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.

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.

Retrenchment and Revised Priorities

The original Ten-Year Plan was more of a political wish than an economic blueprint, and it lacked careful study as to its feasibility. During the first year of the program, some 100,000 construction projects were launched by the government costing $40 billion; with military and scientific procurements the total reached 24 percent of the 1978 national income of $198 billion. Large foreign contracts were also negotiated including the Baoshan steel complex ($2 billion), the Jidong steel complex ($14 billion), and a hotel construction project with the U.S. International Hotel Corporation ($500 million). In addition, regional organizations contracted a large number of sizable agreements with foreign suppliers, which, together with local construction projects, raised the total investment for 1978 to 36 percent of the national income, quite close to the 40 percent (p. 108 ) rate of the disastrous Great Leap years. Such zealous overspending was clearly insupportable.⁴¹

Economic realities soon set in to force a critical reassessment. A debate at the highest level took place regarding the scope and priorities of investment. In July 1978, Hu Qiaomu, president of the Chinese Academy of Social Sciences, called for greater emphasis on agricultural production which reflected the results of the top echelon's reassessments.⁴² Similar sentiments were expressed in December 1978 at the meetings of the Eleventh Central Committee (Third Plenum). On February 24, 1979, the Renmin Ribao [People's Daily] editorialized against a hasty, impractical approach to modernization: “Judging from our experience … China has suffered more from rashness than from conservatism. … Many projects were started hurriedly without the preparatory work that should have been done, thus failing to proceed from realities. … A frightful waste of manpower and materials was involved in these projects.”

China's limited financial and scientific resources forced leaders to reassess the Ten-Year Plan critically. It was decided that the top priority should be agriculture, the foundation of the economy, followed by light industry, which could meet domestic demands and earn foreign exchange, and then heavy industry. Capital investment in agriculture was increased from $26 billion (Ch$40 billion) to $59 billion (Ch$90 billion), and light and export industries also received new allocations. Within heavy industry, steel production targets were slashed from 60 million to 45 million tons; but coal, electric power, petroleum, and building industries retained priorities for investments.⁴³ Projects that could be completed quickly and earn foreign exchange were encouraged, and bank loans rather than government appropriations were planned for future investment projects. On the other hand, projects requiring huge amounts of capital and facing problems in resources, raw materials, location, transportation, technical capabilities, or energy supply were delayed or suspended.

At the Fifth National People's Congress (second session, June 1979), Hua Guofeng announced a three-year period (p. 109 ) (1979–81) for the “adjustment, reconstruction, consolidation, and improvement” of the national economy. Blaming Lin Biao and the Gang of Four for sabotaging the economy, he ruefully admitted: “We had not taken this into full account, and some of the measures we adopted were not prudent enough.”⁴⁴

The immediate effect of the retrenchment was the halting of 348 important heavy industrial projects (including 38 steel and metallurgical plants) and 4,500 smaller ones. Capital investment for 1979 was reduced to 34.8 percent of state expenditures. Specifically, investments in the steel, machinery, and chemical industries were most deeply cut, losing from 30–45 percent of their investment allotment in 1979–80.⁴⁵ Construction also suffered, with a 33 percent cut in Shanghai and a 40 percent cut for Inner Mongolia. Simultaneously, investment in agriculture increased from 10.7 percent of the state budget in 1978 to 14 percent in 1979 and 16 percent in 1980, while in textile and light industries investment rose from 5.4 percent in 1978 to 5.8 percent in 1979 and perhaps 8 percent in 1980.

The retrenchment was necessitated not only by China's limited foreign credit, financial resources, and absorptive power but also by the unexpectedly high cost of invading Vietnam in 1979. In addition, original estimates of oil production and its export potential were far too optimistic, and disappointing performance in the energy sector dampened China's hope of using oil exports to finance modernization. The 1978 budgetary deficit was $6.5 billion and climbed to $11.3 billion in 1979.⁴⁶ Clearly, more sophisticated and thorough economic planning was required. Saburo Okita, chairman of the Japan Economic Research Center and an architect of the Japanese economic miracle, was invited to China as a consultant.

Rearranging developmental priorities served to correct many of the causes of structural disequilibrium in the Chinese economy: (1) the imbalances within fuel, power, and raw material industries; (2) the imbalance between light and heavy industries; (3) the imbalance between agriculture and industry; and (4) the imbalance between capital investment and consumption.

