## Immanuel C. Y. Hsü

Print publication date: 1990

Print ISBN-13: 9780195060560

Published to Oxford Scholarship Online: October 2011

DOI: 10.1093/acprof:oso/9780195060560.001.0001

# The Four Modernizations

Chapter:
(p. 92 ) 4 The Four Modernizations
Source:
China without mao
Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780195060560.003.0004

# Abstract and Keywords

If there was such a thing as a national consensus in China, it focused on the commitment to the Four Modernizations — of agriculture, industry, science and technology, and national defense. The avowed goal was to turn China into a relatively modern state by the year 2000. The Four Modernizations had been written into the party constitution and the state constitution. Zhou Enlai was generally credited with initiating the idea of the Four Modernizations in a report to the Fourth National People's Congress in January 1975. Not until the smashing of the Gang in October were the Four Modernizations revived. Chairman Hua seized the opportunity to promote them in a spirit of revolutionary vigor but without much economic expertise.

If there was such a thing as a national consensus in China, it focused on the commitment to the Four Modernizations—of agriculture, industry, science and technology, and national defense. The avowed goal was to turn China into a relatively modern state by the year 2000. The Four Modernizations had been written into the party constitution (Eleventh Congress, August 18, 1977) and the state constitution (Fifth National People's Congress, March 5, 1978); hence the program should not be affected by changes in leadership. Yet, while modernization was the “general mission of a new historical period,” an objective shared by Deng, Hua, Ye, and other leaders of both party and state, questions concerning its scope, timetable, and practical implementation were causing much heated debate.1

Zhou Enlai was generally credited with initiating the idea of the Four Modernizations in a report to the Fourth National People's Congress in January 1975. Actually, industrialization as the foundation of socialism was a Leninist principle which the Chinese Communists implemented as soon as they achieved power: more than one-half of China's total investment in the 1950s was allocated to industrial development. In 1963 Mao (p. 93 ) called for the “building of a modernized socialist power”; and it was in response to this call that Zhou proposed, at the Third National People's Congress, December 1964, the socialist construction of a “modernized agriculture, industry, national defense, and science and technology” to be accomplished “within a not too long period of history.”2 However, no concrete action followed due to the onset of the Cultural Revolution.

In January 1975, Zhou renewed his call for an “independent and relatively comprehensive industrial and economic system” by 1980, and an overall modernization of the four sectors before the end of the century. This speech, Zhou's last before a national congress, was generally considered the basis of the current Four Modernizations. Again, little came from it due to the obstruction of the Gang of Four, which condemned modernization as a “road to capitalist restoration.” Too sick to fight, Zhou did not risk a confrontation with Mao's wife.

Zhou's chief ally, Deng Xiaoping, was not one to yield easily, however. In the fall of 1975 he drafted three key documents which later served as blueprints for the Four Modernizations.3 These works were branded by the Gang as “Three Poisonous Weeds,” and Deng became the prime target of the “Antirightist Deviationist Wind” Campaign. Deng fought a losing battle as long as the Gang had Mao's support; in his 1976 New Year's Message, Mao warned the nation against overemphasizing material progress.4 Deng dropped out of sight after delivering Zhou's eulogy on January 15, 1976, and was dismissed from all posts after the Tian An Men Incident in April.

Not until the smashing of the Gang in October were the Four Modernizations revived. Chairman Hua seized the opportunity to promote them in a spirit of revolutionary vigor but without much economic expertise. In the months that followed (as Deng's rehabilitation was being negotiated), acceleration of the Four Modernizations was approved. In May 1977, at the “Learn from Daqing for Industry National Conference,” veteran party economist Yu Qiuli declared:

Within the decade (1976–1985) we shall first erect a comparatively complete independent industrial system covering (p. 94 ) the entire country and accomplish fundamental technical renovation of the national economy. From this foothold we shall establish, step by step, six economic systems of different levels, in the Northeast, Northwest, and Southwest, and in North China, East China, and South Central China. Each shall have its unique features, be capable of independent operations, and exert maximum efforts for the development of agriculture, light industry and heavy industry.5

After Deng was formally reinstated, he delivered the closing address at the Eleventh Party Congress in August 1977, stressing the primacy of modernization. As a way to promote the cause, a National Science Conference and a Military Political Work Conference were called in the following spring. At these meetings increasing differences of opinion were revealed between Hua and Deng; the former stressed the use of revolutionary spirit to guide modernization, while the latter emphasized hard work and detailed planning within accepted economic laws.6 Nonetheless, the two shared a final vision of “electricity in rural areas, industrial automation, a new economic outlook, and greatly enhanced defense strength” by the close of the century.7

# The Ten-Year Plan

At the first session of the Fifth National People's Congress in February 1978, Chairman Hua unveiled a grandiose ten-year modernization program for 1976–85; as two years had already passed, it was actually an eight-year plan. It detailed the major goals to be achieved in the four sectors.

