan (1953-57), the government specifically emphasized development of the northeast and areas other than Shanghai, China's most important industrial base. Industrial sites were constructed in the north around the new steel mills at Baotou, Nei Monggol Autonomous Region, and in central China in Wuhan, Hubei Province. Industrial centers also arose in the southwest, mostly in Sichuan Province. In the 1950s, industrial centers in east and northeast China accounted for approximately two-thirds of total industrial output. However, by 1983 industrial centers in the north, south, and southwest had increased their share of output to more than 40 percent (see fig. __, Percentage Distribution of Gross Industrial Output Value by Region, 1983). This increase was the result of a policy begun in the 1950s to gradually expand existing industrial bases to new areas, to build new bases in the north and south, and to establish a new base in the southwest. From 1952 to 1983, south, southwest, and northwest China registered higher industrial growth than the east, northeast, and north regions. Total industrial output grew the fastest in the south--from 13.7 percent of total output in 1952 to 18.5 percent in 1983 (see table __, Gross Value of Industrial Output, By Province, 1952, 1957, 1983. Appendix A). The government had stressed developing the interior regions since the 1950s, but by 1986 it had abandoned that strategy in order to develop areas with more established infrastructures. According to this plan, the south would continue growing, but the east and northeast would be the main benefactors. -------------------------------------------------------------------------- This file extracted from Dept. of Commerce, Economics & Statistic's Division's May 1994 NATIONAL TRADE DATA BANK (NDTB) CD-ROM, SuDoc C1.88:994/5/V.2 Processed 6/10/1994 by RCM (UM-St. Louis Libraries)/ AAH90054 . ARMY AREA HANDBOOK access is provided courtesy of UM-St. Louis Libraries Match 56 DB Rec# - 649 Dataset-ARMAN Source :U.S. DEPARTMENT OF THE ARMY Source key :AR Program :ARMY AREA HANDBOOKS Program key :AR ARMAN Update sched. :Occasionally ID number :AR ARMAN CHINACH7.04 Title :CHAPTER 7.04: LEVEL OF TECHNOLOGY Data type :TEXT End year :1994 Date of record:04/19/1994 Keywords 3 : | China Text : LEVEL OF TECHNOLOGY Despite marked improvement over the early years of the People's Republic, the technological level of Chinese industry generally remained quite low in the late 1980s. The Chinese made remarkable technological progress in some areas, such as nuclear weaponry, satellites, and computers; but overall the industrial sector lagged far behind that of the developed countries (see The Reform Program, ch. 9). Much of China's machinery and equipment dated from the 1950s and 1960s. The Soviet Union had provided technology assistance during the 1950s, but such aid ended abruptly in the early 1960s with the break in bilateral relations (see The Soviet Union, ch. 12). One of the main reasons for lagging technology was the lack of coordination between research institutes and production enterprises. Between 1979 and 1984, the number of major scientific and technical research discoveries grew from 2,790 to 10,000 and the number of inventions approved by the state from 42 to 264. Most of the discoveries and inventions were never implemented. This was mainly because research institutes and production enterprises operated independently, with little or no exchange of information. Also, most enterprise managers were more concerned with meeting production quotas than with technological innovations. There were no clear goals for research and development, and no concept of the importance of research and development to industry. Instead, efforts concentrated on research and development for purely scientific purposes. Therefore, China did not develop a broad base of industrial research and development. By 1981 only 8 percent of the total research and development work force was involved in industrial research compared to 72 percent in the United States. In 1983 only 3.2 persons per 10,000 population were involved in research, compared to 31 per 10,000 in the United States. Institutional obstacles and resource shortages also plagued research institutes. In 1985 the CCP issued the "Resolution on the Reform of the Science and Technology Management System." The resolution sought to coordinate research and production more closely. Part of the overall strategy of the Four Modernizations was to redirect science and technology toward economic progress. Research institutes were to compete for contracts from various industries and operate on a fee-for-service basis. Emphasis went to cooperation among factories, universities, and other institutes. As of 1987, the status of this effort remained unclear. The metallurgical industry had applied more internal technological innovation than the electronics industry because the technologies in the former were more developed than in the latter. The metallurgy industry made a stronger effort to blend research and production in individual enterprises. Also, major metallurgical complexes had internal research facilities for new-product research. On the other hand, electronics was much more compartmentalized; by the late 1980s there was no decisive breaking of the barriers between the technical and production elements. China's assimilation of imported technology had mixed results in the mid-1980s. There had been some remarkable accomplishments, but they had taken a long time. For example, advanced West German cold-rolling technology had moved into the Anshan iron and steel complex in Liaoning Province. The electronics sector was not as successful, because of shortages of raw materials, lack of a reliable power supply, low manpower skill, and a shortage of service and applications personnel. An exception was the Jiangnan Semiconductor Plant in Wuxi, Jiangsu Province, which received equipment from numerous Japanese and American companies. By 1987 it was highly productive. However, China's electronics industry, like most other industries, was far from implementing advanced technology, whatever its source. -------------------------------------------------------------------------- This file extracted from Dept. of Commerce, Economics & Statistic's Division's May 1994 NATIONAL TRADE DATA BANK (NDTB) CD-ROM, SuDoc C1.88:994/5/V.2 Processed 6/10/1994 by RCM (UM-St. Louis Libraries)/ AAH90055 . ARMY AREA HANDBOOK access is provided courtesy of UM-St. Louis Libraries Match 57 DB Rec# - 650 Dataset-ARMAN Source :U.S. DEPARTMENT OF THE ARMY Source key :AR Program :ARMY AREA HANDBOOKS Program key :AR ARMAN Update sched. :Occasionally ID number :AR ARMAN CHINACH7.05 Title :CHAPTER 7.05: SUPPLIES OF INDUSTRIAL RESOURCES Data type :TEXT End year :1994 Date of record:04/19/1994 Keywords 3 : | China Text : SUPPLIES OF INDUSTRIAL RESOURCES Capital Since 1949 China has devoted a large percentage of investment to industry. By 1983 investment in industry was approximately 57 percent of investment in fixed assets. In 1984 about -Y44 billion (for value of yuan---Y--see Glossary), or roughly 30 percent of total state expenditures, was slated for capital construction. In 1981 the leadership attempted to limit uncontrolled, excessive investment in capital construction. The results were not especially positive--partly because of reinvestment by enterprises allowed to retain profits, and partly because of foreign investment. To supplement domestic sources of capital, China's leadership began allowing virtually all forms of foreign loans and credit by the end of 1979. By early 1980, the country had access to the equivalent of almost US$30 billion in foreign loans and credits termed through 1985. The Chinese also sought foreign capital by encouraging joint-venture projects between Chinese and foreign enterprises (see Foreign Trade, ch. 8). But, in early 1986, foreign companies viewed China as a high-cost and high-risk investment area. In 1985 US$8.5 billion worth of foreign capital had been committed, compared to only $US500 million in the first quarter of 1986. Labor In the mid-1980s about 11 percent of the work force, or 50 million people, was employed by the industrial sector in state-owned units and collective enterprises (see Labor Force, ch. 2). In state-owned enterprises, the annual output per worker (the Chinese measure of productivity) rose by 9.4 percent to -Y15,349. In 1987 there was a severe urban unemployment problem, and a virtually unlimited supply of unskilled and semiskilled labor. Skilled workers, engineers, scientists, technicians, and managerial personnel were in very short supply. During the Cultural Revolution, many specialists were forced to abandon their occupations, and most training and educational programs ceased during the 10-year hiatus in higher education from 1966 to 1976 (see Education Policy, ch. 4). This led to a shortage of skilled personnel that seriously hampered the industrial sector's implementation of imported modern technology and independent development of new management and production forms. In 1980 a modern management training center was established in Dalian, Liaoning Province, with the help of foreign experts. In 1987 many Dalian graduates found it difficult to use their newly acquired skills because managerial autonomy was lacking, and many cadres had a vested interest in maintaining the status quo. It was unclear what effect students educated abroad were having on industry. Raw Materials China is well endowed with most of the important industrial ores, fuels, and other minerals. Only a few raw materials are not present in deposits large enough for domestic needs. Supplies of iron and coking coal, although of poor quality, are adequate. By the early to mid-1980s, China was a significant exporter of rare metals necessary for the aerospace and electronics industries. Nonetheless, China imported materials such as steel, pig iron, copper, and aluminum because of a large domestic demand and an inadequate transportation infrastructure--(see Iron Ore; Other Minerals, this ch.). -------------------------------------------------------------------------- This file extracted from Dept. of Commerce, Economics & Statistic's Division's May 1994 NATIONAL TRADE DATA BANK (NDTB) CD-ROM, SuDoc C1.88:994/5/V.2 Processed 6/10/1994 by RCM (UM-St. Louis Libraries)/ AAH90056 . ARMY AREA HANDBOOK access is provided courtesy of UM-St. Louis Libraries Match 58 DB Rec# - 651 Dataset-ARMAN Source :U.S. DEPARTMENT OF THE ARMY Source key :AR Program :ARMY AREA HANDBOOKS Program key :AR ARMAN Update sched. :Occasionally ID number :AR ARMAN CHINACH7.06 Title :CHAPTER 7.06: ENERGY Data type :TEXT End year :1994 Date of record:04/19/1994 Keywords 3 : | China Text : ENERGY Although China was the fourth-largest world producer of fuel in 1985, energy shortages remained a major obstacle to industrial growth. Energy waste was considerable; to offset this, some energy prices increased and penalties for waste went into force. Coal was the primary energy source, accounting in 1985 for more than 70 percent of total fuel consumption. Proven reserves were more than 700 billion tons, and estimated reserves were 3,000 billion tons. Onshore and offshore oil reserves in 1985 were around 5.3 billion tons, mostly untapped. China had the world's seventh-largest electric power generating capacity, but output still fell far short of demand. Total natural gas output for 1985 was 12.7 billion cubic meters, with 15 billion cubic meters the target by 1990. Natural gas and oil received equal weight in the Seventh Five-Year Plan (see Electric and Nuclear Power, this ch.). -------------------------------------------------------------------------- This file extracted from Dept. of Commerce, Economics & Statistic's Division's May 1994 NATIONAL TRADE DATA BANK (NDTB) CD-ROM, SuDoc C1.88:994/5/V.2 Processed 6/10/1994 by RCM (UM-St. Louis Libraries)/ AAH90057 . ARMY AREA HANDBOOK access is provided courtesy of UM-St. Louis Libraries Match 59 DB Rec# - 652 Dataset-ARMAN Source :U.S. DEPARTMENT OF THE ARMY Source key :AR Program :ARMY AREA HANDBOOKS Program key :AR ARMAN Update sched. :Occasionally ID number :AR ARMAN CHINACH7.07 Title :CHAPTER 7.07: MANUFACTURING Data type :TEXT End year :1994 Date of record:04/19/1994 Keywords 3 : | China Text : MANUFACTURING China's manufacturing sector developed according to the principle of "walking on two legs," a policy of self-reliance introduced in the 1950s. In the 1980s one leg consisted of the state-funded and state-controlled large and medium-sized plants with the most qualified personnel and the most advanced equipment. The other leg was small-scale plants using inferior equipment and large amounts of local labor. Together, the two sectors produced a wide range of industrial products. In most cases the larger plants accounted for the bulk of production, but the smaller enterprises were increasing their share and producing a significant percentage of cement, fertilizers, and farm machinery. Iron and Steel Before 1949 the iron and steel industry was small and dispersed; the Japanese had built the only modern steel facility just after World War I at Anshan, Liaoning Province. Although Japan eventually built nine blast furnaces in Anshan, total steel output by all plants never exceeded one million tons annually. Much of the Japanese equipment was either damaged in the civil war or removed by the Soviets at the end of World War II. Since the establishment of the People's Republic, considerable investment has gone consistently to expand steel output. However, steel production has been very sensitive to changes in economic policies and political climate (see fig. 9, Steel Production and Capacity, 1949-85). Steel output rose steadily in the 1950s when Soviet advisers helped establish the basis of the iron and steel industry, installing numerous Soviet-designed blast and open-hearth furnaces. The Great Leap Forward saw great growth