Prewar expansion clustered around two growth poles: the Yangzi Delta area centered on Shanghai, where thriving domestic and foreign private business propelled regional growth; and the northeastern provinces, where infusions of officially directed 【Japanese】 capital, technology, and expertise energized an expansion that prefigured the planned economy of the 1950s.
【Following disruptions arising from an eight-year battle against Japanese invaders, followed by several years of civil strife between Communist and Kuomintang forces,】 the People’s Republic of China, established in October 1949, inherited an economy whose growth potential was obscured by the ravages of war and inflation.
【Large-scale technical aid from the socialist bloc helped】 China to introduce new industries, for example, the manufacture of trucks and equipment for power plants and telecommunications, and to upgrade others. In addition, urgent restructuring efforts necessitated by the downturn following the 1959–1961 【famine and simultaneous withdrawal of East Bloc technical aid】 revealed new technological capabilities on the part of both old and new Chinese firms.
P5
These important achievements coincided with 【significant failures】, most obviously in the area of food supply. 【The man-made famine of 1959–1961 killed 30–40 million Chinese.】 Food scarcity did not end in 1961: average rural diets continued to fall short of basic nutrition standards until the start of reform. 【As a result, food supplies for millions of Chinese villagers were no better in the 1970s than in the 1930s.】
Underdevelopment of services exacerbated these weaknesses. 【Neglect of services follows Marxist theory, which omits most tertiary activities from the national accounts. China’s intermittent campaigns targeting intellectuals, including a decade-long closure of universities and many other schools during the Cultural Revolution, intensified the relative decline of services.】 By the end of the plan period, education-linked wage differentials had largely vanished: one study noted that average pay levels in the catering sector exceeded wages in higher education.
P6
Although China’s leaders valued material progress, considerations of national defense and ideology frequently trumped economics during the plan era, with predictably negative effects on output and productivity. 【Security considerations, for example, dictated the movement of factories from coastal cities to interior regions during the 1950s. Fear of external attack also inspired the “Third Front” policy of the 1960s, which poured massive investments into remote regions. In similar fashion, the pursuit of ideological objectives imposed economic costs, as when schools were closed and urban youths were forced to migrate to rural villages or when small-scale commerce was curtailed to protect citizens from the supposed evils of capitalism’s “silver bullets.”】
【Everyone recognized the death of Mao Zedong in 1976 as a major turning point for the People’s Republic. There was wide agreement among China’s political elite about the need for economic change, without, as Naughton (see Chapter 4) observes, any clear sense of reform direction. Two economic issues stood behind this consensus. Although China’s economy had performed well compared to low income nations worldwide, China’s standing within East Asia was weak. Japan and (South) Korea, societies that many Chinese regard with disdain, had raced far ahead, as had Taiwan and Hong Kong, small entities crowded with refugees from the People’s Republic and, in Taiwan’s case, led by Chiang Kai-shek’s reviled Kuomintang. China’s obvious backwardness in its dynamic East Asian neighborhood galled Beijing’s elites.
More specifically, the winding down of the Cultural Revolution disruptions failed to resolve chronic food supply problems.】 During the first half of the 1970s, rising numbers of grain-deficit households, reductions in grain stocks and in cross-provincial shipments, 【numerous reports of local shortages, and demands that the state return grain procurements to avoid “repeating the error of 1959” – an obvious reference to the Great Leap Forward famine】 – all point to a system near the brink of a serious food crisis, with no indication of sustained progress.
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