## The Industrial Sector

Investment for capital construction in industry was to equal or surpass that of the entire previous twenty-eight years, which was estimated at US$400 billion, and the annual rate of industrial growth was set at 10 percent. Hua called for the completion of 120 major projects, including: 10 iron and steel (p. 95 ) complexes, 10 oil and gas fields, 30 power stations, 8 coal mines, 9 nonferrous metal complexes, 7 major trunk railways, and 5 key harbors. It was hoped that by the end of the century Chinese industrial output in the major sectors would “approach, equal, or outstrip that of the most developed capitalist countries.”8 Steel. In 1952 steel production (1.35 million tons) had already surpassed the pre-Liberation peak, and it rose to 18.67 million tons by 1960. The Great Leap cut the output back to 8 million tons in 1961, and the Cultural Revolution provided further inhibitions. It was not until 1970 that steel production recovered, reaching 25.5 million tons by 1973. Yet production decreased again under the Gang of Four—in 1976 only 21 million tons were produced. In short, from 1960 to 1976, only small gains were achieved. The Ten-Year Plan called for increased production to 60 million tons by 1985 and 180 million tons by 1999. To achieve such major increases, a giant steel complex at Jidong (eastern Hebei), capable of producing 10 million tons a year, was planned under contract with German firms at a cost of$14 billion; a six-million-ton complex was to be constructed at Baoshan (a suburb of Shanghai) under contracts with Japanese firms with an estimated initial cost of $2 billion. A number of other sizable plants were to be built elsewhere, and existing plants were to be renovated. Oil. Before 1957 China's petroleum production was insignificant (1.46 million tons of crude oil per year). Vast advances were made in the 1980s, with new discoveries and the establishment of the Daqing Oil Field in Manchuria, the Shengli Oil Field in Shantong province and the Dakang Oil Field in the Tianjin harbor area. Crude output doubled between 1960 and 1965 and again by 1969. By 1978 it had reached 104 million tons. The Ten-Year Plan called for the construction of ten new oil and gas fields costing$60 billion.9

Coal. Coal provided 70 percent of China's primary energy supply, but most of the mines were small and antiquated. The Ten-Year Plan called for eight new mines along with the renovation of existing ones in hopes of doubling production to (p. 96 ) 900 million tons a year. This meant an annual growth rate of about 7.2 percent compared with 6.3 percent in 1970–77.

Electric Power. Surprisingly, the production of electricity was the weakest link in the modernization plan. In 1978 production totaled 256.6 billion kilowatt hours, ranking China ninth in the world in electricity production, but per capita consumption remained extremely low below both India and Pakistan. The Ten-Year Plan called for the construction of thirty power stations, twenty of them to be hydropower. The largest projects included the 2.7 million kilowatt Gezhouba hydropower station on the Yangtze River near Yichang (Hubei) and the 1.6 million kilowatt Longyang Gorge station on the upper reaches of the Yellow River near Sining (Qinghai). The thirty new plants would increase production by 6 to 8 million kilowatts per year—far short of the 13–14 percent growth rate needed to sustain the goal of a 10 percent annual increase in industry, and leaving nothing with which to increase personal consumption.

## The Agricultural Sector

Agriculture was the foundation of the Chinese economy. It supplied 70 percent of the country's industrial raw materials, 60 percent of its total exports, and 80 percent of its domestic consumer goods.10 Yet, since 1949, agriculture had consistently received less investment than industry and defense. Collectivization and the commune did not materially raise agricultural production. The 1963 movement “In agriculture, learn from Dazhai” was nothing more than a propaganda gimmick, and the Cultural Revolution drove agriculture to the brink of bankruptcy. On Augusts, 1977, Renmin Ribao [People's Daily] frankly stated that “whenever farms are hit by disastrous natural calamities, drastic reduction in output resulted; in the event of smaller disaster, smaller reduction; even with perfect weather conditions there was not much increase.”11 A Chinese leader admitted that “in 1977, the average amount of grain per capita in the nation was the same as the 1955 level; in other words, the growth of grain production was only about (p. 97 ) equal to the population growth plus the increase in grain requirements for industrial and other uses.”12 In October 1978 Deng remarked that “only through an all-out effort to restore agriculture to normalcy and increase production quickly can the entire economy be assured of fast development.” Agricultural modernization was vital to the success of the Four Modernizations.

When he announced the Ten-Year Plan, Hua called for maximizing farm production through mechanization, electrification, irrigation, and higher utilization of chemical fertilizers. Specifically, the targets included:

1. 1. Increase of gross agricultural products by 4–5 percent annually.

2. 2. Increase of food output to 400 million tons by 1985 (from 285 million tons in 1977, a 4.4 percent annual growth).

3. 3. Mechanization of 85 percent of major farming tasks.

4. 4. Expansion of water works to assure one good mou (one-sixth acre) of dependably irrigated land per farming capita to talling 800 million mou (121 million acres).

5. 5. Establishment of twelve commodity and food base areas throughout the nation.

Some estimated that the plan's agricultural modernization would require: (1) 12 million 15-horsepower tractors; (2) 4 million powered farm tools; (3) irrigation and pumping facilities totalling 40 million horsepower; (4) 320,000 combines; (5) 400,000 trucks and power machines; (6) 8 billion kilowatt hours of electricity; and (7) 66 million tons of chemical fertilizers.13

Such a vast undertaking would cost an estimated $33 billion. It would also require 2 million agricultural engineers and technicians, including 1.2 million mechanics to maintain tractors, combines, power tools and machines; 4 million to man pumping equipment; and 8 million truck drivers and farm products processing personnel. On the other hand, this mechanization of farm operations would release 100 million agricultural laborers to other lines of work. Relocating them and creating new job opportunities would cost$50 billion.14 William (p. 98 ) Hinton, an American farm expert, questioned the wisdom of fast mechanization in China in view of the abundance of labor.15

To bolster the slow agricultural growth rate of 2 percent annually since 1957, the government laid down several new guidelines. The “production team,” hitherto the basic accounting unit responsible for any surplus or deficit, was replaced by the larger “production brigade.” Next, the principle “to each according to his work” was adopted to stimulate farm initiative and enthusiasm; hence “more pay for more work and less pay for less work” had become a basic rural economic policy. In addition, encouragement of household “sideline production” should work to supplement the larger economy. Rural families did not own the communally distributed “private” plots but had the right to farm them. They could not rent, sell, or transfer the land, but they did own its products. “Sideline” production made up some 25 percent of total agricultural and subsidiary production. Finally, it was hoped that through intensive development, commune- and brigade-operated enterprises would be able to support large industries and the export trade.