of primitive backyard furnaces producing poor-quality pig iron, numerous new, small, modern plants, overuse of large plants, and exaggerated production reports. In 1961 the industry broke down; nearly all small plants were closed, and output fell to less than half the amount reported for 1960. From 1960 to 1965, output gradually recovered with equipment repair and the purchase of basic oxygen furnaces from Austria and electric furnaces from Japan. Production fell in 1967 and 1968 during the Cultural Revolution, but it grew rapidly in the relative political stability from 1969 through the early 1970s. In the mid-1970s political upheaval retarded output, as did the catastrophic Tangshan earthquake of 1976. That event severely damaged the Tangshan steel plant and the Kailuan coal mines. The latter are a major source of coking coal. After 1976 output climbed steadily, reaching 34.5 million tons in 1979. Steel production for 1986 was fifty million tons. Steel was viewed as the cornerstone or "key link" of both the Great Leap Forward and the Four Modernizations programs (see _______________, ch. 5). But the post-Mao leadership was determined not to repeat the economically disastrous Great Leap policies: in 1979 it called for a period of readjustment and a cutback in steel investment. However, it had set a goal of producing 80 million tons of steel by 2000. Production targets were to be met by renovating and improving existing facilities, rather than building new ones. Improvements in existing plants reduced steel-industry energy consumption from 73.8 million tons of coal in 1978 to 69.1 million tons in 1983, and production increased by 26 percent. However, the Chinese realized they would need outside assistance to fully modernize their steel industry. They sought hardware, technology transfer, and managerial and planning assistance. In 1987 China was the world's fifth-largest producer of iron and steel, but lagged far behind developed countries in production methods and quality. Most steel capacity was in open-earth furnaces with basic oxygen furnaces, electric furnaces, and side-blown converters. Much of the iron and coking coal used in making steel was of low quality. Approximately 25 percent of the country's coal went for steel production in 1985. In 1985 capital construction, considered excessive by the Chinese, exacerbated existing shortages of rolled steel, and imports filled 25 percent of domestic demand. The Ministry of Metallurgical Industry reported in 1985 that China had 13 plants capable of producing at least 1 million tons per year. Accounting for approximately 65 percent of total production, these mills were built mostly during the 1950s. The Anshan plant was the oldest and most productive of all, producing 7 million tons per year. The next largest was in Wuhan. It was constructed in the 1950s with Soviet aid. China began construction in 1978 on its first integrated steel complex, the Baoshan Iron and Steel Works in Shanghai, but the completion date moved from 1982 to 1985, and finally to 1988. Besides the larger plants, about 800 smaller mills were dispersed throughout the country in 1985. They ranged from specialty mills producing 500,000 tons per year to very small operations under local jurisdiction or other ministries. Many of the smaller mills were legacies of the Great Leap Forward, when local authorities had hurriedly established their own steel-making facilities. In the mid-1980s the government hoped to phase out these inefficient plants in favor of larger, more productive plants. In the late 1980s, it was apparent that steel output would remain insufficient to meet the needs of the Four Modernizations. During the period covered by the Seventh Five-Year Plan, imports were expected to average 41 percent of domestic output. Thin rolled sheets, used to make such items as vehicles, washing machines, and refrigerators, were in extremely short supply. In 1984 China had to import about half its steel sheet and about 80 percent of its steel plate. Production of tubes and pipes also was inadequate, and approximately 50 percent of all tubes had to be imported. The country was most proficient in the production of steel bars, but it still had to import an estimated 1.8 million tons of rods and bars in 1984. In 1985 China imported a record 15 million tons of steel, more than two-thirds of it from Japan. Machine Building The machinery industry has been a leading priority since the founding of the People's Republic. The industry expanded from a few small assembly and repair facilities before 1949 to a large, widely distributed machine-building sector producing many types of modern equipment. However, as of 1987 the overall level of technology was still relatively backward. In the late 1970s and early 1980s, China intended to use large-scale imports to modernize the machinery industry, but later decided that limiting imports to critical areas would be less costly. Ministry of Machine-Building Industry plans called for about 60 percent of the industry's products in 1990 to reach the technological level of the industrialized countries during the 1970s and 1980s. Products built to international standards received priority in allocation of funds, materials, and energy. In 1987 the machinery industry was distributed throughout the country. Nearly all counties and towns had one or more machine factories. Major machinery centers were Shanghai, Tianjin, Shenyang, Beijing, Harbin, Changchun, Taiyuan, Luoyang, Wuhan, Chongqing, Chengdu, Xi'an, and Lanzhou. The machinery industry was selected by the State Council to lead the way in management reform. China's leaders realized that the quality of machinery would determine the success of modernization in all areas of the economy. The industry's extreme compartmentalization (a legacy of the Maoist obsession with self-reliance) showed a lack of communication among departments or within regions. Skilled managers were also lacking. Machine Tools In 1986 about 120 major enterprises produced most of China's machine tools. Many of the large plants were in the east, north, and northeast, particularly in Beijing, Shanghai, Shenyang, Harbin, and Tianjin. In the early and mid-l980s, a number of agreements with foreign manufacturers aimed to help China upgrade its machine-tool industry. The Shanghai Municipal Government also asked World Bank's assistance in preparing and financing a comprehensive modernization scheme for the Shanghai machine-tool industry. Overall, the machine-tool industry was based on 1960s technology. Many of the tools had a service life of only five to seven years, compared with twelve to fifteen years in industrialized countries. The tools were generally unreliable and ill-suited for precision work because of outdated design, low-quality purchased components, substandard manufacturing facilities, and a lack of production-management expertise. Electric Power Equipment By the early 1970s, major generator production centers in Harbin, Liaoning Province, Shanghai, Beijing, and Deyang, Sichuan Province, had built both hydro and thermal generators as large as 300 megawatts. There also were numerous small and medium-sized plants producing generators in the 3.2 to 80-megawatt range. As of 1986, China manufactured condenser-type turbo-generating units with capacities of 6,000 to 300,000 kilowatts; back-pressure extraction generating units with capacities of 12,000 to 50,000 kilowatts, geothermal facilities with capacities of 1,000 to 3,000 kilowatts; and hydropower equipment consisting of generator equipment with an 18-million-kilowatt capacity. Deficiencies showed in power-generating equipment and transmission technology, and significant problems existed in direct-current transmission, particularly in converter technology. China continued to lack experience in design and production of high-volt-ampere transformers and circuit breakers. Transportation Equipment The automotive industry, which grew substantially after 1949, did not keep pace with the demands of modernization. In the early 1980s demand was still low. A surge in demand resulted in the production of 400,000 vehicles and the importation of another 300,000 vehicles through early 1985. In the second half of 1985, stringent administrative measures curtailed most imports, and in early 1986 domestic production was reduced to 13 percent of that in early 1985. One cause for this was a large surplus created by high production and importation levels in 1984 and 1985. Although 1986 production levels were considered a short-term slowdown, the targets of the Seventh Five-Year Plan (1986-90) were quite low. China's investment in the railroad industry during the Seventh Five-Year Plan was higher than that for any previous five-year plan, with an 80-percent increase over the Sixth Five-Year Plan (1981-85). The country allocated -Y10 billion to manufacture and purchase locomotives, with the remainder going to repair and renewal of obsolete equipment. During the Seventh Five-Year Plan, the Ministry of Railways set a production goal of 5,000 locomotives, including over 800 electric and over 2,000 diesel locomotives. The ministry also planned to manufacture 110,000 freight and 10,000 passenger cars. Despite these ambitious domestic production targets, China had to rely heavily on imported technology to modernize its railroad fleet. From 1961 to 1987, China's maritime fleet grew faster than that of any other country in the world. During that time, the merchant fleet tonnage increased by an average 13.6 percent per year. From 1982 to 1987, Chinese shipyards produced fifty-five ships, including bulk cargo vessels, freighters, tankers, container ships, partial container ships, and passenger-cargo vessels, with a total dead-weight tonnage of more than 700,000 million. At the end of 1985, about 17 percent of China's merchant fleet was built domestically. In the late 1950s, China began developing its own aircraft, known as the Yun, or Y-series. China built 135 civil aircraft between 1981 and 1985 and was scheduled to build hundreds more during the Seventh Five-Year Plan. Civil aircraft and aircraft engines were produced in large plants located primarily in Shanghai, Xi'an, Harbin, and Shenyang. Medium-sized factories produced the necessary test equipment, components, avionics, and accessories. China hoped for eventual self-reliance in all aircraft production, but it still imported planes in 1987. Metallurgical Equipment Much equipment in the metallurgical industry was based on Japanese designs of the 1930s and Soviet designs of the 1950s. Two-thirds of the major equipment at Anshan, one of the largest plants in China, was built during the 1930s and 1950s. In general, major metallurgical equipment was more technologically advanced than instruments and control systems. Measuring and monitoring instruments, essential to quality control, were in short supply. Most of the iron- and steel-making equipment in general use was domestically produced. This included blast furnaces based on Chinese improvements to old Soviet designs, ore-beneficiation plants, open-hearth furnaces, sideblown converters, electric furnaces, and a wide range of steel-finishing equipment. To achieve a higher technological level, various pieces of equipment were imported since China had not assimilated the technology necessary for domestic production. In most instances the industry imported only the main equipment, neglecting necessary control instruments and auxiliary technologies. Electronics In 1987 China's electronics industry was about ten to fifteen years behind those of the industrialized nations. Key problems were the inability to transfer technology from research to production and continued reliance on hand labor. Also, impatience to reach Western standards sometimes proved counterproductive. For example, instead of buying a complex item such as a microprocessor abroad, China chose to develop its own, at great expense. In 1985 the electronics industry consisted of approximately 2,400 enterprises, 100 research institutions, 4 institutes of higher learning, and 20 secondary vocational schools. The industry employed some 1.36 million people, including 130,000 technical personnel. Besides the approximately 2,000 types of electronic components and large-scale integrated circuits produced by the industry, it made 400 varieties of electronic machinery, including electronic computers, television broadcast transmitters and receivers, and radar and communications equipment. In the 1980s China made great strides in the production of consumer electronic products such as televisions, radios, and tape recorders. Chemicals China's chemical industry evolved from a negligible base in 1949, grew substantially in the 1950s and early 1960s, and received major emphasis in the late 1960s and 1970s. In 1984 chemical products served primarily agriculture and light industry. The three main areas of chemical manufacturing are chemical fertilizers, basic chemicals, and organically synthesized products. Chemical fertilizer was consistently regarded as the key to increased agricultural output. The output of many chemical products rose steadily, sometimes dramatically, from 1978 to 1984. Except for a few items, such as soda ash and synthetic rubber, the great majority of chemical products, including fertilizer, came from small factories. Small-scale plants could be built more quickly and inexpensively than large, modern plants and were designed to use low-quality local resources, such as small deposits of coal or natural gas. They also minimized demands on the overworked transportation system. Larger and more modern fertilizer plants were located in every municipality, province, and autonomous region. In the early 1970s, China negotiated contracts with foreign firms for construction of thirteen large nitrogenous-fertilizer plants. By 1980 all thirteen plants had been completed, and ten were fully operational. From 1980 to 1984 many inefficient fertilizer plants were