(p. 110 ) As a result of retrenchment, the new scaled-down targets for 1985 and the actual output of the five major industries in 1985 appear as follows:⁴⁷

Of note was the very small growth in coal and oil production, the two main energy sources. Coal output grew 12.3 percent in 1978 but only 2.75 percent in 1979. Crude oil registered a 1.9 percent increase in 1979 compared to 11 percent in 1978 and an annual 22.5 percent between 1957 and 1977. This vast decrease might suggest that oil output at current producing sites had already peaked, and thus indicated the necessity for new exploration. Electricity output also fell from an annual growth rate of 13 percent between 1957 and 1978 to 9.9 percent in 1979 and 2.9 percent in 1980.⁴⁸

The overall view clearly showed that energy and transportation remained major obstacles in the modernization plan. Oil, coal, and electricity production fell far short of meeting new demands. While freight volume increased 9.7 times from 1950 to 1978, railway mileage increased only 1.4 times—transport (p. 111 ) lines were strained to the limit. Unless the energy and transportation bottlenecks were eased, China's modernization would be constrained. The small increase in oil output had drastically reduced China's ability to earn foreign currency to finance the purchase of foreign high technology.

It was possible that some additional income might be acquired from the textile and light industries which could more easily meet consumer demands and earn foreign exchange. As a result of increased state investment, bank loans, and better material, textile output rose 30 percent in the first quarter of 1980 over the same period in 1979, and light industry rose by 21 percent.⁴⁹ But it was questionable whether these sources would generate enough funds to hasten materially the date of modernization.

Profit, Material Incentive, and Structural Reorganization

It came as an odd realization that everyone in socialist China was interested in profit and openly talked about making more money. People who worked half-heartedly under Mao's regime were now enlivened by hopes of improving their lives through increased earnings. The new leadership had encouraged these hopes in the interest of increasing production. Indeed, the government had promoted workers' incentives and initiatives by giving material rewards, reforming the industrial organization, and appointing experts with proven managerial skills as plant directors. It was hoped that these reforms would increase the efficiency and output of existing plants as new ones would take time to build and contribute little to the economy for several years. Hua pointed out in 1979: “In the next eight years, and especially in the next three, our existing plants must be the foundation for the growth of production.” China invited Western and Japanese firms to invest in renovating these plants, but most preferred to invest in new plants rather than to put money into obsolescent factories.

The government recognized material reward as a powerful (p. 112 ) incentive for increased production. It was noted that during the First Five-Year Plan (1952–56) when wages rose 7.4 percent annually, productivity increased correspondingly with gross industrial production rising 18 percent per annum. During the Cultural Revolution the bonus system and wage increases were abolished, and the result was decreased production and increased absenteeism. In 1977, after more than a decade, a 10 percent wage increase was granted to 64 percent of the nonagricultural workers, and bonus and piece rate systems were restored in 1978.⁵⁰

Toward industrial reorganization, farm machinery corporations were established in the Six Economic Regions to coordinate efforts at modernization and to reduce duplication and waste. Each province had a tractor motor company, an instruments and meter company, a ball bearing factory, and a machinery export company. To improve management, Maoist worker-participation-in-management and cadre-participation-in-labor schemes were rejected in favor of expert, professional management, with the hope of insuring efficiency and accountability. Economic norms were set up to measure an enterprise's output, including variety, quality, cost, profit, resource allocation, and productivity. Each enterprise had a fixed quota for output, personnel, materials, capital assets, and liquid capital; in return, the enterprise guaranteed the quantity and quality of products, labor and production costs and expected state profit. Surpassing production quotas entitled the enterprise to a part of the profit. Thus profit and material reward were officially used as the means to raise production and efficiency.

In addition, the government was streamlining the industrial infrastructure as well as the management and control system. In the past, the system usually worked from the top down with an ovcrconcentration of decision-making power at the central level causing duplication, waste, and a lack of initiative and enthusiasm among workers. In 1979 the government consolidated some 25,000 to 50,000 marginal enterprises into 970 specialized companies, each with decision-making powers to suit local requirements. Each was allowed to: (1) prepare production plans and sell above-quota products to other units; (2) (p. 113 ) keep 5 percent of profits on quota production and 20 percent on above-quota production; (3) reward more work with more pay and allow workers to control their own welfare and bonus funds; and (4) receive bank loans for investment.⁵¹ In addition, five special economic regions have been established in Beijing, Shanghai, Tianjin, Guangdong, and Fujian, with power to negotiate with foreign concerns and keep part of their foreign currency earnings.⁵²

The new system, borrowing heavily from Yugoslavian and Romanian models, combined central planning with local initiative and market mechanisms to form a blend of capitalist and socialist structures. To say that capitalism had returned to China was an oversimplification; rather, some capitalist management techniques and an emphasis on profit margins had appeared in hopes that those enterprises operating in the red could be made profitable.

Although “private enterprise” had not returned, “individual economic undertakings” were on the rise. Thus, an energetic citizen called Yen converted a tea room into a booming Multi- Service Center selling 500 items and grossing $9 million a year. A Mrs. Liu, with the help of two sons, operated a family restaurant with such success that reservations had to be made days ahead, and waiting lines were a common scene. The economic atmosphere was freer today than at any time in the past thirty years.

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.