With 800 million people working on farms, it was imperative to resolve the manifold agricultural problems and thus loosen the bottleneck in China's economic development. Only so could the Four Modernizations expect to succeed.

## Scientific Modernization

Science and technology were considered basic to successful modernization of the other three sectors. At the National Science Conference in March 1978, a Draft Outline National Plan for the Development of Science and Technology was presented by Vice-Premier Fang Yi, calling for: (1) achieving or approaching the 1970 scientific levels of advanced nations in various scientific and technological fields; (2) increasing professional scientific researchers to 800,000; (3) developing up-to-date centers for scientific experiments; and (4) completing (p. 99 ) a nationwide system of scientific and technological research. The Outline identified 108 items in twenty-seven fields as key projects for research.16 It was hoped that by 1985 China would be only ten years behind the most advanced nations, with a solid foundation for catching up to the advanced nations by the end of the century.

To promote science and technology, the National Science and Technology Commission, inactive during the decade of the Cultural Revolution, was reactivated to formulate short-range (three-year), medium-range (eight-year), and long-range (to the year 2000) projects. Hua called for a “March on the Road of Science and Technology,” and Deng personally appeared at the National Science Conference to set the tone for the new scientific attitude. Deng brushed aside the Maoist disdain for intellectuals and the “antirightist” bias; expertise was now preferred to “redness,” and foreign-trained intellectuals, humiliated in the past, were treated as cherished patriots and as part of the proletariat. A new respect for their knowledge led to their reinstallment in important positions in universities and research organizations, and the younger and talented scientists and engineers were sent abroad for further studies. These intellectuals served as China's bridge with foreign scientific circles.

## Military Modernization

China had the largest regular armed force in the world, numbering some 4,325,000. The army alone included 3,250,000 troops, and China's naval and air forces ranked third internationally in terms of numbers.17 But, except for pockets of intensive development in the strategic sector (e.g. nuclear bombs and ballistic missiles), Chinese military technology remained some twenty to thirty years behind the West. Troops were well trained, highly motivated, and politically indoctrinated but equipped with woefully inadequate weapons. The situation, brought about by a lack of funds and by an underdeveloped technology, worsened with Mao's emphasis on spirit over (p. 100 ) weapons. His idea of “people's war,” employing large numbers of politically motivated, well-trained guerrillas to harass and drive out the invader was primarily a defensive notion, lacking offensive punch. The unspectacular Chinese invasion of Vietnam in 1979 clearly illustrated this. Su Yu, a brilliant strategist and former chief-of-staff, stated that Mao's concepts had “seriously shackled the people's minds and obstructed the development of military ideas.”18

With extensive Soviet aid in the 1950s, the Chinese built up a nearly self-sufficient defense-manufacturing industry, and some of their products (e.g. the AK-47 rifle) ranked among the world's best.19 Yet, by and large, Chinese military technology was two or three decades out of date. Truly swift modernization would require massive purchases of foreign weapons and instruments; but that would be prohibitively expensive and also place China at the mercy of foreign suppliers. As the paramount consideration in China's long-term military planning was still the indigenous control of production capabilities, only selective purchases of high-technology systems and weaponry with special contracts for production in China were planned. The purchase of fifty British supersonic Spey jet engines, with plans for the engines to be manufactured in China with the assistance of Rolls-Royce, and the purchase of several thousand HOT antitank missiles from France, with similar production agreements, were examples of this cautious selectivity.20

Yet problems still existed—after the purchase of the Spey engine technology, Chinese metallurgical capabilities were found insufficient to produce the alloys needed for the engines.21 In addition, both the Spey engines and the HOT missiles were prodccts of an already outmoded technology of the 1960s. Even the vertical takeoff Harrier purchased from Britain had a short-range, a low-speed, and a high accident rate that reflected the technology of a decade past.22 While acquiring such equipment might prevent the technological gap from widening, “stop-gap” measures would not ensure the achievement of China's modernization goals.

(p. 101 ) Chinese experts had visited advanced military establishments in the West to witness the state-of-the-art military technology rather than to purchase it—China's defense needs were so vast and diverse as to defy the country's ability to pay for them. Still, the military sought to prepare the country for a “people's war under modern conditions” requiring “automatic computerized countdown, improved communications and command systems, and rapid, motorized, transportation facilities,” with conventional as well as strategic weapons.23 Under increasing pressure from the brass, Chinese leadership was leaning toward a compromise: “Serious effort should be made to implement the policy of integrating military with non-military enterprises and peacetime production with preparedness against war, and fully tap the potential of the machine-building and national defense industries.”24