shut down, and by 1984 additional plants were being built with the most advanced equipment available. To capitalize on China's rich mineral resources, the new plants were being constructed close to coal, phosphate, and potassium deposits. Compared with advanced countries, China's chemical fertilizers lacked phosphate and potassium, and contained too much nitrogen. To boost supplies of phosphate and potassium, China relied heavily on imports during the Sixth Five-Year Plan. Basic chemical production grew rapidly after 1949. In 1983 production of sulfuric acid was approximately 8.7 million tons with major production centers in Nanjing and Luda, and large plants at many chemical-fertilizer complexes. Soda-ash output in 1984 was 1.88 million tons, with production concentrated near major sources of salt, such as large coastal cities, Sichuan and Qinghai provinces, and the Nei Monggol Autonomous Region. Production of caustic soda was scattered at large facilities in Dalian, Tianjin, Shanghai, Taiyuan, Shenyang, and Chongqing. In 1984 output of caustic soda was 2.22 million tons. Nitric acid and hydrochloric acid were produced in the northeast, in Shanghai, and in Tianjin. The chemical industry's organic-synthesis branch manufactured plastics, synthetic rubber, synthetic fibers, dyes, pharmaceuticals, and paint. Plastics, synthetic rubber, and synthetic fibers such as nylon were particularly important in the modernization drive because they were used to produce such basic consumer goods as footwear and clothing. From 1979 to 1983, plastics production grew from 793,000 to 1.1 million tons and chemical fibers from 326,300 to 540,000 tons. The major centers for organic synthesis included Shanghai, Jilin, Beijing, Tianjin, Taiyuan, Jinxi, and Guangzhou. The industry received large amounts of foreign machinery in the 1970s. Building Materials Large-scale capital construction dramatically increased the demand for building materials. Like the chemical fertilizer industry, cement production featured simultaneous development of small-scale plants and large, modern facilities. Widespread construction of small-scale cement plants began in 1958. By the mid-1970s, these plants existed in 80 percent of China's counties; in 1984 they accounted for a major share of national cement output. These local plants varied widely in size and technology. In 1983 China produced approximately 108 million tons of cement, second in the world to the Soviet Union. In 1984 production increased 14 percent, to 123 million tons and, except for Xizang and Ningxia Hui autonomous regions, every province, autonomous region, and municipality had plants capable of producing 500,000 tons of cement per year. China's building-materials industry developed rapidly and reached an output value of -Y28.7 billion in 1984. It manufactured over 500 types of products and employed approximately 3.8 million people in 1984. These materials were used in the metallurgy, machinery, electronics, aviation, and national-defense industries, and civil engineering projects. The main production centers for building materials were Beijing, Wuhan, and Harbin. By the mid-1980s, China was one of the world's primary producers of plate glass, a critical building material. Production in 1984 reached 48.3 million cases, and twenty urban glass factories each produced 500,000 cases annually. Three large glass plants, each having a production capacity of 1.2 million standard cases, were scheduled for completion in 1985 in Luoyang, Qinhuangdao, and Nanning. Paper In the early 1980s, China's serious shortage of productive forest combined with outdated technology to create a pulp-and-paper shortage at a time of increasing demand. From 1981 to 1986 the annual growth rate of paper production was 7.3 percent. However, in 1986 only 20 percent of paper pulp was made of wood; the remainder derived from grass fiber. China's more than 1,500 paper mills, produced approximately 45.4 million tons and over 500 different types of machine-made paper in 1986. Approximately 1 million tons of pulp and paper were imported annually. In 1986 China focused on pollution control, increased product variety, less use of fiber and chemical ingredients, and more efficient use of energy as measures to improve production. However, China also sought foreign assistance to achieve these goals. Textiles China has a long and rich history in production of silk, bast fiber, and cotton textiles. The earliest silk producer, China began exporting to West Asia and Europe around 20 B.C. Ramie, a grass used to produce woven fabrics, fish lines, and fish nets, was first cultivated around 1000 B.C. and is found in the southern provinces of Hunan, Hubei, Sichuan, Guangdong, and Guizhou, and the Guangxi Zhuang Autonomous Region. Cotton spinning and weaving was the largest domestic industry in the late nineteenth and early twentieth centuries. After a respectable but inconsistent performance from 1949 to 1978, textile production increased significantly with the introduction of the agricultural responsibility system (see Glossary) in 1979 (see Crops, ch. 6). By 1979 supplies of textiles had improved, the cloth-rationing system (in force since 1949) ended, and the industry began to flourish. From 1979 to 1984, the output value of the textile industry rose approximately 13 percent annually. In 1984 China had about 12,000 enterprises producing cotton and woolen goods, silk, linen, chemical fibers, prints and dyed goods, knitwear, and textile machinery. Textile production was 15.4 percent of the country's total industrial output value in 1984. Textile exports in 1984 (excluding silk goods) totaled US$4.15 billion, up 21.7 percent over 1983, and accounted for 18.7 percent of the nation's total export value. By 1986 textiles had replaced oil as the top foreign-exchange source. Traditionally, the coastal areas had the most modern textile equipment and facilities. Shanghai Municipality and Jiangsu Province were the nerve centers of the industry, accounting for 31.6 percent of the total gross-output value for textiles in 1983. Other major textile areas were Shandong, Liaoning, Hubei, Zhejiang, and Hebei provinces. After 1949 cotton textile production was reorganized and expanded to meet consumer needs. Cotton cultivation increased in the areas around the established spinning centers in the port cities of Shanghai, Qingdao, Tianjin, and Guangzhou. New spinning and weaving facilities opened near the inland cotton-producing regions. In 1983 China produced 4.6 millions tons of cotton, more than double the 1978 total. China still was the world's largest silk producer in 1983, manufacturing approximately 1 billion meters of silk textiles. Shanghai Municipality and Jiangsu and Zhejiang provinces were the main silk centers. That year China also produced approximately 100,000 tons of knitting wool, 140 million meters of woolen piece goods, 3.3 million tons of yarn, and 541,000 tons of chemical fibers. Food Processing Food processing made significant advances in China after 1949. The most basic improvement was nearly universal establishment of mechanized grain-milling facilities in rural production units. The processing of food into finished and packaged products also grew extensively. Although a growing number of food products were packaged for export, China's food processing capacity was relatively low in the mid-1980s. An immense variety of baked goods and candies was produced for local consumption, and most Chinese continued to resist processed foods. However, rising standards of living increased the demand for processed food because of its nutritional and hygienic advantages. The beverage industry was very large and widespread. All regions had breweries and distilleries producing beer and a variety of domestic and western alcoholic beverages. China successfully exported several varieties of beer and liquor, and domestic soft-drink production was widespread. Other Consumer Goods In the first thirty years of the People's Republic, many basic consumer goods were scarce because of the emphasis on heavy industry. However, the 1979 economic reform program resulted in a consumer goods explosion. For example, television production increased from approximately 0.5 million sets in 1978 to over 10 million by 1984. During the same period, bicycle output increased about three and one-half times, production of electric fans increased twelve-fold, and the output of radios doubled. In the first half of 1985, compared with the same period in 1984, production of television sets, washing machines, electric fans, and refrigerators increased dramatically. Refrigerators, washing machines, and televisions included imported components. In 1985 economic planners decided to limit production of refrigerators because they estimated that supply would outstrip demand by 5.9 million units in 1990. The following year, authorities curbed production of televisions because of excessive output and an emphasis on quality. -------------------------------------------------------------------------- This file extracted from Dept. of Commerce, Economics & Statistic's Division's May 1994 NATIONAL TRADE DATA BANK (NDTB) CD-ROM, SuDoc C1.88:994/5/V.2 Processed 6/10/1994 by RCM (UM-St. Louis Libraries)/ AAH90058 . ARMY AREA HANDBOOK access is provided courtesy of UM-St. Louis Libraries Match 60 DB Rec# - 653 Dataset-ARMAN Source :U.S. DEPARTMENT OF THE ARMY Source key :AR Program :ARMY AREA HANDBOOKS Program key :AR ARMAN Update sched. :Occasionally ID number :AR ARMAN CHINACH7.08 Title :CHAPTER 7.08: CONSTRUCTION Data type :TEXT End year :1994 Date of record:04/19/1994 Keywords 3 : | China Text : CONSTRUCTION Housing Construction Modern housing has been in chronic shortage in contemporary China. Housing conditions in 1949 were primitive and crowded, and massive population growth since then has placed great strains on the nation's building industry. According to 1985 estimates, 46 million additional units of housing, or about 2.4 billion square meters of floor space, would be needed by the year 2000 to house every urban family. Adequate housing was defined as an average of eight square meters of living space per capita. However, as of 1984, the average per capita living space was only 4.8 square meters. Housing specialists suggested that the housing construction and allocation system be reformed and that the eight-square-meter target be achieved in two stages: six square meters by 1990 and the additional two square meters between 1990 and 2000. To help relieve the situation, urban enterprises were increasing investment in housing for workers. In 1985 housing built by state and collective enterprises in cities and towns totaled 130 million square meters of floor space. In the countryside, housing built by farmers was 700 million square meters. Capital Construction Since the 1950s, the capital construction (see Glossary) industry has been plagued by excessive growth and compartmentalization. There were frequent cost overruns and construction delays, and resources were overtaxed. Project directors often failed to predict accurately the need for such elements as transportation, raw materials, and energy. A large number of small factories were built, providing surplus capacity at the national level but with deficient economies of scale at the plant level. Poor cooperation among ministries and provinces resulted in unnecessary duplication. Because each area strove for self-sufficiency in all phases of construction, specialization suffered. Since the early years of the People's Republic, overinvestment in construction has been a persistent problem. Fiscal reforms in 1979 and 1980 exacerbated overinvestment by allowing local governments to keep a much greater percentage of the revenue from enterprises in their respective areas. Local governments could then use the retained earnings to invest in factories in their areas. These investments, falling outside the national economic plan, interfered with the central government's control of capital investment. In 1981 the economy underwent a period of "readjustment," during which the investment budget for capital construction was sharply reduced (see _________, ch. 5). This administrative solution to overinvestment proved ineffective, and later reforms concentrated on economic measures such as tax levies to discourage investment. The issuance of interest-bearing loans instead of grants was also intended to control construction growth. Despite reforms, capital construction continued at a heated pace in 1986. The majority of the new investment was unplanned, coming from loans or enterprises' internal capital. During the Seventh Five-Year Plan, 925 medium-and large-scale projects were scheduled. The government planned to allocate -Y1.3 trillion for fixed assets, an increase of 70 percent over the Sixth Five-Year Plan. Forty percent of the funds were allocated for new projects, and the remaining 60 percent for renovation or expansion of existing facilities. Some of the projects involved were power-generating stations, coal mines, railroads, ports, airports, and raw-material production centers. -------------------------------------------------------------------------- This file extracted from Dept. of Commerce, Economics & Statistic's Division's May 1994 NATIONAL TRADE DATA BANK (NDTB) CD-ROM, SuDoc C1.88:994/5/V.2 Processed 6/10/1994 by RCM (UM-St. Louis Libraries)/ AAH90059 . ARMY AREA HANDBOOK access is provided courtesy of UM-St. Louis Libraries Match 61 DB Rec# - 654 Dataset-ARMAN Source :U.S. DEPARTMENT OF THE ARMY Source key :AR Program :ARMY AREA HANDBOOKS Program key :AR ARMAN Update sched. :Occasionally ID number :AR ARMAN CHINACH7.09 Title :CHAPTER 7.09: MINING Data type :TEXT End year :1994 Date of record:04/19/1994 Keywords 3 : | China Text : MINING Coal In the first half of the twentieth century, coal mining was more developed than most industries. Such major mines as Fushun, Datong, and Kailuan produced substantial quantities of