Chinese leaders recognized the urgent need to update obsolete equipment on a massive scale but also saw its astronomical cost. Although China's defense budget was a state secret, Western estimates put it at $32.8 billion in 1976, the third largest globally.25 A British source put China's 1978 defense spending at 7–10 percent of the GNP, or about$35 billion.26 The production of new equipment, spare parts, and maintenance accounted for 58 percent of that figure. To modernize fully even a portion of China's military would cost an impossible $300 billion by 1985.27 Since such an expenditure would require massive infusions of foreign capital and equipment, military modernization occupied a low priority. While modernizing science and technology would eventually benefit the military, it was clear that military modernization would be a highly selective and slow process. The ultimate irony might be that after straining to acquire current state-of-the-art technology and weaponry, it would take the Chinese five to ten years to integrate such modern equipment into existing structures. It would be imperative to upgrade research and development in laser, metallurgy, optics, communications, and computers; to prepare the scientific-managerial infrastructure for research development, and production; (p. 102 ) as well as to train military personnel to use, maintain, repair, and refurbish the new equipment. By that time new strides would have been made in the more advanced countries, and China would yet remain behind by ten to fifteen years. While this would represent an improvement over present capabilities, it would have to be seen as falling short of true modernization goals. # Major Problems of Modernization: Capital, Manpower and Planning The most serious problems in China's modernization were the shortages of investment capital and of qualified personnel. Success of the Four Modernizations was dependent on the resolution of these two basic problems. The Ten-Year Plan would cost somewhere between$350 billion and $630 billion;28 China's gold and foreign exchange reserve (1978–79) was only$4.5 billion.29 According to an American estimate, China's GNP in 1978 was $407 billion.30 Assuming a 5.5 percent annual growth rate, the GNP for 1978–85 would generate$3,956 billion (in 1977 price); if 10 percent of this were allocated for developmental investment, China could conceivably raise $400 billion from domestic savings, still leaving the nation with a shortfall of more than$200 billion.31

Past practices might shed light on China's financial stringency. During 1949–59, industrial investment totaled $46.2 billion:$10 billion came from confiscated properties of landlords and capitalists, $3 billion from Soviet credits and loans, and the rest from the difference between the state's low-price purchases of farm products and its high-price sales of industrial products to the farm sector. Of course, the first two sources no longer existed and the third had been severely damaged by the Cultural Revolution and the Gang. Hua reported, “Between 1974 and 1976, the influence of the Gang of Four caused losses worth$63 billion in industrial output and $25 billion in state revenue.”32 The Gang severely crippled the (p. 103 ) economy, and the consequences had continued to plague the country. In September 1978, an estimated 25 percent of state enterprises were operating in the red. To raise capital for modernization, China had resorted to clearly un-Maoist methods. First, tourism had been vastly expanded, and the “lure of Cathay” was proving both irresistible to foreigners and highly profitable to China. In 1978, 100,000 foreigners and 600,000 overseas Chinese visited China. Tourism generated$607.2 million in 1980. To attract more foreign visitors, new hotels were being built, increasing the present room capacity of 30,000 to 80,000 by 1985.33