coal for railroads, shipping, and industry. Expansion of coal mining was a major goal of the First Five-Year Plan. The state invested heavily in modern mining equipment and in the development of large, mechanized mines. The longwall mining technique was adopted widely, and output reached 130 million tons in 1957. During the 1960s and 1970s, investment in large mines and modern equipment lagged, and production fell behind the industry's growth. Much of the output growth during this period came from small local mines. A temporary but serious production setback followed the July 1976 Tangshan earthquake, which severely damaged China's most important coal center, the Kailuan mines. It took two years for production at Kailuan to return to the 1975 level. In 1987 coal was the country's most important source of primary energy, meeting over 70 percent of total energy demand. The 1984 production level was 789 million tons. More than two-thirds of deposits were bituminous, and a large part of the remainder was anthracite. Approximately 80 percent of the known coal deposits were in the north and northwest, but most of the mines were located in Heilongjiang and east China because of their proximity to the regions of highest demand (see fig. __, Coal Deposits and Major Mining Areas). Although China had one of the world's largest coal supplies, there still were shortages in areas of high demand, mainly because of an inadequate transportation infrastructure. The inability to transport domestic coal forced the Chinese to import Australian coal to south China in 1985. The industry also lacked modern equipment and technological expertise. Only 50 percent of tunnelling, extracting, loading, and conveying activities were mechanized, compared with the 95-percent mechanization level found in European nations. Iron Ore China had iron-ore reserves, totalling approximately 44 billion tons, in 1980. However, in the mid-1980s, China relied on imports because of domestic transportation and production problems. Sizable iron ore beds are distributed widely in about two-thirds of China's provinces and autonomous regions (see fig. __, Fuels, Power, Minerals and Metals, 1983). The largest quantities are found in Liaoning Province, followed by Sichuan, Hebei, Shanxi, Anhui, Hubei, Gansu, Shandong, and Yunnan provinces and the Nei Monggol Autonomous Region. In the mid-1980s, mines lacked modern excavating, transportation, and ore-beneficiation equipment. Most of the ore mined had a low iron content and required substantial refining or beneficiation before use in blast furnaces. Most mines lacked modern plants for converting low-grade iron ore into concentrated pellets. Other Minerals and Metals After 1949 geological exploration discovered deposits of more than 130 useful minerals (see fig. __, Fuels, Power, Minerals, and Metals, 1983). China is among the world leaders in proven deposits of tungsten, antimony, rare earth, molybdenum, vanadium titanium, pyrite, gypsum, barite, copper, tin, lead, zinc, aluminum, mercury, manganese, nickel, phosphorus, asbestos, fluorite, magnesite, and borax. Of these, China exported antimony, tin, and tungsten in significant quantities. In general, mineral extraction was inadequate for industrialization because of transportation bottlenecks and shortages of modern equipment for mining, smelting, and refinement. A number of important mineral products were imported despite large domestic deposits, including aluminum, copper, and zinc. Among the rare earth metals and ferroalloys, beryllium, tungsten, molybdenum, barium, manganese, mercury, niobium, zirconium, and titanium were present in large reserves and were extracted in adequate quantities. Deficiencies existed in chromium, platinum, and gold. China produced sufficient quantities of most nonmetallic minerals to meet domestic needs. Barite, fluorite, salt, and talc were available in massive reserves and were exported in large quantities. Graphite, magnesite, phosphates, and pyrite were less abundant but generally satisfied domestic demand. Sulphur deposits were large, but quality was low and imports were necessary. China is rich in uranium and has favorable geological conditions for the formation of uranium deposits. The ore is easy to mine and dress because of its relatively simple physical composition. Oil and Natural Gas Before 1949 China imported most of its oil. During the First Five-Year Plan it invested heavily in exploration and well-development. In 1959 vast reserves were discovered in Songhua Jiang-Liao He basin in northeast China. The Daqing oil field in Heilongjiang Province became operational in 1960. Daqing was producing about 2.3 million tons of oil by 1963, and it continued to lead the industry through the 1970s. Further important discoveries, including the major oil fields of Shengli, in Shandong, and Dagang, in Tianjin, enabled China to meet domestic needs and eliminate nearly all imports by the mid-1960s. In 1973, despite a steadily growing internal demand for petroleum products, output was large enough to export 1 million tons of crude oil to Japan. Exports increased to 6.6 million tons in 1974 and reached 13.5 millions tons in 1978. In 1985 exports of crude oil amounted to approximately twenty million tons, roughly 16 percent of total production. The majority of 1985 exports were to Japan, but the government also had released increasing quantities on the spot market and sent some to Singapore for refining. Although the government temporarily abandoned its drive to broaden its oil export base in 1986, 131 million tons of crude oil still were produced, an increase of 5.8 million tons over 1985. Oil reserves are large and widely dispersed. In general, development is concentrated on deposits readily accessible from major industrial and population centers (see fig. __, Fuels, Power, Minerals, and Metals, 1983). Deposits in remote areas such as the Tarim, Junggar, and Qaidam basins, remain largely unexplored. The quality of oil from the major deposits varies considerably. A few deposits, like the Shengli field, produce low-quality oil suitable mainly as fuel. Most of the oil produced in China from the big fields in the north and northeast is heavy, low in sulphur, and has a very high paraffin content, making it difficult and expensive to extract and to refine. Offshore exploration and drilling were first undertaken in the early 1970s, and it became more widespread and advanced as the decade progressed. Chinese and foreign oil experts believed that offshore deposits were extensive and could equal onshore reserves. Offshore operations relied heavily on foreign technology. In 1982 thirty-three foreign oil companies submitted bids for offshore drilling rights; twenty-seven eventually signed contracts. By the mid-1980s, when offshore exploration results were disappointing and only a handful of wells were actually producing oil, China began to emphasize onshore development. To continue offshore exploration, China established the China National Offshore Oil Corporation to assist foreign oil companies in exploring, developing, extracting, and marketing China's oil. Exploration and drilling was concentrated in areas in the South China Sea, Gulf of Tonkin, and Zhu Jiang (Pearl River) Mouth Basin in the south, and Bo Hai Bay in the north. Disputes between China and several neighboring countries complicated the future of oil development in several promising offshore locations (see Physical Environment, ch.2). Natural gas was a relatively minor source of energy. Output grew rapidly in the 1960s and 1970s. By 1985 production was approximately 12 billion cubic meters--about 3 percent of China's primary energy supply. The following year, output increased by 13 billion cubic meters. Sichuan Province possesses about half of China's natural gas reserves and annual production. Most of the remaining natural gas is produced at the Daqing and Shengli northeastern oil fields. Other gas-producing areas include the coastal plain in Jiangsu, Shanghai, and Zhejiang; the Huabei complex in Hebei Province; and the Liaohe oil field in Liaoning Province. The exact size of China's natural gas reserves was unknown. Estimates ranged from 129 billion to 24.4 trillion cubic meters. The Chinese hoped for a major discovery in the Zhongyuan Basin, a 5,180-square-kilometer area along the border of Henan and Shandong provinces. Major offshore reserves have been discovered. If successfully tapped, these could increase gas output by 50 percent. The largest unexploited natural gas potential is believed to be in Qinghai and Xinjiang. A rudimentary petroleum-refining industry was established with Soviet aid in the 1950s. In the 1960s and 1970s, this base was modernized and expanded, partially with European and Japanese equipment. In 1986 Chinese refineries were capable of processing about 2.1 million barrels a day. By 1990 China plans to reach 2.5 million barrels a day. In the 1970s, China constructed oil pipelines and improved ports handling oil tankers. The first oil pipeline was laid from Daqing to the port of Qinhuangdao; 1,150 kilometers long, it became operational in 1974. The following year the pipeline was extended to Beijing; a second line connected Daqing to the port of Luda and branched off to the Democratic People's Republic of Korea (North Korea). A pipeline from Linyi in Shandong Province to Nanjing was completed in 1978, linking the oil fields of Shengli and Huabei to ports and refineries of the lower Chang Jiang region. In 1986 plans had been made to construct a 105-kilometer pipeline linking an offshore well with the Chinese mainland via Hainan Islands. Electric and Nuclear Power From 1949 to the mid-1980s, China pursued an inconsistent policy on the development of electric power. Significant underinvestment in the readjustment period, starting in 1979, caused serious power shortages into the mid-1980s. Although China's hydroelectric power potential was the world's largest and the power capacity was the sixth largest, 1985 estimates showed that demand exceeding supply by about 40 billion kilowatt hours per year. Because of power shortages, factories and mines routinely operated at 70- to 80-percent capacity, and in some cases factories only ran for 3 or 4 days a week. Whole sections of cities were frequently blacked out for hours. China's leaders began to acknowledge the seriousness of the power shortage in 1979. The government took no positive steps until the mid-1980s, when it announced import of 10,000 megawatts of thermal power-plant capacity to serve the east's large population centers. It also launched a nationwide campaign to create an additional 5,000 megawatts of electric-power capacity. Under the Seventh Five-Year Plan, China planned to add 30,000 to 35,000 megawatts of capacity, a 55-to-80-percent increase over previous five-year plans. The leadership decided to build thermal power plants to meet the country's electricity needs, because such plants were relatively inexpensive and required construction lead-times of only three to six years. In 1985 approximately 68 percent of generating capacity was derived from thermal power, mostly coal-fired, and observers estimated that by 1990 its share would increase to 72 percent. The use of oil-fired plants peaked in the late 1970s, and by the mid-1980s most facilities had been converted back to coal. Only a few thermal plants were fueled by natural gas. Hydropower accounted for only about 30 percent of generating capacity. Observers expected that during the Seventh Five-Year Plan, China would continue to emphasize the development of thermal power over hydropower, because of the need to expand the power supply quickly to keep pace industrial growth. However, in the long term, hydropower gradually was to be given priority over thermal power. In 1986 China's total generating capacity was 76,000 megawatts: 52,000 from thermal plants and 24,000 from hydropower sources. China planned to construct large generators with capacities of 100 to 300 megawatts to increase thermal power capacity. The new, larger generators would be much more efficient than generators with capacities of only 50 megawatts or less. With the larger generators, China would only have to increase coal consumption by 40 percent to achieve a 54-percent increase in generating capacity by 1990. Foreign observers believed that as China increased its grid network it could construct power plants close to coal mines, then run power lines to the cities. This method would eliminate the costly and difficult transportation of coal to smaller urban plants, which had already created a significant pollution problem. From 1949 to 1986, China built at least 25 large, 130 medium, and about 90,000 small-sized hydropower stations. According to the Ministry of Water Resources and Electric Power, China's 1983 annual power output was 351.4 billion kilowatt hours, of which 86 billion kilowatt hours were generated by hydropower. While construction of thermal plants was designed as a quick remedy for alleviating China's power shortages, the development of hydropower resources was considered a long-term solution. The primary areas for the construction of hydropower plants were the upper Huang He,the upper and middle stream tributaries and trunk of the Chang Jiang, and the Hongshui He in the upper region of the Zhu Jiang Basin (see fig. __, Fuels, Power, Minerals, and Metals, 1983). The construction of new hydropower plants was expected to be a costly and lengthy process, undertaken with assistance from the United States, Canada, Kuwait, Austria, Norway, France, and Japan. To augment its thermal and hydropower capacity, China was developing a nuclear energy capability. China's nuclear industry began in the 1950s with Soviet assistance. Until the early 1970s, it had primarily military applications. However, in August 1972, reportedly by directive of Premier Zhou Enlai, China began developing a reactor for civilian energy needs. After Mao Zedong's death in 1976, support for the development of nuclear power increased significantly. Contracts were signed to import two French-built plants, but economic retrenchment and the Three Mile Island incident in the United States abruptly halted the nuclear program. Following three years of "investigation and demonstration," the leadership decided to proceed with nuclear power development. By 1990 China intended to commit between 60 to 70 percent of its nuclear industry to the civilian sector. By 2000 China planned to have a nuclear generating capacity of 10,000 megawatts, accounting for approximately 5 percent of the country's total generating capacity. In 1986 a 300-megawatt domestically designed nuclear power plant was under construction at Qinshan, Zhejiang Province, with completion planned for 1989. Although most of the equipment in the plant was domestic, a number of key components were imported. The Seventh Five-Year Plan called for constructing two additional 600-megawatt reactors at Qinshan. Another plant, with two 900 megawatt reactors, was under construction at Daya Bay in Guangdong Province. The Daya Bay project was a joint venture with Hong Kong, with considerable foreign loans and expertise. -------------------------------------------------------------------------- This file extracted from Dept. of Commerce, Economics & Statistic's Division's May 1994 NATIONAL TRADE DATA BANK (NDTB) CD-ROM, SuDoc C1.88:994/5/V.2 Processed 6/10/1994 by RCM (UM-St. Louis Libraries)/ AAH90060 . ARMY AREA HANDBOOK access is provided courtesy of UM-St. Louis Libraries Match 62 DB Rec# - 655 Dataset-ARMAN Source :U.S. DEPARTMENT OF THE ARMY Source key :AR Program :ARMY AREA HANDBOOKS Program key :AR ARMAN Update sched. :Occasionally ID number :AR ARMAN CHINACH7.10 Title :CHAPTER 7.10: RURAL INDUSTRY Data type :TEXT End year :1994 Date of record:04/19/1994 Keywords 3 : | China Text : RURAL INDUSTRY From 1980 to 1986, the number of rural town and township enterprises rose from 1.42 million to more than 12.2 million. There were five types of town and township enterprises: township enterprises, village enterprises, cooperative enterprises, enterprises jointly run by several households, and household enterprises. In 1986 the assets of the enterprises at the township and village levels totaled -Y134 billion. Their total output value for 1985 was -Y272.8 billion, 17 percent of the gross national output and 44 percent of gross agricultural output. Rural enterprises absorbed a large portion of the surplus agricultural labor displaced by the agricultural responsibility system and the breakdown of the commune system (see Post-Mao Policies, ch. 6). This absorption helped the state greatly by eliminating state support of millions of displaced workers. In 1986 rural enterprises employed approximately 76 million people, or 20 percent of China's total workforce. The town and township enterprises made a significant contribution to overall economic growth. In 1985 an estimated 28 percent of coal, 53 percent of construction materials, 30 percent of paper, 20 percent of textile goods, 33 percent of garments, and 75 percent of leather products came from rural enterprises. The enterprises also made extensive progress in the export market, with 8,000 export-oriented factories, of which 870 were Chinese-foreign joint ventures. In 1985 town and township enterprises earned about -Y4 billion in foreign currency. Despite the rapid growth and success of town and township enterprises, continued expansion faced obstacles in 1987. The government was trying to limit production because of economic and environmental concerns. Moreover, financial mismanagement, poor market analysis, rising energy and raw-material cost, substandard equipment, and constant interference from local government authorities hampered production and expansion. In certain areas, such as Zhejiang Province, efforts were made to solve some of the problems facing the rural enterprises. Local governments allowed the enterprises to keep 70 percent of profits, and of the remaining 30 percent remitted to the county government, 70 percent was invested in existing enterprises or used to establish new ones. -------------------------------------------------------------------------- This file extracted from Dept. of Commerce, Economics & Statistic's Division's May 1994 NATIONAL TRADE DATA BANK (NDTB) CD-ROM, SuDoc C1.88:994/5/V.2 Processed 6/10/1994 by RCM (UM-St. Louis Libraries)/ AAH90061 . ARMY AREA HANDBOOK access is provided courtesy of UM-St. Louis Libraries Match 63 DB Rec# - 656 Dataset-ARMAN Source :U.S. DEPARTMENT OF THE ARMY Source key :AR Program :ARMY AREA HANDBOOKS Program key :AR ARMAN Update sched. :Occasionally ID number :AR ARMAN CHINACH7.11 Title :CHAPTER 7.11: DEFENSE INDUSTRY Data type :TEXT End year :1994 Date of record:04/19/1994 Keywords 3 : | China Text : DEFENSE INDUSTRY China's defense industrial complex produced weapons and equipment based predominantly on Soviet designs of the 1950s and 1960s. Because of a lack of foreign exchange, a low short-term threat perception, and an emphasis on the three other modernizations (agriculture, industry, and science and technology), China had decided to develop its defense industries gradually. It would rely primarily on domestic production, importing foreign technology only in areas of critical need. The defense industries produced a wide range of military materiel. Large quantities of small arms and tanks were produced, and many were exported to Third World countries such as Iran. China had upgraded Soviet aircraft and was developing nuclear-powered ballistic-missile submarines, intercontinental ballistic missiles, and tanks equipped with infrared night-vision gear and laser rangefinders (see __________, ch. 14) Because defense was assigned the lowest priority in the Four Modernizations in the 1970s, China's large defense sector has devoted an increasing amount of its resources to civilian production. For example, in the mid-1980s approximately one-third of the ordnance industry's output was allocated to civilian production, and the share was expected to rise to two-thirds by 1990. The defense sector produced a wide variety of products, ranging from furniture to telescopes, cameras to heavy machinery. Despite the military's contribution to the industrial sector, in 1987 Chinese industry lagged far behind that of the industrialized nations. Much of industrial technology was severely outdated; severe energy shortages, transportation bottlenecks, and bureaucratic interference also hindered modernization. Although output was high in a number of industries, quality was often poor. However, China's industrial sector has made considerable progress since 1949. Output of most products has increased dramatically since the 1950s, and China now produces computers, satellites, and other high-technology items. The reform program introduced in the late 1970s brought an era of more rational economic planning and laid the groundwork for more balanced and sustained industrial growth. As of 1987, China's leaders were aware of the need for greater industrial efficiency and productivity, and were striving to achieve these goals. * * * Industrial growth prior to 1949 is outlined by John K. Chang in Industrial Development in Pre-Communist China. Thomas G. Rawski describes the development of the producer goods industries, both before and after the founding of the People's Republic, in China's Transition to Industrialism. A wealth of material on Chinese industry is found in the two-volume set of China's Economy Looks Toward the Year 2000, which includes an overview article, and specific articles relating to the structure, management, ownership and control, and finance and planning of industry. It also describes and analyzes the energy sector in detail. Volume II of the World Bank Series, China: Socialist Economic Development, contains information on industrial organization, policy, strengths and weaknesses, and issues and challenges. Another World Bank Study, China: Long-Term Development Issues and Options, looks at some of the major development issues facing China to the year 2000. Two RAND studies, Industrial Innovation in China with Special Reference to the Metallurgical Industry and Chinese Electronics Industry in Transition, are excellent case studies, documenting China's attempt to modernize its outdated industrial sector. The annual State Statistical Yearbook of China provides figures on a wide range of industrial categories. The monthly China Business Review provides well-researched articles on many topics related to industry, and the Country Report: China, North Korea, (formerly Quarterly Economic Review of China, North Korea) outlines economic events on a quarterly basis and provides annual summaries. (For further information and complete citations, see Bibliography.) -------------------------------------------------------------------------- This file extracted from Dept. of Commerce, Economics & Statistic's Division's May 1994 NATIONAL TRADE DATA BANK (NDTB) CD-ROM, SuDoc C1.88:994/5/V.2 Processed 6/10/1994 by RCM (UM-St. Louis Libraries)/ AAH90062 . ARMY AREA HANDBOOK access is provided courtesy of UM-St. Louis Libraries Match 64 DB Rec# - 657 Dataset-ARMAN Source :U.S. DEPARTMENT OF THE ARMY Source key :AR Program :ARMY AREA HANDBOOKS Program key :AR ARMAN Update sched. :Occasionally ID number :AR ARMAN CHINACH8.00 Title :CHAPTER 8.00 - TRADE AND TRANSPORTATION Data type :TEXT End year :1994 Date of record:04/19/1994 Keywords 3 : | China Text : TRADE AND TRANSPORTATION are the lifeblood of an economy. In the twenty-five years that followed the founding of the People's Republic of China in 1949, China's trade institutions and transportation and communications networks were built into a partially modern but somewhat inefficient system. The drive to modernize the economy that began in 1978 required a sharp acceleration in commodity flows and greatly improved efficiency in economic transactions. In the ensuing years economic reforms were adopted by the government to develop a "socialist planned commodity economy" that combined central planning with market mechanisms. These changes resulted in the decentralization and expansion of domestic and foreign trade institutions, a greatly enlarged role for free markets in the distribution of goods, and a prominent role for foreign trade and investment in economic development. Despite increased investment and development in the 1980s, the transportation and communications sectors were strained by the rapid expansion of production and the exchange of goods. Transportation, postal services, communications, and trade, including services, employed about 6.3 percent of the national labor force in the mid-1980s--about 22 percent of the nonagricultural labor force. Chinese statistics estimate that these sectors produced about 7.4 percent of the gross national product in 1983. -------------------------------------------------------------------------- This file extracted from Dept. of Commerce, Economics & Statistic's Division's May 1994 NATIONAL TRADE DATA BANK (NDTB) CD-ROM, SuDoc C1.88:994/5/V.2 Processed 6/10/1994 by RCM (UM-St. Louis Libraries)/ AAH90063 . ARMY AREA HANDBOOK access is provided courtesy of UM-St. Louis Libraries Match 65 DB Rec# - 658 Dataset-ARMAN Source :U.S. DEPARTMENT OF THE ARMY Source key :AR Program :ARMY AREA HANDBOOKS Program key :AR ARMAN Update sched. :Occasionally ID number :AR ARMAN CHINACH8.01 Title :CHAPTER 8.01: INTERNAL TRADE AND DISTRIBUTION Data type :TEXT End year :1994 Date of record:04/19/1994 Keywords 3 : | China Text : INTERNAL TRADE AND DISTRIBUTION Agriculture Agricultural products were distributed in three major ways in China during the 1980s. They were either retained by the household (now the primary production unit) for distribution among its members, procured by the state, or sold in free rural or urban markets. Approximately 63 percent of the population was located in rural areas, where the majority of the people worked in agriculture and rural industries. Under the responsibility system (see Glossary) for agriculture instituted in 1981, the household replaced the production team (see Glossary) as the basic production unit. Families contracted with the economic collective to farm a plot of land, delivered a set amount of grain or other produce and the agricultural tax to the state, and paid a fee to the collective. After meeting these obligations, the household was free to retain its surplus produce or sell it in free markets. Restrictions on private plots and household sideline production were lifted, and much of the production from these was also sold on free markets (see Post-Mao Policies; Planning and Organization, ch. 6). Distribution of food and other agricultural goods to urban consumers, industry, and rural areas deficient in food was carried out primarily by the state and secondarily by producers or cooperatives. The state procured agricultural goods by means of taxes in kind and by purchases by state commercial departments (state trading companies) under the Ministry of Commerce. The agricultural tax was not large, falling from 12 percent of the total value of agricultural output in 1952 to 5 percent in 1979. In 1984 the number of agricultural and sideline products subject to state planning and purchasing quotas was reduced from twenty-nine to ten and included grains, edible oil, cured tobacco, jute, hemp, and pigs. In 1985 the system of state purchasing quotas for agricultural products was abolished. Instead, the state purchased grain and cotton under contract at a set price. Once contracted quotas were met, the grain and cotton were sold on the market at floating prices. If market prices fell below the listed state price, the state purchased all available market grain at the state price to protect the interests of producers. Vegetables, pigs, and aquatic products sold to urban, mining, and industrial areas were traded in local markets according