Second, China had devised innovative cooperative investment projects with foreign firms. For instance, Konrad Hornschuch AC of West Germany agreed to build two petrochemical plants in China at $21 million, with 50 percent of the first five years' production as payment. The Japanese firm Itoman & Company contracted to provide materials, equipment, and advice to a Shanghai textile plant in exchange for the right to market its line of products.34 Third, China had adopted a more flexible attitude toward foreign loans. Formerly, Beijing rejected foreign loans out of fear of foreign control; if a loan was negotiated it was euphemistically referred to as “progress” or “deferred” payments. But on December 6, 1978, China openly concluded a loan agreement with a British consortium of ten banks for$1.2 billion at a 7.25 percent interest rate; by mid-April 1979 some $10 billion in foreign loans and credits had been negotiated.35 Generally, however, the Chinese remained reluctant to accept large, long-term loans, due to their limited ability to repay and to their historically founded fear of foreign domination. In spite of these fund-raising devices, China's capital remained very limited, severely constricting the potential for rapid, large-scale importation of foreign equipment and high technology. Indeed, every step in the modernization process raised the problem of insufficient funds. The shortage of qualified manpower was an equally serious handicap in China's modernization drive limiting the country's (p. 104 ) capacity to absorb the new technology. Between 1949 and 1966, Chinese higher education produced 1.8 million university graduates of whom at least one-half majored in sciences and engineering.36 But the twelve-year disruption of the Cultural Revolution caused a loss of 200,000 college graduates per year, a total of 2.4 million or at least 1.2 million scientists and engineers.37 There was also an extreme shortage of scientific-managerial personnel capable of running large-scale modern industrial plants. Even skilled labor was in short supply. Of the country's 94 million-member work force, only 1.6 percent could be considered technical personnel, and 73 percent of the skilled labor force had received an education of only junior high or lower. This lack of training and education made it difficult for workers to operate and maintain the sophisticated imported equipment and to use work manuals, many of which remained in foreign languages due to a lack of qualified translators. As a result, many expensive foreign machines remained unpacked in their original crates, or were left rusting in the open air. The integration of Western science and technology into Chinese society was a century-old problem; China's present predicament was clearly the result of the failure to integrate science with the larger society. China's oldest well-educated group, those scientists and intellectuals trained in the West and Japan from 1920 to 1949, were severely attacked during the Antirightist movement of 1957 and persecuted beyond human endurance during the Cultural Revolution. They were despised, ridiculed, and derided as the “stinking No. 9's,” ranking behind landlords, the rich, counterrevolutionaries, bad elements, rightists, rebels, special agents, and capitalist roaders. Many were plagued and harassed to death, or driven to suicide, others were jailed, tortured, maimed, and crippled. In 1973 an American estimate put qualified Chinese scientific and technological personnel at an incredibly small 65,000, while a leading Chinese scientist and educator38 gave an even more alarming figure of 60,000 in 1978.39 However, with the reopening of the universities and with admissions once again based on a strictly administered national (p. 105 ) examination, Chinese higher education was recovering and promised to produce a new generation of well-educated intellectuals. The government had designated eighty-eight “key” universities and restored dismissed professors to responsible positions. Academic subjects were receiving new respect, and students studied diligently in hopes of further education abroad. By 1981 more than 5,000 qualified graduate and senior scholars were abroad for advanced research and study, and about 130 delegations visited the United States monthly. The academic atmosphere was improving in the universities; but many intellectuals, recently released from the so-called ‘cow shed’ (niulan), understandably felt insecure and were timid, fearful of speaking their minds, and unwilling to commit their views to writing. To arouse their enthusiasm would require a long period of reassurance and trust. Yet most agreed that China's academic institutions had by 1981 become freer than at any time in the past thirty years, To further cultivate scientifically oriented personnel, the government restored the Chinese Academy of Sciences to a position of power and honor. High-quality basic research was encouraged, and five-sixths of the scientist's time was devoted to scientific work. Scientists and other intellectuals were encouraged by the fact that their work was no longer evaluated by political criteria. In addition to new opportunities to study abroad, famous foreign scholars were being invited to give lectures; and training was available in scientific management, operations research, and systems analysis. While these undertakings were worthy remedies to past malpractices, it took time to train the personnel necessary to run a modern economy—it was not a process which could be rushed. In 1982, China had 400,000 college-educated scientists and engineers of varying competence, but middle-echelon technical personnel, skilled workers, and local administrators were in desperately short supply.40 At the same time, it was difficult to work around the party cadres who were entrenched in both central and local scientific and research organizations. Threatened by the new primacy of scientific knowledge and expertise, (p. 106 ) they banded together to protect their vested interests, inevitably slowing modernization. Generally, Chinese scientific and technical personnel could be categorized into five groups. The first consisted of those trained before Liberation in 1949, including many educated abroad. Formerly the target for attack, this small group now enjoyed great prestige serving as China's scientific liaison with the outside world. The second group consisted of those trained after Liberation in the Soviet Union (or by Russians in China) during the 1950s, who were now in middle-echelon positions. The third consisted of college graduates of the period before the Cultural Revolution in 1966, now in their late thirties and early forties. Many of them had been sent abroad for further study and might prove a powerful force in the future. The fourth group was made up of students of worker, peasant, or soldier (gong nong ping) backgrounds trained during the Cultural Revolution. With the exception of a few, they had been inadequately prepared for the tasks of modernization. The fifth group was comprised of college students admitted to the universities after 1977 and represented in a real sense the future of Chinese scientific manpower. Until this last and growing group was fully trained, China's power to absorb the technology of modernization would remain very limited. The lack of qualified experts had led to a poor beginning of modernization projects. The most conspicuous case was the Baoshan steel complex near Shanghai. Originally it was to be a$2 billion complex with an annual production capacity of 6 million tons. Modeled after the highly modern and successful Japanese Kimitsu plant, a thousand Japanese experts and technicians came to help with its operation. Unfortunately, the site was ill-chosen, located on swampy land at the edge of the Yangtze River. Hundreds of thousands of steel pilings had to be driven into the ground before the physical structures of the complex could be built. When work began in late 1979, it was quickly discovered that the power supply was insufficient and that the site lacked accessible deep water ports to receive iron ore from Australia and Brazil. The first (p. 107 ) stage was completed only after confronting countless difficulties and spending $5 billion. The financial burdens were unbearable, and the Chinese government unilaterally halted the second stage of construction by the end of 1980 causing consternation and anger on the part of the Japanese suppliers. Another giant steel complex, to be built with German aid in Jidong, Hebei (at$14 billion for a production capacity of 10 million tons per year), was located in an earthquake-prone region—its progress had been faltering at best. A third example of poor planning concerned the Wuhan Iron and Steel Company, which purchased West German equipment capable of producing 4 million tons of steel annually. The huge German machines required so much electricity that they drained the electricity supply of the entire province, making other industries inoperable. Furthermore, Wuhan had been unable to supply the six million tons of raw steel required to produce four million tons of finished steel per year. For each day production was delayed, an estimated two million German marks were lost—a deplorable waste in capital-scarce China.

# The Consequences of Rapid Modernization

Just as there were problems in achieving modernization, there were also problems created by its accelerated achievement. First and foremost was inflation, which was almost nonexistent in earlier periods when the government deliberately adopted a policy of low wages and low commodity prices. When the people had little purchasing power, the demand for goods was kept low and prices were stable. With the increase in wages and government procurement prices for farm products (up 20–50 percent by 1977–79), the state correspondingly raised (p. 114 ) sale prices on various commodities creating inflation officially computed at 5.8 percent in 1979 but more likely reaching 15 percent. The upward spiral of price increases had continued unabated reaching an annual rate of 15–30 percent in 1980, while the light industry growth was only 9.7 percent. When prices increased faster than productivity, an inflationary psychology set in, resulting in a black market and speculation. Government budgets also revealed growing deficits: $11.3 billion in 1979,$10–12 billion in 1980, and $6 billion in 1981. To offset the deficits, the Ministry of Finance decided in the spring of 1981 to issue$3.3 billion in ten-year maturity bonds at 4 percent interest per annum. Government enterprises, administrative organizations, communes, and the army were urged to buy according to their ability, but individuals seemed free to purchase the bonds as they chose.53 The floating of bonds indicated the financial difficulties China was facing.