to demand. Local commercial departments set the prices of these goods according to quality to protect the interests of urban consumers. All other agricultural goods were sold on the market to the state, to cooperatives, or to other producers. Restrictions on private business activities were greatly reduced, permitting peasants as well as cooperatives to transport agricultural goods to rural and urban markets and allowing a rapid expansion of free markets in the countryside and in cities. The number of wholesale produce markets increased by 450 percent between 1983 and 1986, reaching a total of 1,100 and easing pressure on the state produce distribution network, which had been strained by the burgeoning agricultural production engendered by rural reforms. In 1986 free markets, called "commodity fairs," numbered 61,000 nationwide. Once food was procured and transported to urban areas, it was sold to consumers by state-owned stores and restaurants. In the mid-1980s food items were also available in free markets, where peasants sold their produce, and in privately owned restaurants. As noted previously, the prices of pigs, aquatic products, and vegetables were determined by local authorities according to quality and demand; prices of other products floated freely on the market. Except for grain, edible oil, and a few other rationed items, food items were in good supply. Industrial goods used in agricultural production were sold to agricultural units in the 1980s. Local cooperatives or state supply and marketing bureaus sold most agricultural producer goods, including chemical fertilizers and insecticides, to households at set prices. The state also offered preferential prices for agricultural inputs to grain farmers to encourage grain production. Households were permitted to purchase agricultural machinery and vehicles to transport goods to market. In order to ensure that rural units could cover the costs of the increasing quantities of industrial inputs required for higher yields, the government periodically reduced the prices of the industrial goods sold to farmers, while raising the procurement prices for agricultural products. In the mid-1980s, however, the price gap between agricultural and industrial products was widening to the disadvantage of farmers. Industry After 1982, reforms moved China's economy to a mixed system based on mandatory planning, guidance planning (use of economic levers such as taxes, prices, and credit instead of administrative fiat), and the free market. In late 1984 further reforms of the urban industrial economy and commerce reduced the scope of mandatory planning, increased enterprise autonomy and the authority of professional managers, loosened price controls to rationalize prices, and cut subsidies to enterprises. These changes created a "socialist planned commodity economy," essentially a dual economy in which planned allocation and distribution are supplemented by market exchanges based on floating or free prices (see Prices, ch. 5). As a result of these reforms, the distribution of goods used in industrial production was based on mandatory planning with fixed prices, guidance planning with floating prices, and the free market. Mandatory planning covered sixty industrial products, including coal, crude oil, rolled steel, nonferrous metals, timber, cement, electricity, basic industrial chemicals, chemical fertilizers, major machines and electrical equipment, chemical fibers, newsprint, cigarettes, and defense industry products. Once enterprises under mandatory planning had met the state's mandatory plans and supply contracts, they could sell surplus production to commercial departments or other enterprises. Prices of surplus industrial producer goods floated within limits set by the state. The state also had a planned distribution system for important materials such as coal, iron and steel, timber, and cement. Enterprise managers who chose to exceed planned production goals purchased additional materials on the market. Major cities established wholesale markets for industrial producer goods to supplement the state's allocation system. Under guidance planning, enterprises try to meet the state's planned goals but make their own arrangements for production and sales based on the orientation of the state's plans, the availability of raw and unfinished materials and energy supplies, and the demands on the market. Prices of products under guidance planning either are unified prices or floating prices set by the state or prices negotiated between buyers and suppliers. Production and distribution of products not included in the state's plans are regulated by market conditions. Lateral Economic Cooperation China also undertook measures to develop "lateral economic ties," that is, economic cooperation across regional and institutional boundaries. Until the late 1970s, China's planned economy had encouraged regional and organizational autarky, whereby enterprises controlled by a local authority found it almost impossible to do business with other enterprises not controlled by the same institution, a practice that resulted in economic waste and inefficiency. Lateral economic cooperation broke down some barriers in the sectors of personnel, resources, capital, technical expertise, and procurement and marketing of commodities. In order to promote increased and more efficient production and distribution of goods among regions and across institutional divisions, ties were encouraged among producers of raw and semifinished materials and processing enterprises, production enterprises and research units (including colleges and universities), civilian and military enterprises, various transportation entities, and industrial, agricultural, commercial, and foreign trade enterprises. A multitiered network of transregional economic cooperation associations also was established. The Seventh Five-Year Plan (1986-90) divided China into three regions--eastern, central, and western, each with its own economic development plans. In addition to the three major regions, three echelons of economic cooperation zones were created. The first echelon--national-level economic development zones--cut across several provincial-level boundaries and linked major economic areas. Among these were the Shanghai Economic Zone, the Northeastern Economic Zone, the energy production bases centering on Shanxi Province, the Beijing-Tianjin-Tangshan Economic Zone, and the Southwestern Economic Zone. The second-echelon network linked provincial-level capitals with designated ports and cities along vital communication lines and included the Huaihai Economic Zone (consisting of fifteen coastal prefectures and cities in Jiangsu, Anhui, Henan, and Shandong provinces) and the Zhu Jiang Delta Economic Zone centered on the southern city of Guangzhou. The third tier of zones centered on provincial-level capitals and included the Nanjing Regional Economic Cooperation Association. Smaller-scale lateral economic ties below the provincial level, among prefectures, counties, and cities, also were formed. Retail Sales Retail sales in China changed dramatically in the late 1970s and early 1980s as economic reforms increased the supply of food items and consumer goods, allowed state retail stores the freedom to purchase goods on their own, and permitted individuals and collectives greater freedom to engage in retail, service, and catering trades in rural and urban areas. Retail sales increased 300 percent from 1977 to 1985, rising at an average yearly rate of 13.9 percent--10.5 percent when adjusted for inflation. In the 1980s retail sales to rural areas increased at an annual rate of 15.6 percent, outpacing the 9.7-percent increase in retail sales to urban areas and reflecting the more rapid rise in rural incomes. In 1977 sales to rural areas comprised 52 percent of total retail sales; in 1984 rural sales accounted for 59.2 percent of the total. Consumer goods comprised approximately 88 percent of retail sales in 1985, the remaining 12 percent consisting of farming materials and equipment. The number of retail sales enterprises also expanded rapidly in the 1980s. In 1985 there were 10.7 million retail, catering, and service establishments, a rise of 850 percent over 1976. Most remarkable in the expansion of retail sales was the rapid rise of collective and individually owned retail establishments. Individuals engaged in businesses numbered 12.2 million in 1985, more than 40 times the 1976 figure. Furthermore, as state-owned businesses either were leased or turned over to collective ownership or were leased to individuals, the share of state-owned commerce in total retail sales dropped from 90.3 percent in 1976 to 40.5 percent in 1985. In 1987 most urban retail and service establishments, including state, collective, and private businesses or vendors, were located either in major downtown commercial districts or in small neighborhood shopping areas. The neighborhood shopping areas were numerous and were situated so that at least one was within easy walking distance of almost every household. They were able to supply nearly all the daily needs of their customers. A typical neighborhood shopping area in Beijing would contain a one-story department store, bookstore, hardware store, bicycle repair shop, combined tea shop and bakery, restaurant, theater, laundry, bank, post office, barbershop, photography studio, and electrical appliance repair shop. The department stores had small pharmacies and carried a substantial range of housewares, appliances, bicycles, toys, sporting goods, fabrics, and clothing. Major shopping districts in big cities contained larger versions of the neighborhood stores as well as numerous specialty shops, selling such items as musical instruments, sporting goods, hats, stationery, handicrafts, cameras, and clocks. Supplementing these retail establishments were free markets in which private and collective businesses provided services, hawked wares, or sold food and drinks. Peasants from surrounding rural areas marketed their surplus produce or sideline production in these markets. In the 1980s urban areas also saw a revival of "night markets," free markets that operated in the evening and offered extended service hours that more formal establishments could not match. In rural areas, supply and marketing cooperatives operated general stores and small shopping complexes near village and township administrative headquarters. These businesses were supplemented by collective and individual businesses and by the free markets that appeared across the countryside in the 1980s as a result of rural reforms. Generally speaking, a smaller variety of consumer goods was available in the countryside than in the cities. But the lack was partially offset by the increased access of some peasants to urban areas where they could purchase consumer goods and market agricultural items. A number of important consumer goods, including grain, cotton cloth, meat, eggs, edible oil, sugar, and bicycles, were rationed during the 1960s and 1970s. To purchase these items, workers had to use coupons they received from their work units. By the mid-1980s rationing of over seventy items had been eliminated; production of consumer goods had increased, and most items were in good supply. Grain, edible oil, and a few other items still required coupons. In 1985 pork rationing was reinstated in twenty-one cities as supplies ran low. Pork was available at higher prices in supermarkets and free markets. -------------------------------------------------------------------------- This file extracted from Dept. of Commerce, Economics & Statistic's Division's May 1994 NATIONAL TRADE DATA BANK (NDTB) CD-ROM, SuDoc C1.88:994/5/V.2 Processed 6/10/1994 by RCM (UM-St. Louis Libraries)/ AAH90064 . ARMY AREA HANDBOOK access is provided courtesy of UM-St. Louis Libraries Match 66 DB Rec# - 659 Dataset-ARMAN Source :U.S. DEPARTMENT OF THE ARMY Source key :AR Program :ARMY AREA HANDBOOKS Program key :AR ARMAN Update sched. :Occasionally ID number :AR ARMAN CHINACH8.02 Title :CHAPTER 8.02: FOREIGN TRADE Data type :TEXT End year :1994 Date of record:04/19/1994 Keywords 3 : | China Text : FOREIGN TRADE History of Chinese Foreign Trade Chinese foreign trade began as early as the Western Han dynasty (206 B.C.