Another immediate consequence of inflation and overzealous spending was the decision to cut back major construction projects by 40 percent in 1981. Many large projects involving foreign companies were abruptly terminated. The Japanese, who entered the China market early fared the worst: total Japanese losses were estimated at $1.5 billion including the Baoshan steel complex and three petrochemical projects. The Germans fared less badly while the Americans, who entered the China market late, suffered the least. The Chinese simply explained that they could not afford to go ahead with these costly projects at this time and agreed to compensate for losses incurred without setting definite figures.54 Foreigners understood China's financial dilemma but had to question the nation's international credibility when agreements entered into in good faith were unilaterally cancelled. There was no doubt that China's reputation as a reliable trader had been affected. Cancellations of construction projects led to the layoff of numerous workers, intensifying the already serious unemployment problem. China once boasted that its socialist system guaranteed employment for every able body, declaring proudly that there was no unemployment in China—there were only (p. 115 ) those awaiting job assignment! Semantics aside, overstaffing was common and a job requiring one was frequently shared by three at low wages. But construction cancellations and modernization of factories demanded a reduction in personnel resulting in the loss of many jobs. While$10 billion had been invested in new foreign-style plants, relatively few new jobs had been created. Meanwhile, an estimated 10 to 15 million new workers entered the labor force annually. In the past, surplus human labor was forcibly dispersed to the countryside or hinterlands, but during 1979–82 this practice had been relaxed, and many who were previously so dispersed had managed to return to their home towns. About 80 percent of the over one million youths who were “sent downward” (xiafang) from Shanghai had furtively returned. Although half of them had found some employment, others seemed to have lost all hope. Unemployment in China was estimated at around 20 million in 1981.

Another anomalous phenomenon of modernization was the emergence of new classes in a so-called classless society. Modernization had given new prestige to the scientists, engineers, technicians, plant managers, writers, artists, and other intellectuals who would lead China's “Great Leap Outward”There was a new feeling that “among all activities, only science and technology are lofty.” Scientists and intellectuals along with high party members now constituted a privileged upper class; urban workers of productive enterprises and lower echelon cadres formed the second class, with farmers and those living in the countryside at the bottom of the totem pole. The selective sending of scholars and students abroad for advanced education, many of whom were blood relatives of high party members, further strengthened the elitist trend and widened the class cleavages.

Another deepening problem arose from the increasing disparity between the city and the countryside and among various industrial enterprises themselves. Since the government had opted for an “enclave” strategy of locating key industries in selected urban areas, these areas were more likely to enjoy the fruits of modernization—higher wages, greater upward mobility, (p. 116 ) and a higher standard of living. An average industrial worker in 1981 earned about $40 a month with an additional bonus, while the average monthly cash income of a peasant was only$5–7. It was not unusual for a city worker to earn six to eight times more than a peasant, and scientific or technical personnel over ten times more. Within the industrial sector, the profit was vastly uneven: in 1978 the oil industry enjoyed a 40 percent profit margin; electricity, 31 percent; metallurgy, 13 percent; and coal mining, only 1 percent. Since profit decides not only levels of investment but also the size of bonuses and fringe benefits, it deeply affected the worker's life-style. Differences in rewards led to different degrees of enthusiasm for work.

A further conflict existed between the production enterprises and the state commercial departments. In the past, vital materiel for enterprises was supplied by the Ministry of Material Allocation. Now each enterprise was allowed to sell some materials and products to consumers, competing with the government's commercial departments for profit. With the authorization to engage in foreign negotiations and trade, five provincial-municipal organizations set up offices in Hong Kong and Shanghai to sell their products directly to foreign traders, causing jealousy, competition, price wars, and confusion.

Beneath all the adverse consequences of rapid modernization lay what may be the most serious of China's problems—a crisis of confidence. After thirty years of socialist construction, the country remained poor and backward. Past reports of achievements had often been exposed as pure propaganda, and many, especially the young, had lost faith in the superiority of socialism. There was a conspicuous lack of confidence in achieving a true modernization. Young people were especially critical of the party cadres' privileged status and of bureaucratism, and on the basis of past performance doubted both their capability and sincerity in implementing modernization programs. Indeed, many middle- and lower-echelon party members in responsible positions but lacking scientific expertise were threatened by the new demands of modernization. They secretly resisted, sabotaged, and slowed new undertakings (p. 117 ) which ran counter to their interests.55 There was a popular saying: “The two ends are hot, but the middle is cold”—meaning the leaders and the people wanted modernization but the middle-level bureaucrats resisted change. Chinese newspapers and journals openly discussed China's triple crises: a lack of faith, confidence, and trust in the party and the government.56

# Foreign Value and Chinese Essence

Modernization had been a goal in China for more than a century. The late Qing court, the Nationalist government, and the Communist leadership all had tried to launch China on the road to modernization. Mao Zedong, in spite of his emphasis on peasants and grass root involvement, was an ardent supporter of industrialization though he knew little of economic planning. It was under Mao that China received from the Soviet Union the “most comprehensive technology transfer in modern history”: 11,000 Russian experts worked in China during the 1950s and 15,000 Chinese were trained in the Soviet Union. China imported 157 complete plants from Russia and Eastern Europe representing 27 percent of total investment in machinery and equipment. The Sino-Soviet split in 1960 caused an abrupt termination of Soviet assistance, and during the Cultural Revolution other foreign technological and educational acquisitions virtually ceased. While the alternative to Soviet and Eastern European aid was Western capitalist technology and equipment, learning from the West and Japan was considered highly dishonorable. In September 1975 a spokesman for the Gang of Four proclaimed:

Politically, “wholesale Westernization” meant loss of sovereignty and national humiliation, a total sell-out of China's independence and self-determination. … Ideologically, “wholesale Westernization” was meant to praise what is foreign and belittle what is Chinese. … Economically, “wholesale Westernization” was aimed at spreading a blind faith in the Western capitalist material civilization so as to turn the Chinese economy into a complete appendage of imperialism.57

(p. 118 ) Thus the Maoists advocated self-reliance. Mao recognized China's backwardness as much as he was aware of its limited resources. He feared the effects of modernization on such sensitive issues as income distribution, worker status, and the revival of elitism and bureaucratism at the expense of egalitarianism. Yet self-reliance and the rejection of foreign technology for nearly two decades (1958–76) left China in an undeveloped abyss of poverty, while other countries through technological innovations charged ahead by leaps and bounds. Pragmatic leaders realized the dangers inherent in Mao's policy, but none dared oppose it.

With Mao's death and the demise of the Gang, the way was cleared for a new start to make up for lost time. A crash program for modernization had been launched, with Hua in the lead and Deng as the main spirit of the New Leap Outward. They assumed that science, technology, and the dynamics of technological change were basically politically neutral and classless, and that they could be transplanted without injury to Chinese social and cultural institutions.58 They had opted for a concentrated development of selected areas in key sectors of the Chinese economy through the imposition and internal development of science and technology. This “enclave” approach would undoubtedly result in encapsulated regions of progress to the detriment of a more general technological assimilation.

In the zealous spirit of the post-Gang period, there seemed to be an obsession with the notion that in little more than two decades, science could save China, rescue it from backwardness and poverty, and elevate it into the front ranks of the advanced states. The aim was worthy, but the grandiose targets and the stringent timetable seemed unrealistic. High technology was extremely expensive, and its absorption and dissemination required both time and properly trained personnel. Problems with the industrial infrastructure, scientific management, specialization, standardization, and serialization were not considered in the original Ten-Year Plan. It would be years before scientific methods of operation and new techniques could filter down to the masses of workers, creating the (p. 119 ) necessary ability and enthusiasm for a national modernization drive.

Chinese leaders proclaimed that they did not intend to ape the West but would forge a “Chinese-styled modernization.” Yet the knowledge and skills associated with foreign technology would inevitably influence the thinking and behavior of those who acquired them. The late Qing debate on the “fundamentals versus application” (tiyong) dichotomy would reappear in a different form. Western scientists in China and “returned” students trained in advanced countries would undoubtedly exert new influences on Chinese life and thinking.

The cultural consequences of contact with foreign ideology, institutions, and ways of life could not be totally contained, despite party admonitions and exhortations to the contrary. It was hoped that the Chinese could achieve a happy medium whereby they would become modern in thought and in their specialties without sacrificing the distinctiveness of their Chinese origin. While the meeting of a particular timetable for China's modernization could not be assured, the leadership's increasingly pragmatic goals seemed to point toward the eventuality of the successful modernization of the Chinese nation— perhaps fifty years into the next century.

# Notes

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## Notes:

(1.) The Chinese government has never disclosed the complete blueprint of the Ten-Year Four Modernizations Plan. It is only from various reports on the work of the government, interviews, and scattered reports that we piece together the general outlines of the Plan.

(2.) Chao Yu-shen, “Chinese Communist Attempt to Modernize Industry,” in Chinese Communist Modernization Problems (Taipei, 1979), pp. 29–30 (hereafter to be cited as Modernization Problems).

(3.)

1. (1.) “On General Guidelines of the Party's Nationwide Activities.”

2. (2.) “Summary Outlines of the Academy of Sciences' Activity Reports.”

3. (3.) “Certain Issues Concerning Accelerated Industrial Development.”

(p. 120 ) (4.) The New York Times, Jan. 2, 1976, pp. 1, 4.

(5.) Renmin Ribao [People's Daily], May 8, 1977. Tr. mine.

(6.) Li Tien-min, “Teng Hsiao-pʼing's Past and Future,” in Modernization Problems, pp. 90–91.

(7.) Liu Keng-sheng, “Modernization of Peiping's Science and Technology,” in Modernization Problems, p. 64.

(8.) Renmin Ribao [People's Daily], March 9, 1978, pp. 1–5.

(9.) Chu-yiian Cheng, “The Modernization of Chinese Industry,” in Richard Baum (ed.), China's Four Modernizations: The New Technological Revolution (Boulder, 1980), p. 26.

(10.) Chen Ting-chung, “Agricultural Modernization on the Chinese Mainland,” in Modernization Problems, p. 16.

(11.) “Report on National Conference on Fundamental Farm Construction,” Renmin Ribao [People's Daily], Aug. 8, 1977.

(12.) Hu Qiaomu, “Observe Economic Laws, Speed Up the Four Modernizations,” Peking Review, No. 47, Nov. 24, 1978, p. 18.

(13.) Chen Ting-chung, pp. 19–21. These figures are based on various mainland Chinese sources.