-A.D. 9), when the famous "silk route" through Central Asia was pioneered by Chinese envoys (see The Imperial Era, ch. 1). During later dynasties, Chinese ships traded throughout maritime Asia, reaching as far as the African coast, while caravans extended trade contacts in Central Asia and into the Middle East. Foreign trade was never a major economic activity, however, and Chinese emperors considered the country to be entirely self-sufficient. During parts of the Ming (1368-1644) and Qing (1644-1911) dynasties, trade was officially discouraged. In the nineteenth century, European nations used military force to initiate sustained trade with China. From the time of the Opium War (1839-42) until the founding of the People's Republic in 1949, various Western countries and, starting in the 1890s, Japan compelled China to agree to a series of unequal treaties that enabled foreigners to establish essentially autonomous economic bases and operate with privileged status in China. Foreign privileges were abolished when the People's Republic came into being (see Emergence of Modern China, ch. 1). Foreign trade did not account for a large part of the Chinese economy for the first thirty years of the People's Republic. As in most large, continental countries, the amount of commerce with other nations was small relative to domestic economic activity. During the 1950s and 1960s, the total value of foreign trade was only about 2 percent of the gross national product (GNP). In the 1970s trade grew rapidly but in 1979 still amounted to only about 6 percent of GNP. The importance of foreign trade in this period, however, far exceeded its volume. Foreign imports alleviated temporary but critical shortages of food, cotton, and other agricultural products as well as long-term deficiencies in a number of essential items, including raw materials such as chrome and manufactured goods such as chemical fertilizer and finished steel products. The acquisition of foreign plants and equipment enabled China to utilize the more advanced technology of developed countries to speed its own technological growth and economic development. During the 1950s China imported Soviet plants and equipment for the development program of the First Five-Year Plan (1953-57). At the same time, the Chinese government expanded exports of agricultural products to repay loans that financed the imports (see The First Five-Year Plan, ch. 5). Total trade peaked at the equivalent of US$4.3 billion in 1959, but a sudden decline in agricultural production in 1959-61 required China's leaders to suspend further imports of machinery to purchase foreign grain. Under a policy of "self-reliance," in 1962 total trade declined to US$2.7 billion. As the economy revived in the mid-1960s, plants and equipment again were ordered from foreign suppliers, and substantial growth in foreign trade was planned. But in the late 1960s, the chaos and antiforeign activities of the Cultural Revolution (1966-76; see Glossary) caused trade again to decline. The pragmatic modernization drive led by party leaders Zhou Enlai and Deng Xiaoping and China's growing contacts with Western nations resulted in a sharp acceleration of trade in the early 1970s. Imports of modern plants and equipment were particularly emphasized, and after 1973 oil became an increasingly important export. Trade more than doubled between 1970 and 1975, reaching US$13.9 billion. Growth in this period was about 9 percent a year. As a proportion of GNP, trade grew from 1.7 percent in 1970 to 3.9 percent in 1975. In 1976 the atmosphere of uncertainty resulting from the death of Mao and pressure from the Gang of Four (see Glossary), whose members opposed reliance on foreign technology, brought another decline in trade. Beginning in the late 1970s, China reversed the Maoist economic development strategy and, by the early 1980s, had committed itself to a policy of being more open to the outside world and widening foreign economic relations and trade. The opening up policy led to the reorganization and decentralization of foreign trade institutions, the adoption of a legal framework to facilitate foreign economic relations and trade, direct foreign investment, the creation of special economic zones (see Glossary) and "open cities," the rapid expansion of foreign trade, the importation of foreign technology and management methods, involvement in international financial markets, and participation in international foreign economic organizations. These changes not only benefited the Chinese economy but also integrated China into the world economy. In 1979 Chinese trade totaled US$27.7 billion--6 percent of China's GNP but only 0.7 percent of total world trade. In 1985 Chinese foreign trade rose to US$70.8 billion, representing 20 percent of China's GNP and 2 percent of total world trade and putting China sixteenth in world trade rankings. Trade Policy in the 1980s Under the policy of opening up to the outside world, exports, imports, and foreign capital were all assigned a role in promoting economic development. Exports earned foreign currency, which was used to fund domestic development projects and to purchase advanced foreign technology and management expertise. Imports of capital goods and industrial supplies and foreign loans and investment were used to improve the infrastructure in the priority areas of energy, transportation, and telecommunications and to modernize the machine-building and electronics industries. To earn more foreign currency and to conserve foreign exchange reserves, foreign capital was also used to expand production of export commodities, such as textiles, and of import substitutes, such as consumer goods. China has adopted a variety of measures to promote its foreign economic relations, maximizing the role of imports, exports, and foreign capital in economic development. Foreign trade organizations were reorganized, and control of imports and exports was relaxed or strengthened depending on the balance of trade and the level of foreign exchange reserves. Heavy purchases of foreign plants and equipment resulted in import restraint from 1980 to 1983. Because of the expansion of exports in the mid-1980s, a large foreign reserve surplus, and the decentralized management of foreign trade, imports surged. Huge, uncontrolled purchases of consumer goods led to trade deficits in 1984 and 1985, resulting in the introduction of an import and export licensing system, stricter controls on foreign exchange expenditures, and the devaluation of the yuan in order to reduce the trade deficit and ensure that machinery, equipment, and semifinished goods, rather than consumer goods, were imported. In 1985 China had foreign exchange reserves of US$11.9 billion. China joined a number of international economic organizations, becoming a member of the World Bank, the International Monetary Fund, the Asian Development Bank, the General Agreement on Tariffs and Trade (GATT), and the Multi-Fiber Agreement. China became an observer of GATT in 1982 and formally applied to participate as a full member in July 1986. China also reversed its aversion to foreign capital, borrowing money from international lending organizations, foreign governments, and foreign commercial banks and consortia and permitting foreign banks to open branches in China. The Chinese government maintained a good credit rating internationally and did not pile up huge foreign debts like many other communist and developing countries. Between 1979 and 1985, China signed loans totaling US$20.3 billion, US$15.6 billion of which it already had used. Most loans went into infrastructure projects, such as energy and transportation, and funded raw materials imports. The Bank of China, the principal foreign exchange bank, established branches overseas and participated in international financial markets in Eurobonds and loan syndication. Legal and institutional frameworks to facilitate foreign investment and trade also were created. Laws on taxation, joint ventures, foreign investments, and related areas were promulgated to encourage foreign investment. In 1979 China created four special economic zones in Shenzhen, Zhuhai, Shantou (in Guangdong Province), and Xiamen (in Fujian Province). The special economic zones essentially were export-processing zones designed to attract foreign investment, expand exports, and import technology and expertise. In 1984 fourteen coastal cities were designated "open cities." These too were intended to attract foreign funds and technology. But in 1985 the government decided to concentrate resources on only four of the cities: Dalian, Guangzhou, Shanghai, and Tianjin. Although the special economic zones and open cities had the power to grant investment incentives, problems with the red tape, bureaucratic interference, and lack of basic infrastructure resulted in less foreign investment and fewer high- technology projects than initially envisioned. From 1979 to 1985, China received US$16.2 billion in foreign investment and used US$4.6 billion of that amount. By 1986 China had over 6,200 foreign-funded businesses, including 2,741 joint ventures, 3,381 cooperatively managed businesses, and 151 enterprises with sole foreign investment. Of the joint ventures, 70 percent were in production enterprises (manufacturing or processing) and 30 percent were service industries (primarily hotels or tourism). Hong Kong provided 80 percent of the joint-venture partners, the United States 7 percent, and Japan 6 percent. Organization of Foreign Trade The increasingly complex foreign trade system underwent expansion and decentralization in the late 1970s and 1980s. In 1979 the Ministry of Foreign Trade's nine foreign trade corporations lost their monopoly on import and export transactions as the industrial ministries were permitted to establish their own foreign trade enterprises. The provincial branch corporations of the state foreign trade corporations were granted more autonomy, and some provinces, notably Fujian, Guangdong, and the special municipalities of Beijing, Tianjin, and Shanghai were permitted to set up independent, provincial-level import-export companies. Some selected provincial enterprises were granted autonomy in foreign trade decisions. In 1982 the State Council's Import-Export Control Commission, Foreign Investment and Control Commission, Ministry of Foreign Trade, and Ministry of Foreign Economic Relations were merged to form the Ministry of Foreign Economic Relations and Trade. In 1984 the foreign trade system underwent further decentralization. Foreign trade corporations under this and other ministries and under provincial-level units became independent of their parent organizations and were responsible for their own profits and losses. An agency system for foreign trade also was established, in which imports and exports were handled by specialized enterprises and corporations acting as agents on a commission basis. Ministry of Foreign Economic Relations and Trade The main functions of the Ministry of Foreign Economic Relations and Trade were to establish and supervise foreign trade policies; to work with the State Planning Commission in setting long-term foreign trade plans and annual quotas for imports and exports; to control imports and exports through licenses and quotas; to supervise the management of foreign trade corporations and enterprises; and to coordinate economic and trade relations with foreign governments and international economic organizations. The ministry also undertook international market research, led institutes of foreign economic relations and trade, and directed the General Administration of Customs. Foreign Trade Corporations and Enterprises In the late 1980s China had numerous specialized national corporations handling import and export transactions in such areas as arts and crafts, textiles, "native produce" and animal byproducts, foodstuffs of various kinds, chemicals, light industrial products, metals and minerals technology, industrial machinery and equipment, petrochemical and petroleum products, scientific instruments, aerospace technology and services, ships, and weapons (see table 2, Appendix B). Although nominally supervised by the Ministry of Foreign Economic Relations and Trade each of these corporations was responsible for its own profits and losses. Included among these enterprises, for example, was the Great Wall Industrial Corporation, which imported and exported transportation vehicles, satellites and other products associated with aerospace programs, mechanical equipment, electrical products, hardware and tools, medical apparatus, and chemicals. China Northern Industrial Corporation, subordinate to the Ministry of Ordnance Industry, used military production facilities to manufacture civilian products for export. The business activities of China Northern Industrial Corporation included the sale of heavy machinery, hardware and tools, and heavy-duty vehicles; light chemical industry products, such as plastic, paints, and coatings; and high-precision machinery and optical and optical-electronic equipment. Other corporations offered a variety of professional consulting services. One of these, the China International Economic Consultants Corporation, provided economic and legal expertise on investment and other economic activities. Financial Transactions and Investment Foreign exchange and reserves were controlled in the mid-1980s by the State Administration of Exchange Control under the People's Bank of China, the central bank. Foreign exchange allocations to banks, ministries, and enterprises were all approved by the State Administration of Exchange Control. The Bank of China, the foreign exchange arm of the People's Bank of China, lost its monopoly on all foreign exchange transactions in 1984 when the Agricultural Bank, People's Construction Bank, China Industrial and Commercial Bank, and China International Trust and Investment Corporation (CITIC) were permitted to deal in foreign currency. The Bank of China remained China's principal foreign exchange bank and provided loans for production and commercial transactions related to exports, set up branches overseas, maintained correspondent relations with foreign banks, and did research on international monetary trends. The Bank of China also was active in international financial markets through such activities as loan syndication and issuing of foreign bonds. CITIC, formed in 1979 to facilitate foreign investment in China, also borrowed and lent internationally and issued foreign bonds in addition to encouraging and participating in joint ventures, importing foreign technology and equipment, and making overseas investments. In 1986 CITIC was renamed CITIC Group and shifted its emphasis to power, metallurgical, and raw materials industries, which had trouble attracting investments. In late 1986 the CITIC Group had set up 47 joint ventures, invested in 114 domestic companies, and issued US$550 million in foreign bonds. The China Investment Bank was established in 1981 as a channel for medium- and long-term loans from international financial institutions such as the World Bank. Other Organizations Involved in Trade The State Council's State Planning Commission and State Economic Commission were involved in long-term planning for the development of foreign trade, and they developed national priorities for imports and exports. Several other organizations under the State Council were also involved in foreign trade matters: the Special Economic Zones Office, State Import and Export Commodities Inspection Administration, General Administration of Customs, and China Travel and Tourism Bureau. The China Council for the Promotion of International Trade (CCPIT) assisted the Ministry of Foreign Economic Relations and Trade in foreign trade relations. CCPIT handled trade delegations to and from China, organized foreign trade exhibitions in China and Chinese exhibitions in other countries, and published periodicals promoting Chinese trade. The People's Insurance Company of China expanded its operations in 1980 for the purpose of encouraging foreign trade. New categories of coverage offered to foreign firms included compensatory trade, satellite launching, nuclear power plant safety, offshore oil development insurance, insurance against contract failure, and insurance against political risk. Composition of Foreign Trade The dominant pattern of foreign trade after 1949 was to import industrial producer goods from developed countries and to pay for them with exports of food, crude materials, and light manufactures, especially textiles. The pattern was altered as circumstances demanded; in the period of economic collapse following the Great Leap Forward (1958-60; see Glossary), food imports increased from a negligible amount in 1959 to 39 percent of all imports in 1962. At the same time, imports of machinery and equipment dropped from 41 percent to 5 percent of the total. From this time on, food and live animals remained a significant, although declining, share of imports, amounting to 14.8 percent of the total in 1980 but dropping to 4.1 percent in 1985. The pattern also shifted over time as China's industrial sector expanded, gradually increasing the share of exports accounted for by manufactured goods. Manufactures provided only 30 percent of all exports in 1959, 37.9 percent in 1975, and grew to 44.9 percent in 1985. Important changes occurred in several specific trade categories in the 1970s and 1980s (see table 17, Appendix A). Imports of textile fibers rose from 5.8 percent in 1975 to 10.7 percent in 1980 as the Chinese textile industry grew faster than domestic cotton supplies but then fell to 4 percent in 1985 as domestic cotton production increased. Imports of unfinished textile products also increased from 1.3 percent in 1975 to 5.3 percent in 1985 as a result of textile industry growth. Iron and steel accounted for approximately 20 percent of imports in the 1970s, fell to 11.6 percent in 1980, then rose to 14.9 percent in 1985. Imports of manufactured goods, machinery, and transportation equipment represented 62.6 percent of total import value in 1975, fell to 53.9 percent in 1980 as imports were cut back during the "period of readjustment" of the economy (1979-81), and rose again to 75.2 percent in 1985. On the export side, the share of foodstuffs fell to 12.5 percent in 1985. The fastest growing export item in the 1970s was petroleum, which was first exported in 1973. Petroleum rocketed to 12.1 percent of all exports in 1975, 22 percent in 1980, and 21.2 percent in 1985. In the 1980s textile exports grew rapidly. Although exports of unfinished textiles remained about 14 percent of total exports, all categories of textile exports rose from 5 percent in 1975 to 18.7 percent in 1984. In 1986 textiles replaced petroleum as China's largest single export item. Trading Partners During the 1950s China's primary foreign trading partner was the Soviet Union. In 1959 trade with the Soviet Union accounted for nearly 48 percent of China's total. As relations between the two countries deteriorated in the early 1960s, the volume of trade fell, decreasing to only just over 7 percent of Chinese trade by 1966. During the 1970s trade with the Soviet Union averaged about 2 percent of China's total, while trade with all communist countries made up about 15 percent. In 1986, despite a trade pact with the Soviet Union, Chinese-Soviet trade, according to Chinese customs statistics, amounted to only 3.4 percent of China's total trade, while trade with all communist countries fell to 9 percent of the total (see table 18, Appendix A). By the mid-1960s Japan had become China's leading trading partner, accounting for 15 percent of trade in 1966. Japan was China's most natural trading partner; it was closer to China than any other industrial country and had the best transportation links to it. The Japanese economy was highly advanced in those areas where China was weakest, especially heavy industry and modern technology, while China was well endowed with some of the important natural resources that Japan lacked, notably coal and oil. In the 1980s Japan accounted for over 20 percent of China's foreign trade and in 1986 provided 28.9 percent of China's imports and 15.2 percent of its exports. Starting in the late 1970s, China ran a trade deficit with Japan. Beginning in the 1960s, Hong Kong was consistently the leading market for China's exports and its second largest partner in overall trade. In 1986 Hong Kong received 31.6 percent of Chinese goods sold abroad and supplied about 13 percent of China's imports. Hong Kong was a major market for Chinese foodstuffs and served as a transshipment port for Chinese goods reexported to other countries. The United States banned trade with China until the early 1970s. Thereafter trade grew rapidly, and after the full normalization of diplomatic and commercial relations in 1979, the United States became the second largest importer to China and in 1986 was China's third largest partner in overall trade. Most American goods imported by China were either high-technology industrial products, such as aircraft, or agricultural products, primarily grain and cotton. Western Europe has been important in Chinese foreign trade since the mid-1960s. The Federal Republic of Germany, in particular, was second only to Japan in supplying industrial goods to China during most of this period. China followed a policy of shopping widely for its industrial purchases, and it concluded deals of various sizes with nearly all of the West European nations. In 1986 Western Europe accounted for nearly 18 percent of China's foreign trade, with imports exceeding exports. Third World countries have long served as a market for Chinese agricultural and light industrial products. In 1986 developing countries purchased about 15 percent of Chinese exports and supplied about 8 percent of China's imports. Tourism Between 1949 and 1974, the People's Republic was closed to all but selected foreign visitors. Beginning in the late 1970s, when the leadership decided to promote tourism vigorously as a means of earning foreign exchange, China quickly developed its own tourist industry. Major hotel construction programs greatly increased the number of hotels and guest houses, more historic and scenic spots were renovated and opened to tourists, and professional guides and other service personnel were trained. The expansion of domestic and international airline traffic and other tourist transportation facilities made travel more convenient. Over 250 cities and counties were opened to foreign visitors by the mid-1980s. Travelers needed only valid visas or residence permits to visit 100 locations; the remaining locales required travel permits from public security departments. In 1985 approximately 1.4 million foreigners visited China, and nearly US$1.3 billion was earned from tourism. -------------------------------------------------------------------------- This file extracted from Dept. of Commerce, Economics & Statistic's Division's May 1994 NATIONAL TRADE DATA BANK (NDTB) CD-ROM, SuDoc C1.88:994/5/V.2 Processed 6/10/1994 by RCM (UM-St. Louis Libraries)/ AAH90065 . ARMY AREA HANDBOOK access is provided courtesy of UM-St. Louis Libraries Match 67 DB Rec# - 660 Dataset-ARMAN Source :U.S. DEPARTMENT OF THE ARMY Source key :AR Program :ARMY AREA HANDBOOKS Program key :AR ARMAN Update sched. :Occasionally ID number :AR ARMAN CHINACH8.03 Title :CHAPTER 8.03: TRANSPORTATION Data type :TEXT End year :1994 Date of record:04/19/1994 Keywords 3 : | China Text : TRANSPORTATION Transportation is a major factor in China's national economy. For most of the period since 1949, however, transportation occupied a relatively low priority in China's national development. Inadequate transportation systems hindered the movement of coal from mine to user, the transportation of agricultural and light industrial products from rural to urban areas, and the delivery of imports and exports. As a result, the underdeveloped transportation system constrained the pace of economic development throughout the country. In the 1980s the updating of transportation systems was given priority, and improvements were made throughout the transportation sector (see fig. 16.) In 1986 China's transportation system consisted of long-distance hauling by railroads and inland waterways and medium-distance and rural transportation by trucks and buses on national and provincial-level highways. Waterborne transportation dominated freight traffic in east, central, and southwest China, along the Chang Jiang (Yangtze River) and its tributaries, and in Guangdong Province and Guangxi-Zhuang Autonomous Region, served by the Zhu Jiang (Pearl River) system. All provinces, autonomous regions, and special municipalities, with the exception of Xizang Autonomous Region (Tibet), were linked by railroads. Many double-track lines, electrified lines, special lines, and bridges were added to the system. Subways were operating in Beijing and Tianjin, and construction was being planned in other large cities. National highways linked provincial-level capitals with Beijing and major ports. Roads were built between large, medium, and small towns as well as between towns and railroad connections. The maritime fleet made hundreds of port calls in virtually all parts of the world, but the inadequate port and harbor facilities at home still caused major problems. Civil aviation underwent tremendous development during the 1980s. Domestic and international air service was greatly increased. In 1985 the transportation system handled 2.7 billion tons of goods. Of this, the railroads handled 1.3 billion tons; highways handled 762 million tons; inland waterways handled 434 million tons; ocean shipping handled 65 million tons; and civil airlines handled 195,000 tons. The 1985 volume of passenger traffic was 428 billion passenger-kilometers. Of this, railroad traffic accounted for 241.6 billion passenger-kilometers; road traffic, for 157.3 billion passenger-kilometers; waterway traffic, for 17.4 billion passenger-kilometers; and air traffic, for 11.7 billion passenger-kilometers. Ownership and control of the different elements of the transportation system varied according to their roles and their importance in the national economy. The railroads were owned by the state and controlled by the Ministry of Railways. In 1986 a contract system for the management of railroad lines was introduced in China. Five-year contracts were signed between the ministry and individual railroad bureaus that were given responsibility for their profits and losses. The merchant fleet was operated by the China Ocean Shipping Company (COSCO), a state-owned enterprise. The national airline was run by the General Administration of Civil Aviation of China (CAAC). Regional airlines were run by provincial-level and municipal authorities. Highways and inland waterways were the responsibilities of the Ministry of Communications. Trucking and inland navigation were handled by government-operated transportation departments as well as by private enterprises. Transportation was designated a top priority in the Seventh Five-Year Plan (1986-90). Under the plan, transportation-related projects accounted for 39 of 190 priority projects. Because most were long-term development projects, a large number were carried over from 1985, and only a few new ones were added. The plan called for an increase of approximately 30 percent in the volume of various kinds of cargo transportation by 1990 over 1985 levels. So each mode of transportation would have to increase its volume by approximately 5.4 percent annually during the 5-year period. The plan also called for updating passenger and freight transportation and improving railroad, waterways, and air transportation. To achieve these goals, the government planned to increase state and local investment as well as to use private funds. The Seventh Five-Year Plan gave top priority to increasing the capacity of existing rail lines and, in particular, to improving the coal transportation lines between Shanxi Province and other provincial-level units and ports and to boosting total transportation capacity to 230 million tons by 1990. Other targets were the construction of 3,600 kilometers of new rail lines, the double-tracking of 3,300 kilometers of existing lines, and the electrification of 4,000 kilometers of existing lines. Port construction also was listed as a priority project in the plan. The combined accommodation capacity of ports was to be increased by 200 million tons, as compared with 100 million tons under the Sixth Five-Year Plan (1981-85). Priority also was given to highway construction. China planned to build new highways and rebuild existing highways to a total length of 140,000 kilometers. At the end of the Seventh Five-Year Plan, the total length of highways was to be increased to 1 million kilometers from the existing 940,000 kilometers. Air passenger traffic was to be increased by an average of 14.5 percent annually over the 5-year period, and air transportation operations were to be decentralized. Existing airports were to be upgraded and new ones built. Railroads China's first railroad line was built in 1876. In the 73 years that followed, 22,000 kilometers of track were laid, but only half were operable in 1949. Between 1949 and 1985, more than 30,000 kilometers of lines were added to the existing network, mostly in the southwest or coastal areas where previous rail development had been concentrated. By 1984 China had 52,000 kilometers of operating track, 4,000 kilometers of whi