(14.) In Taiwan, it took US$11,000 to create a job opportunity during 1967–71. If Beijing could manage to create a job opportunity with half the amount, relocation of 100 million would cost$50 billion. Ibid., p. 24.

(15.) Ibid., p. 25.

(16.) These 27 fields include natural resources, agriculture, industry, defense, transportation, oceanography, environmental protection, medicine, finance, trade, culture, and education, in addition to a number of basic and technical sciences.

(17.) According to a study of the Royal Institute of International Affairs, London, by Lawrence Freedman entitled The West and the Modernization of China (London, 1979), p. 5, Chinese armed forces consisted of the following main units:

STRATEGIC FORCES: medium-range ballistic missiles: 30–40 CSS–1, 600–700 miles; intermediate-range ballistic missiles: 30–40 CSS-2, 1750 miles;

[long-range ballistic missiles: some CSS-3, 3500 miles, first tested in 1976, and a small number of CSS-X-4, 6000–7000 miles, first tested in May 1980—author].

ARMY: 3,250,000 men, 10 armored divisions, 121 infantry divisions, and 150 independent regiments.

NAVY: 300,000 men, 30,000 Naval Air Force with 700 shore-based aircraft, 38,000 Marines, 23 major surface combat ships, and a rather large number of submarines and destroyers with missile-launching capability.

(p. 121 ) AIR FORCE: 400,000 men, 5,000 combat aircraft including some 4,000 MIG 17/19, and a small number of MIG 21 and F-9 fighters.

(18.) Cited in Freedman, p. 6.

(19.) Jonathan Pollack, “The Modernization of National Defense,” in Baum (ed.), p. 247.

(20.) Ibid., pp. 249–50.

(21.) Jeffrey Schultz, “The Four Modernizations Reconsidered,” in Baum (ed.), p. 280.

(22.) Almon R. Roth, “Commentary on National Defense Modernization,” in Baum (ed.), p. 262.

(23.) Pollack, pp. 255–56.

(24.) Hua Guofeng, “Report on the Work of the Government,” Peking Review, No. 10, March 10, 1978, p. 23.

(25.) Pollack, p. 243.

(26.) Freedman, pp. 19–20.

(27.) Ibid., p. 19.

(28.) The former figure given by Vice-Premier Li Xiannian, and the latter by Deputy-Premier Deng Xiaoping.

(29.) Sun Yih, “Peiping's Plan for Defense Modernization,” in Modernization Problems, p. 59.

(30.) China: Economic Indicators (Washington, D.C., 1978), p. 1.

(31.) Chu-yuan Cheng, in Baum (ed.), p. 37.

(32.) Hua Guofeng's report to the Fifth National People's Congress, First Session, Feb. 26, 1978, Renmin Ribao [People's Daily], March 9, 1978.

(33.) Shannon R. Brown, “China's Program of Technology Acquisition,” in Baum (ed.), p. 167.

(34.) Ibid., pp. 165–66.

(35.) American Banker, April 19, 1979, quoted in Baum (ed.), p. 271.

(36.) Chu-yuan Cheng, in Baum (ed.), p. 38.

(37.) Cheng Chen-pang, “Tough Knots in Peiping's Four Modernizations,” in Modernization Problems, pp. 80–81.

(38.) Zhou Peiyuan, president of Peking University and a vice-president of the Chinese Academy of Sciences.

(39.) Sun Yih, pp. 58–59.

(40.) Rudi Volti, “The Absorption and Assimilation of Acquired Technology,” in Baum (ed.), p. 188.

(41.) Chu-yuan Cheng, “Industrial Modernization in China,” Current History, Sept. 1980, p. 24.

(42.) Peking Review, No. 47, Nov. 24, 1978, pp. 17–21.

(43.) Chu-yuan Cheng, in Baum (ed.), p. 41; Los Angeles Times, May 10, 1979.

(44.) Renmin Ribao [People's Daily], June 19, 1979; Beijing Review, No. 25, June 22, 1979, p. 11.

(p. 122 ) (45.) Chu-yiian Cheng, Current History, p. 25.

(46.) John Bryan Starr, “China's Economic Outreach,” Current History, Sept. 1979, pp. 50–51.

(47.) Chu-yiian Cheng, Current History, p. 26.

(48.) Ibid., p. 27.

(49.) Ibid., p. 27.

(50.) Renmin Ribao [People's Daily], Nov. 22, 1977.

(51.) Cheng Chu-yiian, “Chung-Kung Hsien-tai-hua ti tun-tsʼo chi chan-wang” (The frustration of and prospect for Communist China's modernization), Hai-wai hsiieh-jen [Overseas scholars], Sept. 1980, p. 29.

(52.) U.S. News ir World Report, March 23, 1981, pp. 56–58.

(53.) Far East Times, San Francisco, March 10, 1981.

(54.) The Christian Science Monitor, Feb. 20, 1981. Reportedly, the Japanese firm Mitsubishi Heavy Industries asked for an \$84 million reparation.

(55.) Hongki [Red Flag], Beijing, No. 14, 1980, pp. 25–27.

(56.) Renmin Ribao [People's Daily], July 1, 1980; Nov. 11, 1980; Feb. 24, 1981; Guangming Daily, March 28, 1981.

(57.) Liang Xiao, “The Yang Wu Movement and the Slavish Comprador Philosophy,” Historical Research, No. 5, Oct. 20, 1975.

(58.) Genevieve C. Dean, “A Note on Recent Policy Changes,” in Baum (ed.), p. 105.